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Serbia, The fear of EPS privatization is not unfounded - Serbia Business

Serbia, The fear of EPS privatization is not unfounded

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Our households pay about four to five dinars for every kilowatt-hour of electricity consumed, and another three to four dinars are received by intermediaries, distributors, traders, owners of wind farms… German households pay about 35 dinars per kilowatt-hour, with eight dinars paid for energy, and 27 dinars go to intermediaries. This huge difference attracts many investors, intermediaries and energy traders who want to make money at the expense of citizens

Following the recommendations of the IMF, Serbia sold NIS in 2008. Politicians talked about inefficiency, excess employees, weaknesses of the domestic profession and the inevitability of bringing in foreigners. Today, natural resources are exhausted, the environment is polluted and citizens are deprived. Memory does not serve us, history repeats itself. Against the interests of the citizens, EPS, the foundation of energy, economic and political sovereignty and the pillar of defense capability, is slipping out of our hands.

Officials assure us that we don’t have enough brains to manage EPS and that we have to rely on foreigners, that EPS is a loser that spends citizens’ money, and that it is in our interest to transform it as soon as possible. Politicians say that EPS has been led by incompetent people for decades, to whom they make serious accusations, even though they themselves appointed, controlled and used every leadership. An image is created of a company that destroys thermal power plants (TE) by burning mud, an image that creates a sense of failure of the entire community. At the time of severe accidents, EPS was managed by a director brought in by the Government of Serbia in 2016.

Resourceful in politics and loyal to the ruling circles, the director had experience in catering and a degree in economics from Sremska Kamenica, but not the necessary professional knowledge that technical faculties and an engineering degree provide. Former party comrades accuse him of endangering energy and state security, but placing all the blame on him would amnesty the officials who chose him and appointed him as director, knowing that he does not have the necessary professional knowledge. Avoiding responsibility, officials skilfully use accidents as another argument in favor of EPS transformation.

The main problem that endangers EPS is the ignoring of the profession and the interference of politics in matters where it does not belong. Inexpert and politically motivated decision-making can have serious financial consequences. The promotion of interest groups cannot be achieved without harming the interests of the EPS and the citizens of Serbia. The employment of political sympathizers also included the lowest positions in the hierarchy, which led to a decline in expertise and competence at all levels and to the departure of the skilled and capable.

During 2005, EPS was divided into several companies, at the expense of system integrity, increasing costs and creating technical problems. The wrong way of developing wind power plants (VE) also creates significant problems. In Serbia, energy from wind farms is paid about 2.7 times more than the price of energy from comparable wind farms in the USA. In addition, our wind power plants do not apply stabilization functions, which is the obligation of power plants in the USA and the EU. Reactions to changes in wind power damage equipment in hydroelectric power plants (HE), which operate without adequate compensation.

EPS produced one megawatt-hour (MWh) at a price of one euro, the energy sold to citizens is charged at 45 euros per MWh, part of the losses are covered by industrial consumers, who pay 102 euros per MWh, and part from the energy trade. The situation is aggravated by the uncritical acceptance of the problematic steps taken by the EU, which today pays very dearly for its energy failures.
The alarming situation In EPS forced the officials to employ the former director elsewhere, and in the spring of 2022, for EPS director they appointed a graduate electrical engineer who included experienced domestic integrity experts in his Executive Board. In the hands of domestic professionals, EPS has turned from an importer into an exporter of electricity. On Friday, April 21 at 6:50 a.m., it exported more than 18 percent of production (885 MW). Currently, over 51 percent of production is obtained from renewable energy sources (HE+VE), which confirms that EPS is much “greener” than the dissatisfiers claim. These are excellent results that confirm that EPS can be managed in accordance with the interests of citizens.

Unfortunately, the mentioned successes did not lead the state to abandon the transformation of EPS from a public company (JP) to a joint stock company (AD). JP EPS provided secure supply at affordable prices. The supply was not interrupted either when it led EPS to significant financial losses, or when the facilities and workers were targeted by criminals in F16 planes. The goal of every AD is profit, which radically changes the security and availability of supply. The primary activity of AD-EPS is reduced to the production of electricity, an activity which the law leaves to the market and which is not considered to be of general interest. Contrary to claims, the influence of politics on the work of the EPS has significantly increased. The one-member assembly (probably a minister) will itself determine the supervisory board, future changes to the Statute and legal form, will dispose of assets, initiate liquidation, bankruptcy and decide on other issues. The role of the general manager is meaningless by denying the opportunity to choose its associates, directors of organizational units.

Although the officials swear that everything is done in the interest of the citizens, the deliberate neglect of the energy trade gives a lot of reason to doubt. Large variations in the price of energy in the region enable the use of cheap energy to fill the upper lake of RHE Bajina Bašta, whose energy can be sold in times of high prices. On the price difference, by selling the energy of the full upper lake, you can earn up to 50 million euros. By reducing the activities of EPS to production, the income from trade will go to others, the survival of EPS will be threatened, while the prices for citizens will be significantly increased.
Officials claim that there will be no privatization, but they reject requests to protect large hydropower plants from sale, pledge and alienation.

The company’s value of only 3.1 billion euros, many times less than the real value, is particularly worrying. According to testimony from 1998, EPS was worth around 15 billion euros. Later estimates varied between 10 and 17 billion euros, increased with investments in new equipment and plants, decreased with the separation of smaller companies and changed depending on the applied methodology (bookkeeping, replacement with new ones, yield, etc.). Only the Đerdap power plants had assets of two billion euros in 2011, while the construction of RHE Đerdap 3 could cost more than three billion, which reduces the value of the EPS indicated at the time of the establishment of AD to the value of one hydroelectric power plant. The company’s reputation and valuation were further diminished by a long-term negative campaign in most media.

