REG - Public Power Corp - Half-year Report <Origin Href="QuoteRef">DEHr.AT</Origin> - Part 5
26/09/2017 16:26
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1,606,470
Current Assets
Materials, spare parts and supplies 46,815
Trade receivables and other current assets 1,120,864
Cash and cash equivalents 219,829
1,387,508
Total Assets from discontinued operations 2,993,978
Non - Current Liabilities
Long - term borrowing 473,972
Other non - current liabilities 448,324
922,296
Current Liabilities
Trade and other payables 1,124,319
Short - term borrowings 20,952
1,145,271
Total Liabilities from discontinued operations 2,067,567
6. Income Taxes (current and deferred)
Group Company
30.06.2017 30.06.2016 30.06.2017 30.06.2016
Current income taxes 317,753 86,686 298,971 78,172
Deferred income tax (293,052) (62,706) (292,598) (65,986)
Additional taxes - 526 - 526
Total Continuing Operations 24,701 24,506 6,373 12,712
Discontinued Operations 3,271 10,900 - -
Total income tax 27,972 35,406 6,373 12,712
According to Greek Tax Legislation, companies that have their residence in Greece are subject to an income tax rate of 29%
and an income tax prepayment of 100%.
Tax returns for the companies residing in Greece are filed annually but profits or losses declared for tax purposes remain
provisional until such time, as the tax authorities audit the returns and the records of the company and a final assessment
is issued. The Group establishes a provision, if deemed necessary, by case and by company, against the event of additional
taxes being imposed by the tax authorities.
Based on the applicable Income Tax Code, since the fiscal year 2011 and until the fiscal year 2016, the certified auditors
issue an "Annual Tax Compliance Report" after conducting a tax audit at the same time with the financial audit. The tax
audit is conducted on particular tax areas, specified by an audit program, according to the provisions of the tax law.
Audit matters which are not covered by the above mentioned decision are dealt in accordance to the ISAE 3000 "Assurance
Engagements other than Audits or Reviews of Historical Financial Information".
Moreover, effective January 2014, the appropriate tax authorities (Centre for Auditing Big Companies) have commenced a tax
audit for the Parent Company's fiscal years 2009, 2010 and 2011, which is still in progress.
In the following table unaudited tax years for the Parent Company and the subsidiaries of the Group are presented:
Company Country Unaudited years since
PPC S.A. (Parent Company) Greece 2009
PPC Renewables S.A. Greece 2012
HEDNO S.A. Greece 2012
Arkadikos Ilios Ena S.A. Greece 2007
Arkadikos Ilios Dio S.A. Greece 2007
Iliako Velos Ena S.A. Greece 2007
Iliako Velos Dio S.A. Greece 2007
SOLARLAB S.A. Greece 2007
Iliaka Parka Ditikis Makedonias Ena S.A. Greece 2007
Iliaka Parka Ditikis Makedonias Dio S.A. Greece 2007
PPC FINANCE PLC United Kingdom 2009
PPC BULGARIA JSCo Bulgaria 2014
PPC Elektrik Tedarik ve Ticaret A.S. Turkey 2014
PHOIBE ENERGIAKH PHOTOVOLTAICS S.A. Greece 2007
7. investments in subsidiaries
The direct subsidiaries of the Parent Company and the value of the investment are as follows:
Company
30.06.2017 31.12.2016
IPTO S.A. (Notes 2 and 5) - -
HEDNO S.A. 56.982 56.982
PPC Renewables S.A. 155.438 155.438
PPC FINANCE PLC 59 59
PPCBULGARIAJSCo 522 522
PPC ELEKTRIK TEDARIK VE TICARET AS 1.350 1.350
PPC ALBANIA 150 -
214.501 214.351
In September 2016, the Board of Directors of the Parent Company decided the set-up of a wholly owned subsidiary in Albania,
under the name "PPC Albania", based at Tirana. The company will be active, among other activities, in electricity trading
and its initial share capital amounts to Euro 150. The set - up of the subsidiary company was held in January 2017 while
the payment of Euro 150 took place in February 2017.
