http://www.zerohedge.com/news/first-real-greek-bailout-electricity
Submitted by Tyler Durden on 04/28/2012 20:35 -0400
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http://www.athensnews.gr/portal/11/55224
First Real Greek Bailout: Electricity
While Greece has had its fair-share of EURs funneled to it and through it over the course of the last year or two, it appears they have now created their first 'internal' bailout as things go from bad to worse. As Athens News reports, Greece will provide EUR250mm in emergency funds to its ailing electricity providers to prevent a California-style energy crisis. This liquidity injection to the country's power utlities was yet another unintended consequence of government interventionaction. An increasing number of consumersstopped paying their electricity bills following the TROIKA's Greek government's infliction of EUR1.7bn property taxation via the electricity providers. The main power utility PPC had a liquidity hole blown through it as non-payments mounted and while regulators claimed the system needed at least EUR350mm to stay afloat, the government has agreed to allow PPC to hold EUR250mm of the property tax it has collected on behalf of the state until June 30 - by which time, it is hoped the utility will have managed to secure other lending facilities. Quite an incredible move - to force the electricity provider to gather the property taxes - and while this attempt clearly failed we suspect the next move will be food-and-water-rationing without proof of tax payment.
Greece will provide 250 million euros in emergency funds to its ailing electricity providers to prevent a California-style energy crisis, government officials said on Friday.The liquidity injection removes the risk of a financial chain reaction which, according to regulators, was threatening to bring the country's electricity system to its knees.The temporary aid will shore up the accounts of main power utility PPC, allowing it to maintain operations and reimburse other suppliers of electricity and natural gas on whom the smooth functioning of the country's energy system depends."The measure was taken to bolster PPC's liquidity position," one official told Reuters after a cabinet meeting that authorised the move.Greece's energy market has fallen into disarray due to a combination of stagnant power demand, rising fuel costs and a government decision to use PPC as a tax collection vehicle.An increasing number of consumers stopped paying their electricity bills after the government started collecting a 1.7 billion euro property tax through them last year, in a desperate effort to meet its budget targets under an EU/IMF bailout.Non-payments blew a hole into the accounts of PPC, which is Greece's biggest power producer and its sole electricity retailer. PPC, which posted a record loss in the fourth quarter, is also the biggest client for upstart producers generating about 23 percent of Greece's electricity.The liquidity crunch sparked fears of a power meltdown like the one that happened in 2001 in California, which suffered large-scale blackouts after its energy market collapsed.In a paper released earlier this week, Greek electricity regulator RAE said the system needed an immediate liquidity injection of at least 350 million euros to stay afloat.The government partly heeded the regulator's call on Friday,allowing PPC to retain until June 30 about 250 million euros of the property tax it has collected on behalf of the state.This will be a temporary solution until the company's cash situation improves later this year, officials said. PPC said last week it agreed terms for a 960 million euro bank loan to cope with the liquidity crunch and roll over 1.12 billion euros of maturing debt later this year.Energy is a sore point in the country's relations with its lenders. The EU and the IMF have been pressuring Athens to introduce more competition in its 5-billion euro retail power market by deregulating electricity prices and abolishing PPC's monopoly over coal, the country's cheapest and most abundant energy source.(Reuters)
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http://www.athensnews.gr/portal/11/55224
| Greek banks to get EFSF bond bridge before full recap | |||
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Greece's cabinet on Friday agreed a state bank support fund would provide the country's four big banks with 18 billion euros worth of European bonds as an interim solution until they are recapitalised later in the year, a government official said.
Huge bond swap writedowns to cut the country's debt nearly wiped out the capital base of National Bank, Alpha , Eurobank and Piraeus, which need to meet a 9 percent Core Tier 1 capital ratio target by September.
"The cabinet approved a legislative act, a bridge recapitalisation, to allow the Hellenic Financial Stability Fund (HFSF) to allocate EFSF bonds to banks to help them with their liquidity needs," the government official said, referring to the European Financial Stability Facility.
The sector's recapitalisation may be pushed back until the end of the year, another official said. The bridge support will boost banks' regulatory capital.
Details on how this will be carried out will be decided at a future cabinet meeting, the official said.
Athens is working with EU/IMF officials on technical aspects of a recapitalisation plan for its banks, likely to be unveiled after a May 6 national election.
About 50 billion euros ($66 billion) have been earmarked in Greece's second bailout to prop up its struggling banking sector.
Another official said that any decision by Athens on bondholders refusing its debt exchange offer will be taken only with the consent of euro zonefinance ministers and will likely be taken only by the new government.
"Any decision we take on holdouts will have the approval of the euro zone," the official said.
Greece has completed a mammoth bond swap that formed part of its second international bailout, restructuring about 199 billion euros of its debt. The participation rate in the swap reached 96.9 percent.
But Athens must decide whether to pay out, default or propose a different offer to holders of a 450 million euro bond that is due to expire on May 15.
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Kiss of life to local banking system
Cabinet approves temporary solution to bolster the sector’s capital base
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Cabinet approved on Friday a temporary capital boost for banks, which will see the local credit system through until the recapitalization process is determined and completed.
The government’s decision provides for the creation of a special account at the Bank of Greece to which the bond from the Hellenic Financial Stability Facility (HFSF) destined for each commercial bank will be transferred in order to bolster their capital base. The bonds cannot be sold or transferred to third parties, but they will count as bank capital so as to ensure the stability of the local system.
This is a temporary solution to support the lenders until the final structure of the recapitalization is decided after the May 6 election. What is certain is that the process is now delayed and instead of concluding by end-September it is now estimated it will be completed by end-December. The interest rate with which the bonds will be given to banks will also be decided at a later date.
The bonds will be replaced either by shares or by convertibles as provided for by the terms of the recapitalization.
| The HFSF has committed 18 billion euros to cover the losses of the country’s four biggest commercial lenders: National, Alpha, Eurobank and Piraeus. These funds originate from the first installment of 25 billion euros that the eurozone set aside for the recapitalization process. That amount will secure those banks a capital adequacy (Core Tier I) index level of more than 8 percent, which renders them viable and secures their uninterrupted funding from the Eurosystem. Cabinet also discussed the distribution of capital to smaller banks. The European Commission, the European Central Bank and the International Monetary Fund -- collectively known as the troika -- have made plans for 50 billion euros to be used for the recapitalization of Greek credit institutions, but bank officials estimate that less than 30 billion euros will be required after all. The second installment, up to another 25 billion euros, is expected this summer.
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