PPC writes off €1.7bn in customer debt as uncollectible

Power utility PPC has written off, as uncollectible accounts, 1.7 billion euros in unpaid receivables accumulated over the past decade or so by household, business and industrial customers.

This sum represents over 60 percent of PPC’s unpaid receivables total, estimated to be worth 2.7 billion euros.

The 1.7 billion-euro amount written off by PPC concerns customer debt that is at least five years old. Many enterprises with electricity bill arrears owed to PPC are no longer in business.

Though PPC is clearing its books of these uncollectible accounts to financially restructure, the debt, owed by customers does cease to exist.

Debt collection firms that recently took on the task of managing PPC’s unpaid receivables will continue to pursue customers with arrears, despite subdued expectations of success.

These collection firms will be focusing their efforts on more recent unpaid receivables estimated to total as much as one billion euros.

PPC, according to data released last year that has changed little, estimates that over 580,000 financially able customers are deliberately dodging electricity bill payments totaling 545 million euros and overdue for more than six months. Overall, PPC estimates this category of customers to total 1,477,000, owing over 1.5 billion euros.

Also, the corporation estimates that a further 895,000 customers have switched suppliers, leaving PPC with a total of one billion euros in of unpaid receivables.

PPP recently reached securitization package agreements with JP Morgan and PIMCO, the former for unpaid receivables overdue by up to 60 days and the latter for unpaid receivables overdue by more than 90 days.

Distribution network operator sale next big challenge for PPC

Power utility PPC’s next major challenge, following a second securitization package of unpaid receivables, will be the privatization of fully owned subsidiary DEDDIE/HEDNO, the distribution network operator, a procedure expected to be pitched to prospective bidders towards the end of the year before a tender is launched in the first quarter of 2021.

A plan to sell a 49 percent stake with increased managerial rights remains intact, but officials are also considering to lower the stake. In addition, some thought is being given to offering DEDDIE/HEDNO buyers the stake through two rounds, but the basic plan, to offer 49 percent as one sale package, remains likeliest.

A new regulatory framework for DEDDIE/HEDNO will need to be approved over the next few months, and, in addition, the government must also fine-tune the privatization’s details.

A leadership renewal at RAE, the Regulatory Authority for Energy, responsible for the operator’s new regulatory framework, has, not unexpectedly, delayed a series of matters on the authority’s agenda, including the new regulatory framework for DEDDIE/HEDNO. It was forwarded for consultation until June 19.

Revisions concerning the operator’s permitted earnings were proposed, while a four-year period is planned for the new framework, from 2021 to 2024, with an option for a four-year extension until 2028.

The new framework is expected to include bonuses for objectives achieved at the distribution network operator and vice versa. The DEDDIE/HEDNO business plan includes goals such as the replacement of conventional power meters with smart meters, as well as operating cost and electricity theft reductions.

PPC nears €350m deal for second securitization package

Power utility PPC is moving fast towards an agreement with a major financial services player for a second securitization package carrying unpaid receivables overdue by more than 90 days.

Less than a month ago, PPC reached a 260 million-euro agreement with JP Morgan for a smaller-scale securitization package of unpaid electricity bills overdue by up to 60 days.

According to sources, PPC’s chief executive Giorgos Stassis has called for an extraordinary board meeting to seek approval of an offer made by a major international financial player for the larger-scale securitization package.

If this offer is approved by the board, PPC stands to receive approximately 350 million euros with an interest rate of around 5 percent. This interest rate is higher than the 3.5 percent rate attached to the preceding securitization deal as a result of the higher risk entailed.

PPC’s ability to attract yet another major financial player reflects the growing faith been placed by the investment community in the power utility, especially its ability to collect unpaid receivables.

The two securitization packages promise considerable cash inflow for PPC. Half the amount to be received through the first securitization package will be used to service debt.