The consolidated financial statements include the financial statements of PPC and its subsidiaries. The subsidiaries,
included in the consolidation, are the following (full consolidation):
Ownership Interest Country and Year Principal
Subsidiaries 30.06.2017 31.12.2016 of Incorporation Activities
PPC Renewables S.A. 100% 100% Greece, 1998 RES
HEDNO S.A. 100% 100% Greece, 1999 HEDN
IPTO S.A. - 100% Greece, 2000 HETS
Arkadikos Ilios Ena S.A. 100% 100% Greece, 2007 RES
Arkadikos Ilios Dio S.A. 100% 100% Greece, 2007 RES
Iliako Velos Ena S.A. 100% 100% Greece, 2007 RES
Iliako Velos Dio S.A. 100% 100% Greece, 2007 RES
SOLARLABA.E. 100% 100% Greece, 2007 RES
Iliaka Parka Ditikis Makedonias Ena S.A. 100% 100% Greece, 2007 RES
Iliaka Parka Ditikis Makedonias Dio S.A. 100% 100% Greece, 2007 RES
PPC FINANCE PLC 100% 100% UK, 2009 Financing Services
PPC Bulgaria JSCo 85% 85% Bulgaria, 2014 Supply of power
PPC Elektrik Tedarik Ve Ticaret A.S. 100% 100% Turkey, 2014 Supply of power
PHOIBE ENERGIAKI PHOTOVOLTAICS S.A 100% 100% Greece, 2007 RES
PPC ALBANIA 100% - Albania, 2017 Supply of power
8. Investments In Associates
The Group's and the Parent Company's associates as of June 30th 2017 and December 31st, 2016 are as follows (equity
method):
Group Company
30.06.2017 31.12.2016 30.06.2017 31.12.2016
Larco S.A. - - - -
PPC Renewables ROKAS S.A. 2,021 2,160 - -
PPC Renewables TERNA Energiaki S.A. 2,944 3,161 - -
PPC Renewables NANKO Energy - MYHE Gitani S.A. 2,363 2,204 - -
PPC Renewables MEK Energiaki S.A. 1,592 1,314 - -
PPC Renewables ELTEV AIFOROS S.A. 2,609 2,532 - -
PPC Renewables EDF EN GREECE S.A. 8,625 8,479 - -
Aioliko Parko LOYKO S.A. 20 20 - -
Aioliko Parko BAMBO VIGLIES S.A. 23 23 - -
Aioliko Parko KILIZA S.A. 27 27 - -
Aioliko Parko LEFKIVARI S.A. 25 25 - -
Aioliko Parko AGIOS ONOUFRIOS S.A. 28 28 - -
Renewable Energy Applications LTD 27 27 - -
WASTE SYCLO S.A. 42 46 221 221
PPC Solar Solutions S.A. 970 971 980 980
21,316 21,017 1,201 1,201
The full list of the Group's and the Parent Company's associates are as follows:
Ownership Interest Country and year Principal
Associates Note 30.06.2017 31.12.2016 of Incorporation Activities
Larco S.A. 11.45% 11.45% Greece, 1989 Metallurgical
PPC Renewables ROKAS S.A. 49.00% 49.00% Greece, 2000 RES
PPC Renewables TERNA Energiaki S.A. 49.00% 49.00% Greece, 2000 RES
PPC Renewables NANKO Energy - MYHE Gitani S.A. 49.00% 49.00% Greece, 2000 RES
PPC Renewables MEK Energiaki S.A. 49.00% 49.00% Greece, 2001 RES
PPC Renewables ELTEV AIFOROS S.A. 49.00% 49.00% Greece, 2004 RES
PPC Renewables EDF EN GREECE S.A. 49.00% 49.00% Greece, 2007 RES
EEN VOIOTIA S.A. 1 46.60% 46.60% Greece, 2007 RES
Aioliko Parko LOYKO S.A. 49.00% 49.00% Greece, 2008 RES
Aioliko Parko BAMBO VIGLIES S.A. 49.00% 49.00% Greece, 2008 RES
Aioliko Parko KILIZA S.A. 49.00% 49.00% Greece, 2008 RES
Aioliko Parko LEFKIVARI A.E. 49.00% 49.00% Greece, 2008 RES
Aioliko Parko AGIOS ONOUFRIOS S.A. 49.00% 49.00% Greece, 2008 RES
Renewable Energy Applications LTD 49.00% 49.00% Cyprus, 2010 RES
Waste Syclo S.A. 49.00% 49.00% Greece, 2011 Waste Management
PPC Solar Solutions S.A. 49.00% 49.00% Greece, 2014 RES
1. It is consolidated from the associate company PPC Renewables EDF EN GREECE S.A. as it participates by 95% in its share
capital.
9. balances and Transactions With Related Parties
PPC balances with its subsidiaries and its associates as of June 30th2017 and December 31st2016 are as follows:
June 30, 2017 December 31,2016
Receivable (Payable) Receivable (Payable)
Subsidiaries
-PPC Renewables S.A. 1,385 - 1,260 -
-HEDNO S.A. 182,909 (473,470) 599,981 (1,028,540)
-PPC Finance Plc. - (4,589) - (6,173)
-PPC Elektrik - (123) 542 (86)
-PPC Bulgaria JSCO - (748) 38 (1,524)
184,294 (478,930) 601,821 (1,036,323)
Associates
LARCO (energy, lignite and ash) 264,713 - 242,709 -
264,713 - 242,709 -
PPC's transactions with its subsidiaries and its associates for the period ended June 30th, 2017 and June 30th, 2016,
are as follows:
June 30, 2017 June 30, 2016
Invoiced to Invoiced from Invoiced to Invoiced from
Subsidiaries
- PPC Renewables S.A. 1,585 - ,1,556 -
- HEDNO S.A. 611,904 (889,285) 533,242 (858,903)
- PPC Finance Plc - (16,916) - (18,551)
- PPC ELEKTRIK 12 (1,868) 954 (366)
- PPC Bulgaria JSCO - (9,297) - (15,536)
613,501 (917,366) 535,752 (893,356)
Associates
LARCO (28,742) (3,882) 29,718 (2,926)
(28,742) (3,882) 29,718 (2,926)
Guarantee in favor of the subsidiary PPC Renewables S.A.
As of June 30th 2017, the Parent Company has guaranteed for total credit line of Euro 8 mil., through overdraft agreements.
As of June 30th 2017 PPC Renewables S.A. has used Euro 896, concerning letters of guarantee.
Interest bearing loan to ADMIE (IPTO) Holding S.A.
During the first half of 2017, the Parent Company granted an interest-bearing loan to the company ADMIE (IPTO) HOLDING SA
up to a maximum of Euro 1,300, of which an amount of Euro 831 has been disbursed. Under the contract, the loan is repayable
on November 30th 2018. It should be noted that in order to secure the repayment of this loan, ADMIE (IPTO) HOLDING SA has
granted to PPC a pledge on the dividends it is entitled to receive from IPTO S.A.
9. BALANCES and Transactions With Related Parties (CONTINUED)
Transactions and balances with other government owned entities
The following table presents purchases and balances with government owned entities Hellenic Petroleum ("ELPE") and National
Gas Company ("DEPA"), which are PPC's liquid fuel and natural gas suppliers, respectively and into which the Hellenic
Republic participates. Furthermore, transactions and balances with the Electricity Market Operator ("EMO"), as well as with
IPTO S.A. are presented.
