PPC looking to capitalize on momentum with July bond issue

Power utility PPC is preparing to issue a new ESG (Environmental, Social and Governance)-linked bond in July, driven by favorable market conditions and a recent B+ credit rating from S&P, banking sources have informed.

A PPC bond issue in July would capitalize on current market sentiment, still positive. If the Delta variant, a strain of Covid-19 believed to be more transmissible and dangerous than others, continues to spread, a growing number of countries will impose restrictive measures, which would dampen economic recoveries and investment activity.

A second driving factor for an issue in July is the increasing inflationary pressure triggered by economic recovery. The Fed has indicated that this inflationary pressure rise will continue.

Rising inflation combined with solid performances in the global economy suggests the time for interest rate increases is approaching, as indicated by a rise in yields on US bonds.

Internationally, investors believe it is a matter of time before central banks raise interest rates to control inflation rates.

This would be an unfavorable development for countries and corporations, such as PPC, that have managed to borrow at low interest rates.

Given these possibilities, PPC, in the months ahead, may not have the opportunity to achieve a bond interest rate that would be as good or better than the rates achieved with a double issue last March. PPC raised 775 million euros through two ESG-linked bond issues, the first at 3.875% for 650 million euros, and the second at 3.67% for 125 million euros.


PPC bond issue, ESG-linked, attracts top international funds

Some of the world’s biggest investors are among the foreign institutional investors who participated in power utility PPC’s recent bond issue as well as a supplementary issue staged yesterday, through which the corporation raised a grand total of 775 million euros.

Participants included US fund Blackrock, managing capital worth nearly 8 trillion dollars, fellow American fund Fidelity, whose portfolio is worth 440 billion dollars, the UK’s Apollo, managing 455 billion dollars, and France’s Pictet, with an investment portfolio worth 689 billion dollars.

The turnout for PPC’s bond issues was dominated by real-money investors, or institutional investors handling enormous amounts of cash reserves for long-term investments in companies with solid prospects. Their clients are chiefly retirement funds as well as corporations looking to the future.

Information made available until now on PPC’s bond issues indicates that 70 percent of subscribers were from abroad and 30 percent domestic. Among the foreign investors, half are institutional and real-economy investors, many of these cross-Atlantic.

US and European investors participated in the issues with shares of close to 50 percent each, while investors from Australia and Asia represented about 5 percent of subscriptions.

PPC’s initial bond issue raised 650 million euros at a borrowing rate of 3.875 percent, while yesterday’s follow-up issue raised an additional 125 million euros at 3.67 percent.

Bond issues linked with ESG (Environmental, Social and Governance) terms, as was the case with PPC’s two issues, are in high demand, internationally.

Through its issues, five-year bonds maturing in 2026, PPC has committed to a 40 percent reduction of CO2 emissions, from 23.1 million tons in 2019 to 13.9 million tons by 2022. If this target is not achieved, 50 basis points will be added to the yield.

PPC bond issue oversubscribed six times, key foreign investors dominant

International investment powerhouses and real-money investors, including US players, were key participants in power utility PPC’s bond issue this week, oversubscribed by six times with orders totaling three billion euros, a vote of confidence for the course being pursued by the company.

PPC promoted the issue by highlighting its comeback over the past year and a half.

Foreign investors – including institutional investors, private banks and hedge funds – comprised 70 percent of the issue’s subscribers, providing approximately 450 million euros of 650 million euros in total, according to estimates by sources.

The issue’s two coordinators, HSBC and Goldman Sachs, were still working on a finalized list of subscribers late last night.

Importantly, half the investment amount provided by foreign investors concerned real-money investors, including top global players handling portfolios worth trillions of dollars.

PPC’s issue, a sustainability-linked bond through which the utility has pledged, to investors, carbon emission reductions, was too good an offer to ignore. Its yield, 3.875 percent, was a standout prospect given far lower yields offered in the eurozone.

The results, since the order book’s opening on Monday, have exceeded PPC’s expectations in what is being hailed as an unprecedented success for a Greek bond issue, both in terms of the level of capital amounts offered and number of participants.

Also, this issue means PPC has succeeded in borrowing at an interest rate that is one-and-a-half percent below its current borrowing cost.

Banking sector officials pointed out the issue’s outcome highlights a wider change in perception of Greece by investors.

Strong investor interest expressed in PPC’s bond issue

Strong demand expressed by Greek and foreign investors for power utility PPC’s five-year, 500 million-euro sustainability-linked bond, whose order book closes tomorrow, suggests the issue will be oversubscribed by two to three times, sources have estimated.

