PPC, Greece's biggest electricity producer, will expand abroad to offset market share losses at home as the debt-laden country liberalises its power market, the head of the utility said.
"Liberalisation means that PPC will shrink in Greece," chief executive Arthouros Zervos told Reuters in an interview on Thursday. "If we want to maintain our size, we have to expand in other markets."
Greek companies are looking to boost business abroad to compensate for losses at home as Greece goes through its worst recession in almost 40 years due to austerity measures put in place to deal with a debt crisis..
State-controlled PPC is set to win a project to build four hydro-power plants in Bosnia and is also looking to clinch similar orders in Romania and Albania, Zervos said.
PPC will also be looking for deals in Turkey after trial runs last month to connect its power grid to the European network.
"It is mostly the construction and development of hydro plants and renewables we are looking at," Zervos said.
Zervos expects PPC to lose about 10 percent of the retail market and about 20 percent of the power generation market over the next three years as a result of the deregulation of the electricity market, required as part of the country's bailout by the European Union and the International Monetary Fund.
"I expect our market share to decline slowly, by about 10 percentage points in the retail market. In generation, I think we will stand at about 70 percent," Zervos said.
PPC currently has 97 percent of the retail and about 90 percent of the wholesale market.
EXPLORES POWER SWAPS
PPC has a competitive edge over its new rivals because it has exclusive control over lignite, a form of soft coal which is the country's cheapest and most abundant source of energy.
Greece must unveil by the end of the year how it will relax PPC's grip on lignite. PPC and the government are looking for a way to achieve this without outright selling some of the company's lignite-fired power stations to competitors.
Zervos said a sale would be counterproductive because it would open up the market abruptly and be a complicated process.
An alternative could be to sell power capacity to rivals at a profit or swap energy with foreign companies, Zervos said.
"What we are mainly looking at is not to swap power plants themselves but generation capacity," Zervos said.
While PPC dominates the domestic electricity market, rival power suppliers have chipped away at its market share by undercutting its regulated tariffs. They have already snatched about 8 percent of the volume sold to PPC's top-paying corporate clients, Zervos said.
MILD PRICE INCREASES
A widely expected reform of power pricing in Greece to remove cross-subsidies between different types of consumers will not affect PPC's earnings, Zervos said.
"Whatever revenues we had before, we will continue to have," Zervos said. Low-consumption households' electricity bills of up to 800 kilowatt hours may increase up to a cumulative 30 percent over the next three years," he said.
A new "social tariff" for low-income households will reduce PPC's earnings by between 100 and 120 million euros a year, Zervos said, but PPC expects to be reimbursed by the government.
On average Greek households consume between 800 and 1600 kilowatt hours and will see their electricity bills rise by about 5 percent, Zervos said.
He reiterated the company's guidance for a pretax profit of about 626 million euros this year.
"That's where we'll be more or less," he said.
Net profit will be smaller than last year's record 643 million euros, with the dividend falling in line, he said.
"I imagine the dividend will also fall a little. We haven't made an estimate yet," he said.