SOCAR to consult with Snam over DESFA deal

Azerbaijan’s state energy giant SOCAR and Italian gas grid operator Snam hold consultations over SOCAR's acquisition of a share in the Greek gas network operator DESFA.

SOCAR’s Deputy Vice-President Vitaly Beglarbekov told EurActiv that SOCAR is “not alone” in the process and the fact adds optimism to the issue.

“We work jointly with Italian Snam, we should admit, however, that the process is quite difficult and complicated,” he said.

He mentioned that the government of Greece demonstrated its constructive position over the issue during the recent meeting between SOCAR’s head Rovnag Abdullayev and Greek Prime Minister Alexis Tsipras.

Beglarbekov said that SOCAR and Greece are fully aware of the importance of the deal, underlining that the main objective is to find a solution which would be acceptable for the sides.

SOCAR won a tender in 2013 on the purchase of a 66-percent stake in DESFA for 400 million euros ($446.3 million) but the acquisition was stalled, when SOCAR faced EU’s anti-trust concerns and was tasked to sell 17 percent of DESFA to a third party, so that its stake drops to 49 percent and satisfy EU competition authorities.

The situation was further complicated, when Greece passed a law in which it raised DESFA's gas tariffs.

Beglarbekov said that the situation is complicated by the changes in calculation which in turn influences cost of DESFA. Nevertheless, he voiced hopes that the problem will be tackled soon, as successful completion of the long drawn-out process of the privatization of DESFA is in the interests of the sides.

SOCAR had previously said it would only go ahead with the deal should the cost was cut significantly, given that a number of obstacles had emerged since it first agreed to buy DESFA in 2013.

SOCAR, the losses of which amounts to 40-50 percent of DESFA’s total cost given the revised tariffs (according to preliminary estimates), repeatedly expressed its readiness to fulfill all obligations, should previous conditions stay in force.

The company earlier agreed to extend a term of a letter of guarantee under the tender till October 31, 2016.

Moreover, SOCAR took a decision to create a working group for the privatization of DESFA with a view to find a solution to a crisis. The working group will also closely cooperate with Italy’s Snam and European Commission and will look for a way to privatize DESFA within a month.