Greece to privatise power grid operator to help island tourism

The law allows potential investors to buy a 66 percent stake of grid operator ADMIE, which runs about 11,000 kilometres (7,000 miles) of high-voltage power lines across the country.

The ADMIE sale is not part of Greece's obligations towards its international creditors under the terms of its 240 billion euro ($325 billion) bailout. But it is necessary to comply with European Union energy laws that say grid operators must be separate, stand-alone entities.

Energy Minister Yannis Maniatis told lawmakers the nation can't afford to invest the 2.5 billion euros it needs to extend the grid to the islands and lay new connections to neighbouring countries such as Italy.

Because they lack connections to the grid, islands such as Santorini depend on polluting, blackout-prone, oil-fired power stations to provide electricity to millions of tourists each summer. Tourism generates about 15 percent of Greek economic output.

"We are spending 1 billion euros ($1.35 billion) a year on diesel and heavy oil to burn on the islands each year," Maniatis said.

New power links would also allow Greece to boost renewable energy production on its sun-baked, windswept islands and possibly export it to other countries.

But Greece's opposition and labour unions oppose the grid sale, fearing it is a precursor to fully privatise state-controlled power producer PPC, which currently owns 100 percent of ADMIE. The main opposition Syriza party pledged to reverse the sale, if it comes to power.

ADMIE's sale is expected to take place later this year. The Greek government will not obtain any money from it because all its proceeds will go to PPC.

ADMIE's buyer will run a regulated business with a fixed rate of return to recoup its investment. PPC has yet to value the stake. Greece late last year agreed to sell its natural gas grid operator DESFA on similar terms to Azeri company SOCAR for 400 million euros.

(Reporting by Harry Papachristou; Editing by Ruth Pitchford)