Republika Srpska energy company(ERS) restructuring or privatization, what are the recommendations from ERS biggest stock market trader PREF

18. January 2013. / SEE Energy News

Energy company of Republika Srpska (Elektroprivreda RS,ERS) Organization as 11 companies’ holding is inefficient and its change toward making one or two strong companies is required.

Darko Lukic, Director of the Management Pension Reserve Fond Association (PREF) RS, second big ERS stockholder, one of the biggest investor this year in shares of the ERS company, believes and estimates that ERS will concentrate on significant financial assets and staff resources by connection of corporations.

He also believes that electricity price reform would bring to economically more sustainable development of energy sector and to even bigger attraction to foreign investors for RS energy sector.

ERS Recapitalization possibility should be analyzed by respectful international financial institution in order to keep energy independence and sovereignty. RS have to keep the mayor package of 51%. Recapitalization would gather significant financial assets and additional preconditions for more affordable borrowing approach, says Lukic.

N: Which securities on Banja Luka’s stock market are most interesting for PREF?

LAKIC: PREF is one of the biggest individual institutional investors on Banja Luka’s stock market. We mostly invest in RS bonds emitted on a war damage debt’s base, i.e. municipal bonds. We invested in Elektroprivreda RS system corporations’ stocks .We bought 400.000 KM stocks from mentioned companies because of relatively small offer of shares on the Stock Exchange. We believe that those companies’ stocks have great potential and that is the main reason why we buy them. ERS company system stock prices were 17% of book value on the last market day in 2012, while trade prices are 50% bigger than book value on developed markets. The book value of 10 ERS system companies is about 3,3billion KM, and their market value is around 600million KM. Those prices had fall of 14% in average on stock market in 2012. However, we still believe that there is potential for market price increase.

N: Considering the fact you’re buying ERS bonds and that PREF is second big stockholder of the holding, how do you comment ERS business results and announced investments in RS energy sector?

LAKIC: I think that RS citizens and industry should be most grateful, because we have regular electricity delivery with almost lowest prices in region. Having in mind such price politics and very bad hydrology, we have to be more than satisfied for business results and announced investments in 2011 and 2012. However, change of price politics and reorganization will enable even better results.

N: It was discussed about electricity price politics in RS exactly on recent conference, held in Teslic. What do you think about that?

LAKIC: I completely agree with Goran Granic, Director of Energy Institute from Croatia, who participated in making of RS energy sector strategy and thinks that only trade forming of energy price brings to economically sustainable development of energy sector and foreign investors attracting. In other words, social politics should be removed from ERS institutions which deal with social politics. Those who are able to pay energy price that enables sustainable development of the sector should pay, while lower energy price should be enabled for consumers who cannot pay market price.

N: You talked about ERS reorganization possibilities on conference, why do you consider it special?

LAKIC: ERS company system stock buyers i.e. RS as mayor stock buyer and minority stock buyers will have more use if one organization structure is established from current organization with 11 dependent corporations holding. That structure would contain one or two industry societies where one company will be consisted of electricity producers and another of electricity distributers. Current dependent corporations could exist on profit center or unit level. We have 12 directorates, same amount of supervision boards, governments, internal and external inspectors, etc. at the moment. That makes decision process or whole business more expensive and less efficient. The concept of holding and dependent corporations has had sense few years ago when the structure for coordinating activities in ERS was established, but I think it’s time for reorganization. More significant financial assets will gather if we connect those corporations in one or two companies. The company that covers all electricity producers will be listed on stock market in Varsava or London, what will give possibility to recapitalize the company.

N: Does recapitalization mean privatization of ERS?

LAKIC: ERS Recapitalization possibility should be analyzed by respectful international financial institution in order to keep energy independence and sovereignty. RS have to keep the mayor package of 51%. Recapitalization would gather significant financial assets and additional preconditions for more affordable borrowing approach. With reorganization effects and changes of price politics, ERS would be more efficient company with meaningfully larger profit what will make many possibilities for independent realization and biggest investments in making of new production capacities.

Source Serbia Energy/ Nezavisne RS

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