Montenegro: Italian A2A might file claim on international arbitration against the state for electricity depts, says EPCG Board of directors chief Kovacevic

9. August 2013. / SEE Energy News

President of Directors’ board of State Power Utility Company (EPCG), Srdjan Kovacevic evaluated that solution of current crisis is meeting between representatives of A2A and Montenegro State, and preferably to start from Understanding Memorandum that we signed two years ago. If the agreement does not be concluded, he evaluated that A2A will have to go on arbitration.

Speaking that if the government was not able to cover the KAP debts to EPCG through the budget rebalance, what would be the possible consequences of such development on State Power Utility Company, which is majority owned by the state, Kovacevic said:

-At the beginning, we have to specify that the total EPCG debt to the state, on several bases, is 46 million EUR. When I say on several bases I think on unpaid VAT debt for and the taxes and contributions. On the other side, the debt to the State Power Utility Company for electricity delivered to the Combine, Combine direct debt, and Montenegro bonus and transfer, account approximately 60 million EUR. At this moment, the claim from KAP and the other partners that delivered electricity to KAP is at so called – active position in bookkeeping. This means that we consider it as income and if it would not be collected, the claim must be booked and it will directly affect the EPCG outcome, which will be worse for 60 million in this year. What is great about this year is that EPCG operated very well for the first six months. By the end of the year we expect profit in amount of about 40 million EUR, which would again turn into a loss unless the claims would be paid. This is just one part of the problem, the other part of the problem is liquidity. If the government wanted to charge it in one payment rate or charge it immediately, it would certainly affect the company’s liquidity and could put it in a very difficult situation. Finally, as you said, we should be aware that this is a state-owned company, which is majority owned by the state, 55 percent. Two years ago the Italian company A2A signed a Understanding Memorandum, where they clearly indicated  ​​that they did not want to take a majority ownership in State Power Utility Company. Considering that, if this compensation would be realized, it would be in major part the state compensation with itself.

–  It is ballast because the State Power Utility Company results are directly transmitted to the results of A2A, and they need to consolidate their balance with the balances of State Power Utility Company. The loss of 60 million EUR will overflow into the A2A loss. Regarding this problem treatment, I have to say that they had a lot of understanding, probably a lot more understanding and patience than someone else would have. Even if it was the Montenegrin management I am not sure that in this way would be accessed to the problem. However, not only State Power Utility Company was burden by KAP problem. Just to remind you that, when the Italians arrived in EPCG, we reduced prices. In 2010. electricity prices were reduced  on the distribution level by an average of 20 percent, next year in average of 10 percent, and they came from some ten  to seven cents. During three years EPCG lost about 155 million euros due to lower prices. Italians also had a lot of understanding with the Steel, where about six million EUR remained “captured” to State Power Utility Company. I will back again on the KAP question, where, believing to the Parliament and the Montenegro Government they came in position to owe large money ​​to State Power Utility Company. I have to say that the directors’ board had a very clear opinion on the KAP issue. We made more than ten conclusions in which from management it was required to take all what was necessary to charge these debts. In this entire story their problem was that they believed overmuch – said Kovacevic, saying that KAP debt for energy, besides the Government of Montenegro and EPCG, also burdens strategic partners, the Italian company A2A.

Contract between A2A and Montenegro government planned some 20 objectives to be reached by management. Today, we are quite far from these goals. Of course, in part due to management errors, but partly due to our errors in Montenegro – said Kovacevic in interview, by giving a general assessment of cooperation with Italian management.

Responding whether he thought that by such attitude towards this problem and the current state to the EPCG, as a stock corporation, sent a bad message to future foreign investors in Montenegro, Kovacevic said that the management sent clear message what was  their opinion over the statement, which was announced two weeks ago.

-The Directors board did not analyze this situation and did not give a statement, but I can say that I personally agree with most that was announced. I think that attitude like this towards the most important investor in Montenegro cannot remain without a problem. Unfortunately or fortunately, EPCG is the largest company in Montenegro and the failure consequences of this problem resolution can be large and can be carried and spread over the state. I think that the solution of this situation is meeting between A2A and the States, preferably to start from the Understanding Memorandum that was signed two years ago. Otherwise, I am afraid that our story will be  finish with arbitration- said Kovacevic.

Source; Serbia Energy See desk/EPCG/Mne TV

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