PPC sees its revamp brightening profits

Electricity utility Public Power Corporation (PPC) said yesterday it expects a revamp to add a total of about 2.2 billion euros ($2.8 billion) to its core earnings over the next five years, sending its shares up. «A restructuring may add a total of about 2.2 billion euros ($2.8 billion) to earnings before interest, tax and depreciation in the following five years,» the country’s dominant power firm said on its website. The company has not yet detailed specific measures in the restructuring, seen as a core plank of its 2006-2010 business plan, but has said it would focus on cost containment. PPC, 51 percent state-owned, forecast a 40-million-euro benefit to core earnings this year from the revamp, 390 million euros in 2007, 480 million in 2008, 580 million in 2009 and 680 million in 2010. Investors cheered the company’s profit targets, sending its shares to a fresh year-high of 21.44 euros, up 4.38 percent. «This business plan is attainable but PPC’s overall performance will remain fairly dependent on some factors, such as global oil prices,» said analyst Nikos Galousis at Kappa Securities. PPC shares trade at 24.45 times estimated 2006 earnings, at a premium to Italian Enel’s price earnings ratio of 15.05 and German utility E.ON’s 14.83 times, according to Reuters estimates. Analysts said investor confidence that the government would approve a fuel surcharge to help PPC offset rising oil prices and expectations of an improvement in 2006 results were supporting the valuation. PPC said it expected a 340-million-euro boost to revenues and a 340-million-euro drop in non-personnel and personnel costs in 2010 from its restructuring. Faced with increasing competition from private investors seeking a place in Greece’s recently liberalized energy market, PPC, which accounts for 95 percent of the country’s power output, has struggled to cut costs to boost profits. The utility posted a bigger-than-expected 54 percent drop in net profit to 135.7 million euros last year, with earnings before interest, tax, depreciation and amortization down 24.9 percent to 906.8 million euros, hit by rising fuel prices, energy imports and low state-regulated tariffs. (Reuters)