Hellenic Petroleum (ELPE) Chairman Timos Christodoulou considers electricity production and the research and utilization of carbohydrates to be the group’s hottest prospects, without forgetting ELPE’s «old love,» as he calls refining. In an interview with Kathimerini he stresses the improvement in the group’s operating costs last year and is tactfully critical of former administrations, saying his job is to manage and not to accuse. He nonetheless refers to investments in the Balkans and a number of overly expensive contracts as his predecessors’ main faults. Christodoulou also extensively analyzes fuel prices in Greece, a subject which he knows well from his previous experience in government posts. Together with Chief Executive Panos Kavoulakos, he is pushing for a restructuring of the group in order to make optimal use of human capital to increase efficiency. Not a believer in sharing management with unions, he says he is ready for conflict, if necessary. The group’s 2004 results were negative. Why so? The last two balance sheets are not entirely comparable as we were supposed to inherit (from the previous administration) large reserves which, by law, we can retain. They were probably sold to boost the previous year’s results and we had to replace them. The difference in evaluation due to the considerable price fall burdens results by about 60 million euros. To that we must add 28 million euros as a result of a value loss in the group’s stakes in foreign ventures. Also,in 2003, the group gained 80 million euros from selling its priority rights to buying an additional stake in Public Gas Corporation (DEPA). What one must note positively in the 2004 results is the improvement in operating costs by 15 percent, despite increased payroll costs. Let us talk about the group’s prospects. ELPE is a group with many activities. We are building an electricity production unit, but will not neglect our old love, refining, our most profitable activity. Upgrading refineries to increase white products of high value to substitute crude oil is among our priorities. Plans include the addition of a Hydrocracker unit: The assessment of this investment is at its final stages. How expensive is that and when will construction start? This investment will cost about half a billion euros. We still need to plan whether it will be located at EKO’s refinery in Thessaloniki or at Petrola’s in Elefsina, both old ones that would improve with the installation of the new unit. As you operate three out of the country’s four refineries, wouldn’t creating another distort competition further? I do not see any competition problems. Motor Oil possesses a first-class refinery and its investments are profitable, unlike ours; we have some 650 million euros in tied capital: 300 million euros from our participation in the Public Gas Corporation (DEPA) and 350 million euros from investments in the Balkans. How is your relationship with the Vardinoyiannis Group (owners of Motor Oil)? It is very good; we are open to cooperation and I have personally made a proposal for joint construction of the electricity-producing unit at Agioi Theodoroi, which they are apparently considering. I presume you are looking for a partner for the Thessaloniki unit, as well. We are not, but if anyone is interested we will discuss it. Electricity production is a high-risk domain today as the market operation framework and many other factors remain unclear. It is a project we have inherited and cannot go back on. A unit on its own, particularly in the north, cannot be viable economically. We will then either enter other investments or seek to sell the unit as long as it’s built, probably by year’s end. What are the prospects for your 35 percent participation in DEPA? We still have not seen any returns at all from our 300-million-euro investment. We are awaiting the government’s decisions both for the company and its market. For now we have asked for greater representation in the company’s board, proportional to our stake. What is your conclusion after examining your controversial Balkans portfolio? We are still trying to comprehend the logic of those investments abroad. With the exception of the investment in Cyprus, all other investments in the Balkans have no returns. In our 2004 results we were forced to include 28 million euros of debts as forecast for the drop of our participation’s value. Can these investments become profitable? The scope is limited anyway. Our evaluation has shown we could improve our positions as there are opportunities in large markets such as Serbia and Bulgaria, and we will pursue them. For the rest we seek the rationalization of existing investments. Should Justice look into those investments? I have repeatedly said that my role is to manage the company and I will not undertake other roles. If I am asked for data I will supply them. Some of the data are already known and Parliament is informed. You are obviously referring to insurance contracts. Certainly. I spoke with the same insurers about the same subject. A year ago, the former administration signed a contract for 16 million euros and we signed for 9 million euros. The figures speak for themselves. Are pretax fuel prices higher in Greece than in other EU states and, if so, why? We have the lowest retail prices thanks to the low duties imposed by the state. Pretax prices are only marginally higher than the EU average, as the domestic trading market is fragmented, meaning greater costs than in other states. Our 8,000 petrol stations would not survive without high prices. Will the new law for direct access of petrol stations to refineries improve the situation? I do not expect serious changes, as conditions set do not allow for real access. Instead, we have high expectations about the market’s sanitization from the government crackdown on illegal trading, which has a positive impact on the market. You often have to keep market prices low through EKO-ELDA. Can EKO play this role? EKO prices are satisfactory. We have to operate simultaneously as a public and a private company and we have to answer to our shareholders. I therefore do not agree with limiting our profits just because 35 percent of the group belongs to the state. The group has now entered the full privatization process as after five years from the Latsis group’s entry to the company the latter will obtain the management. What is the Latsis group’s role in ELPE? Impressive though it seems, the Latsis group does not intervene at all, making me wonder if it is really interested in the investment. Are you moving to its building on Lampsa Street? It is a building that fulfills our requirements, but the negative comments written have annoyed Mr Latsis and he will not give it to us anymore. I will ignore all the comments and try to persuade him, as we do need to move: EKO is housed in one place and Asprofos in another. We have 14 accounting offices and 110 accountants. Relocation will help us manage the company more efficiently. Your restructuring has provoked the employees’ wrath: The unveiling of a new organization chart brought a 24-hour strike and more may follow. Our chart is linked to the improvement of the group’s performance. Unless we improve operating costs, performance will not get better. The average cost per employee is 115-120 percent higher than the EU average. I am not in favor of voluntary retirement programs or layoffs, we just need to restructure our staff. Our average age is high; one in seven employees will retire in two to three years. We will also seek specialized personnel, and train our staff to utilize them better. Without consent, this will be tough. How are your relations with the employees? Perfect, both with the staff and the unionists. I respect the union’s role but I do not agree to the «right to joint management.» We will make the changes even if reactions continue. How do you see ELPE’s research and carbohydrate utilization? We will continue to invest in research and utilization of carbohydrates, as any big group should do, although (with Albania excepted) we have not seen anything promising. The dig in Albania has gone 5,362 meters deep, showing some positive indications.