Local brokerage companies are submitting order requests that represent up to three times the size of actual amounts investors have decided to place in this SLB issue in an effort to ensure their clients will get the bond quantities they want.

The level of interest of foreign institutional investors, targeted by PPC as a key group for the success of this bond issue, is expected to be even higher.

Analysts attribute this heightened investor interest to two main factors, firstly the bond issue’s yield, which is expected to close between 3.5 and 4.2 percent, well over levels registered by corporate bond issues of the past few years in eurozone markets; and secondly, the bond’s sustainability terms.

PPC is committing to a 40 percent CO2 emissions reduction by 2022, from 23.1 million tons in 2019 to 13.9 million tons next year. If this goal is not achieved, 50 basis points will be added to the bond’s yield.

The issue’s environmental, social and governance (ESG) factors, even without guarantees, are also a key attraction for investors.

Since the wider outbreak of the pandemic early in 2020, an increasing number of funds have opted to invest in companies observing ESG criteria. Capital amounts invested by funds in companies maintaining ESG criteria have increased by 170 percent since 2015.

PPC bond issue aims for real-money investors, market clout

Power utility PPC, which has just issued a 500 million-euro bond expiring in 2026, is aiming to attract foreign institutional investors – or real-money investors placed in the real economy, not hedge funds – to the issue, which, the corporation hopes, will also enjoy a solid course in secondary-market trading and help establish the company’s clout in capital markets.

PPC began presenting this bond issue to institutional investors yesterday and will continue to do so over the next two days in an effort to maximize the level of participation in the issue, a Sustainability-Linked Bond, the first of its kind to be offered by a Greek company.

The power utility is committing to a 40 percent CO2 emissions reduction by 2022, which if not achieved, will add 50 basis points to the bond’s yield.

The issue’s order book closes on Thursday. A clear picture on the turnout and type of investors drawn to the issue should emerge today or tomorrow, the latest.

PPC’s push to reduce CO2 emissions, which the company has told investors will fall from 23.1 million tons in 2019 to 13.9 million tons in 2022, is based on two key factors, a planned withdrawal of lignite-fired units representing a total capacity of 3.4 GW by 2023 and a change of investment direction focusing on renewables.

Data shows that PPC managed to reduce its CO2 emissions by 56 percent between 2005, when levels were 52.6 million tons, and 2019. A drop to the 2022 objective of 13.9 million tons would represent a 74 percent reduction, compared to 2005. If achieved, such a reduction would exceed the national target of 62 percent.

An improved BB- rating from Fitch late in December was a key factor in PPC’s decision to head to capital markets at this point in time.

PPC, on solid ground, set for SLB issue, possibly next week

Power utility PPC is set to issue – any day now, possibly during the upcoming week – a 500 million-euro Sustainability-Linked Bond, through which it would commit, to investors, to a specified carbon emission reduction.

Given the heightened activity of late by the corporation and its advisors for this issue, it appears PPC believes now is the right time to head to the bond market, as long as no big changes occur on the wider economic front.

The prospective SLB would mark PPC’s return to capital markets following a seven-year absence. It also promises to make the company the country’s first to issue a bond incorporating sustainability terms.

Until just a few weeks ago, PPC was aiming to make its SLB move within the year’s first half, but the company’s prospects have improved further, as reflected by a recent BB- rating from Fitch.

The power utility is now getting started on the implementation of a business plan aiming for a green-energy transformation at PPC.

SLBs differ to green bonds as they are associated with specific indices, including CO2 emission reduction figures throughout an issuing company’s business plan.

PPC does not necessarily expect any great interest rate improvement through the anticipated SLB issue. Instead, looking further ahead, a solid performance by the utility’s SLB in secondary-market trading would enable the corporation to borrow at a lower cost should it return to capital markets at a future date.

PPC’s share price has risen by more than 170 percent over the past year, from 3.28 euros yesterday, representing a market capitalization value of 761 million euros, to yesterday’s closing price of 8.87 euros per share, putting the utility’s market capitalization value at 2.057 billion euros.

Besides the bond issue, investors are also expecting a list of second-round qualifiers, from 11 possible suitors, in the sale of a 49 percent stake of distribution network operator DEDDIE/HEDNO, a PPC subsidiary. Second-round qualifiers are expected to be announced once PPC has completed its qualification process, seen requiring a few more weeks.

PPC, backed by positive news, on standby for bond issue

The Greek State’s recent bond-market outing for an unprecedented, in the country’s history, borrowing cost of less than 1 percent paves the way for power utility PPC to follow suit.

