PPC, reducing workforce, boosts voluntary exit plan bonus by €2,000

Power utility PPC, looking to decrease its workforce by some 3,800 persons, from 15,300 to 11,500 employees until 2024, has increased the bonus payment offered through its voluntary exit plan by 2,000 euros to 7,000 euros.

No employees will be dismissed nor will salaries be cut, the power utility’s chief executive Giorgos Stassis promised during a weekend visit to Ptolemaida, west Macedonia, in the heart of northern Greece’s lignite-dependent area.

PPC is planning to withdraw all existing lignite-fired power stations over the next three years as part of the government’s decarbonization plan for the country.

Under the current PPC retirement plan, departing staff members receive a 15,000-euro payment, not including the bonus amount.

The PPC boss, speaking at an event staged by local authorities in the west Macedonia region, stressed company employees will be provided alternatives. Options will include transfers to other company divisions, retraining as well as voluntary exits for staff eligible for retirement, Stassis explained.

PPC is awaiting a finalized business plan from McKinsey to decide on the exact number of its staff exodus.

Gov’t to hasten hydrogen market development amid investment interest

Procedures leading to the establishment of Greek hydrogen market appear set to progress faster than expected, the government’s strategic decision for greater renewable energy penetration of the energy market, investment interest and Germany’s upcoming EU presidency being catalysts. The government will aim to implement related regulatory framework by July.

Hydrogen tariffs, sector support, technical prerequisites for the infusion of hydrogen into the natural gas network, as well as the determination of maximum mix levels for the two fuels are among the issues included in the new framework, to be accompanied by a sustainability study on related facilities.

Feasibility studies examining the level of competitiveness of such infrastructure as well as costs do not exist at present. They need to be conducted so as to enable authorities to determine the number of units that can enter the Greek market.

Hellenic Petroleum (ELPE) has publically expressed interest to develop the country’s first hydrogen refueling station for vehicles. Greek utility DEPA and Italy’s Snam have also expressed interest. Snam reiterated its interest at a New Year company event staged yesterday by Greek gas grid operator DESFA. Snam is a main shareholder, along with Enagas and Fluxys.

A recent McKinsey study commissioned by Snam for the Italian market showed that hydrogen can cover 23 percent of domestic energy demand in 2050 amid a 95 percent decarbonized market.

All Ptolemaida V options now being officially examined

A development decision on power utility PPC’s planned lignite-fired Ptolemaida V power station is now officially preoccupying authorities, examining various options, including a fuel switch to natural gas.

All appears possible at this stage. Besides an in-progress report from the McKinsey consulting firm, examining all possible scenarios for the unit along with PPC, Prime Minister Kyriakos Mitsotakis made reference to the matter for the first time yesterday while speaking at the UN Climate Change Summit. He spoke of total decarbonization in Greece by 2028.

Echoing this remark, energy minister Costis Hatzidakis left open the possibility of a zero-lignite energy mix by 2030 when asked if Greece’s new National Energy and Climate Plan, to soon be submitted to Brussels, would include such a target.

Hatzidakis hinted that such a prospect is possible. However, he did not commit on how the government would choose to handle Ptolemaida V.

“If you were to ask me about the existing lignite-fired power stations, I would have answered that we will have a clear picture on how many of these units are sustainable in three to four weeks,” Hatzidakis noted. “But this is not so for Ptolemaida V, where the matter is very complicated. At this stage, nobody can talk of an optimal solution.”

Contrary to the previous PPC administration, the power utility’s new leadership, headed by Giorgos Stassis, does not consider the Ptolemaida V investment a certainty. However, Stassis and his associates are also aware of how complex the matter is, making abandonment difficult.

For example, abandoning the Ptolemaida V project would severely impact the northern region’s local economy, dependent on lignite activity. Also, PPC has already spent close to 950 million euros. Turbine and generator orders have arrived, while agreements, including EPC contracts, have been signed.

As for the thoughts of a fuel switch, from lignite to natural gas, PPC would be better off building a new gas-fired power station in Lavrio, southeast of Athens, close to gas sources and urban centers consuming considerable electricity amounts.


