The main power utility PPC is preparing to return to international capital markets as soon as possible following a four-year hiatus, the utility’s chief executive Manolis Panagiotakis has declared.
Such a move would come in the wake of the offering of last week’s seven-year Greek state bond, staged as a test return to markets with a yield set at 3.5 percent, pricey for eurozone standards.
It remains to be seen what PPC can achieve. The utility shares a corresponding credit rating but is burdened by various problems, including heavy debt, an enormous unpaid receivables figure, anemic turnover and profit figures, an asset devaluation issue, and most crucially, bailout-required retail electricity market share contraction targets.
In comments to energypress, analysts forecast that a PPC bond issue at presnet would most likely lead to a higher interest rate than last week’s rate achieved by the Greek State.
PPC last tapped international capital markets on April 30, 2014, when the utility managed to draw 700 million euros through a bond issue that was oversubscribed six times. Though this high demand was linked to a market return, around the time, by the Greek State amid a wider sentiment that the country was on its way back, the real reason should have been attributed to the bond issue’s high interest rates. They ranged between 4.75 and 5.5 percent – for three-year and five-year bonds that raised 200 million and 500 million euros, respectively. Such interest rate levels, hard to find at the time, ended up attracting investors.
If the anticipated PPC bond issue achieves an interest rate anywhere near the 3.5 percent rate gained by the Greek State, then this would reflect the strict monitoring to be encountered by PPC over the next few years, a prospect investors are well aware of.
Besides needing to meet bailout-required market share contraction targets, PPC will need to deal with its chronic unpaid receivables problem, improve its collections record, reduce company expenses, increase profitability and step out to regional markets.
As was the case with last week’s Greek State bond issue, a PPC bond issue would be well received by investors not because the country’s economy has suddenly taken off but as a result of the certainty that measures and restrictions are – and will continue – being imposed.