PPC achieved the target it had announced for operating profitability for 2021 with an EBITDA of EUR 871.7 million. However, after giving discounts to its customers totalling EUR 800 million, it recorded a pre-tax loss of EUR 149.8 million.
In the midst of the energy crisis, social policy emerged as PPC's top priority and, as noted by company circles, supporting its customers with discounts totaling EUR 800 million in the second half of 2021 was possible due to the company's financial consolidation, which began in 2019, as well as its hedging policy, which allowed it to absorb a significant part of the cost of revaluations from the international crisis for all its customers. Thus, the 30% discount to all low-voltage customers, combined with the State subsidies, absorbed 75% of the charge for 76% of its customers (around 3.5 million customers) and 50% for the remaining 24% of its customers on variable tariffs, and enabled over 500,000 customers who opted for it to "lock-in" fixed tariffs for a year.
At the same time, it also remained consistent in its commitment to the investment community that its Business Plan targets for operating profitability at 2020 levels will be achieved. Although the 2021 results recorded a loss before tax of EUR 149.8 million and a loss after tax of EUR 18.4 million, recurring operating earnings before interest, tax, depreciation and amortization (EBITDA) amounted to EUR 871.7 million, ensuring the continuation of investments. Investments in Grids and Renewable Energy are critical to continue, as they are the only way to more rapidly decouple the country's energy dependence from both fossil fuels and imported price increases. The recent international energy and the geopolitical crisis have shown the necessity to proceed with renewable energy and energy storage projects, which will further enhance cheap and clean generation in the overall energy mix and lead to better prices in the electricity market in the coming years.
How the economic results are shaping up
In more detail, earnings before interest, taxes, depreciation, and amortization (EBITDA) on a recurring basis stood at €871.7 million in 2021 compared to €865.1 million in 2020 for the Group as a whole, remaining essentially stable, with the corresponding margin at 15.3% from 18.6%, due to an increase in turnover. In particular, for the second quarter of 2021, EBITDA on a recurring basis amounted to €245.2 million compared to €169.1 million in the corresponding quarter of 2020. The final results of the Group's individual businesses also incorporate the benefit of hedging operations.
Increased costs due to the rise in natural gas and CO2 emission rights prices and, consequently, wholesale electricity market prices, negatively impacted the operating profitability of the Trading business. This negative impact was largely offset by an increase in average revenue as well as by an improvement in the Generation margin, which helped to support customers. The Generation and Trading activities were also positively affected by transactions to hedge the risk of fluctuations in the prices of electricity, natural gas and CO2 emission rights.
Profit after tax was a loss of €18.4 million compared to a profit of €19.5 million in 2020. Similarly, for the second quarter of 2021, profit after tax was a profit of €23.8 million compared to a profit of €6.7 million in the second quarter of 2020.
Russia - Ukraine conflict
As noted in the financial results announcement, the current geopolitical crisis in Ukraine, combined with the economic sanctions imposed on Russia by the European Union and the United States of America, have created conditions of uncertainty in the economic environment at European and global levels. The PPC Group has no direct exposure to these countries as it has no relevant commercial presence, so there is no direct impact on its activities.
The increased costs in the wholesale electricity market due to the unprecedented increase in the price of natural gas is a development that indirectly affects the Group's activities, but the Group is largely protected by the vertically integrated nature of its activities due to its presence in both electricity generation and trading. Indirect effects may arise due to the consequent reduction in the disposable income of our customers as a result of increased energy costs and the strengthening of inflationary pressures.
Any overall ultimate economic impact of the Russia-Ukraine conflict on the global and Greek economies and business activities cannot be estimated at this time due to the high degree of uncertainty resulting from the inability to predict the ultimate outcome, and also due to the secondary effects of the conflict discussed above. In any case, however, the Group's management is continuously monitoring the relevant developments and evaluating any possible further impact on the Group's operations, financial position and results, being in a state of heightened vigilance to take appropriate precautionary measures to safeguard the Group's liquidity and business activities.
Stasis: PPC continues to invest in renewable energy and support customers
Commenting on the financial results, the President and CEO of PPC S.A. Mr. Georgios Stasis said: "2021 was a year of significant milestones for PPC. We returned to the capital markets for the first time since 2014, proceeded with the launch of our electrification business with PPC Blue, agreed to the sale of PPC's 49% stake in DEDDIE, successfully increased the Company's Share Capital, received another credit rating upgrade from S&P, and made further progress in our Corporate Governance practices.
The recent geopolitical crisis has brought Europe and our country into an unprecedented energy crisis, the likes of which have not been seen in recent decades. PPC, on the one hand, must continue the necessary investments in RES and networks that will help the country's energy transition, and on the other hand, it must support its customers to the extent of its capabilities, making use of its vertically integrated position.
Despite the volatility in commodity markets in 2021, we managed to record resilient performance due to our vertical integration as well as hedging. We stabilized our operating profitability by achieving EBITDA on a recurring basis in line with our target. At the same time, as the largest electricity supplier in the country, we were able to support our customers by absorbing, to the extent possible, a significant portion of the price increases due to the ongoing global energy crisis.
At the same time, we are continuing to make progress on our Business Plan, with a particular focus on renewables, and supporting our customers. The current energy crisis demonstrates the necessity of implementing Renewable Energy projects as soon as possible in order for the country to wean itself more quickly from fossil fuels and imported crises.
For 2022, and despite the fact that the external environment remains volatile, our goal is to continue investing in renewables and networks while supporting our customers and maintaining our business plan's target of achieving EBITDA on a recurring basis at the same levels as in 2021."
Skrekas: The consolidation of PPC is a catalyst for supporting the national economy and society
Environment and Energy Minister Kostas Skrekas said that the government's strategic policy choice to consolidate PPC, even in the most adverse conditions of the last two years, has proven to be decisive in supporting households and businesses from the effects of the international energy crisis, stressing that with gas and electricity prices have soared to record levels, PPC has remained consistent in its social role, providing total discounts of 800 million euros.
"Without the successful implementation of the consolidation strategy, PPC could not only support rebates but its very viability would be at risk. The Company provided a 30 % discount to all low voltage customers. Combined with government subsidies, it absorbed 75% of the mark-ups for 76% of its customers and 50% on the remaining 24% of customers on variable tariffs. At the same time, it gave over 500,000 consumers the option of fixed tariffs for a year.
We will continue to defend and strengthen this support to the Greek society by exhausting all the possibilities of the country. At the same time, we are working with plan and determination to implement the national energy strategy served by the green transition, with the diversification of energy supply sources and routes.
In the coming years, PPC will accelerate its green transformation by investing in renewable energy sources and electricity storage technologies. With these investments, it will be able to further strengthen its social role, offering clean energy at affordable prices for households and businesses," the Minister noted and stressed that the "era of irresponsible and criminal improvisations with tragic consequences for the country and its citizens has passed without return. The final result of the PPC, with losses of 18.4 million euros after taxes in 2021, contradicts the unfounded claims of the opposition for alleged excess profits of the Company at the expense of consumers. The crocodile tears of those who undermined and are fighting the consolidation of the PPC, the distortion of reality and the lies about excess profits cannot convince anyone today. But they convince everyone that some people will not change for anything and insist on feeding on populism and party interest."