Purchases Balance
30.06.2017 30.06.2016 30.06.2017 31.12.2016
ELPE, purchases of liquid fuel 126,692 - 43,535 85
DEPA, purchases of natural gas 211,594 122,819 119,728 105,314
338,286 122,819 163,263 105,399
June 30, 2017 December 31, 2016
Receivable (Payable) Receivable (Payable)
EMO S.A. 112,500 (73,557) 173,764 (128,312)
June 30, 2017 June 30, 2016
Invoiced to Invoiced from Invoiced to Invoiced from
EMO S.A. 864,436 (1,392,699) 617,389 (961,129)
June 30, 2017 December 31, 2016
Receivable (Payable) Receivable (Payable)
IPTO S.A. 113,956 (740,414) 152,844 (807,989)
June 30, 2017 June 30, 2016
Invoiced to Invoiced from Invoiced to Invoiced from
IPTO S.A. 79,493 (283,014) 92,863 (594,465)
Further to the above, PPC enters into transactions with many, government owned, both profit and nonprofit oriented entities
within its normal course of business (sale of electricity, services received, etc.). All transactions with government owned
entities are performed at arm's length terms.
9. BALANCES and Transactions With Related Parties (CONTINUED)
Management compensation
Fees concerning management members (Board of Directors and General Managers) for the six month period ended June 30, 2017
and 2016 have as follows:
GROUP COMPANY
30.06.2017 30.06.2016 30.06.2017 30.06.2016
Compensation of members of the Board of Directors
- Executive members of the Board of Directors 123 181 29 29
- Non-executive members of the Board of Directors 28 27 - -
- Compensation / Extra fees 22 20 - -
- Contribution to defined contribution plans 13 46 9 9
- Other Benefits 70 44 70 44
256 318 108 82
Compensation of Deputy Managing Directors and General Managers
- Regular compensation 351 316 268 253
- Contribution to defined contribution plans 104 86 80 66
- Compensation / Extra fees 13 - 13 -
468 402 361 319
Total 724 720 469 401
It is noted that the amounts relating to the Group, for the period ended on June 30th 2017, do not include IPTO S.A.
Compensation to members of the Board of Directors does not include standard payroll, paid to representatives of employees
that participate in the Parent Company's Board of Directors. Also, it does not include the benefit for the electricity
supply based on the PPC personnel invoice to the Executive Board of Director members, the Deputy Managing Directors and the
General Managers.
10. SHARE CAPITAL
Under Law 2773/1999 and P.D. 333/2000 PPC was transformed, into a société anonyme.
By the Legislative Act of 07.09.2012, which was ratified by art. 2 of L. 4092/2012, the obligatory participation of the
Greek State with at least 51% of the company's share capital was abolished. The Extraordinary General Shareholders'
Meeting, which was convened on November 30, 2012 decided to abolish the article of incorporation which provided for the
participation of the Greek State by at least 51% to the company's share capital. This amendment of the Articles of
Incorporation on one hand harmonizes the articles with the legislation in effect, and on the other hand renders possible
the reduction of the current participation percentage of the Greek State to the company's share capital.
At December 31th 2016 , PPC's share capital (fully authorised and issued) amounted to Euro 1,067,200 divided into
232,000,000 common shares of Euro four and sixty cents (Euro 4.60) per value each.
The Extraordinary General Shareholders' Meeting with its decision on 17.01.2017 and in the context of the carveout of the
"Holding Company ENERGIAKI S.A."(ADMIE (IPTO) HOLDING SA thereafter) according to Law 4389/2016 , approved (a) the decrease
of PPC's share capital by Euro 491,840 "with the purpose of the distribution in Kind to its shareholders" and (b) as a
consequence of the above mentioned distribution in Kind, the transfer to its existing shareholders of the shares held PPC
in the "ENERGIAKI HOLDING S.A." in proportion to their participation in PPC's share capital. This decrease will be achieved
by means of decreasing the nominal value of the PPC's shares from Euro four and sixty cents (Euro 4.60) per value each to
Euro two and forty-eight cents (Euro 2.48).
After this decrease, PPC's share capital amounts to Euro 575,360 divided into 232,000,000 common shares of Nominal Value of
Euro two and forty-eight cents (Euro 2.48) each.
11. LOANS AND Borrowings
During the first half of 2017, the Group proceeded to debt repayments amounting to Euro 469.17 mil. (Parent Company Euro
469.17 mil.) including the A Series of an International Bond, amounting to Euro 200 mil.
In April 2017, the Parent Company issued a syndicated secured common bond loan of Law 3156/2003 with Hellenic Banks,
amounting to Euro 200 mil., maturing in 2019, with gradual repayments. This loan has a floating guarantee on PPC's business
receivables.
In June 2017 the Parent Company proceeded to an Early Repayment of Bonds amounting to Euro 25 mil. under the term 11.4 of
the contract of the above syndicated secured common bond loan of Law 3156/2003 with Hellenic Banks amounting to Euro 200
million
In particular, following the collection by PPC of the price for the sale and transfer of shares issued by IPTO SA on
20.06.2017, a) to the strategic investor State Grid Europe Limited, for 24% of the share capital of the Company for an
amount of Euro 327.6 million and b) to P.H.C. ADMIE (IPTO) S.A for 25% of the share capital of IPTO SA at a price of Euro
295.6 million, the term of the aforementioned bond loan, which concerns the early repayment of Bonds amounting to Euro 25
million was activated.
