Special feature: Greece

Interview with Interview with Mr Emmanouil Panagiotakis, Chairman and CEO, Public Power Corporation S.A.

March, 2018

Last month Greece’s Prime Minister, Mr Tsiparas, at the inaugural speech of the Thessaloniki International Fair, mentioned that Greece has turned the page and the nation is “Leaving Grexit and heading to Grinvest.” What is your assessment regarding the confidence of international investors in Greece’s economy today?

Mr Panagiotakis: I am very optimistic for the future, but not only the near future. I am also optimistic for the medium and long-term. We have learned from our mistakes in the past. We will establish a new path for the development of Greece, without these mistakes.

Perhaps you have heard the speech of our Prime Minister, Mr Alexis Tsiparas, at the Regional Development Congress in Larissa, where he pointed out the importance of inclusive development, or economic growth that affects all Greeks, a key aspect for creation of jobs and reduction of unemployment. In my opinion, all investors must focus not on short-term gains, but have a long-term outlook. Investors should also not depend on the state. It is important to separate the role of the state with that of the private sector because in the past, there was an overlap.

Concerning PPC and the power sector, I think that currently there are many opportunities. First and foremost, there are vast opportunities in renewables. Renewable energy is one of our main domestic sources of power. The technology and cost for storage of energy from renewable sources is not at a level that would allow Greece to run entirely on it. We still need the traditional energy production. The future, however, belongs to renewables.

PPC, and Greece as a country, is very rich in renewables, specifically in solar (photovoltaic), wind and geothermal energy. We are rich in geothermal fields in the Cyclades islands, the Dodacanese islands and the islands of the northeast. There are additionally other geothermal fields, with lower temperatures, that can be used directly, without first generating electricity. For example, they can be used to heat buildings and even greenhouses in agricultural production. The potential for Greece in agricultural production is very big, however there still needs to be further scientific promotion and investment to really take off. Yields are still low so production is not at full capacity.

The first area of opportunity is renewables. The second area is interconnections. Greece is, to an extent, geographically isolated from the core EU nations. We must build and extend our interconnections with the European electrical network. This falls in line with the European strategy to integrate the electricity market. Without interconnections this integration will not succeed. We have to build interconnections with our neighbouring countries. These interconnections need to start between our own islands and between the islands and the mainland. We have already created some interconnections, but we must do more in the future, including Crete, the Dodacanese islands, among other smaller islands.

Investors from the UK are presented with secure opportunities to invest in our energy sector. The two sectors mentioned, renewables and interconnections, are both very secure to do business. PPC plays an important role and is seeking partners to forge joint ventures.

We understand that you will be unveiling a new, 5-year strategic plan in the coming months. Tell us more about the targets that you have set for PPC and what key measures will you be implementing to achieve these targets?

Mr Panagiotakis: Under the framework agreed upon by the bailout plan, PPC is obliged to lose 30 – 35% market share in the retail business. We are also obliged to sell 40% of our lignite assets, including both power plants and lignite fields. We are currently in discussion with the Commission to define the exact portfolio of fields and units that have to be divested. Because of these conditions, we must adapt our business model and seek new areas for growth.

We are now adopting two strategic directions: one is to diversify our products. We are now transforming PPC from a company which sells electricity to a company that will supply broader energy services.

The other direction is to grow abroad, in our neighboring countries. This is very important not only for economic reasons but also because of strategy. PPC, as you know, is the largest energy company in Greece, but compared to our counterparts in Europe, we would be considered a medium-sized company. With the integration of the European electricity market, competition will be very strong. For this reason we must transform and take positions in the Balkan countries, for example. In order to become a leader in production, trading and renewables in our neighbourhood, we must be able to cope with the competition which will be strong for the next five years.

What specific countries are you currently focusing on in the region?

Mr Panagiotakis: We have created three foreign subsidiaries: in Albania, in Bulgaria, a joint-venture with a Swiss company – Alpiq, and the third one in Turkey. All three of these countries are very interesting for us. Bear in mind that some of the Balkan countries belong to the EU and others do not. But together they will all create a regional European market, comprised of Italy, the Balkans and ourselves.

We try to support the EU to develop the market in the Balkan countries. We will support the other states and their companies in our neighborhood because PPC has experience and a strong brand name in the Balkans. The expansion will be based on our values. We will form win-win joint ventures with very careful, measured steps. We do not seek quick returns. Long-term goals are the road for us; these are our values and our strategy. This is the only road for success.

These are our two major strategic directions. In order to succeed, we must adapt and transform our company from within. We must change our systems and our business model. We are now working on the framework for this new business model, which will be ready in a few months (end of 2017). In a very short time, many transformations must take place. We must transform our culture. We need to learn to swim in the ocean, and not just the harbour, which is where we were so far.

The importance of reducing carbon emissions is a top priority for governments and corporations alike. The EU’s target for 2030 demands that 27% consumption of the energy mix come from renewable sources. Is Greece set to reach this goal? What can you also tell us about the shift from carbon-intensive production to greener sources?

Mr Panagiotakis: We strongly support the European strategy to combat climate change, and Paris Agreement, COP 21. We are absolutely aligned with the European targets. As a country, Greece is set to accomplish the 2030 European targets for the year 2030 in terms of the Emissions Trading System (ETS) at 5 or 6 years beforehand.

Part of our energy production in Greece is from lignite, which is our second most significant domestic source. In the past, energy generated from lignite reached up to 75% of the total production. Nowadays, the figure for lignite is less that half of that, roughly 30%. We have decommissioned quite a few power plants and will continue to do so for three more years.

On the other hand we are building a new power plant in Ptolemais. Greece still needs domestic power generation for security of supply, a key issue because Greece is isolated without many interconnections and the natural gas pipelines are limited in their capacity. In order to avoid shortages, we must have our lignite plants with extra capacity. Our studies show that we will still need 25-27% of lignite power generation in the next two decades throughout the transition to renewable sources.

Additionally, natural gas is an imported commodity, and therefore subject to the fluctuations of the international prices. It is dangerous for the Greek economy to be exposed to this risk, particularly during a recession period. We need stable and possibly lower cost of electricity for our economy. This is why we need to decrease gas as much as possible in our energy mix. We are in discussions with the commission for Greece to take

Please share a powerful message with the business and investor community of the UK regarding Greece’s future energy landscape, the role of PPC and the abundance of investment opportunities?

Mr Panagiotakis: There are many opportunities for investments in Greece’s electricity sector. PPC is the right partner with whom foreign investors can collaborate in order to invest. We are now in discussions with some funds from the UK. One example is Pimpco, the fund managers. Some years back we had a partnership with British Platina on a project for windmills through our subsidiary, PPC Renewables. Currently we have relations with Scottish Power. Perhaps we can collaborate with a British partner in the supply of electricity in Greece as we will soon be selling a portfolio of customers to the market, in order to gradually reduce PPC’s market share. We would be very happy if a British fund were interested in such an opportunity.