PPC reports record loss in third quarter on less rainfall

Public Power Corporation (PPC), Greece’s biggest electricity company, had a record loss in the third quarter after a lack of rainfall reduced production at its hydropower plants. The shares slid to a two-month low. The loss for the three months ended September widened 39 percent to -39.2 million ($58 million), from -24 million a year ago, according to Bloomberg calculations from nine-month results the company published today. The loss exceeded a 5-million-euro loss estimate by 11 analysts in a Bloomberg survey. The record loss at state-controlled PPC, based in Athens, is the most since the company first began trading on the Athens Stock Exchange six years ago. Water-driven power generation dropped by more than half in the nine months through September, forcing the company to ramp up production at costlier oil-powered plants and buy more electricity from competitors. »The results were very, very bad and higher oil prices in the fourth quarter will make them even worse,» Nick Photopoulos, an Athens-based analyst at NBG/P&K Securities, said in a telephone interview. Nine-month net income declined 15 percent to -60.2 million. The profit «would have been higher by -180 million approximately compared to the nine months of 2006 had we not been forced to substitute the lack of hydro with generation of natural gas and energy purchases,» Public Power Coorporation Chief Executive Officer Takis Athanasopoulos said in a statement yesterday. Business plan only hope Athanasopoulos is scheduled to announce a new business plan to stop the profit slide later today in Athens. The business plan is the «only hope left,» Photopoulos said in a separate e-mailed note. PPC’s profitability has dwindled since 2004 as rising oil and natural gas prices, which account for almost a third of the company’s installed generation capacity, outpaced government- controlled rates. The Greek government, which owns 51 percent of PPC, controls electricity prices and has kept them lower than the European Union average to please voters. «Tariff increases still don’t reflect the real cost of electricity,» Athanasopoulos said in the statement, adding he hoped «imperative reforms in the Greek electricity market will proceed soon.» PPC’s annual tariffs were raised an average 4.8 percent from August 1, 2006, the first above-inflation increase in four years. Prices were allowed to rise by an average 3.6 percent from August 1 this year. Besides higher fuel outlays, costs to repair damages to the electricity network from wildfires and heat waves this summer also hurt profit, the company said. Competition The falling profit may hamper company plans to defend its leadership in Greece’s recently opened energy market. PPC, which currently produces almost all the power generated in the country, said earlier this month it would spend more than -4 billion in coming years to overhaul old units and build more efficient and cleaner plants. Greece is opening its market to competitors to satisfy increased demand for power and become less dependent on polluting oil and lignite coal. The country expects energy companies such as Spain’s Endesa, Italy’s Enel SpA and Mytilineos Holdings to spend more than -4.5 billion in the country by 2010. Athanasopoulos plans to split the company into units for mining, generation and trading to comply with EU rules. He’s also holding cooperation talks with RWE AG, Germany’s second-biggest utility. The company’s labor union opposes any split of PPC as well as talks with RWE on concern the changes would lead to worse working conditions and cuts in benefits. Athanasopoulos earlier this month averted strikes at the company by promising another six months of talks on the split-up plan.