PPC scrutinizing Ptolemaida V power station prospects

Power utility PPC’s new leadership has requested a study examining all data and the potential of its prospective Ptolemaida V power station from consulting firm McKinsey, already commissioned with a wider task of preparing the utility’s new strategic development plan.

The previous PPC administration had ruled out abandoning the Ptolemaida V project or a fuel switch from lignite to natural gas. Though these scenarios will be scrutinized in McKinsey’s study, well-informed sources, in comments to energypress, noted both prospects are highly unlikely.

PPC has already spent between 900 and 950 million euros, needing a further sum of approximately 400 million euros, while turbines and generators have already been ordered and received, sources pointed out.

Also, a fuel switch for Ptolemaida V at this stage would be like developing a natural gas-fired facility from scratch, the only savings being certain building and land costs, estimated to be worth a maximum amount of 50 million euros, the sources added.

Even so, PPC’s chief executive Giorgos Stassis will refuse to consider the Ptolemaida V project a certainty unless the financial impact of various factors – including non-eligibility for CAT remuneration and higher CO2 emission right costs – has been thoroughly examined.

“We don’t know what the preferred choice will be, but must examine all scenarios without any taboos,” a highly ranked PPC official told energypress.

PPC took a decision to develop Ptolemaida V back in 2010 for a variety of reasons, including national energy security and continued lignite activity in Greece’s west Macedonia region.


Foreign funds find appeal in PPC’s green energy plans

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.

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.

McKinsey’s new PPC business plan to feature major changes

Consulting firm McKinsey, set to prepare a new five-year business plan for power utility PPC, will base its proposals on three key factors: CO2 emission right costs;  lignite-fired units that should remain active or withdrawn; and the resulting impact of these decisions on the grid’s sufficiency.

The study, whose preparation will soon get underway, is expected to end up featuring major changes compared to a previous set of proposals as PPC’s current financial condition has deteriorated compared to early in 2018, when the previous business plan was delivered.

It had called for an improvement of the corporation’s operating profit by 500 million euros over a five-year period. The current demands are far more challenging.

The previous business plan, which was based on eight fronts, placed emphasis on renewable energy investments, new business activities, international expansion and overall investments totaling 3.9 billion euros, approximately half of which would have been channeled into networks and the RES sector. A 23 percent share of the investments was planned for the construction of a new lignite-fired power station, Ptolemaida V. Major changes are now expected along all these fronts.

A tougher stance on unpaid receivables; a plan entailing the partial sale of DEDDIE/HEDNO, the distribution network operator; and pricing policy adjustments are expected to feature in the new plan.

McKinsey’s examination to determine which lignite-fired power stations must keep operating or be withdrawn is expected to generate a voluntary retirement list of 2,000 employees.

If so, severance pay costs for PPC will amount to 30 million euros, as employees are currently entitled to 15,000-euro payments for early retirement.



PPC to delay gas, electric car plans for after auditor report

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.  

Older McKinsey plan for DEPA sale favored by country’s new administration

An gas utility DEPA privatization plan proposed last year by consulting firm McKinsey but rejected by the utility’s previous administration for a more complicated and, ultimately, less achievable alternative is re-emerging as the likeliest option to be adopted. Certain adjustments and updates may be made to the plan.

The McKinsey plan now back in favor proposed the establishment a holding company to house three subsidiaries representing the utility’s commercial, network and international project interests.

This plan would involve offering stakes in the commercial and network subsidiaries to investors while the international projects division would remain in the holding company portfolio.

The McKinsey plan proposes the sale of a 66 percent stake of the commercial subsidiary and surrender of its management, the sale of a minority stake in the networks subsidiary, as well as the sale of a stake of a holding company through the bourse.

The country’s previous government favored a DEPA split plan separating the utility’s commercial and infrastructure interests into DEPA Trade and DEPA Infrastructure. This plan, which would have involved the sale of a majority stake in DEPA Trade and, later on, a minority stake in DEPA Infrastructure, was plagued by delays all the way to last month’s election that brought the main opposition New Democracy party into power.

Finalized decisions on the new DEPA privatization plan are expected this coming autumn, in agreement with the country’s lenders, as the sale is on the bailout-required list of privatizations.





