Power utility PPC, driven by a favorable report from certified auditor Ernst & Young easing sustainability concerns as a result of the utility’s rescue package worth over 900 million euros, will examine market conditions for a new international bond issue attempt to refinance existing debt with improved terms and also fund growth plans, the corporation’s chief executive Giorgos Stassis has noted.
PPC attempted a bond issue at the end of 2018 but the effort was halted by the then-government’s refusal to approve tariff hikes needed for the state-controlled utility’s rebound from loss-incurring territory.
PPC’s administration expects earnings to increase by 532 million euros in 2020 as a result of recent tariff increases, company officials noted during yesterday’s presentation of first-half results to analysts.
PPC expects a 2018 fourth-quarter balance sheet improvement of approximately 120 million euros, not including a public service compensation (YKO) cash inflow worth 200 million euros and a customer debt securitization initiative.
The securitization plan has been divided into two categories, one for overdue amounts up to 60 days, the other up to 90 days. Investors have asked for more data to submit offers.
A NOME auction scheduled for October will not take place, PPC’s administration informed. A related legislative act is soon expected, it added.
PPC’s leadership also referred to the utility’s decarbonization plan. Stassis, the CEO, said a swifter process is being examined for incorporation into a new business plan to be announced early next year. The utility’s commercial policies would be modernized, he added.
Power utility PPC’s strategic decision to decarbonize and make a dynamic entry into the renewable energy sector is the prospect that interests foreign fund managers most about the utility, judging by the overall response at a series of meetings between PPC chief executive Giorgos Stassis and fund managers in London over the past couple of days.
The PPC boss held meetings with over 30 fund managers as part of a roadshow at the London Stock Exchange.
PPC’s plans to restructure, boost cash flow and sell a majority stake of distribution network operator DEDDIE/HEDNO were also embraced by fund managers representing foreign funds such as Ambrosia Capital, Pictet Asset Management, One Investments, STJ and Schroders. But, without a doubt, the power utility’s plans for a greener future drew the greatest amount of interest.
For years now, green energy investors have found it difficult to fathom why Greece, a country blessed with abundant sunlight and exceptional wind energy potential, is not at the forefront of renewable energy developments, but, instead, missing RES targets.
PPC needs to take the initiative and develop major green investments, otherwise Greece will not establish itself as a key market player in this domain, the fund managers commonly believed.
Many foreign fund managers questioned how PPC would accumulate the capital needed to move ahead with its green plans given the fact that, until recently, it was in frantic search of between 900 and 950 million euros to avoid an unfavorable rating in an imminent report, due September 24, by certified auditor Ernst & Young.
PPC hopes a new business plan being prepared by McKinsey will convince investors and quell these fears.
Though the newly appointed administration at struggling power utility PPC agrees on the previous leadership’s plan for market diversification into the retail natural gas market as a revenue-boosting measure through combined power-and-gas packages, it has decided to delay this effort’s launch, preferring instead to currently focus on passing a crucial report to be delivered by certified auditor Ernst & Young on September 24.
PPC’s previous administration had planned to launch its gas market campaign at the Thessaloniki International Fair, beginning tomorrow.
In view of the auditor’s report, PPC’s new board, led by chief executive Giorgos Stassis, has also decided to delay its preparations for an entry into the electric vehicles market.
Stassis and his associates intend to look at PPC’s forays into the gas and electric vehicle markets as part of a new business plan following the Ernst & Young report and the establishment of agreements with the country’s lenders and the European Commission on electricity market reforms.
PPC believes its prospective gas market revenues have the potential to offset part or all of the utility’s bailout-required market share contractions in the electricity market.
In a study for PPC, consulting firm McKinsey noted the power utility’s gas market activities could end up representing 70 percent of business.
As for the electric vehicles market, PPC signed a Memorandum of Cooperation with Polish company Solaris in 2017. An older PPC business plan also includes partnerships with regional authorities around the country.
Power utility PPC, shaping a more aggressive pricing policy as a result of its need to boost cash inflow, is preparing to abolish most or all of its 10 percent punctuality discount, offered to customers paying their electricity bills on time.
The power utility is also looking to adjust tariffs for various consumption categories, while the implementation of a clause triggering price hikes when CO2 emission right costs exceed certain levels is now seen as a certainty.
State-controlled PPC needs to have finalized its rescue plan by early September, ahead of an upcoming report from Ernst & Young, the utility’s certified auditor, on September 24.
The government wants a reduction of a RES-supporting ETMEAR surcharge included on electricity bills in order to offset electricity price hikes.
PPC’s recently appointed CEO, Giorgos Stassis, who will be officially approved at an extraordinary shareholders’ meeting tomorrow, faces the challenging task of ensuring greater cash inflow for the utility while concurrently reducing surcharges.
Stassis could offer some clarification, during tomorrow’s meeting, on various models being examined by the government.
Power utility PPC’s shareholders will approve the corporation’s new CEO, Giorgos Stassis this Thursday, initiating a crucial period for the struggling corporation, Greece’s biggest, in need of life-saving measures from the state-controlled company’s administration and government.
