By Kakia Papadopoulou
It is obvious that Public Power Corp or PPC as it is better known, is the last restructuring play in the utilities across Europe which still remains on hold. Ahead of the full energy market’s deregulation, the state cannot determine the company’s tariff regime and the human resources status in the biggest public utility company in Greece for ever. And probably the time has drawn nearer for the changes now.
Surely the recent chief executive officer’s resignation-it was the third consecutive departure of top ranking official in PPC the last two years- showed the company’s vulnerable position.
The Greek Finance Minister said on Monday that the country’s main electricity producer “needs to restructure its tariff policy in order both customers and investors to enjoy a more stable environment.” He said that the government considers for the first time a “more automated tariff policy.” The state’s direct and indirect stake in PPC exceeds 51%.
At the same time, the name of the new CEO is the big bet. “It won’t be easy for a successful manager in the market, to restructure PPC with his hands being tied up,” commented a high ranking PPC official.
PPC experienced one of its worst years in terms of profitability in 2006. Analysts see a more than 40% drop in net profits last year, due to be announced late February.
Persistent calls for higher tariff increases to counterbalance the higher cost of energy, given the sharp rise in oil prices last year, were in vain.
PPC’s spending in oil and natural gas rose from EUR547 million in the first three quarters of 2004 to EUR921 million during the same period in 2006, a rise of 68%, Dimitris Maniatakis, the former CEO said recently.
On top of the higher fuel costs, the company saw in the first nine-months of the year, a 9% rise in its personnel costs.
Although PPC is heavily overstaffed, with its headcount amounting to 26,500 at the end of September, the company called a tender recently for some 2,030 new hirings. PPC’s overall needs do not justify more than 20,000 employees, analysts reckon.
Amid the highest unemployment rates within the eurozone, around 10% and the increasing possibility of early government elections, the government follows its old tactics- promising jobs to voters in exchange of votes in the upcoming elections. Commentators see elections in the fall this year.
Credit Suisse First Boston slashed last week 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 broker said.
At midday, the stock was down 0.8% at EUR21.22 amid mild gains of 0.5% of the general stock market index.