Targeted PPC staff exit plan a must to avoid functional issues

A voluntary exit plan envisioned by the new energy minister Costis Hatzidakis for power utility PPC should carefully target a pool of around 2,000 workers primarily maintained as back-up staff rather than specialized, experienced personnel working at the utility’s technical and commercial divisions, so as to avoid any operating issues, company sources have informed.

A plan prepared by consulting giant McKinsey for PPC proposes the reduction of a similar number of staff.

The voluntary exit plan, whose details will need to be honed by PPC’s next chief executive, will cost no less than 30 million euros as each outgoing employee stands to receive severance pay of 15,000 euros.

Precision will be needed when selecting staff for the voluntary exit plan to avoid any operational disruptions at the already-troubled power utility, sources highlighted.

PPC currently employs a total of 9,500 staff members, 65 to 70 percent of these, or 3,000 to 3,500, holding technical positions. A further 800 to 900 are employed in the commercial division, while the back-up staff numbers roughly 2,000 persons.

At present, many PPC units do not possess younger staff possessing sufficient technical skills to replace experienced older personnel. Bailout restrictions have prevented state-controlled PPC from hiring new personnel, which has created a shortage of younger employees ready to take on responsibilities.

“This means that if, for example, five staff members stationed at a island power unit employing ten persons were to leave after reaching retirement age, then this unit would definitely not be able to continue operating,” one highly ranked PPC official warned.

PPC’s payroll cost totaled 790 million euros last year, which works out to an average of 49,000 euros per employee, a costly figure prompted by a high average age of over 50 and correspondingly elevated pay packages.




McKinsey voluntary exit plan for PPC reentering picture

Besides cash injections and capital reinforcements envisioned through the sale of a minority stake of network operator DEDDIE/HEDNO, among other moves, cost reductions are also a key part of the government’s rescue plan for the power utility PPC.

Energy minister Costis Hatzidakis, who delivered his PPC rescue plan in Parliament yesterday, included a voluntary exit plan, to be aimed at retirement-age workers, among the measures.

This proposal is not new. Various versions of differing scale were included in older business plans prepared by McKinsey on behalf of PPC.

A revised voluntary exit plan, including incentive details and schedule, will need to be shaped by PPC’s new administration, expected to be appointed within the current week, in collaboration with the energy ministry.

Of the series of older McKinsey staff-reduction proposals delivered, a milder – by comparison – plan was favored. It envisioned 2,000 job cuts by 2022 through the gradual withdrawal of retirement-age personnel.

An initial McKinsey plan was far tougher, proposing 1,300 job cuts through asset disinvestments; 500 cuts through the withdrawal of the outdated Kardia and Amynteo power stations; no further job contract extensions for 1,000 persons; 900 job cuts through retirement; as well as a voluntary exit plan for 3,000 workers.

PPC widens voluntary exit plan eligibility, limits food allowance

The main power utility PPC’s severance pay of 15,000 euros offered to employees agreeing to depart through the corporation’s voluntary exit plan will now also be made available to staff members who have been employed at the company for at least 25 years, not just older personnel eligible aged at least 62 and eligible for retirement, PPC’s administration has decided at a board meeting.

The measure, part of a PPC personnel restructuring plan prepared by the consulting firm McKinsey that includes more flexible labor terms for new and outgoing employees, incentives and staff redistribution, aims to lower the average age of the power utility’s workforce, currently numbering approximately 10,000, to less than 50, the current average age.

So far, the voluntary exit plan has been accepted by 273 employees at two lignite-fired power stations, Megalopoli and Melit, included in PPC’s bailout-required disinvestment of lignite units, as well as a further 220 employees at other divisions and units.

It remains to be seen if PPC will succeed in reducing its payroll by approximately 4,000 employees for cost savings of 330 million euros, as McKinsey has advised in its business plan for the Greek power utility.

As part of the corporation’s wider cost-reduction measures, the PPC board has also decided to reduce a food allowance offered to employees to 3.40 euros per day from its previous level of 6 euros per day over the next three years.

PPC to launch retirement offer as part of restructuring effort

The main power utility PPC is set to launch a personnel restructuring plan, as part of a business plan prepared by McKinsey consulting firm, beginning with a voluntary retirement offer for 220 employees, expected to be presented at a company board meeting today.

