PPC's CONSOLIDATED 9M2011 FINANCIAL RESULTS

 

Athens, November 25, 2011

 

GROUP FINANCIAL RESULTS

• Turnover: € 4,203.6 m.
• EBITDA:  € 794.7 m.
• Net Income: € 90.8 m.
• Net Income (adjusted for the impairment of marketable securities): € 111.7 m.

 

 

• ΕΒΙΤDΑ amounted to € 794.7 m in 9M2011 compared to € 1,223.6 m in 9M2010, reduced by € 428.9 m (-35.1%). ΕΒΙΤDΑ margin reached 18.9%, compared to 27.4% in 9M2010.

 

• Total electricity demand, decreased in 9M2011 by 289 GWh (-0.6%) to 46,635 GWh vs 46,924 GWh in 9M2010. Excluding exports and pumping, electricity demand decreased by approximately 2% (926 GWh).

 

• PPC's total electricity sales, including exports, decreased by 2,131 GWh (-5.4%) to 37,414 GWh, while the corresponding revenues declined by 6.6%.

 

• PPC's electricity sales and revenues in the domestic retail market decreased by 6% (2,377 GWh) and by 7% (€ 280.5 m) respectively compared to 9M2010.

 

• Turnover reached € 4,203.6 m, compared to € 4,467.6 m in 9M2010, a reduction of € 264 m (-5.9%). Turnover includes an amount of € 91.1 m reflecting network users' contributions for connections to the network (9M2010: € 149.5 m).

 

• In 9M2011, PPC's electricity generation and imports, covered 70.6% of total demand, while the corresponding percentage in 9M2010 was 77.8%, a reduction of 3,573 GWh.

 

• PPC imports decreased to 1,399 GWh from 1,701 GWh in 9M2010 (-17.8%).

 

• Concerning RES generation in 9M2011, PPC RENEWABLES generated 195 GWh compared to 209 GWh in 9M2010, a decrease of 14 GWh, mainly due to reduced hydro generation by 11.4%. Pre-tax profits of PPC RENEWABLES amounted to € 8.2 m versus € 9.4 m in 9M2010.

 

• The expenditure for liquid fuel, natural gas and energy purchases increased by € 303.7 m, an increase of 21.8% compared to 9M2010, mainly driven by the higher expense for energy purchases and imports (€ 251 m), the increase of the Special Consumption Tax on diesel (€ 40.5 m) and the increase in expense for heavy fuel oil (€ 42.2 m of which € 3.2 m relate to the doubling of the relative consumption tax as of the end of June 2011). Excluding the positive impact of an amount of € 37.3 m from previous years' settlements, which are included in energy purchases expense for 9M2010, the increase of the relevant expense amounts to € 213.7 m. This increase is on one hand, attributed to the increase of energy purchases quantities from the System by 18.2%, mainly due to the reduced hydro generation and the increased IPPs' output and, on the other hand, to the increase in energy purchase prices by 12.3%.

 

• The total reduction of payroll cost, including capitalized payroll, between the two periods amounts to € 119.5 m (-11.2%). This reduction is attributed to a large extent (€ 98.2 m) to the net decline in the number of permanent employees on payroll by 852 to 21,075 on 30/9/2011 from 21,927 on 30/9/2010, as the impact of Laws 3833/2010 and 3845/2010 had already started being reflected in the accounts as of 2Q2010. In addition, the reduction in overtime and shifts expense by € 23.4 m, as a result of the decrease by 10.2% in the respective hours, despite the lower number of personnel, contributed also to the decrease of payroll expense. The net decline of the number of permanent employees on payroll for the period 1.1.2011 to 30.9.2011 amounts to 770.

 

• In 9M2011, 41.6% of the Company's total revenues were expensed for fuel, energy purchases and CO2 emission rights compared to 32.7% in 9M2010. On the contrary and despite the decrease in total revenues, payroll expense is further reduced to 19.9% of total revenues compared to 21.1% in 9M2010.

 

• EBT in 9M2011 declined by € 551.2 m (-79.9%), to € 138.4 m from € 689.6 m in 9M2010. EBT was impacted with an amount of € 20.9 m associated with the impairment of marketable securities. Excluding the abovementioned impact, EBT would have reached € 159.3 m (reduced by 76.9% compared to 9M2010).

 

• Net income amounted to € 90.8 m, versus € 520.2 m respectively in 2010, a reduction of € 429.4 m (-82.5%). Excluding the aforementioned impact, net income is adjusted to € 111,7 m (-78.5%).

 

• There is no provision related to the windfall tax, as the relevant law for 2011 corporate profits has not yet been voted.

 

 

 

 

 

Commenting on the financial results of the period, Arthouros Zervos, Public Power Corporation's Chairman and Chief Executive Officer said:

 

“The slowdown in market share loss continued in the third quarter of 2011, offsetting to some extent the impact on revenues from the decrease in electricity demand.

 

However, the significant increase of the energy mix cost by 15.4% led to a reduction of EBITDA margin for 9M2011 to 18.9% from 27.4% in 9M2010, despite the continuing decrease in payroll expenses (-11.1%).

 

The worsening of the EBITDA margin highlights the unsustainable situation created by the fact that retail tariffs are still not linked to wholesale market prices, essentially wiping out the benefits from the significant payroll reductions. The Company has already communicated to RAE and the competent Ministry, the need for immediate transition to a new electricity market operation model, in order to address the existing inefficiencies.

 

For the full year:

 

-          The decline in revenues from electricity sales is estimated to be approximately 6% compared to 2010, with turnover marking approximately a 5% decline.

 

-                    Assuming Brent oil price of $110/bbl and €/$ exchange rate of 1.37, EBITDA margin is estimated to be in the range of 16.5%-17%. The reduction in EBITDA margin compared to the nine month 2011 is attributed to a higher energy mix cost mainly due to the lower than expected hydro generation, the impact from the variable cost recovery mechanism, as well as the reduced demand.

 

In the difficult economic conditions that are currently prevailing, the limited liquidity and the increased financing costs create a new financial environment to which we are adapting our operational and our investment planning. Thus, we are focusing on the further rationalization of our controllable expenses, while we are proceeding with further actions for additional reduction in payroll expenses. In addition, we are carefully reviewing every new investment with respect to its expected return as well as the required funds and their availability. By carefully planning investments as well as expenses, and strictly evaluating all new projects, we formulate a revised business plan which will be submitted to the BoD for discussion and finalization in December.

 

However, for achieving the sustainable growth of our Group, we need a clear regulatory environment fostering a stable and rational market operation and ensuring the fair pricing of energy services and products and on this basis, we have already submitted to the Regulatory Authority for Energy cost data for the shaping of the energy component of 2012 tariffs and we expect its immediate actions.

 

Finally, PPC consistent with its commitments towards the State and European Commission and following complex procedures and intense negotiation, despite the adverse economic conditions, completed the spin-off of the Transmission Division, which is an enormous transaction for Greek standards, involving the transfer of assets with a net value of approximately € 1.7 bln. and 1,400 employees.