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PPC: The worst quarter in history and the light at the end of the tunnel

The losses resulted from a significant increase in operating expenditure of 1.18 billion euros. Remarkably, expenses increased by 133% compared to the first quarter of 2021, while turnover increased by 102%.
The first quarter of 2022 was probably the worst quarter in PPC's history, with March definitely being the worst month in terms of cost. However, conditions improved in April and May, and management appears optimistic that a target for 800-850 million euros for EBITDA- about as much as in 2021- will be achieved.
 
For the time being, the published data do not support the achievement of the goal, but obviously management knows better. If the EBITDA target is reached, it will be a positive development for the company and the shareholders, since this way PPC will be able to finance its investment plan with emphasis on networks and RES.
 
In the first quarter of the year, PPC posted a loss before tax of 30 million euros, about as much as in the first quarter of 2021. The losses resulted from a significant increase in operating expenditure of 1.18 billion euros. Remarkably, expenses increased by 133% compared to the first quarter of 2021, while turnover increased by 102%.
 
In particular, the company spent 156 million euros in purchasing fuel oil and diesel, an increase of 49% compared to the first quarter of 2021. 424 million euros went to the purchase of natural gas. while 95 million was spent in the same period last year. For energy purchases, PPC paid 645 million euros (+395%), due to the increase in the market clearing price from 53.6 euros/MWh to 238 euros/MWh. Finally, 300 million euros was on CO2 emission allowances. compared with last year’s 138 million euros.
 
Recurring EBITDA stood at 170 million euros, compared to 225 million of last year's corresponding quarter, with a decrease of 25%, followed by depreciation of 166 million euros and financial costs that led to the negative result. Net loss after tax amounted to 185.7 million euros, due to the 183.6 million euro tax on capital gains of 787 million euros, from the sale of 49% of HEDNO. In the absence of this tax, the net losses after tax would have been 2.1 million euros.
 
Production profits support customers
 
With a 30% discount on tariffs that are still in force from the summer of 2021, PPC supported its customers in the first quarter with an additional 360 million euros, which of course are missing from the profitability of the company.
 
The structure of recurring EBITDA of 170 million euros is interesting. From the production, EBITDA amounted to 339 million euros, up from 4 million, with profit margins being used to support customers. Trading from profits of 120 million turned into losses of 275 million euros. The distribution from 96 million of EBITDA showed 100 million euros this quarter, and RES showed an EBITDA of 6 million euros, up from 5 million.
 
The company's investments in the first quarter reached 102 million, from 91 million last year. The lion's share (72 million euros) was spent on distribution networks investments.
 
Net borrowing increased due to the decrease in reserve assets. This decrease came as a result of the needs for hedging operations and the large working capital needs for the purchase of natural gas and pollutant rights. In particular, net borrowing (total borrowing minus reserve assets) amounted to 2.132 billion euros on 31/2/2022, from 1.89 billion euros on 31/12/2021 and 3.27 billion euros in the first quarter of 2021.
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