 

PPC, heavyweight firm close to big-scale securitization deal

Power utility PPC is believed to be making sound progress in its negotiations with a financial world heavyweight for an agreement on a securitization package carrying unpaid receivables overdue by at least 90 days, making it a high-risk venture, energypress sources have informed.

A deal is believed to be imminent and could be presented to the PPC board next week, the sources noted, adding that an agreement will definitely be finalized within July.

These talks follow PPC’s recent agreement with JP Morgan for an initial, smaller-scale, lower-risk securitization package carrying unpaid receivables of up to 60 days.

PPC secured a cash injection of approximately 250 million euros through this agreement and an interest rate of 3.5 percent, regarded extremely favorable.

The higher risk entailed in the forthcoming securitization package is expected to lead to a considerably higher interest rate than the figure agreed to between PPC and JP Morgan.

Even so, the overall securitization procedure indicates that PPC’s credibility is gradually being restored as major players are showing greater faith in the utility’s ability to handle its unpaid receivables.

Both the previous securitization agreement and the one currently in the making are non-recourse agreements not requiring PPC to provide guarantees.

Debt collection services firm Qualco and legal firms hired by PPC will continue handling the collection effort.

PPC aims to receive approximately 300 million euros for the second securitization package.

Besides the absence of guarantees, the securitization agreements represent yet another source of funding for PPC that is not added to the company’s debt figure.

JP Morgan awarded PPC’s small securitization package

US investment bank JP Morgan has been awarded power utility PPC’s smaller of two securitization packages, carrying unpaid receivables of up to 60 days, after submitting the strongest offer to a tender at a rate of 3.5 percent.

This agreement, expected to be endorsed by PPC’s board today, represents the first, and simpler, step of the utility’s securitization plan, to be followed by a bigger-scale effort in September for unpaid receivables of at least 90 days. PPC expects an interest rate of more than 7 percent for this second package, carrying higher risk.

PPC’s securitization plan reflects the corporation’s ongoing effort to gradually regain its credibility. Offering unpaid receivables packages for cash injections would have seemed unimaginable a year ago.

The deal with JP Morgan is a non-recourse agreement, meaning PPC will not need to offer guarantees.

If companies (Qualco, legal firms) that have taken on the task of collecting unpaid receivables from PPC customers, on behalf of the utility, do not succeed, then JP Morgan, as buyer of securitization titles, will incur losses to the extent of the failure.

 

PPC chief delivers favorable news on a number of fronts

Power utility PPC, undergoing gradual transformation, expects to have amortized the cost of an initial voluntary exit plan for lignite-unit workers within six months, while amounts owed by the corporation to a series of third parties are being reduced, chief executive Giorgos Stassis informed analysts during a conference call yesterday, following a presentation of first-quarter results.

The cost of an initial voluntary exit package concerning approximately 1,000 PPC employees working at lignite units in northern Greece, is estimated between 30 and 35 million euros.

Stassis offered positive news on a number of fronts, including electricity-bill payments and cash flow, service digitization, securitization of unpaid receivables, and the ongoing implementation of a five-year business plan.

Online payments by customers now represent 30 percent of transactions, an 80 percent increase since the beginning of the lockdown measures, while 18,000 customers per day turn to the corporation’s call center for information, up from 5,000, maximum, prior to the lockdown, the company boss informed.

PPC has chosen the current period to launch its initial voluntary exit plan in order to determine, within the next two-and-a-half months, how many of its 4,000 or so employees working at lignite-fired power stations and mines will take up the offer, offering severance pay totaling 35,000 euros.

State-controlled PPC wants to organize personnel transfers as part of the country’s decabonization process.  Vacant positions will be filled by workers to be transferred from PPC’s Amynteo facilities, planned to shut down in September, and Kardia, whose withdrawal is expected in 2021.

Electricity-bill payments by customers, down 18 percent in March and 14 percent in April, have rebounded to pre-lockdown levels since May, the chief executive informed.

Amounts owed to contractors, suppliers, operators and other third parties have fallen to 650 million euros from 900 million euros, Stassis said.