Also, during the period May - June 2017, the Parent Company drawed down an amount of Euro 46.2 million to finance part of
the cost of the construction of the Lignite Unit "Ptolemaida V" relating to a Bond Loan of Euro 739 million with a
consortium of foreign banks supported by the German Euler Hermes Export Credit Insurance Organization.
GROUP COMPANY
30.06.2017 31.12.2016 30.06.2017 31.12.2016
- Bank Loans 2,023,485 2,082,955 2,023,485 2,082,955
- Bonds Payable 2,365,616 2,529,088 2,365,626 2,529,098
Unamortized portion of loan issuance fees (34,851) (30,039) (34,851) (30,039)
Total long term borrowings 4,354,250 4,582,004 4,354,260 4,582,014
Less current portion:
- Bank Loans 197,182 173,091 197,182 173,091
- Bonds Payable 241,879 466,879 241,879 466,879
Unamortized portion of loan issuance fees (10,396) (8,868) (10,396) (8,868)
Total current portion of borrowings 428,665 631,102 428,665 631,102
Non-current portion of borrowings 3,925,585 3,950,902 3,925,595 3,950,912
Short term borrowings 30,000 30,000 30,000 30,000
Total loans and borrowings 4,384,250 4,612,004 4,384,260 4,612,014
Credit Rating
On June 30th 2017, PPC's credit rating from S&P and ICAP credit houses was set "CCC" with negative outlook and "F"
respectively
12. FAIR VALUE AND FAIR VALUE HIERARCHY
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs that have a significant effect on the recorded fair value and they are not based on
observable market data.
During the reporting period there were no transfers between level 1 and level 2, and no transfers into and out of level 3
for the fair value measurement.
12. FAIR VALUE AND FAIR VALUE HIERACHY (CONTINUED)
The following tables present a comparison of the carrying amount of the Group's and the Parent Company's financial
instruments that are carried at amortized cost and their fair value as well as the tangible fixed assets which are revalued
periodically:
Carrying amount Fair value
Group 30.06.2017 31.12.2016 30.06.2017 31.12.2016
Non - financial assets
Fixed Assets 11,765,460 11,936,838 11,765,460 11,936,838
Financial Assets
Trade receivables 1,652,959 1,597,997 1,652,959 1,597,997
Restricted cash 101,266 110,963 101,266 110,963
Cash and cash equivalents 511,797 207,034 511,797 207,034
Financial Liabilities
Long-term borrowings 4,354,250 4,582,004 4,294,875 4,514,548
Trade payables 1,749,348 1,283,795 1,749,348 1,283,795
Short term borrowings 30,000 30,000 30,000 30,000
Carrying amount Fair value
Parent Company 30.06.2017 31.12.2016 30.06.2017 31.12.2016
Non - financial assets
Fixed Assets 11,539,755 11,714,407 11,539,755 11,714,407
Financial Assets
Trade receivables 1,612,598 1,566,858 1,612,598 1,566,858
Restricted cash 101,266 110,963 101,266 110,963
Cash and cash equivalents 435,647 149,414 435,647 149,414
Financial Liabilities
Long-term borrowings 4,354,260 4,582,014 4,294,885 4,514,558
Trade payables 1,498,589 1,864,956 1,498,589 1,864,956
Short term borrowings 30,000 30,000 30,000 30,000
The fair value of investments available for sale, restricted cash, cash and cash equivalents as well as financial
derivative instruments equals their carrying amount.
Fair value of trade receivables and trade accounts payable approximate their carrying amounts. Fair value of the remaining
financial assets and financial liabilities is based on future cash flows discounted using either direct or indirect
observable inputs and are within the Level 2 of the fair value hierarchy.
Fair value of tangible assets is included in level 3 of fair value hierarchy.
As at June 30th 2017, the Group and the Parent Company held the following financial instruments measured at fair value:
Fair value Fair value Hierarchy
Financial Assets 30.06.2017 31.12.2016
Group
Investments available for sale 3,082 1,276 Level 1
Parent Company
Investments available for sale 2,695 889 Level 1
Macroeconomic conditions in Greece - Imposition of capital Controls
By the Legislative Act of 06/28/2015 (GG 65 A / 06.28.2015) a bank holiday was declared while capital controls were
imposed. The bank holiday ended on 07.20.2015, while capital controls remain in effect. Capital controls include
limitations on cash withdrawals and restrictions on payments abroad, consequently, affecting domestic transactions and
transactions with foreign suppliers and creditors. Due to the fact that the Group and the Parent Company are almost
exclusively operating in Greece, any change and development at the macro and micro environment of the country, directly and
very significantly affects their activities, operating results, financial condition and cash flows.
13. COMMITMENTS, CONTINGENCIES AND LITIGATION
13.1 OWNERSHIP OF PROPERTY
Major matters relating to the ownership of the Group's assets, are as follows:
1. The Parent Company has completed the registration of its property through a fixed assets registry. These assets are
registered at the relevant land registries over the country and the cadastral application is monitored. The update of the
existent in the company new integrated information system for fixed assets management is in progress.
2. In a number of cases, expropriated land, as presented in the expropriation statements, differs (in quantitative
terms), with what the Parent Company considers as its property.
3. Agricultural land acquired by the Parent Company through expropriation in order to be used for the construction of
hydroelectric power plants, will be transferred to the State at no charge, following a decision of the Parent Company's
Board of Directors and a related approval by the Ministry of Development, if such land is no longer needed by the Parent
Company for the fulfilment of its purposes according to Art. 9 of Law 2941/2001.
The property, plant and equipment of the Group are located all over Greece. Currently, the Group does not carry any form of
insurance coverage on its property, plant and equipment in operation (except for its information technology equipment),
resulting to the fact that if a sizable damage is incurred to its property, it might affect its profitability. Materials,
spare parts as well as liabilities against third parties are not insured. It is examined -in the newly formed legal
framework- the conduction of a tender for the selection of an insurance company to cover for assets as well as liabilities
against third parties.
