Greece's dominant power utility, the Public Power Company (PPC/DEH), posted its first quarterly loss in almost two years, paying the price for a recession and for having become the tax collection vehicle of the country's cash-strapped government.
The state-controlled electricity company hiked bad debt provisions and took an unexpected writedown on its investment portfolio, resulting in a net loss of 38 mln euros, compared with a profit of 172.3 mln a year earlier and a forecast loss of 14.9 mln.
DEH officials and analysts fear many customers may refuse to pay after the government decided to collect a controversial property tax through electricity bills — a last-ditch measure taken in September to meet budget targets under an EU/IMF bailout.
"This is a serious issue, it will certainly lead to payment delays," said an analyst. DEH shares closed down 3.4% in Athens, underperforming Greece's general stock index which lost 1.4%.
The tax has already sparked a backlash against the company, while leading labour unionists were arrested last week on misdemeanour charges for trying to boycott the tax.
Rising prices for natural gas and oil have made things even worse.
DEH's energy costs rose by almost a quarter from January to September. At the same time, revenue has been hit as businesses, the company's most lucrative clients, curbed electricity use or turned to cheaper rivals to save money in the recession.
The company warned sales would shrink by about 5% this year and lowered its forecast for core profit margin to about 17% from a 20% forecast earlier this year.
NEW SITUATION
"Difficult economic conditions, reduced liquidity and the worsening of financing conditions are creating a new situation," said Chief Executive Arthouros Zervos, vowing to cut costs and reappraise investments in a new business plan next month.
To save money, DEH has scrapped a planned 135 mln euro project to build a 100 MW power plant in Crete. But it stuck to an ambitious 1.4 bln euro project for a new coal-fired power station in the north of country, deciding on Thursday to award it to Greek builder Terna.
A more positive effect comes from shrinking labour costs after the government cut public sector wages as part of its austerity plan.
But investors are deserting the company's stock, whose price has plummeted 59% since the beginning of the year, underperforming a 52% drop in the general Athens bourse index.
The shares trade at about 3.3 times estimated 2011 earnings, compared with a multiple of about 10 for French utility group EDF.
Analysts attribute the discount to DEH's exposure to Greece's debt crisis. The company has already seen its credit rating slashed and analysts are concerned it might not be able to service its debt, which rose 9% to 4.66 bln euros at the end of September.
The discount also derives from the high degree of regulatory uncertainty, particularly relating to oil and carbon emission costs.
Lignite, a polluting form of brown coal, forms the backbone of PPC's electricity production and carbon emission costs are set to rise in the EU from 2013.
The Greek state, which owns 51% in the company, plans to sell a stake or some lignite plants to competitors to comply with its bailout terms, but its workers have said they would unleash a wave of strikes if this happened.
