EAC boss Othonas Theodoulou warned the decrease in the tariff will adversely impact the electricity utility’s market value. He was addressing parliamentarians during a recent discussion of the organisation’s 2014 budget.

Citing calculations performed by the EAC itself, Theodoulou said the 8% price cut – ordered recently by the energy regulator – would cause the EAC’s price-to-earnings ratio to shrink.

The EAC’s revenues are expected to take a hit of €50m from the price reduction. Theodoulou proposed instead that the €50m be kept off the books, and that other ‘indirect’ means be found by which to lower the cost of electricity to consumers. Rather than deducting the €50m directly from invoicing, the EAC says it can give the amount as a dividend to the government, which would then find a way to return the cash to consumers. Electricity prices for households here are among the highest in the EU.

The EAC’s balance sheet for 2014 anticipates revenues of €786m and expenditures of €753m – a slim margin of profit of just €33m. By contrast, in 2013 the entity posted profits of €78m, and €100m the year prior.

This year staff payroll is forecast to come to €89m, down from €97m in 2013, and operating expenses will be reduced to €550m from €605m last year.

Fuel is by far the largest cost item on the organisation’s balance sheet. EAC officials said the significant drop in operating expenses is due to a 20% decrease in electricity consumption, resulting in €240m less fuel purchases.

This year, the EAC will save money by burning exclusively mazut (heavy fuel oil) instead of the more expensive diesel. But it will not be using the combined-cycle gas turbines at Vassilikos power plant, which are its most efficient machines.

The semi-governmental organisation is meanwhile drafting an early retirement scheme that it estimates will generate additional savings. The current plan provides for the exit of 109 staff, over and above the 83 people who took early retirement under a previous scheme.

The EAC is one of a number of state-owned enterprises slated for privatisation, by 2017. In the meantime it has to slash costs and turn more competitive – and thus more attractive to prospective investors.

Source: Cyprus Mail