October 19, 06

NEWS / ContourGlobal - PPC to Ink Venture in Kosovo Lignite

The Public Power Corp (PPC) and US energy firm ContourGlobal are set to finalize the structure of a joint venture and decide on a bid for a lignite field in Kosovo, a PPC source told Reuters.

???The joint venture??™s board will comprise six members, with three from PPC and three from Contour,??? the source said. ???A decision on an expression of interest for the Kosovo fields will also be taken.???

The two sides were expected to meet later yesterday in Athens to finalize the agreement, the source said.

The joint venture??™s main focus will initially be in Southeastern Europe in the fields of mining, the generation of electricity and renewable energy resources. It could expand into the broader Mediterranean region in the future, the source said.

The two groups will initially each control a 50 percent stake.

The European Bank for Reconstruction and Development (EBRD) has also expressed an interest in being part of the joint venture as an equity partner and will probably join with a 10 percent stake by the end of next month, the source said.

Constantinos Panousopoulos, strategic adviser to PPC??™s management, will be named CEO of the joint venture company, with ContourGlobal president Joseph Brandt its chairman and PPC head Dimitris Maniatakis the vice president.

An expression of interest in developing Kosovo??™s lignite fields will probably be one of the venture??™s first forays into the region.

The Serbian province of Kosovo, under United Nations administration since 1999, will tender contracts to develop its lignite fields in the Sibovc region and build power generation plants. PPC is seeking to secure alternate sources of lignite as Greece liberalizes its energy market allowing competitors access to the cheap fuel.
Tax exemption

Separately, sources said the government is preparing legislation to exempt lignite from the special consumption tax. The obvious beneficiary would be PPC, which otherwise would incur an additional cost of 105 million euros in the current fiscal year, and more from the future operation of new lignite-plants to be constructed. The new bill, expected to become law in the new year, will be based on EU Directive 96/2003, according to which national governments retain the right to exempt power producers using solid fuels from the tax.

Meanwhile, the first tender to new investors in the lignite deposit of Vevi has run into delays, estimated to last about five months, following a Council of State ruling to suspend the tender until ownership of the deposit is definitively adjudicated.