As Greece’s largest electric power provider, Public Power Corporation (PPC) plays a natural role in the nation’s renewable energy transition and positioning as a regional energy hub. Georgio Stassis, CEO of PPC, discusses the dramatic restructuring efforts undertaken during his tenure to bring stability to the company, as well as the organization’s efforts to phase out lignite and deepen investments in renewables. Mr. Stassis discusses PPC’s MOUs with German companies for joint construction and energy projects, and his hopes to continue to grow those opportunities as PPC expands its mark on the European energy sector
You have been recently appointed CEO of PPC, inheriting a difficult mandate and financial circumstances. What was the situation you inherited and what have been your main priorities since your appointment?
When I arrived at Public Power Corporation (PPC) this summer, the company had reached a dangerous financial position. There were major issues in terms of liquidity, which was highlighted in an audit conducted by Ernst & Young. It could have been a very bad situation if the banks demanded loan payment immediately, which would have resulted in PPC needing to declare bankruptcy. We implemented a set of corrective measures immediately, working with a team internally and with the Ministry of Energy to try to handle this ticking time bomb we had in our hands. We raised tariffs, but in parallel reduced VAT on this particular energy segment and modified the billing process to reduce the impact on the consumer. In the end, it worked as consumers only saw a two to three euro a month increase in their bills. We took many other measures with the government to fulfill public obligations and we restructured payments to address our liquidity problems. I took office on August 22nd, 2019, and by August 30th we passed a set of measures to address liquidity. By September Ernst & Young removed their flag on us, and by October S&P upgraded PPC as a result of those immediate actions. We managed to diffuse the time bomb and the measures we took created a horizon of stability for the next two years. While these measures stabilized the company, we need to address the structural reforms that got the company into this place in the first place. We created a new business plan by the end of December to tackle the root of the problem. We worked with the government on the legal and regulatory framework to make sure there is an environment in which PPC can operate properly and in line with our European peers. This involved changes to employment and how we compensate people and harmonizing our procurement process with European standards. We created our governance structure, systems, and operating model to align with European best practice.
What are the main pillars of PCC’s five-year strategic plan? What are the main objectives of the plan and how do you plan to achieve it?
In the past, PCC hesitated to make decisions that would send the company towards the future. One has to think about how the market will look for PPC in the coming years. The energy transition will see the emergence of a new energy market where renewables penetrate the system even more, with even more fragmentation than today. This will require flexible distribution networks that are fully digitalized, modern supply chains, and modern services for consumers. Our strategic plan aims to address all of these aspects. We are doing this in three key ways. The first is through our transition away from lignite and increasing our investment in renewables, and to do so quickly. The second is digitalizing our business, specifically our grid, to make a flexible distribution network that can manage the demand of fragmented generation and immediate consumption. This means a significant investment in smart meters, automatic controls and other digital systems. The third is customer-centricity, making customers the center of our world, offering value-add services and improving the customer journey to make it quicker and higher quality. We also entering new areas like electric mobility and e-vehicles. We have the ambition to create the biggest electric charger network in the country.
Can you elaborate on PPC’s plan to close lignite plants and focus on renewables?
For our German audience, it has to be understood that Greek lignite is different than the north European lignite. The thermal power is less than one-third of the northern European coal and lignite. This means that ] with increased costs we are already negative EBITDA from the production of lignite. In 2018 we were around €200 million negative EBITDA for the overall segment. 2019 is expected to be around €300 million. We do not have the time to wait to make this transition and we are doing so for two additional critical reasons: our climate agenda, and the fact that we do not have any reason not to do so as renewables are cost-competitive. Economically, we have an incentive to do it immediately. We will phase lignite out by 2023, except for one asset which will take until 2028. We gave ourselves this timeline to ensure we can do the due diligence including implementing replacement heating sources for some of the cities we serve and finding additional power plants to enter the system to guarantee energy security. We were at a disadvantage because we didn’t enter the renewables market strongly enough and early enough, but the good news is we can enter now at a cheaper cost. We have a subsidiary with around six gigawatts worth of projects in development. It is a big portfolio of new projects and we can say that we can invest significantly in this area with a high degree of certainty that we can do it without any risk. We’ve always been a company possessing engineering excellence and the capabilities to execute such programs.
What are your financial and operational projections for the short and medium-term for PPC?
In the outlook we issued last December, we stated we would produce 1.5 gigawatts of renewable energy while phasing out lignite in the medium term, and in parallel investing a lot in distribution and modernizing supply of renewables. I can reaffirm this commitment. By April we will announce our final results for 2019 as well as the forecast for 2020 and 2021, but I can confirm that we are on a good track to recover PPC as we had forecasted. We said that we would do around €700 to €750 million of reclaiming EBITDA and we are targeted to do about €1 billion by 2024.
How do the latest technologies and the impending fourth industrial revolution impact PPC and the energy sector? What is PPC doing to address these challenges and opportunities?
The energy sector is highly impacted. The energy transition involves the drastic reduction of the cost of renewables, and wind and solar in particular. Today, renewables are much below grid parity. We see in the not far away future that batteries will play an important role and will revolutionize industries such as the automotive industry. Demand will increase exponentially, which will have a correlating exponential drop in cost. We think that the implementation of industrial batteries in houses is much closer than we think. This is a new horizon where we need a digital grid and applications top make all the new technologies interoperate. The role of the utilities is changing as well dramatically and new competencies and skills need to be brought and developed within companies like PPC. This is why we are also starting with a mobility business segment.
You just returned from the German Hellenic Economic Forum in Berlin and Germany plays a leading role in the renewables sector. What opportunities do you see for collaboration between PPC and German companies and for the energy sector more broadly?
PPC has an enormous task in front of us. We will pursue a lot of partnerships, as we cannot advance alone. We recently signed an MOU with RWE focused on knowledge exchange on the lignite phase-out, and co-development of new renewables projects in Greece. We have signed these kinds of agreements with other companies but the RWE agreement is, of course, huge given the size and importance of the company. We also are experimenting with batteries with some German companies. We’ve collaborated with big players such as Siemens over the years. I think this will all continue moving forward.
Greece is strategically positioned and can become a regional energy hub in the future. What strategic opportunities do you think will emerge for Greece from regional interconnections?
Greece is strategically positioned geographically and can have a very important role as a future energy hub. We also have an abundance of sun and wind for renewable production. The more we advance in this European vision to increase interconnection, the more Greece will be able to support this growth. Greece is currently a net importer of energy, but in the future, we hope to become a net exporter which could increase the overall competitiveness of Europe.
What comes next for PPC in an increasingly competitive energy landscape?
PPC has always been a pillar of the Greek economy. When you have a strong PPC you can have also a big business develop around PPC. We strongly believe that PPC’s recent changes and strengthened corporate strategy will drive Greece’s energy transition for the future and will drive competitiveness in the Greek economy. We are not afraid of competition. We cannot hide from change, but we can develop our capacity to manage the change that is important. Our vision is to become a utility that is agile and can manage change no matter what comes and will work closely with stakeholders and local communities to be a sustainable business of the future.