The main power utility PPC’s EBITDA (operating profit) to debt ratio is not sustainable, the consulting firm McKinsey, commissioned by the main power utility PPC for guidance in shaping a new strategic plan, has found in preliminary findings, just disclosed.
Reflecting the magnitude of PPC’s problems, the adviser’s contract with the power utility was due to end this month but has been extended until June.
Until now, it was commonly known that PPC is under tremendous pressure as it prepares to sell 40 percent of its lignite units, a bailout requirement, and, in another demand set by the country’s lenders, faces the prospect of a drastic retail electricity market share reduction to less than 50 percent by 2020. However, problems concerning PPC’s ability to service debt have been concealed by the power utility’s administration.
To improve its financial standing, PPC has been advised to either drastically reduce its operating expenses or increase revenues by about 500 million euros in 2018.
This 500 million-euro amount could come from a collections boost of unpaid receivables or an increase in lignite production.
PPC’s debt service needs for 2018 are worth around 400 million euros – 215 for Greece’s main banks and 190 million euros for the European Investment Bank (EIB), it was noted yesterday. As for 2019, PPC’s debt service needs will add up to 1.85 billion euros – 350 million for the remainder of an international bond, 1.3 billion for a common loan extended by Greek banks, and 200 million for the EIB.
The consulting firm also noted that lignite-based electricity production, if it is to remain sustainable, will require improved CAT payments, a highly unprobable prospect given the EU’s determination to gradually withdraw lignite-fired facilities from the system.
PPC’s board yesterday approved the utility’s agreement to collaborate with Greek engineering and construction firm Archirodon and a foreign partner for participation in a tender offering a project in Dubai. The utility board also endorsed a plan concerning PPC’s acquisition of EDS, an electricity supply firm based in neighboring Fyrom (Former Yugoslav Republic of Macedonia). The acquisition deal is estimated to be worth nearly 5 million euros.