Why is the state now planning to change the legal form of EPS and turn it from a public company into a closed joint-stock company, and how does this relate to the obligations that the Government of Serbia has assumed in the recently approved arrangement with the IMF?
As much as it seems that the representatives of the authorities, led by the President of Serbia, Aleksandar Vučić, can be trusted when they deny for the umpteenth time in the last few years that the state intends to privatize EPS, their arguments that they want an “efficient, productive and responsible” Elektroprivreda sound just as unconvincing. Serbia. If what Dubravka Đedović, the Minister of Mining and Energy, said last weekend was at least a little true, the state would not have treated that same EPS the way it is in the previous decade. Because, if the minister is a new name in the executive power and at the head of this department, the government is still the same one under whose auspices the company, which was promoted for years as the main generator of future Serbian economic growth, suddenly became a generator of losses, but also an expense for fragile Serbian public finances. Well, in that same conversation, in which she emphasized what the state wants from EPS, Đedović cites the struggle to secure energy sources as her main concern, and as a special success the fact that December passed, thanks to the hydrological situation, better than we had hoped. because there was no need to import. On the contrary, she says, EPS even exported a little electricity.
The reason for the latest in a series of media speculations that the state is about to slowly privatize Elektroprivreda was the decision of the Supervisory Board of this public company to submit their proposal to the Government that EPS change its legal form and become a closed joint stock company. We investigated what is hidden behind this decision of the NO at the moment and whether and what will fundamentally change when the EPS changes its legal form.
First of all, the decision to make this company a joint stock company is not new. In a statement from exactly eight years ago, i.e. back in 2014, the then Minister of Mining and Energy, Aleksandar Antic, said that “reforms in EPS will create the conditions for this company to become a joint-stock company majority-owned by the state from September 2016.” Both the government representatives and the management of EPS, the members of the Supervisory Board, boasted at that time that this company was among the few from the list of public companies whose management was selected in a public competition, and that it was moving towards its fundamental reform and corporatization precisely with the aim of it becomes what Đedović pointed out that the state wants – efficient, productive and responsible. Thus, Branko Kovačević, the then president of NO EPS, declared that “the company must be reformed into a company that will go public and own valuable shares.”
As a reminder, the elected director was Aleksandar Obradović, and EPS really took at least initial steps with the intention of transforming and reforming. The epilogue, however, was not its transformation into an efficient, productive and responsible company, nor the change of its legal form from a public company to a joint-stock company. On the contrary, the “reforms” that Minister Antić talked about in the winter of 2014 did not lead to the desired goal in the next two years, but they brought Milorad Grcic, a proven soldier of the ruling party and an equally unproven expert in the field of energy, to the head of the EPS. The result of his leadership is now known to everyone. The system such as EPS began to collapse, the reforms reached a dead end, and everything ended with a series of accidents and the need for this company to import huge amounts of electricity in the midst of the price energy offensive, without asking how much it costs or who will pay for it. According to the data from the financial reports of EPS, which NIN recently wrote about, it is clear that this company went from the top of the list of the most profitable to the top of the list of the biggest losers and that it turned from an exporter of electricity into an importer of not only this energy, but also raw materials such as coal, necessary for the production of electricity.
The reforms were not implemented even when, a few years later, Prime Minister Ana Brnabić, angry that public companies do not contribute to GDP growth as much as the government representatives expect them to, declared that their reform would begin immediately, and that it would begin precisely with EPS and Srbijagas. The fact is, however, that apart from bad management, the collapse of the EPS and its decreasing efficiency and profitability, and thus a smaller contribution to GDP growth, was also “contributed” by the state’s decision to insist that public companies pay higher dividends to the state than was usual and stipulated by the regulations. Namely, the intention was to generate as much revenue as possible in the budget so that the government could brag about it, and the result was that those public companies were left without money that they could use for any kind of investments, which would then enable in the following years better business for them, and higher revenues for the state and a more significant impact on economic growth.
