Range of challenging tasks await next CEO at PPC

The share price of PPC, the Public Power Corporation, has had to weather a barrage of negative analyst reports lately, especially following the country’s snap elections on January 25. Various reports being delivered have focused on the development of a dangerous combination of conditions prompted by the recently elected leftist Syriza-led coalition government’s intentions, ranging from its social policy relief measures for underprivileged households to the power utility’s transforming corporate nature. The prospects are made even more onerous by PPC’s alarming cash flow problem, its seeming avoidance of introducing more favorable pricing policy revisions, and the previous government’s part-privatization plan, now stalled, if not canceled, by the new administration.

The power utility’s next CEO to be appointed following last week’s resignation by Arthuros Zervos will have numerous serious issues to deal with. Zervos, incidentally, has remained at his post until the government appoints a successor.

PPC’s cash flow crisis, caused by the potentially devastating rise of unpaid overdue electricity bills owed to the power utility, will be the most crucial challenge to be encountered by the company’s new boss. Latest data indicated that the level of unpaid bills has now risen close to two billion euros. PPC’s liquidity problem is made worse by the company’s inability to seek credit support, especially following the latest downgrade by Standard & Poors.

The situation is also impacting PPC’s investment plans. Over the next few months, the company will seek funds for the development of a new power plant, Ptolemaida 5, in northern Greece, which ranks as the power utility’s most ambitious project in years.

Analysts have expressed deep concern over the new government’s announced plans for PPC’s new course. The cost of the government’s free-electricity plan for 300,000 cash-strapped households, estimated at 100 million euros, could end up being shouldered by PPC, despite assurances that the social policy’s expense would be incorporated into the state budget. For quite some time now, the state has been unable to pay outstanding debt of about 180 million euros to PPC. Operational costs may also increase at PPC as a result of possible salary increases.

The new PPC head will also need to deal with the company’s pricing policy for disgruntled industrial consumers. Some have signed temporary agreements. Relations between the two sides have deteriorated over recent years and, in some cases, reached extremes. Mutal trust will need to be reinstated as a necessary first step.

PPC will need to clamp down on excess expenses as a means of paving its way for the future. A recent Ernst & Young study, conducted on behalf of RAE, the Regulatory Authority for Energy, located flab estimated to be worth between 192 million euros and 236 million euros in the corporation’s production and mining departments.

As for the more promising side of things at PPC, a reduction of costs related to regulatory changes and lower petrol and natural gas prices is expected to boost the company’s profit figure by over 500 million euros in 2015.