By Kakia Papadopoulou
Greece’s main electricity producer Public Power Corp or PPC announced that it will release its full-year earnings performance next Tuesday prior to the stock market’s open.
Despite earlier estimates for an around 40% drop in its bottom-line results, analysts appear now more cautious and they give predictions for an around 50% slide in profits.
Analysts surveyed by local media, see PPC’s full-year net profits at EUR70 million versus EUR136 million in 2005.
However, the most worrying sign for the company’s future is that the pace of cost rises is higher than the respective revenue generation figure.
Proton Securities see total operating costs running 16.2% in 2006 with revenues growing by just 10.6%.
“Higher fuel prices along with inelastic operational spending has driven the company to a deadlock and the market is eager for the new CEO’s comments to see if there will be any drastic change in the company’s business plan,” an analyst noted.
However, he added that “ we don’t expect miracles until the next country’s elections.”
PPC is state-controlled, with the state imposing more or less the company’s tariff regime.
The 5% rise in tariff increases last year was not enough to counterbalance the the 21% rise in oil prices, 32% increase in natural gas prices and the personnel cost which is seen over 10%, analysts said.
PPC’s future is seen bleak as the closure of Kozloduy nuclear plants in Bulgaria deprived the electricity producer of cheap electricity imports.
In other words, PPC will need to spend more money from now on in operating its own plants to cover the country’s energy needs.
At the same time, PPC’s high dependency on cheap lignite seems to have started irritating European Union environmentalists who call for a more friendly fuel use.
PPC is Greece’s single largest producer of carbon output, contributing 40% of total national greenhouse gases.
According to rules set by the EU, Greece is obligated to cut emission growth by 25% over the 2008-2012 period.
EU goals also specify that 150 of Greece’s most polluting industries must also reduce their emissions by 8.9% – a target Greece is challenging.
The Greek EU Environment Commisioners Stavros Dimas has repeatedly called on the country to reduce its dependence on lignite-powered energy, which adds to harmful carbon emission.
However, PPC does not appear prepared for such a policy which will enable it to substitute even a percentage of the lignite produced electricity long-term.