ECONOMY

PPC improves results by cutting costs with lignite and hydro-power

Power utility PPC beat forecasts with buoyant results yesterday, sending shares up almost 5 percent on expectations that its improved fuel mix could help it withstand oil price hikes. The utility said earnings before interest, tax, depreciation and amortization (EBITDA) under International Financial Reporting Standards (IFRS) rose 12.3 percent to 375.1 million euros ($454 million) from 333.9 million last year. Morgan Stanley said the major driver of EBITDA growth was the improved fuel mix in generation, as the company contained use of oil- and gas-fired stations through an increase in the load factor of lignite plants and imports from Bulgaria. Sales in the quarter grew 9.5 percent to 1,043 million and net profit rose 10.5 percent to 115.6 million euros, while earnings per share (EPS) increased from 0.45 to 0.50 euro. CEO Stergios Nezis said during a conference call that PPC was focusing on improving its fuel mix by reducing the oil contribution in favor of cheaper lignite and hydro production, and aimed to push both of these to the maximum. Chief Financial Officer Gregoris Anastasiadis said hydroelectric contributed 10 percent, lower than the first quarter of 2003, because PPC was retaining reserves to use later, especially during the summer’s Olympic Games. «This water is going to be used in the best way to minimize the effects of the oil price hikes,» he added. Anastasiadis added that costs of lignite, the company’s most important fuel cost item, were up around 9 percent year-on-year, due to the development of new mines and purchases of lignite from third parties. Nezis said exports brought an additional 22 million euros of revenue this quarter, and although they would slow down in the second quarter due to hot weather in Greece, they were seen back at these levels in the third and fourth quarters. PPC, which has a market capitalization of around 4.39 billion euros, said its total financial expenses rose by over 68 percent largely because of foreign currency losses of 6.3 million euros versus last year’s gain of 17.7 million. The company said it made progress in net debt reduction, adding that a 45.8 percent year-on-year increase in capital expenditure included the cost of Olympics-related projects. PPC’s participation in Tellas, a telecom joint venture with Italian firm Wind, cost it 3.2 million euros in the quarter, an almost 65 percent improvement on the same period last year. «Tellas is doing quite well… we are expecting to have positive EBITDA in the last months of the year,» Nezis said. Commenting on expansion plans, Nezis reiterated that PPC was preparing a final bid for Bulgarian distributors, but said PPC «had no megalomania to go into the Balkans,» and would only make a move if the return on investment capital was profitable. Management of the state-run utility added they would soon submit a proposal for tariff increases to the Greek regulator and ministry, but saw no developments on that front before the fall.