PPC’s retirement offer will be extended to ageing staff members who are eligible for pensions but have opted to carry on working.

Besides severance pay of 15,000 euros for each outgoing employee, the plan is believed to also include a 5,000-euro exodus incentive for staff members who choose to register for the voluntary retirement plan by the end of this year.

Retirement-age employees who neglect the offer will be dismissed and their resulting compensation payments will be restricted to amounts required by Greek labor law, sources noted.

The 220 employees targeted for the voluntary retirement offer stem from PPC’s labor-intensive categories and are over 60 years of age, according to sources. Some workers are over 65 years old, it is believed.

McKinsey’s business plan for PPC recommends expense reductions of 330 million euros to be achieved through the departure of approximately 4,100 employees. The majority of these workers, numbering roughly 3,500, are currently stationed at lignite-fired power stations and mines included in a bailout-required sale package of lignite units representing 40 percent of the utility’s lignite capacity.

PPC board set to adopt vital natural gas market entry plan

The main power utility PPC is expected to officially adopt a natural gas market entry and growth plan at a board meeting today with the aim of compensating for a shrinking electricity market presence.

PPC’s entry into the gas market is one of eleven strategic moves established following consulting firm advice from McKinsey, Boston Consulting and Samaras & Associates.

The power utility has lofty expectations from the plan, seen as one of its most vital and necessary market adjustments whose objective will be to partially or fully cover lost ground prompted by PPC’s bailout-required contraction in the retail electricity market and production.

In its report, McKinsey stresses that PPC needs to offer a wide range of energy services and products, including combined electricity and natural gas packages. The consulting firm believes the natural gas sector has the potential to represent approximately 70 percent of PPC’s total market value.

PPC’s initial objective will be to put a halt on shrinking sales before commencing its quest to regain lost ground.

Some 600,000 consumers are currently linked to Greece’s natural gas network while an annual growth rate of between 30,000 and 40,000 has been forecast for the next few years.

PPC seeking two deputies to fit McKinsey’s new business plan

Main power utility PPC has launched a recruitment process for two deputy executives  with advanced academic qualifications and experience of at least three years at major organizations or corporations, local or international, as part of necessary corporate and strategic adjustments, based on a proposal prepared by consulting firm McKinsey.

Interested parties have been given until November 30 to submit applications and detailed resumes accompanied by a letter explaining why they believe they are the appropriate candidates, according to a related announcement made by PPC’s personnel department.

The prospective deputies to be hired will fill voids left by Konstantinos Dologlou, who passed away in July last year, and Stavros Goutsos, whose term at PPC expired in April. Their positions have since remained vacant.

The tasks of the two former deputies, ranging from commercial, personnel, strategic, growth, corporate restructuring, mining and production matters, have been temporarily taken on by the power utility’s general managers and CEO Manolis Panagiotakis.

RES sector a vital growth factor, consultant advises PPC

The main power utility PPC needs to invest in the renewable energy domain as a fundamental growth tool, consulting firm McKinsey has advised in a business plan prepared for its client.

PPC should aim for a RES capacity of 2 GW to 2.5 GW between 2030 and 2035; increase its share in this sector from 3 percent to 10 percent by 2022; represent approximately 25 percent of new RES installations for the grid; boost its EBITDA operating profit stemming from renewable energy by a level of between 73 and 84 million euros by 2022; restructure its PPC Renewables subsidiary in terms of ownership and capabilities; and set up a specialized project development team at PPC Renewables.

PPC Renewables must aim for growth not only through PPC-owned projects but also partnership ventures involving the utility’s subsidiary and other firms, the business plan notes.

The plan also calls for 1.5 to 2 billion euros of PV investments for roughly 2.2 GW of additional solar capacity; wind energy investments of 1.8 to 2.4 billion euros for a resulting additional capacity of 1.4 to 1.9 GW, biomass investments worth 1.5 to 2.1 billion euros for 0.6 to 0.8 GW, as well as geothermal investments of 2.4 to 3.2 billion euros for 0.5 to 0.7 GW.

PPC may seek compensation for power station withdrawals

The main power utility PPC is considering seeking compensation for the undepreciated value of power stations on islands to stop operating as a result of the launch of grid interconnection projects.