13.2 Litigation and Claims
The Group from continuing operations is a defendant in several legal proceedings arising from its operations. The total
amount claimed by third parties as at June 30, 2017 amounts to Euro 1,573 mil. as further detailed below:
1. Claims with contractors, suppliers and other claims: A number of contractors and suppliers have raised claims against
the Group. These claims are either pending before courts or under arbitration and mediation proceedings. The total amount
involved is Euro 574 mil. In most cases the Group has raised counter claims, which are not reflected in the accounting
records, until the time of collection.
2. Fire incidents and floods: A number of individuals have raised claims against the Group for damages incurred as a
result of alleged electricity-generated fires and floods. The total amount involved is Euro 44 mil.
3. Claims by employees: Employees are claiming the amount of Euro 222 mil., for allowances and other benefits that
according to the employees should have been paid by PPC.
4. Litigation with PPC Personnel Insurance Organization (PPC-PIO):
Until June 30, 2017, PPC Personnel Insurance Organization (former "PPC PIO", former "PPC PIO", EFKA at present) had filed,
before the courts, seven (7) lawsuits against PPC, claiming an amount in total of Euro 87.7 mil., of which three (3) are
pending for a total amount of Euro 7 mil.
5. General Federation of PPC Personnel (GENOP DEI/KHE) and PanHellenic Federation of Retirees' (POS DEI) lawsuit against
PPC
GENOP DEI/KHE and POS DEI have filed a lawsuit against PPC in the Multimember Court of First Instance in Athens. By the
above mentioned lawsuit they pursue that PPC will be obliged to pay to third parties, who are not litigants, in particular
the insurance funds of IKA - ETAM and TAYTEKO (EFKA at present) the amount of Euro 634.8 mil. plus interest, for the
coverage of the resource, which according to the lawsuit, the State did not pay to the above mentioned insurance funds for
the years 2010 and 2011.
13. COMMITMENTS, CONTINGENCIES AND LITIGATION (CONTINUED)
The lawsuit was scheduled to be heard in the Multimember Court of First Instance in Athens on September 18th, 2014 but it
was postponed for February 23, 2017, when it was tried and a decision is pending. In view of the fact that the above
mentioned lawsuit is based on admissions which are in contrast with the provisions of Decision 13/2010 of the Supreme Court
(see also Decisions of the Supreme Court 1767/2014, 299 and 805/2015) and Decision 668/2012 of the Athens Court of Appeals,
the Parent Company considers that the possibilities of a positive outcome for the lawsuit in question, are minimal and
therefore, has not established a provision.
6. PPC's lawsuit against ETAA (former TSMEDE)
ETAA (former TSMEDE) by its Decision 7/2012 has imposed on PPC the amount of Euro 27.4 mil. in application of article 4 of
L. 3518/2006, as employer contributions due to the Main pension Branch for the period 01.01.2007 - 30.04.2012 and
pertaining to the engineers insured before 01.01.1993 to the above mentioned Insurance Fund, that have been employed by PPC
for the above mentioned period.
Against the above mentioned 7/2012 decision of the Insurance Fund in question, PPC has filed (legally and timely) the
05.09.2012 appeal to the Athens Administrative Court of First Instance. The date for the discussion of the appeal has been
taken place by the court for discussion on 03.11.2014. The discussion of the appeal took place and the preliminary ruling
11872/2016 was issued, which obliges TSMEDE to produce to the Court the documents referred to in the judgment and then the
case will be discussed again in order to issue a final decision .
Since its employees - who are engineers- are insured mandatorily to PPC's Insurance Fund based on L. 4491/1966, thus
resulting to PPC paying on their behalf to the above mentioned Insurance Fund the corresponding employer contributions
while insurance for the above mentioned engineers in ETAA is optional and is done by choice, with them paying the
corresponding insurance contributions provided for engineers that are independently employed, the Parent Company considers
that the possibilities of a negative outcome of its appeal are minimal and therefore has not established a provision.
7. Annulment requests against the request for binding offer (RfBO) by PPC S.A. for the sale of 24 % IPTO's shares
An annulment request has been filed in front of the Supreme Court against PPC's RfBO (Request for Binding Offer) in 2016
for the sale of 24% of IPTO's (PPC's subsidiary) shares. The above mentioned request has been filed by General Federation
of PPC Personnel (GENOP DEI/KHE). The applicant for annulment, GENOP / KHE, filed a written declaration of resignation (No.
2144 / 31.03.2017) which was, accepted by the President of the Supreme Court.
8. Lawsuits of IPTO against PPC.
IPTO has filed against PPC, two lawsuits for a total amount of Euro 540 mil. for amounts due - according to IPTO- to the
Company's participation in the wholesale electricity market. In particular:
· By its first lawsuit IPTO is asking for an amount of Euro 242.7 mil. (with interest) for amounts due which the
Parent Company collects from supply bills and conveys to IPTO, that in turn conveys them to EMO. The interest amount for
the above mentioned sums amounts to Euro 22.5 mil.
· By its second lawsuit, IPTO is asking for the payment of Euro 232.6 mil. (with interest) for amounts due which the
Parent Company collects from supply bills and conveys to IPTO. The interest amount for the above mentioned sums amounts to
Euro 40.6 mil.
The lawsuits are scheduled to be heard on May 18, 2017 in the Multimember Court of First Instance in Athens and was
postponed for February 28th 2019. The Parent Company considers that there is a chance of paying interest on certain sums
due and has established a provision of Euro 30.3 mil. It is noted that PPC, if necessary, will file lawsuits against IPTO
as well.
