PPC profit falls after mild winter

Greece’s dominant electricity utility Public Power Corporation (PPC) said first-quarter earnings fell due to an unseasonably mild and dry winter, but were still ahead of analysts’ forecasts, lifting its shares. A fall in energy generation from PPC’s cheaper hydroelectric plants due to the shortage of rain added to the company’s burden. PPC could not pass on the rising energy costs to its customers, as the government controls electricity tariffs. «The profitability of the company which was affected by a single factor, namely very low snow and rain fall, would have exceeded last year’s levels had hydro-generation remained at those of Q1 2006,» PPC Chairman Takis Athanasopoulos said in a statement. Net profit for the first quarter fell by 54 percent to -41 million, but was still better than the -34.1 million average forecast by analysts in a Reuters poll. PPC, which the government has scheduled for further privatization, is upgrading its plants, cutting personnel and seeking to expand abroad in an effort to counter increased domestic competition as Greece deregulates its energy market. Sales rose 3.5 percent to -1.24 billion, a result of government-regulated tariff rises. Earnings before interest, tax, depreciation and amortization (EBITDA) dropped 20.1 percent to -235.6 million. Last August, the government allowed PPC to raise rates by an average 4.8 percent to deal with high oil prices. Operating expenses rose by about 11.2 percent to -1 billion in the first quarter, mainly due to increased expenditure for natural gas and energy purchases as hydro-generation fell 71 percent, due to low rainfall. «The results for revenue and EBITDA were expectedly low, but net profit came in better than expected, and there are a couple of elements which are promising for the future,» said Nikos Photopoulos, an analyst at P&K Securities. «Payroll, and overall operating expenses were lower, which is important because this is where the company can make savings,» he added. PPC shares were up 2.4 percent at -20.50 on the Athens Stock Exchange at midday, outperforming the broader market. The shares, up 6 percent in the year to date, have slightly underperformed the broader Greek market, which has gained about 10 percent. The stock trades at about 62 times 2007 earnings, a big premium compared with French EDF’s P/E ratio of about 26 and Italy’s Edison, at about 25, according to Reuters Estimates. Analysts attribute the premium largely to expectations the company will expand in the Balkans and on hopes the government will liberalize electricity tariffs in Greece. Appeal against tender stop PPC said on Monday it had appealed against a decision by Bulgaria to cancel the sale of a power plant. Bulgaria’s Privatization Agency earlier this month cancelled the -105.2 millionale of its Bobov Dol power plant to PPC on what it said was environment concerns and disagreements on the purchase of coal. PPC also said that its chairman had met Bulgaria’s environment minister to discuss the possibility of reopening the tender. (Reuters)