GIG: IPTO is playing a crucial role in ensuring that reliable power reaches every corner of Greece by building an extended national grid. Can you tell us more about progress in your efforts to improve electricity transmission across Greece and the interconnection of Greek islands to the mainland network, as well as the Crete-Attica subsea cable project that was recently cleared? What kind of impact will your work have on the national economy?
Manousakis: Greece’s national power grid operator ADMIE, also known as Independent Power Transmission Operator (IPTO), is playing a key role in the country’s fast changing energy market. With a €5 billion investment plan that runs through to 2030, the company is setting the foundations for Greece’s deregulated energy market and aiming at turning the country into a regional player. By using overhead lines, underground cables, and submarine equipment, IPTO is building a network that will help cut the cost of power while making the provision of electricity on the islands more reliable and environmentally friendly. This will allow for oil combustion units on the islands to be gradually switched off along with the development of renewable energy sources.
The company has taken on the implementation of one of the biggest infrastructure projects in Greek history, valued at €1 billion, the Crete-Attica electrical interconnection. Ariadne Interconnection, IPTO’s subsidiary special purpose vehicle (SPV) that will finance and construct the project, proceeds in a timely manner with the two tenders and their respective contracts to be signed between March and April of 2020. Construction works will begin without delay and the interconnection is expected to electrify in the beginning of 2023. Once completed, Greece’s biggest island will have a reliable electrical supply, and the existing dirty power plants will be shut down.
IPTO has also finalised the contracts and begun the works on a series of major projects, most of which had been stalled for years, namely: the Crete-Peloponnese Interconnection, which will be the longest submarine AC interconnection in the world upon electrification in 2020; phases B and C of the Cyclades Interconnection, which are co-financed by EU funds and have been hailed by the European Commission as one of the flagship projects of EU cohesion policy; and the extension of the 400 kV system to the Peloponnese.
Across borders, IPTO is strengthening its interconnections with neighbouring countries: Bulgaria, North Macedonia, and Turkey. By undertaking vital infrastructure projects in southeastern Europe, IPTO is becoming an even stronger company and consolidating its leading position in the power transmission industry in the region.
GIG: Using submarine cables that will connect the mainland’s grid with the island’s sounds like a very technically challenging project. What are some of the problems you have encountered in the sea, while passing the underground cables, that maybe you did not expect?
Manousakis: Submarine interconnections in Greece are extremely demanding at a technical level. At the Peloponnese-Crete Interconnection, for example, the cables will be laid at a depth of 950 metres – one of the greatest laying depths for submarine electricity cables worldwide. There are three main challenges:
• Bottom morphology: Greek seas are very deep compared with those in northern Europe, where such interconnections are made with offshore wind farms. An additional challenge are the large fluctuations – in the form of valleys and peaks – that require specific technical specifications and methods of cable protection. For this reason, we apply innovative technologies to our projects, as we did with the Evia-Andros-Tinos cable which we recently laid, in order to ensure that the cables, apart from being durable, are also lightweight, which is a prerequisite for great depths.
• Existing cables at the bottom: There are older cables installed under the seabed, either medium voltage or fibre optic cables. Special care must be taken with respect to crossings.
• Fishing: There is intense fishing activity in the Greek seas, which poses a risk to our cables. In order to protect them, we bury them at a certain depth so that they are not endangered by fishing (trawls, anchors, etc.). Previously, we buried the cables up to 30 metres deep, but at the Peloponnese-Crete Interconnection they are buried up to 100 metres deep. In the case of the Crete-Attica Interconnection, cables go as deep as 600 metres. Another preventive measure entails coordination with port authorities to assure that navigation charts are always up to date on where our cables are located, and that vessels are not allowed either to fish or anchor in these zones.
GIG: One of the key benefits of extending the power grid to the islands is that it will ensure the supply of more environmentally friendly energy. But how does this actually promote RES? In what way will this help make Greece a greener country?
Manousakis: On the autonomous islands, and mostly on the big islands, restrictions on the absorption of RES have been implemented for reasons of network stability. This means that even islands with high renewables capacity could not absorb it. However, as soon as the new interconnections are implemented, this restriction ceases to apply because the islands become part of the national system. This means that many renewables can be installed without any technical constraints, despite being scattered across the various islands. The islands themselves, as well as our own interconnections, are a privileged space for the development of offshore wind energy, which at present has not been developed in Greece. Thus, in the Aegean – where our largest interconnections are located or planned – we can create hubs where offshore windfarms can be connected. In this way, an even greater penetration of renewables will be achieved, as offshore windfarms are very large.
GIG: The Crete-Attica Interconnection is budgeted at about €1 billion. Out of this amount, ADMIE is seeking investors to fund 39% of the company that will build the power cable. What has investor interest been like so far? Why should an investor put money here?
Both financial and industrial investors have expressed an interest in acquiring a percentage of the Ariadne Interconnection, the subsidiary that implements the Crete-Attica Interconnection. Financial investors include pension funds and long-term financial investors who are looking for steady and safe revenue. The reason for someone to invest is clear. It is an opportunity to directly participate in IPTO’s projects with a regulated remuneration for 35 years. One of the financing scenarios for Ariadne is equity funding. For a non-industry investor, this is a unique opportunity to have access to a privileged sector, the power transmission industry, that enjoys de facto secured and fixed income.
