EPS to transform to JSC in 2020, tariff review for 2018 to be completed by end-August, Serbia tells IMF

The legal status of public power utility Elektroprivreda Srbije (EPS) will be changed to a joint-stock company in 2020, while a tariff review for 2018 will be completed by the end of August with the assistance of the World Bank, the Serbian authorities wrote in the program statement concerning the new Policy Coordination Instrument (PCI) recently approved by the International Monetary Fund (IMF).

EPS’ legal status will be changed to a joint-stock company in line with the ongoing corporate restructuring process and financial consolidation, aiming to improve the viability of the company and ensure its professional management, according to the text of the program statement concerning the PCI, which the IMF Executive Board approved on July 18.

“We have continued implementing the 2016–19 labor optimization plan. We have engaged the World Bank and the EBRD [European Bank for Reconstruction and Development] to support our plan to enhance corporate governance, management, and procurement and planning frameworks,” the Serbian authorities wrote.

In March, the World Bank approved the Second Public Expenditure and Public Utilities Development Policy Loan (PEPU DPL 2), in the amount of EUR 160.6 million, to support the Serbian government’s multi-year effort to raise the efficiency and effectiveness of public spending as well as the transformation of the energy and transport sectors, including EPS.

PEPU DPL 2 will support EPS in achieving increased convergence of the guaranteed electricity supply tariff to reach market parity levels from 64% at end-2014 to 80% at end-2018, conditional on the analysis of the financial position of the company and the adequacy of resources for needed investments, the World Bank said in a press release at the time.

In line with the tariff methodology for the public supplier, the convergence will be measured by the difference between the guaranteed supply price charged by EPS and the prevailing regional wholesale price set on the basis of neighboring power exchanges (Hungarian exchange HUPX), according to the documentation posted on the World Bank’s website.

Among the goals of the operation is to increase the number of total beneficiaries of the Energy Vulnerable Program, from 60,600 households in 2014 (of which 27% were female headed households) to 70,000 households in 2018 (of which 30% are female headed households).

The loan will also back EPS’s efforts to optimize its labor force targeting an increase in the education level of EPS workforce, according to the March press release.

EPS made a net profit of around RSD 3.4 billion (about EUR 28.8 million) in 2017, as its distribution subsidiary EPS Distribucija ended the year RSD 2.4 billion (about EUR 20.3 million) in the black, according to unconsolidated audited financial reports posted on EPS’ website.