A small-scale securitization package for unpaid receivables up to 60 days will be offered in June or July, he added.

 

 

PPC determined to stage small-scale securitization in June

Appearing to have avoided the worst in a slowdown of electricity bill payments by customers, power utility PPC, whose revenue figures have gradually recovered to approach pre-pandemic levels, is now striving to offer its first of two securitization packages, a small-scale version concerning unpaid receivables of up to 60 days, in June.

PPC has yet to decide whether this package, which could rake in approximately 200 million euros for the utility, will be offered concurrently with a bigger, higher-risk securitization package containing unpaid receivables of more than 90 days. Its revenue potential for PPC is estimated at 300 million euros.

Regardless of when PPC decides to offer its large-scale securitization package, the smaller version will definitely go ahead as soon as possible, within June, if this is feasible, energypress sources informed.

Market sentiment will be instrumental in PPC’s decision. Fluctuating stock markets over the past few months have spooked the investment community. Global market indices have been at the mercy of breakthrough prospects for a coronavirus vaccine.

The resulting insecurity is expected to subdue price levels investors will be prepared to offer PPC for its large-scale, higher-risk securitization package. PPC already feels more comfortable about moving ahead with the small-scale securitization package of lower-risk, short-term unpaid receivables, less susceptible to market conditions.

PPC financial results for 2019 seen reflecting moves late last year

Power utility PPC’s financial results for 2019, expected to be released this afternoon, should favorably reflect measures taken by the state-controlled corporation’s administration and the government during the final four months of the previous year, analysts have forecast.

The results, expected once the day’s trading has ended at the Athens bourse, are also expected to include an initial assessment of the impact, so far, of the coronavirus pandemic-induced lockdown on the corporate group.

Also expected is an update on new initiatives, including investment plans, for the rest of 2020, following a forced revision of plans prompted by the pandemic.

PPC’s administration has set an operating profit objective of between 420 and 470 million euros for 2019, up from 150 million euros in 2018.

EBITDA figures of 240 million euros for the fourth quarter of 2019 and 337 million euros for 2019, overall, have been forecast by Pantelakis Securities.

During the final few months of 2019, PPC revised tariffs and abolished NOME auctions, described by company and government officials as a loss-incurring measure for the firm.

PPC expects even greater clarity on its financial standing in the immediate future. The corporation is waiting for more appropriate market conditions to securitize unpaid receivables worth 1.5 billion euros and issue a company bond.

Proceeds from these initiatives are expected to enable PPC to move ahead with an ambitious investment plan.

PPC eagerly awaiting right time to launch securitization plan

Power utility PPC is ready to pounce on the first opportunity it will get to launch its securitization plan for unpaid receivables owed by customers.

Extraordinary market conditions resulting from the coronavirus pandemic’s wider impact have delayed the plan, whose various technical details and negotiations with investors have been completed.

The terms of the securitization effort would be too costly for PPC if the utility were to launch the plan under the present conditions.

PPC’s electricity bill collections have dropped by a level estimated between 25 and 30 percent over the past 20 days, latest company data has indicated.

However, the extent of the coronavirus-related impact on this reduction in electricity bill payments is unclear as Hellenic Post (ELTA) has experienced delays in posting hundreds of thousands of bills to customers during this same period.

A clearer picture on the pandemic’s impact on PPC’s unpaid receivables is expected towards the end of this month.

RAE, the Regulatory Authority for Energy, and the energy ministry have both requested updated collection figures from all the country’s power supply companies.

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.

PPC securitization to start with 60-day receivables in March

Power utility PPC is preparing to issue two securitization packages of unpaid receivables totaling 1.5 billion euros, beginning with a package of 60-day receivables, whose agreement with investors is expected to be finalized by the end of March.

PPC is currently in talks with investors who will provide conditional funding in exchange for the packages.

A second securitization package carrying 90-day receivables needs more work. PPC is awaiting data that is required before it can commence talks with investors. Though this securitization procedure could also be completed by the end of the first quarter, finalization in April cannot be ruled out.