The details of PPC’s rescue plan must be finalized by September 15, ahead of a report from Ernst & Young, the utility’s certified auditor, expected on September 24. The report will feature observations on the utility’s first-half results. In the lead-up, PPC needs to convince of its potential for a rebound to avoid further unfavorable news from the auditor.
Details of measures aiming to accumulate a sum of 750 million euros for PPC have yet to be finalized, sources informed.
The measures will include an electricity tariff increase as well as the endorsement of a clause triggering hikes when CO2 emission right levels exceed upper limits.
The government wants to offset the tariff hike, expected to be about 10 percent, with a reduction of a RES-supporting ETMEAR surcharge included on electricity bills.
PPC is also expected to securitize unpaid receivables of between 1.5 to 1.7 billion euros, the target being to rake in 400 million euros. The first of two securitization packages is expected to be issued in September or October.
PPC is also anticipating 195 million euros in public service compensation (YKO) returns for 2011. A legislative amendment enabling RAE, Regulatory Authority for Energy, to proceed with the details is needed. Also, the government must decide whether the national budget or electricity consumers will cover the cost of this measure.
Electricity tariff hikes alone will not suffice to ensure power utility PPC raises an additional 750 million euros needed to stabilize the company balance sheet.
The planned tariff hikes, expected to be about 10 percent, promise to rake in a sum of between 400 and 450 million euros, over a year, meaning the energy ministry and the state-controlled utility’s new CEO Giorgos Stassis must apply additional means to raise the missing amount.
This measure, whose implementation is not expected sooner than September, should secure 110 million euros for PPC’s coffers by the end of the year.
Officials intend to avoid bigger electricity bills for consumers by offsetting the tariff hikes through a reduction of a RES-supporting ETMEAR surcharge included on bills. This could prove to be a tricky equation for authorities if payments to renewable energy producers for output are not going to be affected.
Energy ministry officials forecast a RES special account surplus of 200 million euros as a result of higher CO2 emission right costs, but some of this amount could just be nominal.
RAE, the Regulatory Authority for Energy, handling the ETMEAR reduction, will also need to factor in the cancellation of a RES-supporting surcharge for suppliers, which came into effect in January as a result of the RES special account’s surplus.
Authorities will be working against the clock for an overall solution for PPC by September 24, when Ernst & Young, the utility’s certified auditor, is due to issue a new report on the utility’s financial standing. PPC and the energy ministry desperately want to avoid any further unfavorable news on the utility.
PPC is also relying on the return of a public service compensation (YKO) amount concerning 2011 and worth 190 million euros, as well as inflow from the securitization of 400 to 500 million euros of unpaid receivables.
Energy and finance ministry officials, working against the clock, are scrambling to ensure a payment to power utility PPC for an outstanding public service compensation (YKO) concerning 2011 ahead of the next report on the utility’s results by certified auditor Ernst & Young, scheduled for September 24.
Meetings involving energy ministry, RAE (Regulatory Authority for Energy) and finance ministry officials have increased in frequency over the past few days as a solution is sought.
The officials are seeking to determine if the amount, calculated at 195 million euros by RAE, can be covered via the national budget without the need to impose YKO hikes on electricity consumers.
The amount is needed by PPC, struggling with poor finances, if further bad news from Ernst & Young is to be avoided in the next report.
The officials are also looking at whether PPC could receive this amount as one lump sum or through installments, until 2021, to avoid impacting the budget and consumers.
Initial calculations by RAE, the Regulatory Authority for Energy, had estimated a sum of between 160 and 200 million euros before the authority finalized the figure at 195 million euros.
A legislative revision giving RAE full authority over the matter is needed before PPC can receive the amount.
Renewable energy producers appear the likeliest market group to be affected by a government plan for electricity tariff hikes at the state-controlled power utility PPC, needed to boost revenues at the struggling utility, as, to protect consumers, these hikes will need to be offset by a reduction of a RES-supporting ETMEAR surcharge included on electricity bills.
All calculations strongly suggest that no other combination than a reduction of the ETMEAR surcharge is possible to avoid higher electricity prices for consumers.
Officials are scrambling for a finalized formula ahead of a September 24 report by Ernst & Young, PPC’s certified auditor, to avoid further bad news on the power utility’s condition.
Officials at the energy ministry, working on the plan daily, see a negative outcome for RES producers as the least detrimental alternative because they constitute a minority group of far less political cost compared to the country’s millions of electricity consumers.
Power utility PPC’s newly appointed chief executive Giorgos Stassis, preparing to officially assume his post on August 22, faces an enormous task comprised of a series of hurdles that will need to be cleared by September 24, when Ernst & Young, the utility’s certified auditor, is due to issue a new report on the utility’s financial standing.
Much will need to be accomplished over this one-month dash if the auditor is to leave out from the report unsettling news on the power utility’s sustainability.
The new PPC boss will need to strike a fine balance in order to increase electricity tariffs, needed to boost the utility’s revenues, without burdening consumers, the idea being to offset these tariff hikes by reducing a RES-supporting ETMEAR surcharge included on electricity bills. However, this could prove tricky as renewable energy producers, too, must not be affected.
