PPC rebound needed for woes to be avoided next spring

The upcoming NOME auctions, breakway of the main power utility PPC’s subsidiary firm IPTO, the power grid operator, PPC’s alarming level of unpaid receivables, and its maturing loans, all add up to paint an explosive picture for the financial state of PPC, whose cash flow problems are becoming increasingly apparent to all parties involved in transactions with the utility.

Market sources forecast that PPC will face serious issues in the spring of 2017 if the utility does not achieve any significant turnaround.

The utility’s unpaid receivables front may have shown signs of improvement, according to PPC boss Manolis Panagiotakis’s recent remarks accompanying the utility’s first-quarter results, but the situation remains extremely perilous.

Even if a recent claim made by Giorgos Adamidis, president of Genop, PPC’s main union group, of unpaid receivables at the utility worth 2.7 billion euros is proven untrue, the figure definitely remains over 2.3 billion euros, despite softened terms of its installment-based payback program in a bid to improve collections.

This is severely affecting the utility’s cashflow, while the imminent introduction of NOME auctions – to provide third parties with access to PPC’s low-cost lignite and hydropower sources as part of the bailout-related obligation to help break the utility’s dominance – and the plan to remove IPTO from PPC’s ranks, promise to apply further pressure and worsen the utility’s financial position.

A recent Investment Bank of Greece analysis noted that the NOME auctions will make major impact on PPC’s stature. Although basic factors such as the starting price of these auctions have yet to be finalized, PPC’s EBITDA performance is expected to contract by 25 million euros in 2016 and 115 million euros by 2020 as a result of the NOME auctions. This fall, combined with the existing cashflow problems resulting from the unpaid recievables, will lead to serious problems, the analysis noted.

PPC incurred losses in 2015 as a result of a 472 million-euro rise in bad debt, to 886.3 million euros, which represented 16.6 percent of the utility’s total turnover, posted at 5.7 billion euros.

The IPTO breakaway plan is expected to reduce between 150 million and 200 million euros from PPC’s profit potential.

Maturing loans further deteriorate PPC’s standing. The utility will need to provide loan payments worth nearly 1.5 billion euros this year and in 2017, followed by 1.192 billion euros in 2018. PPC’s net debt level stood at 4.9782 billion euros last September.

Also, last summer’s downgraded credit rating by Standard and Poors has severely affected the utility’s borrowing ability.