PPC, the largest electricity company in Greece, is currently navigating a period of intense investment activities and restructuring. However, despite continuous efforts towards modernization and growth, a significant obstacle stands in its way: high debt. The burden of this debt is a critical factor that worries both domestic and international investors, negatively impacting the company’s stock performance and its prospects on the stock market.
The Financial Reality Unveiled
According to the latest financial data, PPC has a debt-to-equity ratio of 1.49, while its debt-to-EBITDA ratio reaches 1.93. Although these ratios are not the highest in the market, they remain concerningly high, especially when compared to the total debt volume, which stands at €4.45 billion. This amount is the largest among its competitors, making PPC the most indebted company in the sector.
PPC’s financial condition is particularly sensitive to movements in international markets and interest rates. With inflation rising and interest rates remaining high, the cost of servicing this debt increases, further straining the company’s financial situation. Investors closely monitor these developments, as any deterioration in conditions could reduce PPC’s ability to invest in new technologies and projects, which are crucial for modernizing the network and transitioning to renewable energy sources.
Investment Activity and Prospects
PPC is in the midst of a significant investment phase, with major projects underway, particularly in the field of renewable energy sources. The company’s strategy focuses on reducing dependency on fossil fuels and adopting green technologies, which could enhance its competitiveness and enable it to play a leading role in the country’s energy transition. Additionally, investments in infrastructure and networks aim to upgrade service quality and reduce operational costs.
However, high debt serves as a significant obstacle in this effort. Every investment move requiring new borrowing increases the pressure on the company’s financial stability. Despite PPC’s ambitions, its high leverage prevents it from fully reaping the benefits of its investments, while also limiting its flexibility in case market or regulatory conditions worsen.
The Expansion in Romania: A Necessary Move
Despite the challenges, PPC has made significant strides to strengthen its market position. Acquisitions in Romania have ensured an increase in PPC’s revenues and electricity sales in the first half of the year, compensating for the reduction in the company’s market share in Greece.
This was highlighted in the presentation by PPC’s CEO, Giorgos Stassis, to stock market analysts, following the announcement of the company’s results for the first half of the year. Specifically, PPC’s sales last year were 12.6 terawatt-hours, and this year amounted to 11.6 terawatt-hours in Greece, plus 3.6 terawatt-hours in Romania. This means a total increase of 21%, despite the reduction in market share in the domestic market to 50% from 58% last year. Similarly, the customer base remained at 5.6 million consumers in Greece, while with the addition of Romania and natural gas customers, it increased to 8.8 million.
Electricity sales were also boosted by a strong rise in demand (+6%) in Greece, while in Romania, the increase was 0.9%. At the turnover level, there was a 12% increase, from €3.6 billion to €4 billion, attributed to the contribution of Romania and the Kotsovolos chain in Greece.
The Romanian market and the increased contribution of the Hellenic Electricity Distribution Network Operator (HEDNO) are also the main reasons for the 57% increase in operating profits compared to last year, reaching €927 million in the first half of 2024, a performance that signals progress towards achieving the annual EBITDA target of €1.8 billion. The Romanian operations contributed 21% of this year’s operating profits. PPC also announced net profits of €228 million compared to €84 million in the first half of 2023.
The Future of PPC
PPC faces a challenging road ahead. The coming months will be crucial for the company’s trajectory as it needs to demonstrate that it can balance the need for investments with the management of its debt. The strategy for reducing debt, the course of interest rates, and broader economic conditions will play a decisive role in shaping investor expectations for the stock.
PPC’s challenge is to continue its investments and highlight its efforts toward a green transition, without being excessively burdened by debt. Only in this way can it regain investor confidence and ensure sustainable growth in the future. The path to the end of 2024 will be decisive, as by then, investors will have a clear picture of whether PPC can meet the challenges and live up to the high expectations that have been set.
