The public company “Elektroprivreda Srbije” made a decision to form an Expert Team for changing the legal form to a joint-stock company, which should complete the transformation of this company that began eight years ago. The announcements about the reform aroused suspicions that it was a prelude to the privatization of the energy giant, but experts estimate that privatization will not happen now – on the one hand for political reasons, and on the other hand, because there would be no buyers interested.

The Ministry of Mining and Energy rejects allegations of privatization and claims that these changes will contribute to better work of EPS. This topic has been talked about since 2014, when the EPS reorganization program was accepted by the Government’s conclusion, which envisages changing the legal form of the company to a joint-stock company. After that, EPS is expected to change its share capital, which will be expressed in shares.

As Željko Marković, an energy expert at the Delloit consulting firm and former director of EPS supply, told Euronews Serbia, the initiated transformation in EPS means that this public company will continue to remain a closed joint-stock company with the sole owner of the shares, the state, and yes, if one days are needed, part of the shares can be offered for sale on the stock exchange.

Marković believes that the goal of the transformation of EPS from a public to a joint-stock company is not privatization at the moment, but that maybe one day the shares will be on the stock market if necessary and to facilitate business in some segments. A company’s listing on the stock exchange determines its market value, which depends on the supply and demand for shares. Going public alone does not necessarily mean that EPS will be privatized.

“With the transition to a new status, EPS will become a closed joint-stock company and will be subject to the Law on Business Companies, the Law on Public Enterprises will no longer apply.
Public enterprises are those enterprises whose activities are of general interest. The production and sale of electricity is energy activity can be prescribed and carried out through the form of a public company, but the ministry defined it as an energy activity”, explains Marković.

Ministry: Serbia will not renounce EPS

The Ministry of Mining and Energy emphasizes that Serbia will not give up EPS, but they emphasize that this change is necessary, because this company no longer meets the requirements to be a public company.

Assistant Minister of Energy Zoran Ilić tells Euronews Serbia that Elektromreže and Elektrodistribucija, which perform activities of general interest, have already changed their legal forms, that is, the form of economic organization, and that the same has yet to happen with Elektroprivreda Srbije.

“Elektrodistribucija is a d.o.o., and Elektromreže is a joint-stock company, however, both are fully owned by the state. The transformation of EMS took place in 2016, and these days it will also happen with EPS. However, the state’s participation remains 100 percent and the state has no intention of changing that”, Ilić adds.

He claims that EPS no longer has absolutely any reason to be a public company, because it does not perform activities of general interest.

“It used to be a guaranteed supply, that is, the price at which households and small customers are provided with electricity, i.e. their security of supply. This status that EPS now has as a guaranteed supplier is not prescribed by law and is not directly intended for it. Therefore, a tender is launched and that whoever offers the best conditions for the citizens, he will be the guaranteed supplier”, says Ilić and states that these changes should enable EPS to work more efficiently.

Gajić: Nothing without essential reform

According to the calculations of the Fiscal Council, the collapse in EPS and the import of electricity due to the energy crisis has cost EPS about 500 million euros so far, and it was paid for mostly from liquidity loans. Their estimates are that, unless there is a strong turnaround in the company’s operations, that account would double during the coming winter.

EPS has come to a situation where it will have to import coal for the next few years, even though the reserves at its disposal are quite sufficient for the period after 2050, because it did not invest in its mines in time. According to expert estimates, we only have more than three billion tons of lignite, but it is still deep underground, because the mines are not ready for exploitation. The Government of Serbia approved the import of four million tons of coal by Elektroprivreda Srbije, which is estimated to be needed by the end of 2023. EPS is now short of electricity and imports coal at record high prices.

Economist Mihailo Gajić is convinced that Serbia will not renounce EPS, primarily for political reasons. He believes that through privatization, the government would lose the possibility of party employment and control of public procurement, and besides, as he claims, there would be no one to buy a company with such large losses. Gajić believes that the legal change means nothing if it is not followed by a fundamental reform in the management of EPS.

“Here we can expect a more efficient operation of EPS in principle, because the hierarchical structure within the company itself has changed, but if it continues with the party’s installation of management, who will be more concerned about the interests of the party, and not the citizens, who are the indirect owners through the state of that company, then in practice not much will change”, says Mihailo Gajić.

Until now, in the process of reorganization, the businesses of electricity production and distribution have been separated. The conversion of EPS into a joint-stock company should be the last step, and according to the Ministry of Energy, it will take at least another six months.

Marković: EPS is not attractive for purchase

Željko Marković believes that, if the EPS is well organized, it will certainly contribute to more efficient work, but he points out that primarily that efficiency in work depends on the workers themselves, the company and the way the company is run”, so the legal form will not contribute much or delay if someone won’t or doesn’t want to work”.

“When you are a public company, you can count on state aid if you do not operate as you should. On the other hand, the energy activities performed by EPS are not even in the EU something that should receive state aid, but it is an activity that should be market, which finances itself from profits. On the other hand, when the state guarantees EPS for a loan raised by that company or some claims are written off by the state, the EU criticizes us as candidates for entry and often the Energy Community writes reports on state aid and publishes when and where state aid was provided. This is simply not allowed”, explains Marković.

He notes that by switching to a joint-stock company, if it goes from closed to open, the company can issue shares, then it can also obtain the necessary capital and does not have to count on state aid to realize some new investments.

Marković does not believe that there will be any great interest in the privatization of Eelektroprivreda Serbia, bearing in mind that 70 percent of electricity is produced from coal, from fossil fuels, and we know that, by all accounts, this will have to be abandoned by 2050 at the latest.

“EPS is not an attractive company to buy at the moment. It is very difficult to answer whether anyone would come forward. I do not think that there would be so many interested parties. In Europe, every country prefers that model where the majority of the capital is owned by the state , because it is of strategic importance, especially in times of crises and wars. When everything is functioning normally, you can always buy electricity on the market, which is integrated in Europe”, says Marković.

He notes that it will depend on the EPS itself whether it succeeds in making that transformation so that it emerges as a winner or a loser from this transition.

“There is a plan to slowly reduce production from coal, and to increase production from renewable sources, and the whole goal is to decarbonize by 2050. We have another certain period ahead of us when production will take place from coal, but it will gradually exclude certain capacities by age. It is important that as we gradually exclude them, we also build new capacities that can replace them. This is important for EPS and if it does that, then it will be the winner”, Marković believes, Euronews writes.