GIG: How will the installation of an underwater, high-voltage electricity cable connecting the Peloponnese to the mainland across the Rio-Antirrio straits become part of a bigger plan to turn the Peloponnese into a major energy hub? And how can it bolster the region’s capacity for developing renewable energy resources?
Manousakis: Currently, the Peloponnese does not have a 400 kV high-voltage network, which means that there are very tight limits on the power that can either flow into or out of the Peloponnese. The submarine cable laid in the Rio-Antirrio section is part of the line connecting the extra high-voltage substation (EHV S/S) of Megalopolis to the 400 kV mainland system, also known as the western circuit. At the same time, the eastern circuit is also being constructed, which will connect Megalopolis with Corinth and end in Attica. With these two circuits, the Peloponnese essentially acquires two high-voltage corridors, which ensure both system stability and the potential for greater power generation in the region, whether it is thermal or renewable. By 2021, when these projects are completed, the Peloponnese will essentially become a power transfer centre, both north to the mainland and south to Crete, as well as becoming a RES
GIG: IPTO reported some solid financial results for 2018, the first full year of operation under the new management team. Can you give us some insight into your forecasts? How do you aim to keep up efficiency levels?
Manousakis: Upon undertaking our duties, the acceleration and timely implementation of IPTO’s investment plan was our top priority. This was achieved thanks to everyone’s hard work. Now is the time for the next challenge: strengthening the financial results of the company. We are convinced that with both the implementation of the appropriate actions and the active involvement of IPTO’s workforce, this goal will also be achieved.
ADMIE Holding S.A. published strong nine-month financial results for the January-September 2019 period. They reflect its 51% share in the profits of ADMIE Group S.A. and amount to €32.8 million, marking a 12% increase compared to the same period in 2018.
For 2019, the management has proposed the distribution of the maximum allowed rate as an interim dividend. The interim dividend per share was €0.06 and was distributed to shareholders in August. ADMIE Holding S.A delivered a strong set of results and expects the favourable trend of the first nine months of 2019 to have continued in the fourth quarter in the top line. The rationalisation of operating and financial costs has been one of the top priorities of the last two years. In this context, voluntary retirement plans have been implemented, as has the refinancing of existing debt, along with new financing on more favourable terms. The benefit of the 2018 voluntary retirement plan is estimated at approximately €8.8 million annually, while the benefit of the 2019 voluntary retirement plan is estimated at approximately €5.4 million on an annual basis. The overall benefit to the company, which will be reflected gradually in the results of subsequent years, will total approximately €14 million annually, excluding payroll costs of new staff being hired, which will be lower.
IPTO: Telecom providers will be able to lease the fibre optic network that you are building along with the electricity network. What are the expansion plans for the fibre optics network? What kind of impact do you see this having on Greece’s information and communications technology (ICT) structure?
Manousakis: IPTO has an extended network of optical fibres, of a total length of 2,500 km, which are installed inside the electrical interconnection cables. According to IPTO’s 10-year investment plan, this network will keep expanding throughout the country, but mostly towards the islands, where the new interconnection projects are focused for the years to come. The underwater cable network that IPTO installs is a unique business opportunity for Grid Telecom to provide the infrastructure to the telecommunications companies and, in turn, for the latter to provide high-end services to the Greek islands. Moreover, we estimate that there will be great commercial interest for the routes leading to the northern borders of the country, as Thessaloniki has recently been selected as the location for the Southeast Europe regional security centre (RSC). This is expected to boost further Grid Telecom’s business activity. IPTO’s telecommunications interconnection with the transmission system operators (TSOs) in the neighbouring Balkan countries, which is set to take place next year, is a unique opportunity to expand our subsidiary’s network across borders.
GIG: Can you tell us a little bit about the role undertaken by China’s State Grid in your company?
Manousakis: State Grid Corporation of China (SGCC) provides full support to IPTO in undertaking a leading role in developing new interconnections between Greek islands – and from the islands to the mainland – improving the scale of the Greek transmission system and its power supply capacity. Likewise, SGCC is promoting the utilisation of renewable energy resources in Greece – realising a clean and low-carbon energy transition – providing sustainable power supply for Greece’s economic prosperity and social development. With the assistance of its strategic shareholder, IPTO has been included in the updated 10-year network development plan (TYNDP) and is now implementing the major electrical interconnections of the Cyclades, Crete, and Dodecanese islands with the mainland system of Greece to strengthen the transmission system and create thousands of jobs over the next 5 to 10 years.
The benefits of this strategic alliance are not limited to capital and technology. The entry of the strategic investor opened the door to cheap financing from Chinese banks for the operator. In 2018, IPTO secured a €199 million syndicated loan from the Bank of China and Commercial Bank of China. At the same time, it has strengthened its bargaining power to secure cheaper financing within Greece, in view of the implementation of the colossal €5 billion investment programme. The financial benefits of this agreement are estimated at €8 million, per year, for the operator.