What will happen to EPS? Why the conversion from a public company to a joint stock company? Is it just a prelude to privatization and the transfer of the value of our probably most significant business entity into someone else’s hands?
These questions were on everyone’s mind when, at the beginning of April, the Government of Serbia finally decided to complete the long-announced transformation of the Electric Power Industry of Serbia, reports Demostat. And today, only a month after she did that job, there are fears that the answer may have arrived.
On Friday, the EPS supervisory board decided on a proposal to withdraw 11 hydroelectric power plants from EPS and transfer them to a new company that would be formed jointly with the Hungarian company MVM. EPS did not inform the public about this.
Instead, the document that Demostat had access to and whose authenticity it can confirm, and which in the meantime began to circulate on social networks, shows the agenda for the meeting of the Supervisory Board of the Electric Power Company of Serbia scheduled for last Friday, May 18, in which under point 5, just above point Misc., the following item is briefly stated:
“Information on the proposal of MVM Group, Hungary for the establishment of a joint company in the Republic of Serbia for the production of renewable energy with the allocation of 11 hydropower facilities from EEP EPS AD”.
Hungarians want the Drina-Lim hydropower plants
We do not know which 11 facilities are involved, because neither EPS nor the Ministry of Energy have answered Demostat’s questions about this case, but as we unofficially learn, the hydropower corps that MVM wants to see in its co-ownership are actually the Drina-Lim hydroelectric plants.
Within this unit there are nine hydropower plants (Bajina Bašta, RHE Bajina Bašta, Bistrica, Potpeć, Uvac, Kokin Brod, Zvornik, Ovčar Banja and Međuvršje), as well as two small hydropower plants (Vrelo and Radaljska Banja).
The Drina-Lim hydroelectric power plants recently also own a photovoltaic power plant in Brana Lazići, where electricity is produced by solar panels. According to the information so far, the proposal of MVM, at least for now, has not been accepted.
After the information about the board’s agenda appeared in the public, the Ministry of Mining and Energy of Serbia announced that the Supervisory Board of EPS did not make a decision on the establishment of a joint company and the separation of 11 hydroelectric power plants with the Hungarian company “MVM”.
“Anyone who talks about the alienation of EPS property in the public is spreading falsehoods and panic”, it was stated in the statement, with the note that “unfortunately, it is not new that individuals from EPS itself falsely harass the public and employees”, and that “they should be the subject of an investigation as to why the official documents of the company’s management are released to the public with untrue information”.
What gives this news weight is the fact that MVM is the Hungarian state energy company, a counterpart to EPS, which supplies 70 percent of the local market with electricity, half of the economy and all citizens with gas and, among other things, owns the Paks nuclear power plant.
It Is hard to believe that MVM sent such a proposal to EPS “out of the blue”, just one month after EPS’s transformation into a joint-stock company, without prior discussions with the management of the Serbian company and the country’s political leadership. Especially since this company has contacts with both.
Moreover, Serbian President Aleksandar Vučić asked Hungarian Prime Minister Viktor Orban two years ago that Serbia be given the opportunity to participate in the construction of a new nuclear plant block in Paks, which is being built by MVM, with a completion date of 2032. According to this proposal, 15 percent of the new nuclear plant should belong to Serbia.
The answer of Orban and MVM is not known, just as it is not yet known what MVM offered to EPS last week as its share in the joint company in which the Serbian company would include hydroelectric plants. Alienation would lead to the bankruptcy of EPS, but also strategic problems for Serbia. Experts, however, fear that the exclusion of hydro capacity from the composition of EPS could lead to very negative consequences for this company.
When asked whether the adoption of the Hungarian company’s proposal would mean the de facto privatization of EPS, energy expert Aleksandar Kovačević told Demostat that “the alienation of these assets would lead not only to the rapid bankruptcy of EPS, but also to very serious financial, strategic and political problems for Serbia”.
“The process of European integration would be practically suspended for a long period, and national security would be further threatened. Explaining the current situation in the Serbian energy sector, Kovačević says that “at this moment, the real commercial value of hydropower facilities in Serbia is not known”.
“For thirty years, energy policy has prevented these facilities from expressing their full commercial value on the European market. The opportunities in that market are such that the value of this type of property grows significantly from year to year and further growth in value can be expected in the next 30 years. Purposeful use of these facilities is only possible if they are under the sovereign control of one undivided interest. It is necessary for Serbia to keep these facilities completely under its ownership, adopt and implement a new energy policy and enable EPS to properly use these facilities,” says Kovačević. As he adds, EPS and MVM have behind them decades of successful cooperation in electricity trade.
“The valid use of hydropower plants in the EPS along with the new energy policy of Serbia is in the best interest of both Hungary and the whole of Central Europe, Ukraine and the European Union. This is the best way to increase Europe’s common security of supply, enable greater use of nuclear energy and enable far greater use of renewable energy sources. Any other arrangement is not good enough,” warns the interlocutor of Demostat.
When asked if there are reasons why EPS would not be able to enter production from renewable energy sources on its own, Kovačević answers: “In short, there are none.”
“EPS may have commercial opportunities to finance the construction of new facilities for the use of renewable energy sources. The very ambitious EPS investment program is a prerequisite for the economic development of Serbia without further indebtedness of the state. In addition, the dynamic commercialization of EPS would also open a new perspective of European integration and significantly improve the international position and security of Serbia”, concludes Kovačević.
A step towards Russia?
It is also questionable why, at this geopolitical moment, the issue of a joint investment of EPS with a Hungarian state-owned company is being raised, and whether the realization of the proposed plan would actually represent one step in Serbia’s further approach to Russia.
Namely, behind the Hungarian state energy company is Viktor Orban, who is a strategic partner of the Russian President Vladimir Putin in Europe, while the company MVM has long-term contracts with the Russian Gazprom.
Sign up for business updates & specials.
