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By Angeliki Koutantou
ATHENS, May 2 (Reuters) - Greece has agreed to sell coal-fired plants and coal mines equal to about 40 percent of its dominant power utility Public Power Corp's coal-fired capacity, to help open up its electricity market, the energy ministry said on Tuesday.
The agreement is part of a reform deal Greece and its foreign creditors reached early on Tuesday, paving the way for the conclusion of a drawn-out reform review and the disbursement of further rescue funds under the country's third international bailout.
Under the rescue deal signed up in 2015, the third since 2010, Greece has agreed to cut the dominance of its state-owned Public Power Corp in the retail market to below 50 percent by 2019 from about 90 percent now.
Last year Greece launched power sales to smaller power producers to help cut Public Power Corp's share. But the lenders questioned the effectiveness of the measure and also wanted Athens to sell coal-fired plants after a European court ruled last year that Public Power Corp had abused its dominant position in the country's coal market.
Greece will hold a market test to sound out investors interested in buying coal-fired plants and mines owned by Public Power by November, aiming to wrap up the sale by June 2018, the ministry said in a statement.
Athens also agreed to sell a larger quantity of power capacity from December until 2019 but once the sale of the utility's plants is concluded the quantity will be reduced, the ministry added.
PPC, which is 51 percent-owned by the state and also earmarked for a partial sale, has been hurt by overdue bills which have reached 2.2 billion euros since the debt crisis broke out in 2010.
The company, a former power monopoly, has tried to recoup payments with phased repayment schemes, which has helped provisions for overdue debt decline, still the burden of unpaid bills had squeezed its cash reserves.
As prior action for the conclusion of the bailout review, Greece has promised its creditors to swiftly propose a plan to deal with the issue, the ministry said.
The lenders and Greece also agreed that Athens will relaunch the sale of a 66 percent stake in its natural gas grid operator DESFA and conclude it by the end of the year.
A 400 million euro deal to sell a 66 percent stake to Azerbaijan's SOCAR collapsed in November after Athens passed legislation raising DESFA's gas tariffs by a lower amount than SOCAR had expected and SOCAR asked for a lower price.
The potential buyer should be a European operator to safeguard energy supply security both for Greece and the European Union, the ministry added.
Privatisations have been a key plank of Greece's international bailouts but have reaped poor revenues so far due to political resistance and bureaucracy. (Reporting by Angeliki Koutantou, editing by Jeremy Gaunt and David Evans)