This low yield and strong attraction of institutional investors, who ended up with over 95 percent of the Greek State’s bond issue, combined with a steady interest by foreign investors in PPC’s portfolio are believed to be pushing the power corporation towards a more aggressive financing policy for a return to bond markets following a six-year absence.

However, PPC has yet to decide on when to make its move. The corporation has not planned a bond issue for this month or next, sources have informed energypress. Even so, a sudden decision cannot be ruled out, they added.

PPC has been contemplating a bond-market outing since late December, when Fitch Ratings delivered a positive credit rating. The US firm included, for the first time, PPC on the list of enterprises it rates and offered a BB ranking, two times better than a preceding B ranking delivered by S&P in November.

At the time, despite the good news, company sources insisted PPC’s objective to head to capital markets in the first half of 2021 remained unchanged.

But a wave of favorable news, which, besides the BB rating from Fitch Ratings, includes PPC’s securitization packages for unpaid receivables; the achievement of profit figures for a fourth successive quarter; a new business plan; the launch of a privatization procedure for distribution network operator DEDDIE/HEDNO; and an upcoming partnership agreement with Germany’s RWE for RES investments in Greece; has generated momentum for PPC.

A bond issue would help finance many of the company’s project plans, primarily in the RES sector, as well as distribution network investments. It will also enable PPC to restructure older debt for lower-cost borrowing terms.

Solid Fitch Ratings grading for PPC paves way to bond issue

American credit rating agency Fitch Ratings has delivered a favorable review of power utility PPC that enhances the company’s credit image and takes it a step closer to capital markets.

The credit agency has not only added PPC to its catalogue of companies reviewed, but also given the utility a BB- rating, noting that a firm outlook lies ahead. This status is twice as good as a B rating offered by S&P in November.

It enables PPC to begin examining the prospect of borrowing through a bond issue for the first time in six years.

The Fitch Ratings grading has been embraced at PPC’s Athens headquarters, as it not only seals a perfectly successful year but also puts in place a solid foundation for an even better year in 2021.

Interpretations of the outcome by some analysts remain cautiously optimistic. These analysts believe consolidation of PPC’s improved standing must wait for the release of its financial results for the year. Favorable news on the forthcoming 49 percent privatization of subsidiary DEDDIE/HEDNO, the distribution network operator, will also further enhance PPC’s image, they pointed out.

PPC’s integrated business structure, dominant market position, long-term sustainability as a result of strategic repositioning, as well as favorable energy sector reforms from 2019 to the present were key factors in the favorable Fitch Ratings grading.

PPC bond issue seen late in 2020, securitization sooner

Power utility PPC intends to seriously consider a bond issue towards the end of the year, once it expects to have further improved the company’s profile and credit rating, banking sector sources believe.

Although very low interest rates at present and the country’s better image have improved foreign market bond-issue prospects for Greek enterprises, PPC will prefer to hold on a little longer, the sources added.

The power utility can afford to wait as conditions are continuing to develop in favor of PPC, banking officials told energypress. Last November, S&P upgraded the power utility’s credit rating to B- from CCC+. PPC’s borrowing cost is currently approximately 5 percent.

Moreover, major debt payments are not due until 2021 and the utility is planning to launch 60 and 90-day securitization packages for unpaid receivables, whose incoming revenue should suffice for the time being.

PPC also plans to stage an Investor Day event in London late this month during which the corporation’s administration will present business plan details to foreign analysts, the objective being to further improve the utility’s image and generate new share purchases. Also, the company is scheduled to post its financial results for 2019 in April.

PPC’s capitalization has steadied at a level of approximately one billion euros for a share value of 4.14 euros yesterday. This stability is a positive development, the banking officials stressed.

ELPE roadshow ahead of bond issue, €300-400m sought

Hellenic Petroleum ELPE has organized a series of meetings with institutional investors over the next few days to pitch an imminent five-year bond issue aiming to attract a capital amount of between 300 and 400 million euros at an interest rate, according to some sources, of just under 3 percent.

The ELPE bond issue could take place this week, sources have informed.

The listed petroleum group has asked participating banks to organize a series of presentations, the first in London today. Zurich and Paris follow tomorrow, while an Athens session is planned for Thursday.

ELPE officials are optimistic on the prospects of the bond issue, whose objectives include premature settlement of a bond with a 4.875 percent interest rate, expiring October 2021. This bond is worth 449.53 million euros.

The new ELPE bond issue comes amid a favorable time for the Greek economy and following a successful bond issue by Hellenic Telecommunications OTE.

A privatization plan to offer part of the Greek State’s 35.48 percent stake of ELPE has yet to be finalized, according to energy minister Costis Hatzidakis. Sources insist the privatization will take place through the Athens bourse.

