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Understanding Special Purpose Vehicles in Serbia: A closer look at state-owned enterprises

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The announcement of the first tender for a project within EXPO 2027 has brought attention to the entity tasked with creating technical documentation, catalogs, 3D models, and equipment projects for a residential complex in Surčin, spanning nine hectares. This task falls upon SPV Galovica 1 d.o.o., a company based in Belgrade, which is fully owned by the Republic of Serbia.

While the name of this firm suggests familiarity as a limited liability company, it raises questions about why a total of 17 state-owned enterprises, represented by the Construction Directorate of Serbia, incorporate the “SPV” designation in their names, indicating involvement in project financing, specifically as Special Purpose Vehicles (SPVs). According to data from the credit rating agency CompanyWall, a total of 42 companies in Serbia bear the “SPV” designation in their names, with 17 of them being wholly owned by the Republic of Serbia, indicating that the use of this abbreviation is not exclusive to the state.

Furthermore, another 43 companies incorporate the Serbian variant of this name – “društvo za posebne namene” (DPN).

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The meaning of “SPV” or “DPN” is not explicitly defined in the main Law on Business Entities but is referenced in the Law on Public-Private Partnerships and Concessions. It defines “društvo za posebne namene” (DPN) as a business entity established by a private or public partner for the purpose of entering into a public contract or implementing a public-private partnership project.

“SPV” is an international designation indicating that it is a special-purpose company, also known as a “special purpose entity” (SPE). These subsidiary companies are established by parent companies to manage financial risk, and their status as special entities protects them even if the parent company goes bankrupt.

In Serbia, the most well-known SPVs are established by the state – with 10 such companies founded in 2018 as part of the project to build apartments for members of the security forces. Companies like SPV Avala, Nišava 1, 2, and 3, as well as Pčinja, Dunav, Tisa, Sava, Ibar, and Lepenica were created. Recently, the state has also established SPV companies in connection with the EXPO 2027 project, resulting in the establishment of Galovica 1, 2, and 3, as well as SPV Petrac 1, 2, and 3 in January of this year.

Each of these newly established companies is registered under activity code 41.2, indicating engagement in the construction of residential and non-residential buildings. Additionally, SPV Akvatik has also been established.

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Despite the availability of other legal options, both the state and private companies may establish SPVs to ensure legal certainty and a specific purpose for a particular project. Economist Aleksandar Stevanović suggests that this approach is likely driven by a need to better manage assets, revenues, and expenses.

While the term “SPV” has positive connotations in terms of risk-sharing and project management, it also carries negative perceptions in the public eye, potentially stemming from its association with the collapse of Enron, where the company used SPVs to conceal its true financial status.

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