PPC is hoping to collect a sum of between 350 and 400 million euros for its two securitization packages carrying unpaid receivables of 1.5 billion euros.

The amount to be collected promises to offer the power utility a cash flow boost that will help fund the company’s investment plan.

Deutsche Bank and Finacity Corporation are organizing the two securitization procedures, sources informed.

 

PCC’s more favorable payback plan registering with customers

Power utility PPC has expressed satisfaction over the results of its recently revised payback system concerning unpaid receivables, a more appealing scheme with lower deposit demands for ensuing installment-based settlement of arrears.

In the final quarter of 2019, the new payback system, launched October 1, drew approximately 110,000 customers who agreed to terms for settlement of an overall sum worth 155 million euros.

Debtors qualify for the new payback plan by providing deposits representing up to 20 percent of their arrears, compared to deposits of between 40 and 50 percent demanded until the end of last September. A 30 percent deposit is required if customers prefer to settle debt over a greater number of installments.

Stricter monitoring of strategic debtors, or customers deemed able but unwilling to service unsettled amounts, has also helped improve the power utility’s collection record for its increased unpaid receivables, now stabilized at 2.7 billion euros, according to state-controlled PPC.

Highlighting its tougher approach, PPC has issued 55,000 electricity supply cut orders to distribution network operator DEDDIE/HEDNO over the past four-month period.

An overall improvement in customer punctuality concerning electricity bill payments has been discerned since the new collection measures came into effect, the utility has noted.

The collection of 155 million euros through the payback plan promises to offer PPC a considerable cash-flow boost. An even bigger boost is expected from the prospective securitization of unpaid receivables worth 1.5 billion euros, a plan that could be carried out within the first quarter of 2020 through two separate packages.

 

PPC aiming for €650m EBITDA in 2020, seen as a pivotal year

Power utility PPC’s administration is aiming for a return to profitability in 2020, the objective, numerically, being to generate an EBITDA figure of between 650 and 700 million euros.

The company’s chief executive Giorgos Stassis presented PPC’s goals and challenges during a presentation, late in 2019, of a business and strategic plan for 2020, seen as a landmark year by the corporation’s leadership.

Within the next few days, PPC is expected to receive a 200 million-euro amount stemming from arrears linked to public service compensation in previous years. This amount, alone, promises to offer a considerable boost to PPC’s cash flow and operating profit.

Within the first quarter, PPC plans to stage a forum for investors and analysts during which the company business plan, objectives until 2024, as well as a restructuring plan will be presented in detail.

The PPC board may decide to proceed with an international bond issue during this period, once market conditions and reactions have been appraised. However, Stassis, the CEO, has clarified there is no great need to take such action fill any financial gap.

PPC is expected to securitize unpaid receivables worth 1.5 billion euros during the first quarter of 2020.

The company also intends to reshape its profile as perceived by customers. New products combining electricity and natural gas, as well as products reflecting household and business needs, will soon be marketed, possibly within the first two months of the year, sources informed.

The company’s transformation for a green-energy focus is one of PPC’s biggest challenges. As part of this effort, a series of partnerships with private-sector firms entailing joint RES investments are expected to be announced. Talks with ten investors have already taken place, the PPC boss noted during his presentation of the business plan.

PPC’s signing of a memorandum of cooperation with Masdar Taaleri Generation (MTG) for the development of wind and solar energy projects is expected to be followed by more initiatives.

Also, PPC will launch its decarbonization plan in 2020 with the withdrawal of its Amynteo I and II lignite-fired power stations.

The state-controlled power utility is also expected to announce details concerning the sale of a 49 percent stake in distribution network operator DEDDIE/HEDNO, a subsidiary firm. This privatization is seen generating major investment interest. Digitization of the country’s networks and installation of smart meters have fallen well behind schedule.