ELPE bond issue plan may be delayed by Middle East tension

A Hellenic Petroleum ELPE plan for an imminent bond issue that will seek to raise a sum of at least 300 million euros at an interest rate of less than 2 percent in order to refinance an existing loan could be delayed by increased tension in the Middle East over the past few days as a result of drone attack on Saudi Arabia’s oil installations.

A firm US reaction against Iran would further escalate this tension in the wider area and could negatively impact ELPE’s planned bond issue as some investors would certainly hesitate to invest.

The petroleum group’s net debt is 1.4 billion euros, down by approximately 500 million euros compared to a year earlier, according to ELPE’s first half results, announced August 29.

Along with its first-half results, ELPE announced a bond issue plan for within 2019, the objective being to further decrease its financial costs.

PPC bond issue in January after rescue package measures

Power utility PPC will delay a planned bond issue until early next year, most probably within January, once a series of rescue-plan measures have been implemented, energypress sources have informed.

Though current market conditions are ideal, as highlighted by the 10-year Greek Govt bond yield of between 1.5 and 1.7 percent, the power utility’s board would rather wait for the implementation of all measures included in its rescue package before proceeding with a bond issue in pursuit of low-cost capital from international markets.

A series of measures intended to bolster PPC will have been taken by early next year. PPC’s first-half results, expected along with a report by the power utility’s certified auditor Ernst & Young on September 24, will include all measures deemed necessary for the corporation’s restructuring.

The energy ministry is soon expected to take legislative action enabling public service compensation returns of approximately 200 million euros to PPC for 2011 as well as the termination of NOME auctions in October or November, a favorable prospect for PPC, which has been obligated to offer below-cost wholesale electricity to rivals through the auctions over the past few years.

Also, between October and December, PPC plans to securitize unpaid receivables concerning electricity bills overdue by at least 60 days to draw capital from foreign funds.

Furthermore, consulting firm McKinsey is expected to have delivered an updated business plan for PPC by the end of December.

All these initiatives, along with electricity tariff hikes, will be included in PPC’s bond issue prospectus to make the utility’s growth prospects as convincing as possible.

PPC, requiring cash injections, reiterates need for tariff hikes

The main power utility PPC, facing relentless pressure ahead of an international bond payment obligation worth 350 million euros in May, is using every available opportunity to reiterate its need for electricity tariff hikes.

Commenting yesterday on PPC’s refinancing needs for the current year, PPC officials indicated the utility would need to resort to existing cash reserves to service the maturing international bond if it fails to access capital markets by May. Pundits have interpreted this as an indirect reference to the need for tariff hikes.

A month earlier, PPC’s chief executive Manolis Panagiotakis linked the utility’s need for tariff increases with an effort to improve its finances before heading to capital markets.

Energy minister Giorgos Stathakis, mindful of upcoming elections, has strongly rejected any tariff hike plans by the state-controlled power utility, but appears more lenient towards a reduction of a 15 percent discount offered to customers paying their electricity bills on time.

If PPC ends up not increasing its electricity tariffs, as appears most probable, it will need to postpone a planned bond issue. Despite this threat, an international road show intended for this issue’s promotion may be launched next month, PPC officials informed yesterday.

PPC has faced sharply increased operating costs over the past year or so. Wholesale electricity prices have reached levels of more than 80 euros per MWh, up from 53 euros last year. This includes the cost of CO2 emission rights purchased by PPC for its lignite-fired power stations, which have skyrocketed to 25 euros per ton from just 5 euros per ton in 2017.

PPC preparing market return with 1Q €300-400m bond issue

The main power utility PPC is planning a return to capital markets with a bond issue expected to range between 300 and 400 million euros in the first quarter of 2019, signalling a return to normality.

The power utility has already hired a financial consultant, now establishing contacts with prospective international investors.

Confirming that the issue’s preparations have reached a far more advanced stage than has been believed until now, PPC’s chief executive Manolis Panagiotakis, speaking yesterday at the Hellenic-American Chamber of Commerce, noted progress in talks with investors.

However, Panagiotakis also pointed out certain investment funds appear unwilling to participate in the forthcoming bond issue due to environmental reasons, not financial. PPC’s portfolio is heavily reliant on lignite-related assets.

The power utility’s first-quarter bond issue will be planned to precede the maturity date of a May, 2014 bond issue and could be staged in London. According to current estimates, the issue’s interest rate is expected to be set below 5 percent, possibly less than 4.5 percent.

The issue’s precise date will depend on an anticipated credit rating upgrade expected at PPC. Standard and Poors has noted a Greece upgrade would prompt a matching upgrade for state-controlled PPC.