On its side, the Parent Company has served an extrajudicial document inviting IPTO to pay a total amount of Euro 14 mil.
The above mentioned amount corresponds to overdue interest of invoices which incorporate debts to PPC from March 2012 until
the 02.02.2015. IPTO, up to this date, has not answered to this extrajudicial document.
In December 2016, IPTO filed against PPC a new lawsuit, by which IPTO asks the Parent Company to be obliged to pay an
amount of Euro 406.4 mil. (with interest) for overdue receivables arising from the Company's participation in the wholesale
electricity market and refer to specific non-competitive charges of IPTO invoices. Moreover, IPTO asks the Parent Company
to be obliged to pay an amount of Euro 52.9 mil. corresponding to interest litigation plus the relevant stamp duty. The
Parent Company considers that it is likely to be asked to pay interest on certain overdue receivables, and has established
an adequate provision.
13. COMMITMENTS, CONTINGENCIES AND LITIGATION (CONTINUED)
For the above amounts, the Group from continuing operations and the Parent Company have established provisions which as of
June 30, 2017 amounted to Euro 208 mil. and Euro 121 mil., respectively (30.06.2016: Group: Euro 201 mil. and Parent
Company: 123 mil.), which are considered adequate for the expected losses arising from the final judgment.
PPC's relation to its personnel's Social Security Funds
Despite the fact that under the current legislation the Group does not have any obligation to cover in the future any
deficit between income and expenses to PPC's personnel Social Security Funds, there can be no assurance that this regime
will not change in the future.
Litigations Risk
The Group and the Parent Company are involved in several legal proceedings arising from their operations, and any adverse
outcome against PPC or any other of the Group's companies may have a negative impact on their business, financial condition
and reputation.
In addition, as a majority state owned utility, the Group is subject to laws, rules and regulations designed to protect the
public interest, such as of public procurement or environmental protection. Violation of such legislation, entails, among
others, criminal sanctions for the Board of Directors members and executive officers as well as the employees of the
companies and utilities that are subject to those rules.
Simultaneously, the Group is one of the largest industrial groups in Greece, with complex activities and operations across
the country. In the ordinary course of its business, from time to time, competitors, suppliers, customers, owners of
property adjacent to the Group's properties, the media, activists, and ordinary citizens, raise complaints (even to public
prosecutors) about the Group's operations and activities, to the extent they feel that such activities and operations cause
or are likely to cause economic damage to their views and/or interests, businesses or properties and, in the context of
advancing those complaints, they often file criminal complaints against the Group. In this context, reports involving
complaints and accusations for allegedly unlawful acts of executives against the Group usually involve their further
investigation by the Prosecuting Authorities in the so-called preliminary proceedings, which usually ends up in the closing
of the investigated case due to lack of conclusive evidence.
These practices have intensified during the recent economic crisis, as public prosecutors and the general public have
generally become more sensitive to similar allegations, especially against companies in which the Hellenic Republic is a
major shareholder and are viewed as operating in the public interest.
As a result, the Group and the Parent Company, their Board of Directors members and directors, are at present and could be
in the future, subject to various criminal or other investigations at various stages of procedural advancement on a variety
of grounds arising in connection with their activities in the ordinary course of business. These investigations and legal
proceedings may be disruptive to the Group's and the Parent Company's daily operations to the extent that the officers and
directors involved need to spend time and resources in connection therewith. They may also adversely affect the Group's and
the Parent Company's reputation, although to date, none of the proceedings initiated against the Group and the Group's
officers or directors has resulted in any criminal convictions.
PPC's audit by the European Commission's Directorate-General for Competition
Since February 2017, a European Commission's Directorate-General for Competition audit of the Parent Company is in progress
in accordance with Article 20 of the Regulation 1/2003 of the European Union. The audit is carried out pursuant to a
relevant Commission's decision dated February 1st 2017 for alleged abuse of a dominant position on the wholesale market for
the production of electricity from 2010 onwards. This audit is in progress.
Litigation with "Álouminion of Greece" (ALOUMINION)
1. On 31.10.2013 with a majority of two to one (2/1) Decision No. D1/1/2013, the Permanent Arbitration Court of RAE
decided the price for the supply of electricity to ALOUMINION S.A. at Euro 40.7/MWh for the period 01.07.2010 until
31.12.2013. At this price both the fixed and variable energy costs were included, as well as System Use Charges, Ancillary
Services Charges, Public Service Obligations, and state fees on behalf of RAE and HTSO/EMO, although Renewable
Energy/Gaseous Pollutants special fees/ETMEAR, Special Electricity Tax, DETE and other taxes imposed were not included. The
burden on the financial results of the third quarter of 2013 imposed by the above mentioned Decision, as far as the supply
of electricity to ALOUMINION is concerned, for the period 01.07.2010 until 30.9.2013 amounted to Euro 105.5 mil.
As the abovementioned Decision compelled PPC to sell at a loss, PPC filed a lawsuit for invalidity against it, which was
scheduled to be heard on 04.12.2014, and was postponed for 01.10.2015 and, in addition, submitted a complaint for state aid
before the European Commission (December 2013).
Regarding PPC's appeal for the annulment of RAE's Arbitration Decision, the Athens Court of Appeals issued on 18.02.2016 a
decision (634/2016), not accepting PPC's lawsuit for the annulment of RAE's arbitration decision No 1/2013 and against
ALOUMINION.
13. COMMITMENTS, CONTINGENCIES AND LITIGATION (CONTINUED)
The European Commission by a letter in June 12th, 2014, notified PPC that it does not intend to further examine the
complaint. PPC has challenged the Commission's decision in front of the General Court of the European Union by its appeal
dated 22/08/2014 (case T-639/2014).