It remains to be seen if the collective cash inflow of the upcoming measures will be enough to stabilize PPC.
State-controlled PPC is anticipating a series of cash injections endorsed by the government, including a 190 million-euro return for public service compensation (YKO) concerning 2011.
Also, PPC also intends to securitize unpaid receivables worth 2.7 billion euros. This securitization plan, shaped by PPC’s previous administration, could lead to collections of between 400 and 500 million euros, but they are not expected to start coming in until October.
The electricity tariff increase, which could be around 10 percent, would boost PPC’s annual turnover of 4.7 billion euros by 450 million euros. The hike will most likely be implemented in September, meaning just 110 million of this amount would be injected into PPC’s coffers by the end of this year.
A main power utility PPC annual report and certified auditor EY have both warned of an uncertain future for the utility that may require additional protective measures.
Reduced sales, as well as elevated losses and debt have increased the sustainability risk concerning PPC’s business activities, EY noted.
The auditor did not go as far as to warn of a bankruptcy risk at PPC but noted that various measures already taken will ensure the company’s future for the next twelve months. Additional measures, however, could be needed if CO2 emission right costs continue to rise, the auditor stressed.
The absence of cost-recovery mechanisms combined with a continued cash flow reduction and short-term liabilities that exceed short-term demands has left the company exposed to the possibility of sharp price increases, internationally, for CO2 emission right costs and wholesale electricity, PPC’s board noted in its annual report. Additional measures will be needed if such developments take place, the report added.
CO2 emission right costs yesterday struck a new high of 27.38 euros per ton.
Gas utility DEPA is currently engaged in talks with the professional services domain’s four biggest players, PwC, KPMG, Ernst & Young and Deloitte, as part of its preparations for new legal action against troubled ELFE (Hellenic Fertilizers and Chemicals), through which a forced administration request will be made.
DEPA is believed to be examining offers received from each one of the Big Four firms, as they are known, to act as administrators of ELFE, now owing close to 130 million euros to the gas utility.
Just days ago, an Athens Court of First Instance lifted temporary protection measures offered to ELFE, which had enabled the beleaguered producer to issue six-month post-dated cheques to cover DEPA gas supply since 2016, despite DEPA demands for cash payments, based on a decision by company shareholders.
The court verdict paves the way for DEPA to request that ELFE be placed under forced administration. This will enable an administrator to act in the best interest of creditors.
ELFE’s debt owed to DEPA has continued to rise as it is subject to a 7.25 percent interest creating additional amounts of approximately 200,000 euros per month.
Solar enegy sector-related employment in Greece has the potential to increase by 403 percent between 2016 and 2021, which would represent Europe’s second-largest rise, a new Ernst & Young study has forecast.
Spain is predicted to possess the greatest growth potential, this being 471 percent for the same period, the study noted.
Poland was ranked third with a 381 percent solar sector growth capacity between 2016 and 2021, according to the Ernst & Young study.
As for Europe, overall, a total of 175,000 additional solar energy sector work positions can be added between 2016 and 2021, according to the study. Such a development promises to end the sector’s subdued activity of recent years and spur new facility development and RES auctions.
The Ernst & Young study also noted that increased RES penetration in Europe’s energy mix, to a level of 35 percent in 2030, from 27 percent at present, would create an additional 120,000 solar energy sector jobs.
The Ernst & Young study forecast that the 1,022 solar energy sector-related jobs registered in Greece in 2008 and the 2008 jobs registered last year can grow to 10,094 by 2021. This would boost the market’s value from 48 million euros in 2016 to 264 million euros in 2021.
Further capacity would need to be installed if such growth figures are to be achieved.
The participation of main power utility PPC’s lignite mines in the “disruption management” plan’s two recent auctions prompted a reaction from disgruntled industrialists as a result of the limited capacity amount that was left over for industrial enterprises, and the consequent flattening of prices caused by the utility’s involvement in the auction process.
PPC’s decision to seek “disruption” plan capacities through the auctions linked to the “disruption management” plan – introduced to enable energy cost savings for major-scale industry in exchange for shifting energy usage to off-peak hours whenever required by the operator – clearly indicated that the utility is not at all interested in reducing its operating costs.
PPC submitted bids worth 5 euros per MW at these auctions, a long way off the nearest bid of 1,000 euros per MW.
PPC’s complete disinterest for more efficient cost-related management of its mines was made all too clear at the “disruption” plan auctions. The approach, however, did not come as a surprise for energy market officials who have closely monitored how PPC has managed its mines over the years. The strategy has been to bloat expenses with disregard for the effects on operating costs.
A cost study conducted by the multinational professional services company Ernst & Young noted that PPC’s mines paid 78.2 million euros for 924,288 MWh of electricity supply in 2012, or an average supply price of 84.6 euros per MWh. The study stressed that the utility’s mines, as a high-voltage electricity consumer, had the potential to pay 65 euros per MWh, or 23.1 percent less. This, alone, would have saved the mines 18 million euros in operating costs.