PPC is promising to investors who will contribute to its 1.35 billion euro share capital hike the biggest turnaround in the business history of Greece, with an increase in profitability by 1.279% within a five-year period and the distribution of dividends as of 2024. However, the management of PPC, under George Stassis, clarifies in the prospectus for the share sale that these forecasts are accompanied by a number of asterisks and will have to meet many difficult conditions to make this impressive turnaround story a reality.
After a long period of disappointing financial results, with the emergence of losses until the year 2019, PPC achieved low profitability (pre-tax profits of 67 million euros) in 2020. The prospectus, however, presents the prospect of transforming PPC into a ... profit-generating machine.
Over a period of five years, ie until the fiscal year 2026, the company forecasts an increase in revenues by 13.52% and a reduction in expenditures by a single digit percentage. Operating profitability (recurring EBITDA - earnings before interest, taxes, depreciation and amortization) is projected to almost double (96% increase).
Profits before taxes from 67 million euros in 2020 will jump to 554.8 million euros in 2024 and 924 million euros in 2026, marking an increase of 1,279.1%. By the end of 2026, PPC is projected to have transformed into a company with extremely high profit margins. This spectacular improvement in profitability will allow, according to management, PPC to start distributing dividends to shareholders again. "We plan to propose the distribution of dividends in 2023. If our proposal is accepted (by the shareholders) the dividends will become payable in 2024", the prospectus says.
To achieve these goals, PPC will have to implement an extremely ambitious five-year business plan, which includes closing down lignite-fired plants and huge investments in Renewable Energy Sources, and even the emergence of PPC as a leading provider in the wholesale telecommunications market, with significant investments in fiber optic network. "We have a budget for capital expenditures of about 9.3 billion euros for the years 2022 - 2026, of which we intend to invest 6.0 billion euros over the next three years,” the company says.
Of this 6 billion euros, PPC intends to allocate the following: (i) around 3.2 billion euros in capital expenditure on renewable energy projects by 2024, including hydropower generation and projects in neighboring markets, to achieve an installed RES capacity of 7.2 GW by 2024 (ii) approximately 1.0 billion euros for capital expenditures in our business distribution unit by 2024, with particular emphasis on network development, network automation, facilitation and (iii) around 1.7 billion euros in capital expenditures by 2024 for conventional electricity generation, our business power plant, the construction of a waste-to-energy plant, digitization, telecommunications and charging points for electric vehicles.
The forecasts, though, are based on a number of assumptions, including:
- The successful execution of the 9.3-billion-euro investment plan.
- Achieving RES capacity of 9.5 GW by 2026.
- Completion of the sale of a 49.0% share to HEDNO.
- Completion of investments amounting to 1.8 billion euros in the distribution network.
- Expansion in Bulgaria and Romania.
- Successful development of capital expenditures in fiber optic infrastructure.
- Increase in sales of electric vehicles by more than 30.0% of total passenger car sales by 2030 and successful development of the network of charging points for electric vehicles.
- GDP growth between low and medium single digit percentage per year.
- Low interest rates being maintained for an extended period.