On 17.04.2015 PPC was notified of a subsequent decision (dated 25.03.2015) of the European Commission, through which, the
latter concluded, as the decision dated 12.06.2014 had, that PPC's complaint, concerning illegal state aid towards
ALOUMINION, does not require further investigation concerning state aid but using a different rationale. Specifically, the
new decision is based mostly on the fact that the decision to resort to arbitration met the criteria of a private investor
and therefore that it could not lead to an illegal state aid.PPC has challenged the Commission's second decision in front
of the General Court of the European Union (case T-352/2015). On 31 May 2017 the Court delivered its judgment in favor of
PPC in Case C-228/16 P (PPC v Commission, T-639/14, which concerned the annulment of the aforementioned decision of
June12th 2014), in which it accepted the claim of PPC to set aside the above-mentioned order of the General Court of
February 9th 2016 (regarding the dismissal of the first above mentioned trial T-639/14) and ordered the case to be referred
back to the General Court for a ruling on PPC's claims. The Court therefore referred the case to the General Court of the
European Union. Subsequently, on 23 August 2017, the Commission notified PPC of its new Decision (No. (2017) 5622 final),
which, according to the text of this new Decision, revokes the letter of 2014 and its confirmatory decision of 2015
replacing them with this new above mentioned Decision. With this new Decision, the Commission has accepted that the measure
in question does not constitute state aid for the same reasons as it set out in its repealed Decision of 2015. The deadline
for challenging this Decision is two months.
2. State Aid of Euro 17.4 mil.
Furthermore regarding case C-590/14 P, relating to PPC's petition for the annulment of the General Court's decision dated
8.10.2014 in case T-542/11 "ALOUMINION against Commission", which annulled the Commission's decision dated 13.07.2011,
which awarded to PPC an amount of E17.4 mil., payable by ALOUMINION, for an illegal state aid, as a result of the
implementation of a favorable tariff for the period January 2007 - March 2008, a decision was issued on October 26th 2016
by the European Union's Court of Justice.
With this Decision the aforementioned judgment of the General Court was annulled. Therefore, and given that the
Commission's Decision of July 13th, 2011 remains in force, following the annulment of the General Court's judgment, in
accordance with Article 266 TFEU and the case law, PPC should recover (once again) the illegal state aid with interest. For
the purpose of this recovery, the Commission sent a letter to the Central State Aid Unit (LTC-IC) informing that the
amount, plus statutory interest for the period from January 1st, 2015 until the date of payment, will be reimbursed by
Alouminion of Greece to PPC and requested information on this matter. LTC-IC subsequently informed PPC, which also informed
Alouminion of Greece and the parts (PPC and ALOUMINION) are in communication in order for the aid to be recovered. It is
noted that ALOUMINION appealed against the above mentioned Decision of the Court (Case T-542/11 RENV ALOUMINION OF GREECE
S.A., former ALOUMINION S.A. against European Commission, PUBLIC POWER CORPORATION S.A. (PPC) , intervener. In this Case
the Court may examine the other grounds of ALOUMINION's appeal for the annulment of the decision of July 13th, 2011.
ALOUMINION has applied in writing for an oral procedure to be conducted before the General Court. The Court has adjudicated
this case (for oral proceedings) on July 13th.
Subsequently, ALOUMINION in its letter, requested from PPC not to proceed with the aid recovery until the issuance of the
General Court's Decision in the aforementioned Case T-542/11 RENV. PPC sent ALOUMINION's letter to the Central State Aid
Unit (LTC-IC) which sent it further to the Commission. Commission, by its letter dated 17.02.2017, replied to the
ALOUMINION's request, reiterating the obligation of the Greek Authorities to execute the decision immediately and
effectively. It also notes that the amount of aid and its interest can be deposited in a blocked account, in order to cease
the payment of interest on the amount of illegal aid. Moreover, the Commission by its letter, asks from the Greek
Authorities information concerning the recently signed "Electricity Supply Agreement between PPC S.A. and ALOUMINION OF
GREECE S.A.", in order to determine whether it could be considered that the content of the abovementioned agreement covers
the obligation to reimburse the illegal aid and compounding interest. Additionally, the Commission requested and the
updated calculation of the recovery amount of the illegal aid and its interest. PPC replied to the above mentioned letter,
with a letter to the Central State Aid Unit (LTC-IC) on 10.03.2017, and expressed the opinion that in this case, the
deposit by the ALOUMINION of the aid amount in a blocked account should not be considered as an immediate and effective
fulfillment of the obligation of the above mentioned Decision's execution in accordance with the State Aid rules.
Consequently, for the fulfillment of this obligation, the full amount (plus interest) must be reimbursed to PPC. The views
of PPC, following the relevant attachments and information which the Commission had requested, were sent to the Greek
Permanent Representation of the Hellenic Republic by the LTC-IC on 22.03.2017.
13. COMMITMENTS, CONTINGENCIES AND LITIGATION (CONTINUED)
Subsequently, the Commission sent a new Letter (May 2nd 2017) indicating that it did not accept ALOUMINION's arguments and
called on the Greek authorities to proceed with the temporary recovery of the aid plus an interest and send the relevant
supporting documents within twenty (20) working days of receipt of the Commission's letter. PPC sent a letter to ALOUMINIO
asking the company to proceed with the payment of the amount of state aid to PPC within the deadline set by the Commission
(May 31st 2017).
