Serbia, Energy companies will be managed by foreign professional management

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The Norwegian partners, who will help Serbia implement reforms in the energy sector, have proposed a “Management services agreement” model, which implies that the energy state enterprises in Serbia will be managed by foreign professional management. Namely, for the revitalization of energy companies, EPS, Srbijagas and others, financial resources are necessary, among other things, for the construction of new capacities. Foreign partners are ready to help, but they do not trust the previous local management, which was often chosen along party lines.

The state does not intend not to be the owner of energy companies, the Ministry of Mining and Energy told Demostat, but they emphasized that the main problem at the moment is not ownership, but management. The goal is for Serbia to have security of supply and for key energy companies to be efficient and profitable, and this should be the task of professional management, according to the Ministry. They add that the goal is to get money through business improvement that would later be invested in strengthening the energy sector.

We have not received an answer from the Ministry whether this means that foreigners will be at the head of state energy companies and when they will be appointed to those positions. There is no answer to the question of whether the consulting company Rystad Energy, which was chosen as a partner in the process of reforming the management of energy companies in Serbia, will choose professional management and whether and when there will be a change of management in public companies. For now, the Ministry does not specify what has been achieved so far within the framework of cooperation with the Norwegians and what the first reform wave will entail, which, as earlier announced by the relevant minister Dubravka Đedović, should be completed by March or April.

The Ministry states that Norway’s experience as an energy giant is valuable for Serbia in the process of reforming our energy sector, given that the Scandinavian country introduced professional management in energy companies 30 years ago and created a favorable climate for private investment in a sustainable manner. 

“From Norway’s experience, this implies that citizens feel that natural resources belong to them as well, and that the state and companies should manage them in a responsible, rational and efficient way,” the ministry states.

As Demostat learns, the Norwegian partners, who will help Serbia implement reforms in the energy sector, have proposed a “Management services agreement” model, which implies that the energy state enterprises in Serbia will be managed by foreign professional management. Namely, for the revitalization of energy companies, financial resources are necessary, among other things, for the construction of new capacities. Foreign partners are ready to help, but they do not trust the previous local management, which was often chosen along party lines.

In the meantime, the Supervisory Board of Elektroprivreda Srbije adopted a decision and made a proposal to the Government that EPS change its form from a public company to a closed joint stock company with 100 percent of the shares owned by the state. The transition to a joint-stock company would contribute to raising the maximum efficiency of operations, establishing an efficient management and business management system, more rational use of personnel potential and more favorable conditions for more efficient market opening and development, according to the explanation of the decision.

The news about the transformation of EPS from a public company into a joint-stock company raised speculations that the door is opening to privatization and the search for a strategic partner for the largest energy company in Serbia, since a public company cannot be privatized, but a joint-stock company can.  

It is speculated that this is a maneuver by the authorities in order to find a way for EPS to get a loan at a time when the conditions for borrowing by Serbian state enterprises are increasingly strict. In fact, there is a fear that the ownership transformation of EPS is taking place so that, for the purposes of obtaining a loan, the company’s shares may be pledged.

Demostat wrote in January that, apparently, the model for converting EPS into a joint-stock company will be the one that was applied in the case of Elektromreža Srbije. This means that it will be a closed joint-stock company wholly owned by the state, as are energy systems in a large number of countries. In practice, this means that there is no trading in its shares, nor will the company be licensed on the stock exchange. 

If the Government of Serbia were to make a decision on privatization, EPS could be reformed into an open joint-stock company and part of the shares could be listed on the stock exchange, so that the company would get money for investment.

President Aleksandar Vučić said on December 15, answering the question of what is behind the idea of ​​EPS becoming a joint-stock company, that the state will not sell EPS and that the goal is for the company to go public, but for the state to remain the majority owner.

Vučić and Energy Minister Dubravka Đedović visited Norway at the end of November, where they spoke with state officials, as well as Norwegian companies and advisers interested in helping Serbia and investing in Serbia for the reform of its energy sector.  

During the visit, the president said that the Norwegian partners had completed the development study and offered solutions. As he stated, they said that a change of management was not necessary for only one of the five main companies in the energy sector. He also said that it is necessary to do it as soon as possible, so that the companies will bring profit in the future, Demostat writes.

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