The company Mining Basin “Kolubara” for years back, was not in the epicenter of investments plans of “Electric Power Industry of Serbia”, and modernization of power plants were not accompanied by making investments in the coal mining and thus, it is high time to renew “Kolubara” as well – said Mr. Milorad Grčić , the Director of MB “Kolubara”, in an interview for “kWh”.
Our interviewee indicates that MB “Kolubara”, as the most important factor in EPS, both in terms of strategic and security aspect, found itself in a situation to end 2012 with illiquid funds. He points out that for all the accumulated problems there are external, but also internal causes. That’s why a system that provides 76 percent of the total amount of produced coal and 54 percent of the total electricity produced in Serbia cannot be left to go down. Because, if the production in “Kolubara” halts, the whole chain in the production of electricity will be stopped.
What are the biggest and most difficult issues in “Kolubara“ ?
One of the objective causes of illiquidity is the low cost of electricity. In the very company there are many causes such as costs based on the workers’ shift work compensation claims. This problem ensued from the Labor Law, and there is nothing disputable about that, the shift work is being paid and will continue to be paid, but the problem is that this regulation is not a valid part of the company-level agreement. And thus, the workers advised by lawyers, start bringing complaints against “Kolubara” so that in 2012, the company lost almost 2.4 billion RSD. It is a huge amount for the companies abroad as well, let alone in Serbia.
Are there any problems that “Kolubara“ could have solved on its own?
Yes, there are. One of these pressing problems is a re-appropriation of urban construction land after expropriation into the lowest category. The legal department “Kolubara ” proved to be inefficient and unprofessional. If the re-appropriation had been done correctly, the costs would have been reduced from the current 600 million to less than 200 million. For settling the debts to the state and suppliers, the company needed a loan of two billion. If we add 2.4 billion RSD paid out for shift work claims, it is clear that the costs are too heavy for MB “Kolubara”. And it should be noted that for all investments in the expropriation in 2013, three billion RSD will be allocated. Poor relationship between production and commercial sector in “Kolubara” is also one of the internal problems. The good relationship between the two entities is essential for the system to function properly, because the needs of open pit mines were aligned with the procurements of the Commercial Sector.
How to solve these issues?
We are entering the process of solving the accumulated problems step by step. The most important thing is not to stop the equipment procurement, procurement of the excavator and coal exploitation lines. As far as better connection between commercial and production sector is concerned, some significant changes have been made and everything is running better, both at the level of MB “Kolubara“ and EPS. The first effects of these changes will be visible in early 2013. We have initiated legal procedure, so that the injustice made related to the compensation for urban construction land should be rectified in the first trimester of the following year.
Is there a “remedy“ for shift work issue?
In 2013, the compensation claims costs for the shift work could reach a value of three billion RSD. More than 5,000 workers have filed a lawsuit so there are 7000 pending cases. It should be noted that not all workers, who believed they had the right to sue, have actually sued MB “Kolubara”, because there are people who will not complain. One of the solutions to the shift-work issue is the amendment of the company-level agreement, which must be signed by the end of January or early February. In the Serbian Parliament we have launched a procedure for the authentic interpretation of the Labour Law and the final solution for handling shift-work will be included in the amendments of the law. Since a new Labor Law is being prepared, the procedure will be longer than the procedure just with law amendments.
Slow expropriation could very soon jeopardize the future of “Kolubara”.
How to involve the State and EPS more, in order to accelerate the expropriation?
We have the support from EPS and the State, but it is much more important that we have been understood by EPS. It’s time to make investments in MB “Kolubara”. We could find ourselves in a situation of having consolidated and “tightened up” thermal power plant with no sufficient coal quantities, because there were no investments in “Kolubara”. In the last month, daily production was raised up to maximum 103.000 tons. Although scheduled three billion RSD intended for expropriation in 2013 sound significant, it is not enough. The expropriation process must run faster than before, because the Field “D” is at the end of its exploitation lifetime. It is necessary to complete expropriation in Vreoci as soon as possible and initiate important infrastructure investments, such as the relocation of the Ibarska main road, several local roads, part of the railway, and the part of the Pestan river. These are all preconditions for the expansion of current and new fields opening. In order to open the new open pit “Radljevo”, mentioned as the most significant mine in the future, it is required to realize all these investments. No investments, no construction of TPPNT B3 either.
