PPC profits power up on reversed provisions

Public Power Corporation (PPC) reported an unexpected rise in first-half profits, mainly due to a reversal of provisions, sending its shares higher. However Chief Executive Takis Athanassopoulos said yesterday the destruction of part of its distribution network by fires that have raged across Greece since August 25, may weigh on future earnings. First-half net profits rose by 4.3 percent to -99.4 million, the company said. PPC’s provisions dropped by -42.5 million after a -25.2 million settlement with its Larco nickel mining unit. PPC holds a 28.6 percent stake in Larco. Analysts in a Reuters poll had, on average, forecast net profits to drop 38 percent to -59.4 million. But despite the unexpected jump in profits, the company’s long-term outlook remains weak due to tight regulation that limits its ability to raise prices to meet ever increasing costs, analysts said. PPC’s prices are set by the government, which also owns 51 percent of the utility. «Although PPC’s results came in ahead of consensus estimates at the bottom line, this was largely due to a reversal of past provisions for doubtful receivables from Larco,» HSBC Pantelakis analyst Paris Mantzavras wrote in a note to investors. PPC’s sales rose 6 percent to -2.47 billion after the government allowed the utility to raise its industrial and night electricity prices by 4 and 5 percent respectively this April. «(Profitability) remains at pretty depressed levels on the back of fully regulated tariffs, high fuel prices and an unfavorable generation mix,» Mantzavras said. A drop in energy generated by PPC’s hydroelectric plants due to a dry winter – which lightens its fuel cost burden – and the forest fires may squeeze profits. (Reuters)