Favorable report encourages PPC to reconsider bond issue

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.


First round of new ministry, lender talks this Wednesday

The current financial standing of state-controlled power utility PPC, effort  to reduce the power corporation’s market share, competition in the electricity market, target model progress, and prospective energy utility privatizations will all feature on the agenda of the recently appointed energy ministry’s first official meeting with the country’s lender representatives, scheduled for this Wednesday in Athens, sources have informed.

Energy minister Costis Hatzidakis will participate in the meeting but the country’s lenders will not be represented at the highest level, the sources added. The energy minister’s participation at the meeting Wednesday highlights the political significance of the PPC rescue effort for the government, the sources noted.

Finalized decisions are not expected during Wednesday’s negotiations. Talks are expected to run until mid-November. A Greek post-bailout  appraisal has been deferred until then as a result of European Commission personnel changes following the European elections last May.

This Wednesday, the energy ministry will inform the country’s lenders on the results of a first round of measures taken by the new Greek government to prevent PPC’s collapse.

A government decision to abandon NOME auctions, introduced about three years ago to offer lower-cost wholesale electricity to independent players, will also be officially announced at Wednesday’s meeting. This measure has cost PPC approximately 600 million euros since its launch, according to Hatzidakis, the energy minister.

The energy ministry officials will also seek a revision of a PPC market share contraction agreement, included in the bailout terms, requiring the utility to reduce its retail market share to less than 50 percent by the end of this year. It is not yet clear if the lenders will accept this request and, if so, what the replacement plan could be.

The key aspects of a government plan for swifter decarbonization, including the closure of PPC’s Amynteo and Megalopoli III power stations; planned efforts for no further target model delays; as well as privatization plans concerning gas utility DEPA and Hellenic Petroleum ELPE will also be discussed Wednesday.

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.

Additional cash needs at PPC to end up burdening consumers

Power utility PPC requires a cash injection of between 800 and 900 million euros, considerably higher than an initial estimate of 750 million euros, to stabilize its troubled finances, the corporation’s new chief executive Giorgos Stassis indicated yesterday.

This increases the likelihood of measures that could burden consumers by as much 150 million euros.

The termination of PPC’s 10 percent punctuality discount benefiting about four million consumers – of the utility’s seven million in total –  paying their electricity bills on time is seen as one definite source for this needed amount. The discount’s cancellation will increase PPC’s annual turnover by roughly 150 million euros, it is estimated.

Officials at state-controlled PPC and the energy ministry have been looking for a formula that could neutralize the overall cost-effect for consumers. But yesterday’s revelation by the new CEO of even greater cash needs at the utility suggests this will be difficult to accomplish.

Electricity tariff increases combined with a reduction of a RES-supporting ETMEAR surcharge included on power bills will not work given PPC’s need of 800 to 900 million euros.

The urgency of the financial situation at PPC, Greece’s biggest corporation and the backbone of the country’s energy system, requires swift action. Tariff revision decisions will be finalized on August 30 and implemented as of September 1, according to sources.


PPC’s new boss faces tough sprint until September 24

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.



Conditions ripening for PPC breakaway from state restraints

Power utility PPC’s ability to operate amid a fully competitive market without Greek State dependencies will be a crucial factor in its plan to restructure and restart.

The utility’s transformation has been on the cards for quite some time but conditions now seem ripe for all the talk to be put to action.

PPC’s exemption from slow-moving public contract procedures when needing to conduct business practices such as ordering new mechanical equipment appears to be one of the simpler tasks among the various tasks ahead.

Energy minister Costis Hatzidakis appears to agree on the need for a change in this domain.

It has become blatantly clear that state-controlled PPC cannot keep functioning in a competitive market when it takes the company months to complete orders and purchases of needed equipment when rivals are acquiring whatever they need in far less time.

Making matters worse, some PPC officials are hesitating to put their signatures to orders fearing public money mismanagement charges.

PPC would also like to be exempted from employee salary and recruitment limits imposed on all state-controlled companies as part of the bailout. Such issues, however, are politically sensitive.

These restrictions do not permit pay rises for personnel promoted to positions of greater authority and responsibility. The bailout pay-freeze regulation is prompting some employees to be on the lookout for opportunities elsewhere and also deterring qualified persons from seeking jobs at PPC.




New PPC boss announcement imminent, market waiting

The announcement of power utility PPC’s new chief executive, which could be made today, will signal the completion of a first wave of action taken towards rescuing the utility from further trouble.

Over the weekend, the newly appointed energy minister Costis Hatzidakis told local media PPC’s new boss has been selected, and also endorsed by Prime Minister Kyriakos Mitsotakis.

Standard procedures by the privatization fund, controlling the Greek State’s 51 percent stake of PPC, are pending.

Hatzidakis described the still-unnamed new PPC chief executive – to succeed Manolis Panagiotakis, who submitted his resignation shortly after the conservative New Democracy party won the July 7 legislative election – as an experienced manager who fits the technical demands of the position.

A brave restructuring plan will need to be implemented at PPC, a loss-incurring corporation threatening the country’s energy system.

Investors are eagerly awaiting the announcement of PPC’s new boss. Their endorsement of the new chief executive’s ability to rescue the power utility would prompt a rebound of the corporation’s battered company share to more realistic levels. The company share has risen sharply in recent days but remains well under older levels.

In other weekend comments, Hatzidakis stressed Greece needs to gradually move on towards a post-lignite era.

PPC’s old lignite-fired power stations are responsible for the bulk of the corporation’s operating losses as a result of sharply increased CO2 emission right costs, which have escalated to levels of nearly 30 euros per ton, no longer feasible.


New PPC boss announcement next test for rebounding share price

Investors are fully backing an imminent restructuring plan for the power utility PPC, as highlighted by the spectacular rise of the company’s share, up 124 percent since an April low and 145 percent from the deepest dive registered in 2018.

PPC’s share, which shed 80 percent of its value over the past five years, has regained 18.5 percent of this loss over the past few days alone, driven by the prospect of a restructuring plan seen as realistic and implementable by investors.

It has been a roller-coaster ride for PPC’s share price over the past few years, a reflection of the contradicting views of upbeat and concerned pundits.

PPC shareholders may have gained 145 percent since the 2018 low but they have also lost 40 percent since the highest price in 2017 peak, 62 percent since the highest level recorded in 2015, and 75 percent since the peak in 2014.

The appointment of PPC’s new chief executive, rumored to be set for an announcement over the next few days, will serve as the next major crash test for the power utility’s share price.

The new boss will succeed Manolis Panagiotakis who submitted his resignation from the state-controlled power utility just days after the July 7 election that brought the conservative New Democracy party into power.

The new PPC boss has already been picked from a limited list of candidates and could be announced by tomorrow, when energy minister Costis Hatzidakis returns from an energy forum in Cairo, sources informed.

PPC’s EBITDA performance has the potential to rise by between 400 and 600 million euros over the next year or two, according to the results of an Axia Research study released yesterday.