Cash injections of one billion euros keep the lights on at PPC

Power company PPC has needed cash injections of more than one billion euros to avoid the nightmarish scenario of a bankruptcy and for auditors to sign off on its first-half earnings without any dire warnings about the sustainability of the company.

But efforts to save the former state power monopoly will need to continue until at least 2020 as the auditors (EY) point out in a note on its first-half earnings that short term obligations will rise due to immediate demands. 

In other words, PPC's cash problems are deep and have not been solved, while the company's net debt remains large, approaching 3.9 billion euros.

But how did the government, in cooperation with PPC, prevent an extremely difficult cash shortage from turning into a solvency crisis? The answer given by management and auditors is that PPC received multiple cash boosts from banks, the state budget and consumers, which totaled 1.1 billion euros.

More specifically:

1-Banks offered PPC, despite their economic difficulties, additional long term debt of 238.1 million euros

2-The state indirectly offered financial assistance to PPC as the hike in the cost of electricity that had been decided upon by management was largely offset by the reductions in VAT and the ETMEAP surcharge, in order to limit as much as possible the price hike passed onto consumers. How much did this cost taxpayers? Τhe hike in prices, the reduction in discounts offered to customers paying οn time and introduction of an environmental charge will boost PPC's earnings by 120 million euros this year and 532 million euros next year. Almost all of this total amount, (ie 652 million euros) will be offset by lower budget revenues stemming from the cuts in VAT tax on PPC bills and the reduction in the ETMEAP surcharge.

3-Another cash injection is due through an additional 200 million euro payment that will be made to PPC as a state utility. This payment is scheduled to be paid from the budget by January.

4-These amounts add up to 1.091 billion euros without taking into account an upcoming prepayment by the state in the first quarter of 2020. It is also worth pointing out that prepayments like this had also taken place in 2018 and 2019 due to the company's cash problems.

PPC is looking for new sources of income. It is targetting the collection of 40 million euros per month in revenues from debts owed by customers, as reported by Business Daily.

This, along with a push to securitize outstanding customer debts can provide PPC with a cash buffer of one billion euros in one year. Additionally, improvements to its financial health could help pave the way for the PPC to issue a bond and take advantage of the low cost of lending on international markets. This, according to some estimates, could earn the company 500 million euros with an interest rate well below that paid to Greek lenders.

Meanwhile, PPC's fortunes are set to improve with the scrapping of NOME auctions that cost the company some 120 million euros in the first half of the year. Additionally, CO2 charges, that reached 251 million euros in the January to June period, will be rolled over onto the consumer and not paid for by the Greek power company.

Nondas Chaldoupis