The answer to the question of why the state, if not because of possible privatization, insists on changing the legal form of EPS, i.e. its transition from public foot into the joint stock company, could be sought in the following fact. Even in 2014, when this transformation and major reforms were discussed, it was not hidden that this is something that the International Monetary Fund and the World Bank actually insist on. Furthermore, in the Strategy of State Ownership and Management of Economic Entities Owned by the Republic of Serbia for the Period from 2021 to 2027, which was adopted by the Government in April last year, and in fact it was due before the beginning of the Covid pandemic, it is clearly written that the initiative for the adoption of such a document stemmed from the agreement that Serbia had with the IMF, within the framework of the then arrangement – the Instrument for Policy Coordination. It also states that Serbia has undertaken to “create a document that will establish the general goals of ownership and management for companies owned by the state of Serbia.”
This Strategy foresees a change in the form of public companies either to joint-stock companies or to companies with limited liability, and therein lies the answer to the question of why the Post of Serbia is announcing a change in form in 2023, and the Supervisory Board of EPS submits the same proposal to the Government. At the same time, the Ministry of Economy recently prepared the Draft Law on the Management of Companies Owned by the Republic of Serbia, which is currently under public discussion. Those in the know say that the state’s intention is to enable the corporatization of public companies, i.e. the change of their legal form, but also the application of the Law on Business Companies, not the Law on Public Companies, in this way, that is, by adopting this legal solution. Again, as a reminder, the Law on Public Enterprises does not only apply to public enterprises, but also applies to some that are not public enterprises due to their form. For example, Železnice Srbije is a state-owned joint-stock company, while Corridor Srbije is d. about. about. according to its form, but the Law on Public Enterprises applies to them, while this is not the case with Telekom, even though it is a state-owned joint-stock company, just like the Railways.
In the end, this is all just a form, since the essence testifies that the state did not respect the Law on Public Enterprises, especially when it comes to the selection and qualifications of directors who, in addition to coming to those positions despite the conditions established by law, also remained in them in c. d. condition much longer than the law provides. So it is a common situation in Serbia that “they are not directors, but citizens who illegally sit in the offices of directors and manage public resources whose assets are measured in billions of euros”, as recently announced by the organization Transparency Serbia.
And while everything points to the conclusion that this time, by concluding an even stronger agreement – the standby arrangement, the state has committed to the IMF that it will continue with this process of enterprise transformation, analysts do not see how this will contribute to the goals it recently talked about Minister Đedović, especially if you stop at that. First of all, with this decision, when it is implemented, EPS may want to get some share capital, but it is about the intention to become a closed joint stock company, which in translation means that its shares will not be traded on the stock exchange, nor will its stock be determined value. Also, it is unknown whether, as was the case with NIS, Aerodrom or Telekom Srbija, the shares of this company will be distributed free of charge to citizens, which was talked about by the former government once upon a time. And to make sure there is no confusion, shares of NIS and Aerodrom are traded on the Belgrade Stock Exchange, while trading of Telekom shares has never been possible, even though the shares of this company were once distributed to citizens. That is why Telekom’s shares are traded “below the grain”, on the black market, by concluding fictitious “gift” contracts. Although at one time each of the 4.8 million adult citizens who were not employed by Telekom received 31 free shares of that company, now five citizens have more than 20,000 shares each, two people more than 30,000, and a certain Miodrag Brankov has even 71,040 Telekom shares.
The example of Telekom clearly shows that the conversion of EPS into a joint-stock company does not essentially have to bring about any change, apart from this legal make-up. This is not a signal that the state is planning its sale, nor its more transparent operation, nor its transformation into an efficient, productive and responsible company that will indeed be a generator of economic growth in the future, making a profit and producing a surplus instead of a shortage of electricity. EPS, therefore, had nothing to prevent all of this from happening even though its legal form is a public company, just as a change in legal form is no guarantee that it will become so. Because no legal form is stronger than the political will to reform this company or not, NIN writes.
