In this video, Dimitrios Koutsoubos revisits his first article, written 13 years ago. Going back is a great opportunity for learning some lessons.
2007 Article (translated):
In today’s circumstances, the stock hasn’t gone up with the rise of the energy prices, and is constantly downgraded by analysts. Without being a specialist, I believe that analysts deal with it in a wrong way, and that it is a great opportunity, and will be a greater opportunity if oil goes beyond 100 dollars per barrel.
The only reservation is PPC to stay attached to the “chariot” of the state for many years
PPC is an enterprise controlled by the state, and is called to demonstrate its social profile. Households get subsidized by paying lower prices per kwh, while energy price rises do not pass through to consumers. I am not talking about just the oil cost, but for the global energy prices, which are inter-connected. We should not forget that PPC is primarily an energy producer (coal, hydro) and then a consumer. Due to this distortion, PPC behaves in its accounts as a consumer and is dealt as such by investors.
Due to the fact that, sooner or later, this state enterprise will disengage from direct state control, and that the cost of subsidizing consumers will die off, PPC is becoming a great investing opportunity.
In case of oil prices exploding above $100 per barrel, the enterprise will become loss-making. However, there is no chance for others to compete by using natural-gas or oil (an example is ELPE’s failure in electricity generation due to PPC’s low cost of generation through coal). At the same time, the value of electric power and coal would increase. For example, using air-conditioners for heating would be more attractive than heating with oil. Long-term, other usages could also get replaced through the support of the electricity grid (electric vehicles, hydrogen, etc.). A privatized PPC under this environment could have such great profits, that current profits would seem like a joke. Only emission rights, and environmentally friendly alternatives could threaten PPC. In an energy crisis environment though, stopping relying on coal initially seems impossible.
On the occasion of an oil price decline, I don’t think that electricity prices will drop. The short-term outcome would be great, but low prices would make natural gas competitive, which is environmentally friendlier.
Thus, the long-term importance and value of PPC increases under conditions of rising energy prices. On the contrary, its future would be precarious with lower energy prices, because flexible players would gain share and would manage to compete in price. This is the exact opposite of what the analysts suggest.
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