ECONOMY

Cabinet green-lights PPC sell-off

The Cabinet approved on Wednesday a plan for the restructuring and privatization of electricity giant Public Power Corporation (PPC) as published by the Environment and Energy Ministry on May 15, which will now have to be voted by Parliament.

The plan provides for three stages of privatization, with the first being the sell-off of electricity transmission networks by the second quarter of 2014. That will be followed by the sale of 30 percent of the company’s production capacity that will constitute the portfolio of a new company, the so-called “Small PPC,” in the first quarter of 2015, before the sale of a 17 percent stake in PPC to a strategic investor, which is aimed at completion by Q1 of 2016.

The Cabinet’s decision notes that the proposed reforms are seen preparing the power company for privatization as well as laying the groundwork for the full liberalization of the electricity market. It adds that the implementation of the plan constitutes a complex project on a corporate, legal, accounting, tax and regulatory level.

The establishment of the Small PPC is aimed at creating a sustainable rival to PPC, while the aforementioned 30 percent of production capacity will come from both old units and new ones that are expected to be constructed. The new firm will also have a similar share in PPC’s commercial activity, too. It will receive lignite-power units from PPC with a capacity of some 1,400 megawatts, plus hydroelectrics totaling 500 MW and wind power units of 500 MW.

The new company will have to operate along the same lines as the capital structure of PPC, its value and obligations. The price to be secured through the tender process should not result in a loss for PPC, and the new firm will be staffed by employees working at the production units and mines that will be affected as well as personnel from PPC’s administrative and support divisions.

Once the new company is formed, part of PPC’s obligations (including borrowing) will be carried over along with its assets. After all, much of PPC’s loans were issued for the construction and maintenance of the plants that the Small PPC will obtain.