The future of PPC, the Public Power Corporation, has entered uncharted territory following the outcome of yesterday’s Greek elections as changes are already being planned by the winning party, leftist Syriza, on pivotal issues such as the privatization of PPC subsidiary firm IPTO, the Independent Power Transmission Operator, which was in progress during the ousted coalition’s term. The market had viewed this specific move as a favorable development for the company’s future course. The Syriza party considers PPC as a key tool in its social policy.
The privatization of IPTO, through the sale of a 66 percent stake, was expected to provide revenues of between 600 million and 800 million euros towards the end of the year’s first half. The tender for the agreement would have been completed had the snap elections not intervened. But the privatization effort appears set to be ended. Syriza, which fell just short of gaining a majority in the 300-seat Greek Parliament, clinched a coalition deal with the right-wing Independent Greeks, officials from both parties confirmed early today.
The previous government’s plan for a part-privatization of PPC, through the formation and sale of a new company – locally dubbed “Little PPC” – representing a 33 percent share of PPC, as well as the further sale of a 17 percent equity share in PPC to strategic investors, are both now also highly doubtful prospects.
Besides its plans to halt these procedures, the Syriza party’s policy includes merging all PPC subsidiary firms, overall restructuring, as well as investments for new production facilities. Also, how Syriza will go about fulfilling its pre-election promise of free electricity for 300,000 households remains to be seen.
Syriza’s program has made reference to a reduction in electricity production costs that would lead to lower-priced electricity. Party leader Alexis Tsipras has publically noted that he is in favor of reducing energy costs for the industrial sector.
A number of favorable market developments, such as plunging crude oil prices, are serving as a counterweight to the politically linked uncertainty that surrounds PPC. Analsysts estimate that if oil prices average 60 dollars a barrel in 2015 then PPC stands to gain an additional profit of 300 million euros, annually.
Two-thirds of this additional profit would stem from PPC’s reduced expenses for mazut supply, while the other one-third, or 100 million euros, will be generated by the lower cost of natural gas, whose price-level is pegged to international oil prices, based on an agreement by DEPA, the Public Gas Corporation, with its gas suppliers. Many PPC electricity production plants are gas-fueled. It is also estimated that PPC will save a further 80 million euros within 2015 as a result of regulatory changes leading to lower-cost CATs (Capacity Availability Tickets).
On a more ominous note for PPC, the amount of overdue unpaid electricty bills owed to the corporation, which has risen to a level of over two billion euros, is a major concern. Collection of a large percentage of this debt figure is believed to be doubtful as it concerns enterprises that have gone of businesss, while about half the amount concerns cash-strapped low-voltage consumers, or households and small businesses.