This detail has been included in PPC’s Strategic and Business Plan for 2018 to 2022, prepared by consulting firm McKinsey.

One chapter in the consulting firm’s plan, totaling approximately 80 pages, focuses on the repercussions to be experienced by the power utility as a result of interconnection projects concerning Crete, Rhodes, the Dodecanese and the Cyclades.

It has been estimated by McKinsey that PPC will need to seek compensation worth a total of 269 million euros, of which 211 million concerns the withdrawal of diesel-fueled power stations in Crete’s Hania, Linoperamata and Atherinolakos regions.

The compensation amount concerning power station withdrawals on Dodecanese and Cyclades islands has been estimated at 38 million euros, while a further 20 million euros has been linked to the undepreciated value of units to stop operating on Rhodes.




PPC, facing €3.5bn unpaid bills amount, boosts collection effort

Intensifying its debt collection effort over the past month, the main power utility PPC, whose unpaid receivables figure has reportedly risen to over 3.5 billion euros, has ordered some 340,000 customers to settle unpaid electricity bills and plans to soon forward thousands more payment orders, all signed by legal officials.

Consumers who have failed to make payments over two consecutive four-month billing periods are being targeted, regardless of amounts, sources informed.

The initiative has drawn many household and business consumers to the power utility’s outlets for immediate settlement of unpaid amounts or, most commonly,  payback program arrangements not exceeding 24 monthly installments.

Payback plan terms being offered to customers are not standardized but shaped in accordance with individual customer profiles and track records.

Debt collection services firm Qualco, hired by PPC for unpaid receivables support, has joined the effort by sub-contracting fellow debt collection and law firms to notify customers of their electricity bill arrears. Qualco has pledged to collect 450 million euros for PPC over the next nine months.

A PPC business plan prepared by consulting firm McKinsey has set a debt collection target of between 690 million and 1.1 billion euros.


McKinsey advises PPC to make seven moves for EBITDA boost

The main power utility PPC can add between 420 and 550 million euros to last year’s operating profit performance of 805 million euros by 2022 if it makes improvements in seven areas, consulting firm McKinsey, hired by the power utility to assist in its reshaping, has advised.

Further penetration of the renewable energy sector, improved utilization of mines and power stations, grid sufficiency compensation, less generous pricing policy adjustments, the development of a more effective distribution network, an improved collections record, and supplementary operations would lead PPC to higher operating profit figures, the consulting firm noted in its business plan proposal, obtained by energypress.

However, such initiatives would require PPC to make considerable investments worth between 1.15 billion and 1.45 billion euros, according to the McKinsey plan.

The consulting firm proposes a more aggressive RES policy from PPC as a top strategic priority so that its portfolio of installed renewable energy projects can reach 6,000 MW by 2022. This would demand investment capital of about 700 million euros.

As a secondary move, the McKinsey report recommends a more aggressive utilization policy by PPC at its power stations and mines. The investment costs here are estimated to be lower and should not require more than 21 million euros, but this move could provide PPC with an additional 220 million euros of annual operating profit by 2022, half the overall objective, the McKinsey report estimates.

CAT remuneration for lignite units, as compensation for grid sufficiency, could add a further 50 million euros to PPC’s annual EBITDA figure, according to the McKinsey proposal.

Distribution network investments of between 424 million and 728 million euros can add between 35 million and 81 million euros, annually, to the power utility’s operating profit, the consulting firm noted as a fourth move.

Listed as a fifth priority, pricing policy adjustments by the state-controlled power utility, which requires no capital but would carry considerable political cost, could improve PPC’s annual operating profit by amounts between 75 and 97 million euros.

Though the power utility’s CEO Manolis Panagiotakis has denied rumors of a prospective reduction to a 15 percent discount offered to customers meeting electricity bill deadlines, the McKinsey report believes this policy needs to be revised to bolster the company’s profit performance. Electricity bill revenues could be boosted by as much as 100 million euros, the consulting firm believes.

An improved electricity bills collection record could add between 690 million and one billion euros to PPC’s annual operating profit by 2022, while supplementary operations could add a further 18 million euros to the EBITDA figure, the reported added.

