Electricity

World Bank suggesting strategic partner for EPS, Branko Kovačević: that is not good idea

Photo: Wikipedia (Media center Belgrade), World Bank

Published

May 4, 2017

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Published:

May 4, 2017

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Tony Verheijen, Country Manager of the World Bank in Serbia said that privatization of Electric Power Industry (EPS) would be too complicated, which is the reason for the government to possibly consider strategic know-how partnership for this state power utility. However, Branko Kovačević, President of EPS Supervisory Board  thinks that is not a good idea.

Verheijen: financial model for EPS  to be proposed after July 2017

In his recent interview to Belgrade daily newspaper Blic, Verheijen recalled that even after financial consolidation in 2016, EPS  still recorded losses, neither did it cut costs nor reduced the manpower. Due to huge losses the World Bank proposed 3.8% electricity price increase. At that time, lay-offs and cost reduction were agreed upon. Today, Tony Verheijen believes that EPS is working according to the plan. He announced that major status assessment will take place in July this year. On the basis of those data, World Bank will adopt financial model for EPS for the period until 2019 and recommend it to the government.

Tony Verheijen also added that after July assessment, the final decision will  be reached whether the price of electricity should go up. In 2016 the World Bank Office already expressed their stand that it should rise annually during next two years.

When asked whether EPS should be privatized or get a strategic partner, Verheijen said: „Privatization of EPS would be complicated. But strategic partnership which would provide management know-how is something worth of government’s consideration. With good management in place, EPS would have positive impact on economy in general. Still, World Bank does not insist on that, it is up to the government to decide.”

Branko Kovačević: discussions about EPS future only after assets register and transformation into joint-stock company

Neither a proposal for the strategic partner for EPS nor increase of electricity price,  impressed President of EPS Supervisory Board Branko Kovačević. In his exclusive statement for Balkan Green Energy News portal, he said that a precondition for discussions about the future of that company is to have assets register in place and that transformation from public utility into a join-stock company is finished.

“EPS is not yet in that phase, because neither its assets nor its capital are listed. After  capital assessment, EPS could be listed at the stock exchange. In the first round it could become an enclosed-type of joint-stock company, which is likely to happen by the end of 2017, and only then one could discuss different types of cooperation, where somebody invests capital and profit is shared”.

Kovačević  is firmly against the idea suggested by Verheijen that EPS should find the strategic partner to be in charge of company management: “EPS is not to be managed by somebody who knows nothing about it. We have seen the result in the  case of  Zelezara  Smederevo – foreing investors only made new debts”, he said.

Branko Kovačević also added that when in future new power plants are built, EPS will be obliged to allow them use its distribution network for appropriate fee. It is true that privatization would be difficult, Kovačević said, remarking that “cash cow is not something to be sold, not only because it brings profit and contributes to the state budget, but also because that company is very important for the entire Serbian economy”.

Talking about price increase, President of Supervisory Board of EPS reminded that the company is already doing business on a free market and has several hundreds of large commercial consumers who pay market price. “We are not against anyone who wants to challenge us and offer competitive price”.  However, Branko Kovačević warns that higher electricity prices would enable other electricity producers to take over the market and shut down competition.

Both Kovačević and Verheijen have already voiced their disagreements about the future of EPS. In July 2016, Kovačević suspected that there were preparations under way to sell EPS, while Verheijen warned about serious flaws in its business operations.

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