PPC defends choice of US partner for Balkan ventures

Electricity utility Public Power Corporation (PPC) yesterday defended its decision to join a US energy firm in investing abroad after widespread public criticism of its choice. PPC has come under attack from the media and the main political opposition for linking up with New York-based ContourGlobal in establishing a holding company for the exploration of buyout opportunities in the Balkans. The criticism follows the resignation of PPC’s chief financial officer, Grigoris Anastasiadis, who after serving as CFO for the past six years, cited personal reasons for his departure on Tuesday. «ContourGlobal was chosen based on its executives’ significant performance in energy investments in more than 25 countries,» PPC said in a stock market filing. In May, PPC and New York-based ContourGlobal LLC set up a holding company to explore buyout opportunities in the Balkans, each holding a 45 percent stake, while the European Bank for Reconstruction and Development (EBRD) is in the process of acquiring the remaining 10 percent, according to PPC. PPC, which is 51-percent state owned, is the country’s dominant utility. Greek TV and newspapers have questioned ContourGlobal’s credibility and even existence, while members of the Socialist opposition said PPC should have picked a partner after a public tender. PPC said its board unanimously approved the choice of ContourGlobal. It said the World Bank investment arm International Finance Corporation (IFC) was one of several financial institutions to express interest in participating in the holding company. Analysts said that PPC may continue to attract criticism in the near future but expected this to have more of a political rather than a financial impact. «Even if the criticism continues, the impact, if any, on the company’s share will be short lived,» Artion Securities analyst Elias Lazaris said. PPC faces increased competition following the passage of a deregulation law last year which allows industrial consumers to choose suppliers. So far, newcomers are only generating electricity for their own use, but competition is expected to intensify when residential consumers will also be able to choose a supplier other than PPC beginning in July 2007. The company’s shares closed down 0.11 percent at 18.70 euros yesterday, underperforming the broader Athens bourse which ended up 0.83 percent. PPC shares trade at 36 times 2006 estimated earnings, at a hefty premium to Italian utility Enel’s multiple of 15 and Spanish Endesa’s P/E of 13, according to Reuters Estimates. (Reuters)