Is there a financial support for the project? Is there enough time left?
Yes, there is. We have the support for the financial part of the project. We cannot allow losing any month for expropriation, in order to maintain the production at the level of 30 million tons annually.
It seemed earlier that “Kolubara” did not have the support from anyone in terms of expropriation. What is the situation like now?
The concept of changes in EPS will lead to changes in philosophy of doing business and will yield fruit so early as in 2013. It is very important to change the business philosophy of every company and form a management that will treat and lead the company in a host-like way.
“Kolubara” has not got the best reputation in public for the last couple of years and is known to be a company in which there were many unappropriated spending and malpractice.
The previous management succeeded in cutting the costs. Are there any room left for additional cuts and in which way can “Kolubara“ be a sound company?
“Kolubara“ has been tagged negatively in public due to events that took place several years back and the people in Serbia consider this company to be swarming with corruption. I am satisfied with the cut of costs for the engagement of external machinery in the previous period, since “Kolubara“ and “Kolubara-Građevinar” got the machines by making significant investments. Today, the engagement of the machinery that is not owned by “Kolubara” or “Kolubara-Građevinar” does not exist. However, it is just one segment known to public, and for the past two months of me leading the company, I have noticed many shortcomings and malpractice happening in various departments. By making staff changes, we have eliminated the possibility of further malpractice, and the competent authorities will be informed about all adverse activities from the previous period.
The companies of “third circle”, once excluded from the system, have been troubled by multiple problems. How are “Kolubara-Metal and similar companies going to survive?
“Kolubara-Metal” is the only separate company, whose founder’s rights are still owned by MB “Kolubara”, but the level of the engagement of “Metal” was cut in half in the recent years. The solution lies in additional engagement within EPS, and it is required to use all legal means, so that “Metal” could directly do business with anyone in the EPS system. It is a long-term remedy.
Starting from January 1th ,2013 the changes in the EPS system are announced. What does it mean for MB “Kolubara”?
As of 2013, the procurements will be centralized at the level of EPS and will be favorable for “Kolubara”. By centralizing the public procurements, we will have insight and monitoring of the state of stocks in the warehouses in all companies, because it happens that TPP-KO Kostolac has in stock for years something that “Kolubara” needs, and often it cannot be procured or it is too expensive. Therefore, it is vital to connect the procurements of the companies in order to be more efficient. To tell the truth, by this move the directors of the companies lose a part of their power, but I am of the opinion that it is most important for the company to operate well and to achieve results. The estimates say that if the procurement centralization is achieved, the savings are from 25 to 30%. We should not be afraid of transformations, but decisively head for the goal.
The multiple-importance Project
In which phase is the project “Environmental protection improvement in MB “Kolubara”, funded by EBRD and KfW bank loans?
Technical teams of EPS and MB “Kolubara” are working intensively on a number of activities for this project. Published are the tender for the procurement of excavator for overburden excavation and a Call for the procurement of belt conveyor systems and spreaders and for the consultant service for the part of the project that is planned for financing from funds of KfW bank. The Plan envisages that the tender for the procurement of power supply systems is announced as the last one of all the packages, because of the dynamic compliance with the completion of procurement. The goal of this project is to provide secure and continuous supply of coal and the rational management of natural resources, including the reduction of air pollution in thermal power plants that burn coal from Kolubara basin. This project is of technological, environmental and social importance. The implementation will ensure the use of uniform quality coal that is mined in the open pits of “Kolubara”, which will increase the efficiency of the Thermal power plant “Nikola Tesla” and TPP “Morava”.
Source; Kwh/Serbia Energy