 

Ministry plans legal protection for PPC securitization plan

An energy ministry draft bill concerning power utility PPC’s restructuring, forwarded for public consultation yesterday, includes terms offering the utility legal protection for its plan to securitize unpaid receivables.

The terms are designed to counter various arguments that could be raised by defendants, including breach of personal data, through the European Commission’s General Data Protection Regulation (GDPR).

PPC is planning to securitize unpaid receivables for sale to funds. The protection terms are intended to quell any fears of prospective buyers.

Prospective buyers are currently conducting due diligence via PPC’s data room. A large number of funds are believed to be interest in the power utility’s sale of securitized unpaid receivables, sources informed.

PPC has toughened its stance against debtors believed to be capable but unwilling to cover their electricity bill arrears, the objective being to present prospective buyers an improved collection record.

Investors are expected to submit offers to PPC once all data has been fully analyzed. It will then be up to the power utility to decide if it will go ahead with its securitization effort.

According to an early plan, two respective packages containing 60 and 90-day packages of unpaid receivables worth a total of between one and 1.5 billion euros could be offered to investors.

PPC securitization plan, being revised, draws investor interest

Power utility PPC is making revisions to the previous administration’s securitization plan for unpaid receivables worth 1.5 billion euros.

Recently appointed PPC chief executive Giorgos Stassis and his team are taking cautious, slower steps, believing better preparation is needed for the two packages, respectively grouping unpaid receivables of up to 60 and 90 days. Investors are already showing signs of interest.

The initial plan, spearheaded by former PPC chief Manolis Panagiotakis, was planned to issue two packages in September.

Both packages are being developed concurrently, according to reliable enegrypress sources.

The power utility’s stricter handling of consumer debt generated by customers seen as capable but unwilling to settle their electricity bill arrears, combined with PPC’s new and revised installment-based payback plan, appear to be producing positive results for PPC’s cash flow.

If the securitization packages are to attract investor interest, participating funds will need to be convinced a substantial part of the debt owed is retrievable.

Pimco and CarVal Investors are among the funds believed to be expressing interest. Deutsche Bank is organizing the package for unpaid receivables up to 60 and Finacity the 90-day package. JP Morgan is also rumored to be involved in the procedure.

 

PPC updates VDR for unpaid receivables securitization

Power utility PPC has updated its virtual data room with additional information for  investors ahead of a first securitization package for unpaid receivables of up to 60 days.

Prospective investors reentering the power utility’s VDR to study the new data are seeing improved collection prospects.

This is a crucial aspect in the investment decisions of funds if they are to be convinced of financing PPC in exchange for unpaid receivables as guarantees.

Once PPC’s current financial condition has been fully appraised by the interested funds an agreement on the securitization terms will be established.

Though it remains unclear when the securitization package could be ready, a decision is expected at one of the forthcoming PPC board meetings between mid-October and November.

The securitization of PPC’s unpaid receivables promises to offer cash flow relief for the utility. PPC will remain responsible for settling unpaid receivables included in the securitization package.

 

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.

 

New PPC board, approved this week, needs to move fast

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.

 

 

 

PPC considering CO2 right cost risk hedging, arrears securitization

The main power utility PPC plans to adopt risk hedging practices in order to limit the uncompensated impact of fluctuating international CO2 emission right prices, which, in recent times, have risen to levels representing a considerable part of the utility’s overall electricity production cost.

PPC’s first quarter results, posted this week, showed that its CO2 emission right costs increased by 22.9 percent despite an 18.5 percent reduction of lignite-based electricity production and a 54.5 percent hydropower output increase.

Earlier this week, PPC’s board decided to set up a specialized team to systematically monitor the European market, buy CO2 emission rights at relatively lower prices and utilize resulting reserves to cover needs when price levels are high, PPC’s boss Manolis Panagiotakis has informed.

PPC is also considering the prospect of securitizing amounts owed by customers as a means of creating an additional cash flow source. Consultants hired by PPC have already conducted an unpaid receivables management study.