GIG: One of the company’s strategic priorities is to boost its competitiveness. Can you tell us about the initiatives aimed at achieving this goal, along with your growth and investment plans?
Alexopoulos: Competitiveness is the name of the game in energy and particularly in our core business of refining. In spite of the positive global environment in refining from 2015 to 2018, a number of refineries are still at risk of closure in Europe. EU refineries face much higher compliance and energy costs compared to their direct competitors in the Middle East, Russia, and beyond; therefore, only the most competitive ones will survive. As a result of targeted investments and ongoing performance improvement programmes, Hellenic Petroleum (HELPE) already has a very competitive refining system, with a product mix that matches new market requirements very well. Nevertheless, we continue to pursue improvements relentlessly in a number of areas including margin enhancement, energy efficiency, digital transformation, and procurement optimisation.
GIG: Recently you acquired Blue Circle Engineering in Cyprus, boosting your international presence. HELPE owns petrol stations in Bulgaria, Serbia, Montenegro, and North Macedonia. Can you tell us about how you see your presence in the region?
Alexopoulos: The Blue Circle acquisition is an excellent addition to our international business portfolio, building on our strong presence in Cyprus. Our integrated fuels marketing operations in southeastern Europe comprise wholesale and retail businesses and a network of over 300 petrol stations, mainly under our EKO brand in Bulgaria, Serbia, Montenegro, North Macedonia, and Cyprus. We leverage our strong supply and logistics position out of our refining network in Greece to offer high-quality, differentiated products to these markets, and we aim to grow our international businesses further through selective investments over the next five years.
GIG: The name agreement that Greece reached with North Macedonia is of particular significance to HELPE. Currently, HELPE is locked in a legal dispute with the government of North Macedonia over the unfulfilled contract for the purchase of heating oil produced by Okta. What amounts are we talking about and how do you see this matter evolving? Also, what is happening with the resumption of the Thessaloniki-Skopje pipeline?
Alexopoulos: Hellenic Petroleum Group initiated arbitration proceedings against the government of North Macedonia in the International Chamber of Commerce (ICC), claiming $32.6 million in damages arising from non-absorption of minimum contracted quantities of fuel oil for the period between 2008 and 2011. The members of the Arbitral Tribunal have been appointed and the process is currently underway. I note that we had resorted to international arbitration for the same reason in 2004 and won. In parallel to the arbitration process, we are in discussions with the North Macedonian government with a view to finding an amicable resolution to the dispute. Regarding the Thessaloniki-Skopje pipeline operation, we are also in contact with the North Macedonian government and expect to be able to restart the pipeline in the near term.
GIG: Hellenic Petroleum is one of Greece’s largest exporters. In 2018, exports contributed to growing sales volumes. How do you see exports performing this year given the challenges in the global economic environment?
Alexopoulos: Hellenic Petroleum is a leading exporter with more than 50% of its total sales corresponding to exports of oil products and petrochemicals. In 2018, we registered almost €5 billion worth of exports equivalent to 15% of the total exports of Greece. We expect our exports to remain at comparable levels for the foreseeable future, adjusted for the fluctuations in the price of oil. Given that our export markets are very competitive, continually striving to improve our competitiveness is of paramount importance and, as such, is a fundamental component of our strategy.
GIG: Can you tell us about your renewable energy portfolio held by your subsidiary and your future goals?
Alexopoulos: As the recent tenders by the Regulatory Authority for Energy demonstrate, renewables are also becoming increasingly competitive versus conventional electricity sources and have effectively reached grid parity. We expect the pursuit of climate goals, coupled with increasing competitiveness of renewables and lower cost of capital in Greece, to drive large investments in photovoltaic and wind in the coming years. Hellenic Petroleum Renewable Energy Sources, our wholly owned renewables subsidiary, owns a diversified portfolio of RES projects of 1,000 MW (photovoltaics, wind, and biomass) at various stages of development.
Recently, HELPE announced the acquisition of a large photovoltaic project at the final permitting stage, in the area of Kozani, Western Macedonia, from German RES developer and contractor JUWI. The project, with a total installed capacity of 204 MW, will be the largest RES plant in Greece and one of the five largest photovoltaic plants in Europe. It is expected to generate more than 300 GWh annually, sufficient to power 75,000 homes with zero-emission energy, with resulting CO2 emission avoidance of around 300,000 tons annually. The total investment will come at €130 million, with a significant benefit for the economy, particularly Western Macedonia. The acquisition is expected to be completed during 2Q20 and the Project to become operational in 4Q21. This is an important step towards implementing our strategy – to develop new low carbon activities, accelerating the achievement of our near-term target of 300MW from RES by 2021. Our growth targets will be met through the development of our existing portfolio and selective acquisitions. As with all of our investments, safety, health, and environmental protection are non-negotiable prerequisites for our renewables projects.