Credit Suisse First Boston slashes Public Power Corp’s rating to neutral from outperform, setting the end-2007 price target at EUR21.3 versus EUR24.3 at end-2006. The reasoning behind the downgrade is “the political influence in regulation and management which could outweigh the positive impact of persistently low oil prices.
The Swiss-based broker said in a report dated Jan.17, that the recent resignation of CEO Maniatakis raises questions about the government’s commitment to restoring PPC’s profitability through regulatory action and efficiency enhancement.
“We now see risks that our expected efficiency gains of EUR196 million by 2010(out of the EUR340 million by PPC in its Hercules plan presented in May 2006) could fail to fully materialize,” CSFB says.
However, the broker sees a glimmer of light coming from PPC’s international strategy.
“PPC’s commitment in international expansion is functional to its domestic core business and in turn key to reducing the burden of its expensive coverage of supply needs with its own assets, local IPPs and imports. We would regard newsflow on its plans regarding Kosovo lignite reserves privatization and FYROM’s Negotino plant sale could act as additional catalysts for the stock.
Late Monday, PPC announced the resignation of its CEO Dimitris Maniatiakis after two years in the post.
PPC’s bad profitability along with the state’s influence which control the company’s tariff regime and the human resources status were cited for the CEO’s resignation.
Maniatakis departure is the second top-ranking official’s resignation in PPC within the last three months. Grigoris Anastasiadis, the company’s CFO resigned last September.
PPC is state controlled, with the state’s direct and indirect stake exceeding 51%.
Midway through the session, the stock was trading at EUR21.70, up 3.5% reacting to the recent battering.