PPC union attacks utility over unit upgrades, consultation cost

Genop, the power utility PPC’s main union, has unleashed a wide-ranged attack on the utility’s administration by condemning upgrade projects of two pivotal power stations as well as the eventual cost of consulting services provided by McKinsey.

The union group also criticized the leadership’s handling of a bailout-required disinvestment of PPC lignite units and reiterated threats to intensify its protest activity with the aim of preventing the sales of lignite-fired power stations and mines, representing 40 percent of the power utility’s overall lignite capacity.

Genop alleged that serious problems hang over upgrades conducted at the Agios Dimitrios III and Agios Dimitrios IV power stations, planned to play crucial production roles at PPC following the disinvestments, while adding that high-cost desulphurization work at the facilities in not making good progress.

If these allegations are true, then PPC could have trouble operating the power stations as of 2020, following the end of an exemption to an EU law concerning power station emission limits for high-polluting units.

Also, work at Ptolemaida V, a new unit, is well behind schedule, Genop contended. This investment may not be sustainable if CAT payments for production are not secured, the union warned.

In its criticism of the amount paid by PPC to the consulting firm McKinsey for a business plan, the Genop union group alleged an initial 1.2 million-euro cost for the consulting services ended up reaching 1.8 million euros.

McKinsey was paid an additional 600,000 euros for a six-month extension to its contract with PPC as its initial report, presented in February, did not include crucial issues such as the power utility’s debt restructuring plan, completed later, the union alleged.



NOME record price to prompt tariff hikes, exporters unfazed

The record price level of 48.8 euros per MWh reached at yesterday’s NOME auction will most likely force suppliers to raise prices offered to consumers, market officials agree.

Though this price level does offer local electricity suppliers protection against dangers stemming from rising wholesale electricity prices both in Greece and abroad, it does not provide independent suppliers any leeway to undercut prices offered by the still-dominant main power utility PPC.

The power utility must reduce its retail electricity market share to less than 50 percent by 2020, according to the bailout agreement.

The diminished ability for true competition in Greece’s retail electricity market once again brings to the fore PPC’s 15 percent discount offer for punctual customers, introduced two years ago.

However, unlike previous reactions, the discount’s removal is now not only being called for by independent electricity suppliers but also being considered by PPC.

The power utility’s chief executive Manolis Panagiotakis has not ruled out such a move, while a business plan prepared for PPC by consulting firm McKinsey stresses a need for the client to boost revenues by raising customer tariffs.

Should PPC end or revise downwards its 15 percent discount offer, all suppliers can be expected to respond by increasing their tariff price levels. Over the past couple of years, independent suppliers have had choice but to adjust their tariffs based on standards shaped by PPC’s overaggressive pricing policy.

Besides the role played by local suppliers seeking to cover their domestic market needs, NOME prices were also pushed up yesterday by traders who sought to buy for prospective exports to foreign markets offering considerably higher prices.

Evidently, existing NOME auction regulations are insufficient, as was highlighted by the large quantities acquired yesterday by participants with export activity in mind.

A move by RAE, Regulatory Authority for Energy, on the eve of yesterday’s auction, to summon five suppliers to hearings over NOME export abuse suspicions linked to previous auctions, which could lead to fines, did little, or nothing, to thwart such future intentions at the latest auction.




McKinsey delivers challenging targets for PPC’s transformation

The main power utility PPC will need to increase revenues, limit expenses and drastically reduce its debt level for a sustainable and robust future, consulting firm McKinsey, commissioned by the Greek power utility, has proposed in a project compass setting challenging targets for the firm.

To meet these targets, PPC will need to broaden its foreign market exposure, transform into a more functional enterprise and manage expenses with greater effectiveness.

In a company announcement, PPC avoided including the full details of the McKinsey report’s proposals, whose implementation would require electricity tariff hikes and job cuts, but instead opted to present their gist in more general terms.

Taking into account certain figures provided in PPC’s announcement, the power utility’s operating profit will need to increase by approximately 500 million euros to reach a level of between one and 1.1 billion euros proposed by McKinsey. Also, the power utility’s debt will need to be reduced to 2 billion euros from 3.9 billion euros for a sustainable EBITDA/debt ratio.

