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Greeks No Longer Pay Their Energy Bills

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Kalina Oroschakoff, Politico

Greeks haven’t been paying their energy bills, causing huge problems for the country’s biggest utility.

The banking crisis set off by last month’s snap referendum announced by Greece’s Prime Minister Alexis Tsipras is wreaking havoc on the country’s biggest utility, Public Power Company S.A. (PPC), because even fewer customers than usual are paying their power bills.

The company is seeing a shortfall of about €20 million a day, said Thucydides Koukoulios, with Pöyry Management Consulting, an energy consultancy.

“The further reduction of cash inflows means that PPC has to rely on their cash reserves,”  he said, which creates difficulties for its operations. Because of the cash squeeze, PPC is contemplating withholding a €200 million down payment for a new €1.5 billion coal-fired power plant in order to free up funds, according to the Kathimerinini daily. There have also been reports of problems in mining operations as a result of capital controls.

PPC is the biggest power producer and electricity supplier in Greece with approximately 7.4 million customers. The company holds assets in lignite (or brown coal) mines, power generation, transmission and distribution. It controls almost all the retail electricity market and accounts for about two-thirds of Greece’s electricity output.

“We don’t have the full picture about the past two weeks, but the situation is obviously an emergency condition,” Sotiris Chatzimichael, head of the Strategy Directorate at PPC, told POLITICO. “People don’t have access to their money. The electricity bill is not their first priority.”

Paying energy bills

The dramatic situation is only the latest symptom of a long-running crisis for PPC, which has struggled with customers being either unwilling or unable to pay for bills for years. The Greek government has similar problems with getting people to pay their taxes. Earlier this year, the company announced it was sitting on a mountain of unpaid bills worth €1.9 billion. That’s more than its market capitalization of just over €1 billion, according to Bloomberg. In 2014 it had revenues of €5.8 billion.

“Of course this is not money we consider lost, it’s unpaid bills,” said Chatzimichael. “Nevertheless it presents a huge cash flow problem for PPC on top of all the others.”

The company also noted that it has had to provision €374 million for customer bad debts.

With banks still shuttered, cash withdrawals limited to €60 a day, and capital controls, Greeks have more on their minds than paying their bills.

“Liquidity issues can be as much the result of an inability to pay – due to the capital controls or a lack of funds — or a desire to maintain as much cash as possible in the current uncertain environment,” said Anastasios Giamouridis, a senior consultant at Pöyry.

For now PPC is able to deal with the crisis, Chatzimichael said, but added, “PPC is an industry and as an industry we have hundreds of contracts — money changes hands every day.” If the crisis continues and the banking situation does not improve, “obviously the situation will deteriorate.”

There is hope that the immediate problem will abate if Greece manages to unlock a bailout program which allows banks to reopen.

“If the government manages to strike a deal with creditors, we expect the situation to come back to a more normal everyday situation,” Chatzimichael said.

That would help with the short-term, but in an economy that has contracted by a quarter over the last five years, and where unemployment is 25 per cent and expected to rise, the issue of people having problems paying for power will continue.

“What would be relatively probable, of course, is that the people don’t pay for their power but the power continues to flow. Otherwise it’s not politically tenable,” said Christian Egenhofer of the Centre for European Policy Studies.

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