Investor Relations - 25.11.2013

Comment on the Arbitration Decision for ALUMINIUM S.A.

                                                        ANNOUNCEMENT

Following the recent Decision (no 1/2013) taken by the majority of the arbitration court in RAE, which determined the electricity price for ALOUMINIUM S.A. to be clearly lower than the cost, causing significant retroactive economic impact to PPC S.A., the Company decided to exceptionally disclose with complete transparency the relevant cost data so as to protect its interests and the interests of its shareholders, as well as to demonstrate to any interested party the enormous divergence between the price defined arbitrarily and unjustifiably by the majority of the arbitration court and the PPC’s actual cost.

Cost Data

For this reason, PPC S.A. assigned ERNST YOUNG Certified Auditors S.A., who are the Certified Auditors of the Company, the assessment of the calculations of PPC S.A. regarding the generation cost of electricity per MWh for lignite-fired power plants as well as for all generation plants of the interconnected system for the financial years 2009 to 2012. Given that from the total amount of energy supplied to consumers, PPC S.A. generates about 65%-70% and purchases the remainder from third party generators, the cost of the total supply mix of electricity that PPC provides to the market is included in this assessment.

The assessment procedures were undertaken in accordance with the International Standard on Related Services (ISRS) 4400, “Engagements to Perform Agreed-upon Procedures Regarding Financial Information” and were based upon figures from the published audited financial statements of PPC regarding elements of cost and on quantitative generation data obtained from the published data of the Independent Transmission System Operator (IPTO).

The capital base was also assessed for the mining, lignite-fired generation and total generation in the interconnected system.

From the application of the above procedures, the unit generation cost in Euros per MWh for each activity is:

COST OF ELECTRICITY THE INTERCONNECTED SYSTEM WITHOUT ANY RETURN ON CAPITAL

/ MWh

2009

2010

2011

2012

PPC LIGNITE-FIRED GENERATION

49,0

52,5

53,7

50,8

PPC TOTAL GENERATION

53,4

53,8

60,8

59,5

PPC TOTAL GENERATION + PURCHASES FROM THIRD PARTIES

53,9

53,2

63,8

69,2

 

It is noted that since 1.1.2013 the above costs include an increased cost of purchasing CO2 emission certificates, following the abolition of free rights from 31.12.2012.

Cost Data with Return on Capital

In addition the Company, based on the results of the assessment procedure, calculated the cost of generating electricity including a minimum return on the capital base assessed. Based on this the above costs are as follows:

COST OF ELECTRICITY THE INTERCONNECTED SYSTEM WITH RETURN ON ASSESSED CAPITAL BASE

Euro / MWh

2009

2010

2011

2012

PPC LIGNITE GENERATION

56,7

61,7

62,2

59,1

PPC TOTAL GENERATION

61,8

63,6

71,6

71,3

 

It is noted that the above undisputable cost data of PPC fully verify the cost data of PPC that the international consulting firm PwC submitted in writing to the arbitration court.

Comment

It is obvious that there is a huge divergence in the price of €36.6/MWh determined by the majority (2 to 1) of the arbitration court compared to the actual cost.

Even in the most extreme case that the court wanted to satisfy the unjustified request of ALOUMINIUM S.A. to be supplied exclusively by the cheapest lignite-fired generation (transferring the cost of more expensive energy sources to the rest of the consumers), the price decided by the majority of the arbitration court is at least 20 euros/ MWh lower than the actual cost.

The two members of the arbitration court majority have unjustifiably and arbitrarily chosen:

      to ignore the cost data submitted by PwC,

      to ignore PPC’s cost data deriving from the Company’s published financial statements for the period examined by the Arbitration,

      and, finally, to rely exclusively on arbitrary and false calculations made by an executive of ALOUMINIUM S.A. with respect to PPC’s internal cost.

Once more, we point out that selling at a loss below cost clearly violates not only the general provisions of the National and EU Law but also the rules and regulations that govern the electricity market such as the Code for Power Purchasing explicitly defining that electricity tariffs:

      must reflect the actual electricity cost

      must not create discriminations between Consumers of the same Category

      must not distort competition.

The arbitration decision cannot contradict with the National and EU law. PPC will use all legal means for the protection of its interests as well as the interests of its shareholders.

 

Athens, November 25, 2013

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