Greece's state-controlled electric utility, Public Power Corp. SA (PPC.AT), acknowledged Friday that it was facing delays with several major power plant projects, but denied that its giant six-year, EUR13.5 billion investment program was in jeopardy.
"Despite the significant delays which have occurred, the investment program has not been overturned," the company said in a statement. "The completion of the investment program, in an organized manner, in as short a period of time and with improved financial results, remains of the highest imperative."
The statement follows a meeting between PPC management and Greece's power workers' union, Genop. According to Genop, which issued its own statement earlier Friday, management warned that at least three major plant projects were likely to be canceled because of the delays.
"The grandiose and much touted PPC investment program has become scrap paper," the union said.
The news sent PPC share prices lower. At 1158 GMT, PPC shares were down 4% at EUR15.50 in an otherwise higher market.
Among the projects likely to be canceled is a tender for the construction of a 800-megawatt natural gas fired power plant in the southern city of Megalopolis, according to Genop. The delay in the flagship project, which is intended to replace some PPC's oldest coal fired power plants, was due to unexpected problems in bringing a natural gas pipe to the facility.
Likewise, delays in a government tender for a coal mine in the northern Greek town of Vevi, may force the company to cancel tenders for two new power plants with a combined capacity of about 1,000 MW.
"In all, newsflow is negative for PPC as its investment plan is facing delays in three of the most important projects," said Piraeus Securities in a note. "Although we have incorporated in our model delays in the roll out of all new plants (to the tune of 1-1.5 years), it is not clear that this will be sufficient."
After posting record losses in 2008, PPC last November outlined an ambitious restructuring program. The program called for billions of euros in new investments and other measures to turn around the one-time monopoly as it braces for competition in Greece's newly liberalized power sector.
However, analysts have been sharply skeptical about PPC management's ability to implement its 2009-2014 investment program. Many say that the company has had a poor track record in seeing through its goals. An existing power plant project just north of Athens has fallen years behind schedule because of snags, while the company has repeatedly failed - despite years of efforts - to expand overseas.
The six-year plan specifically calls for a sharp increase in borrowing, higher electricity tariffs and significant cost savings - none of which may be realized in the face of government intransigence, union opposition and the economic crisis.