Bottom Line: As Greece sells off its state-owned natural gas company (DEPA/DEFSA) under insolvency pressure, a minor Russian holding steps in as a proxy for Russian giant Gazprom. Whoever gains control, gains control over some major transit pipelines that will re-shape the pipeline game.
Analysis: DEPA is Greece’s state-owned Public Gas Corporation, while DEFSA is the state-owned Gas Transmission System Operator. DESFA is fully owned by DEPA, but the two are being sold separately. DESFA is valued at about $650 million, and it operates all the country’s transmission pipelines and the entire distribution network, along with an LNG terminal. This is where it gets interesting: EU energy legislation prohibits Gazprom—a gas supplier—from acquiring DESFA pipelines, so in order to bypass this hurdle, Gazprom has struck a deal with a small Russian company you haven’t probably heard of, Sintez, to stand in as its proxy bidder. So while Gazprom will bid on DEPA, which is allowed, Sintez will bid on DESFA, netting the whole deal for Gazprom in the end. There will be some stiff competition, though. Other preliminary bids have come from Azerbaijan’s state-owned SOCAR, Italy’s Eni, Algeria’s Sonatrach and the Israel Corporation, among others. But for now it looks like it’s down to Sintez (around $2.6 billion for acquisition and future investment) and SOCAR ($588 million for acquisition alone), for DESFA.
Recommendation: This will have major implications for Europe because it will solidify Russia’s upper hand in the pipeline game, with Greece being a potential hub for both Gazprom’s South Stream pipeline and the rival EU-supported Southern Gas Corridor to Europe. Sintez is only valued at about $146 million, yet still it has promised billions in investment in DEFSA—courtesy unofficially of Gazprom. This will be interesting for the fate of the Trans-Adriatic pipeline (TAP), which foresees carrying Azerbaijani gas to Italy via Greece, and the competing Nabucco-West pipeline which is eyeing that same Azerbaijani gas. For Europe, if Gazprom and its proxy win the DEPA/DESFA bid, it will also jeopardize the Greece-Bulgarian Interconnector project owned by DEPA/DESFA, Italy’s Edison and Bulgarian Energy Holding. This interconnector project is part of the EU effort to create a unified gas market, and it could be dead in the water if Gazprom gets its hands on DESFA.