Greece's Public Power Corp. SA Wednesday said nine-month net
profit fell 15.4% as unusually dry weather cut hydro production,
forcing the company to pay more for energy.
For the nine months to Sept. 30, the company said net profit
was EUR60.2 million, compared with EUR71.2 million a year earlier. It
said the figure for last year was adjusted upwards by EUR1.33 million
due to the identification and recognition by the parent company in 2006
of certain payroll obligations for which no liability had been
recognized in previous periods.
Revenue rose by 7.4% to EUR3.84 billion from EUR3.58 billion
in the same period last year, while earnings before interest, taxes,
depreciation and amortization, or Ebitda, fell 3.2%, to EUR610.8
million from EUR631.2 million. Ebitda was also adjusted upwards for
2006, to reflect payroll obligations.
The net profit figure was lower than analyst expectations of
a 29% increase for the period. However, the revenue result was slightly
higher than expectations of a 6.7% rise. Analysts had forecast
nine-month net profit at EUR93 million and revenue at EUR3.82 billion.
"The results are lower than expectations" said Paris
Mantzavras, analyst at HSBC Pantelakis Securities. "But the strategic
plan will be the main focus rather than weak results," he added.
PPC, the de facto monopoly power producer in Greece, has seen profits shrink continuously since 2005.
The main reason is that PPC has been facing sharply higher
costs for fuel, mainly oil, as well as high costs for energy purchases
from third-party power producers - the so-called electricity pool. At
the same time, the prices that PPC can charge consumers are tightly
controlled by the government.
Apart from low overall tariffs, PPC subsidizes farmers,
islanders, large families, company employees and pensioners. The
reduced tariffs to farmers alone cost the company some EUR158 million a
year. Furthermore, the inhabitants of the islands that aren't connected
to the mainland electricity transmission system pay the same tariffs as
the rest of Greece - despite a much higher cost of supply.
"...tariff increases still do not reflect the real cost of
electricity. Thus, the negative impact of the increased expenditure to
cover electricity demand, was absorbed only to a limited degree," said
Chairman and Chief Executive Takis Athanasopoulos in a statement.
He also said that had the company not substituted for the
lack of hydro generation, it's nine-month profitability would have been
about EUR180 million higher.
More specifically, during the nine month period, the
expenditure for energy purchases increased by 34.5% to EUR492.4 million
from EUR366.2 million in the same period last year.
At the same time, capital expenditure rose 18.6% to EUR584.8
million, mainly due to the development of mines and electricity
generation projects, the company said.
PPC is scheduled to announce its strategic priorities
Wednesday after the market closes. These are expected to range from
intensifying the company's focus on cost control and on the management
of power generation to developing other businesses, particularly in
renewables and internationally.
Analysts hope to see a timeframe for cost-cutting, a capital
expenditure program for refurbishing the company's existing plants and
replacing aging ones, as well as an outlook for tariffs and the actual
amount of PPC's public service obligations, for which current estimates
range between EUR500 million and EUR1 billion.
PPC shares were down EUR0.50, or 2%, at EUR24.88. In the
past 12 months to 20 November, the stock rose 29.5% on expectations of
a restructuring, while the Athens Stock Exchange general index rose 11%.