RES sector and network investments proposed in the report – to counter an anticipated drop in sales as a result of the bailout-required market share contraction targets to less than 50 percent by 2020, as well as PPC’s anticipated electricity generation drop due to obligations concerning a disinvestment of lignite units and withdrawal of older units representing 1,200 MW – will not be able to deliver direct results.

Favorable developments for PPC concerning CAT payments, NOME auctions and a lower supplier surcharge appear insufficient to help the power utility increase its operating profit to the level of between 1-1.1 billion euros proposed in McKinsey’s project compass. Also, proposals for reduced expenses in production, at mines and related activities will not be enough to help boost the firm’s operating profit to such a level.

This will inevitably create a need for tariff revisions at PPC, the most probable move being its scrapping of a 15 percent discount offered to punctual customers.

The McKinsey report proposes a medium-term installation of RES facilities measuring 600 MW by 2022 and over 1,500 MW by 2030, which would represent between 20 and 25 percent of PPC’s overall production capacity. PPC’s renewable energy track record suggests such figures will be difficult to achieve.


PPC units sale second-round deadline set for October 7

Participants through to the second round of the main power utility PPC’s bailout-required sale of lignite mines and power stations representing 40 percent of the utility’s overall lignite capacity have been given 90 days, as of July 7, to submit binding offers, according to the second round’s terms, just revealed to qualifiers.

This sets an October 7 deadline for what represents the first major step to be taken by the power utility towards its future role in the energy market.

The corporation’s overall restructuring, to be based on a new strategic plan being prepared by PPC with consulting firm McKinsey – commissioned by the power utility last year – will represent the second, and most fundamental, step towards PPC’s future shape and role.

McKinsey delivered its plan last month following a six-month extension that was needed as a result of reactions by the power utility and energy ministry against certain proposals.

The consultant’s strategic plan, in its finalized form, will be presented to PPC’s board today, according to sources. Adjustments are believed to have been made as a result of major developments at PPC, including the refinancing of a loan extended to PPC by the country’s main banks.

The main aspects of the consultant’s draft plan, parts of which were leaked earlier this year, are expected to remain intact. These include recommendations for a turn by PPC to new business activities, including in the RES and natural gas markets, as a means of offsetting revenue losses as a result of the lignite unit sale and market share contraction concerning electricity supply; improved efficiency in various sub-sectors; and better utilization of personnel.

An initial McKinsey recommendation for tariff hikes, which would limit the benefits of a 15 percent discount offered by PPC to punctual customers, is expected to be limited following a reaction by the energy ministry.

Energy ministry rules out PPC tariff hikes, as proposed by McKinsey

Main power utility PPC electricity tariffs will not be increased, as the utility has been advised by consulting firm McKinsey, energy ministry sources have told energypress.

McKinsey, commissioned by PPC for guidance in shaping a new strategic plan, has pointed out a need for the power utility to either disrupt its 15 percent discount offered to punctual customers or increase tariffs for certain consumer categories as a means to boost revenues.

Ministry officials have told energypress that the government will not, under any circumstances, accept this advice for the state-controlled power utility.

According to McKinsey, the utility’s adoption of either of the two proposals is essential as no other revenue-boosting solutions are available.

The consulting firm also noted that PPC’s net debt to operating profit ration needs to be restricted to 4:6 if the power utility is to regain sustainability. PPC will need to generate an additional profit amount totaling 400 to 550 million euros by 2022, or an extra 100 million euros per year, if this ratio adjustment is to be achieved, McKinsey has estimated. However, a profit increase of such magnitude without tariff increases is not possible.

In its report, the foreign consulting firm appears to have fully rejected PPC’s sustainability plan as envisioned by the Greek government.

Instead, the report highlights an alarming reality in which the power utility’s net debt is eight to nine times over its operating profit level. Ratios at equivalent European corporations such as RWE, ENGIE, EON and EDF, are considerably lower.

The McKinsey report anticipates revenues of no more than 100 million euros for PPC through its imminent bailout-required sale of lignite units as a result of the EU’s decarbonization policy.

The consulting firm, in its report, also proposes a voluntary retirement plan for 2,000 PPC employees.


PPC’s profit to debt ratio not sustainable, McKinsey finds

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.