Frequent promises that EPS will not be privatized call for us to pick up a pen and look at the effects of privatization on our electricity bills. Paying for one used kWh, households pay about 4-5 dinars for electricity, while the remaining 3-4 dinars go to intermediaries (distribution, traders, owners of VE and others). A German household pays about 35 dinars for a used kWh, where 8 dinars are given for energy, while the rest of 27 dinars (over 75 percent of the total amount) goes to intermediaries. Perhaps the share of our intermediaries will not reach the share of the German ones, but by multiplying only a part of the assumed earnings of the intermediaries with our annual consumption of 29 TWh, we get a huge sum that attracts foreign and domestic interest groups and their promoters. The price will be paid by the citizens, and the profit is so great that it justifies investments in changing the public’s mind, motivating politicians, creating studies with the ordered outcome and campaigns that the profit motives of numerous actors of the transition try to portray as a “green” fight against climate change.

In support of the transformation of the EPS, the support of the profession and the IMF, foreign embassies and auditing firms is cited and hints at the salvation brought by Norwegian experts, who we hope will work in the interest of our society, at the expense of the interests of their principals. The mentioned individuals and organizations are not our opponents, they earn their living by taking care of the interests of their employer and their country. However, it should be understood that the IMF is not coming to help us, but to enable the penetration of large capital; big capital does not come to give but to take; politicians do not call Norwegians to reduce their own influence on the EPS, ambassadors do not solve our problems but their country’s problems; while foreign auditors and consultants seek to promote the interests of their economy. We have to cooperate and negotiate with the world. Differences in interests emphasize the need for our representatives to put the interest of our society before all others.

In order to follow other people’s profit and geopolitical interests, our officials are under very strong pressure.

Ambassador Christopher Hill is a diplomat of the highest rank who is respected and valued around the world. As the US Special Envoy for Kosovo and Metohija in 1998-1999, he participated in a well-known meeting with the KLA. He is better known in the world for his brilliant diplomatic successes in China and North Korea, as well as for skillfully winning the favor of the citizens of South Korea. Diligent, penetrating and “ready to turn over every stone until he achieves his goal”, in Belgrade he has already proven to be stronger than the decisions of our officials. A diplomat of this caliber is not hired to achieve small goals and win small concessions. In a misinformed society without agreement on key goals, with dysfunctional institutions of the system and with self-denial as a virtue, there is a danger that the results of the work of this top diplomat will be very unfavorable for all of us.

Significant influence on our economy, media, politics, public opinion, and even school textbooks are exerted by Western interest groups that do not like the Russian presence in the NIS, nor the Chinese intensive exploitation of increasingly precious copper. Eastern influence can be suppressed by making it difficult to supply the necessary electricity relatively cheaply. The unsatisfactory dynamics of Russia’s containment and the uncertain outcome of the conflict over the Black Sea increases the importance of the Danube and control over Đerdap.

American capital has already taken over a significant part of Romania’s power industry. Control over our electricity industry could help achieve the stated goals. However, in addition to the desired HPPs, EPS also has less attractive coal-fired thermal power plants (TE). The informal idea of EPS transformation from the time of the previous minister meant that the “black” thermal power plants would remain in the hands of the state, while the American partner would go to the “green” thermal power plants and new sources. This scenario should be avoided at all costs. One of the main comparative advantages of EPS is the particularly well-balanced production from coal-fired thermal power plants and the production of renewable energy from HPPs. Therefore, separating the “black” and “green” parts of the EPS would devalue both.

The energy transition often mentions deregulation, liberalization and privatization, which implies the reduction of restrictions, less state influence, freer trade, curbing monopolies and promoting markets and private initiatives in the hope that competition will lower prices and bring progress. Experience from the USA shows that deregulation increases prices for households by about two cents per kWh, while the reduced interest of private individuals in long-term maintenance is the cause of frequent power outages with hundreds of human casualties. France tried to liberalize the market for large consumers (U 10 kV) and to privatize EDF, but the consequences were very bad. The changes degraded maintenance, putting half of France’s power plants out of commission at their most critical moment. France concluded that it is more profitable to give up the EU market principle, pay appropriate fines to Brussels, start renationalization and preserve security of supply.

It Is increasingly clear that the supply of electricity cannot be left to market mechanisms and private initiative. Like communism, perhaps liberalization could take root under ideal conditions, in completed societies with functional institutions, separation of powers, and an informed, interested public.

Until then, the leading countries see more and more clearly the problems that privatization leads to and return to the proven concepts of national and centralized power engineering. Market liberalization and privatization are insisted upon in countries such as Serbia, with the aim of removing resistance to big capital, establishing monopoly in all spheres, weakening self-awareness and local initiative, suppressing first energy and then political sovereignty, and natural and human resources bring other people’s geopolitical interests into function.

For the good sake of citizens of Serbia, EPS should be in the hands of domestic professionals, hosts who should be freed from the pressure of politicians, narrow interest groups, representatives of large capital, foreign embassies and service experts. It is necessary to abandon privatization, restore the neglected practice of renewal and training of professional staff and find a vertical that will connect the dismembered body of EPS and return it to a functional whole.

Source: NIN

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