PPC at last trying to broaden its market base in the Balkans

The Public Power Corporation (PPC) is trying to organize its line of defense against the expansion plans of Europe’s electricity giants. Having spent many years in the narrow domestic market, it has waged a battle of little significance, under unfair conditions, for the maintenance of its local monopoly. Yet in the new environment of the broadened and single European electricity market, its domestic monopoly provides PPC with no safety at all. The dynamic corporation, by local standards, seems to be belatedly realizing the major threat to it from abroad – cross-border trade. After a period of few developments, it now is seeing the electricity market becoming dominated by a small number of companies, which are heading to consolidate via the mergers and acquisitions under way, and with aggressive policies which PPC will soon have to face. The state power company’s new administration seems to have fully grasped the danger and the need for a defensive strategy, aiming mainly at the market of Southeast Europe, where there are still some investment opportunities. PPC has rejected at this stage any alliance with market leaders, such as Germany’s E.ON, France’s EdF and Italy’s Enel in order to penetrate the region. «At present, the corporation has no presence abroad, while its profits have severely fallen off. These two factors do not allow it to have an equal say in negotiations with major production companies in Europe,» PPC officials said. «We need to create a strong investment portfolio abroad to be able to talk of such alliances,» they added. The plan With this portfolio as its goal, PPC is promoting the setup of a holding company in cooperation with the international energy investment firm Contour Global. The corporation’s governing board has already approved the creation of an energy holdings company – a corporate venture fund – joint-owned by PPC and Contour Global, with 45 percent each, and by the European Investment Bank with 10 percent, as the latter has expressed its interest, or maybe with another institutional investor. The company’s share capital reaches 600 million euros and will support acquisitions in the broader region of Southeast Europe. The first target is to be the market of Montenegro, with the buyout of an electricity-producing plant of 210 megawatts, as well as the mine of Pljevlja which feeds the plant. Kathimerini has been told that tomorrow PPC’s board is expected to approve the joint company’s participation with Contour Global in the tender for the plant’s sale, to take place in early June. High-level PPC officials recognize the high risk of this investment, both due to political instability and the lack of a regulatory framework in the market. This risk is lessened, they say, by the participation of Contour Global. The sources stress Contour Global’s international experience in operating companies and in cross-border mergers and acquisitions. Contour Global is a private energy firm, based in New York and with offices in Houston, Paris and Kiev, that develops and operates infrastructure projects. The company profile it has submitted to PPC suggests it focuses its activity on high-growth markets worldwide. It has investments in over 25 countries in America, Europe and Africa, having realized more than 55 energy projects. Its head is Joseph C. Bradt, former vice chairman and chief operating officer of AES Corporation, one of the biggest electricity companies internationally. Contour Global’s main shareholder is the Capital Group, a private investment firm which manages $3 billion.