PPC then forwarded this letter to the Central State Aid Unit, which subsequently sent it to the European Commission's
Directorate-General for Competition. Subsequently, PPC sent a new extrajudicial document (since July 11th 2017) to
ALOUMINIO (already ''MYTILINEOS S.A. - GROUP OF COMPANIES'') by which PPC called it again to pay the amount of that state
aid plus the interest (Euro 21,910,586.96). PPC also stated to ALOUMINIO that if the two-week period set by the
extrajudicial document will be expired, in accordance with the European Commission's decision, PPC will take legal action
in order to claim the above-mentioned amount of state aid. The above mentioned extrajudicial document was sent to the
Central State Aid Unit (LTC-IC) which subsequently sent it to the European Commission's Directorate-General for
Competition.
3. Continuation of ALOUMINION Pricing
ALOUMINION does not accept tariffs for the High Voltage Customers, which were decided on PPC's 28.02.2014 General
Shareholders' Meeting and proceeds with a partial payment of the amounts due to PPC for the consumptions of its industrial
installations, calculating, by its statement, the supply tariff of the energy consumed for the year 2014, on the base of
the above mentioned 1/31.10.2013 Arbitration Decision.
In addition, ALOUMINION, in months of negotiations has denied all proposed tariffs by PPC, since 2013, including the tariff
decided by PPC's General Shareholders Meeting on 28.02.2014.
PPC through its General Shareholders' Meeting on 22.12.2014 has decided concerning High Voltage Customers that do not
accept its 28.02.2014 Decision that : "The Management should have been committed to take measures against companies that do
not sign an electricity supply contract for 2014". Following that, PPC proceeded on 02.01.2015 to an order for the
deactivation of ALOUMINION's load meters and invited IPTO to proceed to all necessary actions.
Following that, ALOUMINION has filed the RAE I-191545/09.01.2015 complaint -application of interim measures- application of
special regulatory measures against PPC, which was notified to IPTO. RAE, by its letter to PPC and IPTO -notified to
ALOUMINON- recommended to all parties not to execute the above mentioned order of deactivation. Afterwards, on 28.04.2015
RAE, notified by a letter an extract of its 11.03.2015 plenary session, by which the discussion and decision on
ALOUMINION's complaint was suspended until the resolving of some issues relating to the quorum set by law in order to take
a decision on the above mentioned complaint.
On 20.03.2015 a document of the Competition Committee (CC) was notified to PPC, by which CC asked the submission of PPC's
views on a memo submitted by ALOUMINION, with which the latter asked from the CC, on 25.02.2015, to apply interim measures
(among others the suspension of PPC's complaint regarding its supply relationship dated 07.11.2013, as well as its January
2015 declaration of discontinuation of representation of ALOUMINION's meters). PPC has submitted the relevant data in time.
The CC set 29.07.2015 as the hearing date. Finally the hearing was held on 25.09.2015 and on 14.10.2015 and the CC granted
to PPC a deadline for submitting a commitment proposal under the provision of par. 6 of article 25 of Law 3959/2011.
Following an oral hearing of the case on 15.10.2015, PPC submitted the final set of commitments undertaking that : a)
within ten (10) days of the notification of the CC's decision, will proceed in recalling the order for the deactivation of
ALOUMINION's load meters which has been sent by PPC to ALOUMINION and IPTO SA by its extrajudicial statements on 02.01.2015
and 19.01.2015 and b) that it will continue to supply electricity to ALOUMINION under the current terms and conditions,
while the issue of ALOUMINION's electricity tariffs, will be resolved through either direct negotiation between the parties
or by any other means. Negotiations should have been completed within three (3) months from the date of CC's acceptance of
the
commitments. The latter date has been extended until 31.05.2016. Meanwhile PPC would refrain from adopting, and generally
taking any measures against ALOUMINION. The above mentioned PPC's commitments were accepted by the CC, which issued the
relevant decision (621 / 2015). Abiding by its commitments, PPC recalled the order for the deactivation of ALOUMINION's
load meters. Subsequently, negotiations were held between the parties, while an extension of the quarter in which the
parties must conclude their negotiations was granted twice by successive decisions of the Competition Committee (CC),
initially until 31.05.2016 and then until 08.07.2016. The theme of "Electricity Supply Agreement between PPC S.A. and
ALUMINION OF GREECE S.A" was introduced at the 14th Annual General Meeting of PPC's Shareholders dated 11.07.2016, which
decided to postpone its decision on the matter for the next General Meeting. On 13.09.2016 PPC's BoD decided to convene an
Extraordinary General Meeting of PPC's Shareholders on 05.10.2016. On the latter's agenda the above mentioned matter was
included.
13. COMMITMENTS, CONTINGENCIES AND LITIGATION (CONTINUED)
By the October 5th, 2016 Decision of the EGM of PPC's Shareholders the customer's (ALOUMINION) pricing terms for the period
1.7.2016 - 31.12.2020 were approved, as well as pricing for the period 1.1.2014 - 30.6.2016. Based on the Decision of the
EGM, a Supply Agreement was signed on October 20th 2016 between ALOUMINION and PPC. Under the signed agreement, ALOUMINION
proceeded to a prepayment of Euro 100 mil for future electricity bills for the first contractual period July 1st 2016 to
June 30th 2017, as well as to a prepayment of Euro 29.1 mil for the second contractual period of July 1st 2017 to June 30th
2018.
Old Bank of Crete
The dispute with the old "Bank of Crete" is dating back to 1989, when the bank was under liquidation. More precisely, by a
mandatory action of the then trustee of the Bank, PPC's deposits were mandatorily converted to stake-holding in the share
capital of the Bank and to obligatory credit to the Bank. PPC by its July 22, 1991 lawsuit against the bank asked to be
compensated for GRD 2.2 billion approximately, (Euro 6.5 mil.) for the reason that the above mentioned Act of the trustee
of the Bank was held invalid.
Moreover, PPC had outstanding loan balances, received under six (6) loan
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