Developments linked to an ongoing investigation by the European Commission’s Directorate General for Competition of the main power utility PPC, prompted by market abuse suspicions, could prove devastating for the utility if preliminary findings are confirmed.
The DG Comp is expected to summon PPC – and, possibly, its subsidiary IPTO, the power grid operator – to present its defense against the findings. This procedure may require the delivery of statements as well as hearings.
Besides hefty penalties, PPC could be forced to sell a considerable proprtion of its production units if the market abuse suspicions are proven true. Such an outcome would contravene the utility’s plans for a milder, more controlled surrender of its persisting market dominance.
The penalties, determined by EU electricity market regulations, would also be multiplied in accordance with the duration of violations committed. Ultimately, the prospective penalties could reach as much as ten percent of the corporation’s annual turnover.
Given PPC’s currently anemic financial condition, burdened by a poor cash flow as a result of a substantial unpaid receivables figure, a penalty of large proportions would certainly prove devastating for the utility. To put it frankly, PPC would be forced to sell company units to cover the penalty’s cost.
The threat of such penalties bolsters the European Commission’s negotiating position in the effort to break PPC’s market dominance. Despite a bailout-related need to reduce its electricity market share to less than 50 percent by 2020, the utility has, so far, maintained a sturdy market share. It currently stands at nearly 90 percent, supported by a series of discount offers introduced last summer.