Serbia exclusive: EPS Power utility company, A step towards the joint stock company interview with EPS Legal Director Dragan Velic

10. March 2014. / News Serbia Energy

         Compliance of the EPS Articles of Association with the Law on Public Enterprises allows the staged entering into the change of the legal form. – In PE EPS the preparations are completed in order to register EPS JSC by the end of March. – Appointing the executive directors and new organization of EPS follows. Strategical changes and reform as well as the business plans of the company explained Dragan Veljić, the Director of EPS Department for Legal and General Affairs

Previously arranged interview regarding the preparations for the change of the legal form of PE EPS into EPS JSC, begun Mr. Dragan Veljić announcing the latest news: that morning, the Serbian government gave the consent to the EPS Articles of Association which was amended in accordance with Law on Public Enterprises. He said that it really was the exclusive news, and why? – because, thus, the conditions were created for improvement and more efficient management in EPS. Based on that, the next is the change of the legal form of PE EPS into Joint Stock Company and it is expected that these changes take place by the end of first quarter of this year. This new situation made us devote the major part of this interview to what lies ahead in the change of EPS, according to the Law on Public Enterprises and plans for the corporatization of EPS.

            The new EPS Articles of Association shall take effect upon approval of the Government. What follows after this?

The founding acts of the EPS companies need to be in compliance with the Law on Public Enterprises. This business is in the final stage, the drafts of these documents are prepared with embedded novelties from the Law on Public Enterprises, so that the new, changed founding documents act could be adopted during March.  We have worked on it simultaneously with the drafting of the new Articles of Association, so that we could finalize all the activities as planned. Compliance of the PE EPS Articles of Association and founding acts with the Law on Public Enterprises is just one of many steps that were committed at the same time with the preparations for a change towards the corporatization of EPS. This strategy lays upon the “Starting points for the reorganization of PE “Electric Power Industry of Serbia”, which was adopted by Serbian government in November 2012. Also, Minister of Energy, Zorana Mihajlović, B. Sc., has announced that the legal form of EPS will be changed by the end of first quarter of this year. In EPS, with the modifications of the norms, it has been worked on establishing of the new organization which has to be in accordance with the legal and statutory solutions.

            The new organization involves the application of the legal provisions on two levels of management in the company. What does it mean?

In December 2013, the Serbian government appointed the Supervisory Board of PE EPS in accordance with the current Law on Public Enterprises. The Supervisory Board is the first level of management in the company. The second level of management is the Board of Directors or, as it is written in the EPS Articles of Association, the Executive Board of Directors which includes the seven directors led by the Director of PE EPS. The preparations for appointing the executive directors are finalizing, who are appointed, on the suggestion of Director of EPS, by the Supervisory Board of EPS. Simultaneously, the new work organization at the level of EPS is in preparation. The new types of organization are in establishing process, which will be in correlation with the provision of the Law on PE, but also very near to what we want to achieve by corporatization.

            Is the implementation of the Law on PE the necessary preliminary step, knowing that this is what normally follows the change of legal form and the creation of the joint stock company?

            This organization will be in use until the change of legal form, when the general meeting of stakeholders is also introduced. In fact, we lay the foundation of the future EPS joint stock company. Perhaps, we could have skipped this step, bit it will, without doubt, help us to gradually start the change of legal form. We have been thinking not to comply the PE EPS, which we call in the jargon the Directorate or Central of EPS, with the Law on Public Enterprises since the supply (retail trade), as the activity of public interest, is relocated in new “EPS Supply”, Ltd. However, the founder believed that EPS subject group is of a strategic interest thus has to be in accordance with the Law on PE. Moreover, the electricity production is considered to be a strategic activity, although as such it hasn’t been the activity of public interest in Law on Energy.

            Thus, we will have the executive directors. And what will happen with the directorates of EPS?

Directorates, in the present terms, will not exist. We will have the organizational units in the service activity, for which the executive directors will be appointed. These new organizational units will be in compliance with the functions of the executive directors, who will extend their management functions from the Board of Directors, over the organizational units (which can also be named Directorates), up to the companies. In that way, better management and better control over the implementation of the goal and objectives of the business policy, than it is now, will be established.

            Does that mean that, in the company, only the executive director will be legitimate leader, but not an organizational unit?

            Yes. More precisely, the executive director for the particular activity will be legitimate leader not only in front of the company, but also in the Board of Directors, in front of the Supervisory Board, founder and, later, in front of the general meeting of the stakeholders. In addition, in the Executive Board – Board of Directors, as an authority which will be consisted of all the executive directors and directors of PE EPS, the all management functions will form an integral unit, and thus each of the executive directors will be obliged to consider all the operations in other sectors of the company. He will be obliged to follow these developments and to make sure that all the business policy is successfully achieved by working in his sector. Also, the executive director will be obliged to vertically follow the implementation of the Board directors’ decisions and to take measures for their realization. How will it be implemented in practice? I do not hope that we can avoid the “malfunction” of the beginning, but I do believe that we will soon prove that EPS will take the road of prosperity with the new system of operation and responsibility. Now, we are preparing the normative acts for the future organization at the level of EPS, where all has to be clearly defined and fully applicable.

            Let us go back to the legal form. If we have just received the revised Articles of Association, can EPS be registered as JSC by the end of March?   

I believe it can. If EPS has the sufficient political support for it, he will be ready.  We have prepared the draft documents for the change of the legal form. There is also a solution on how to provide the capital valuation, which is definitely imminent, even though that’s not a prerequisite for a change of legal form. However, considering that it was only a change of legal form, that is, registering JSC without going public, already registered capital will be reported to the Serbian Business Registers Agency (SBRA). Changes in capital will depend on the outcome of the proceedings to establish the ownership of real estate in accordance with the Law on public property, and until then the capital would be expressed by the value which is recorded in the founding acts of PE EPS and company of EPS. After all, the change of legal form is just the mediator between two steps, from the PE to the joint stock company as such. Accordingly, the value of capital of EPS will be evaluated before EPS JSC goes public. It is very complex, large and responsible job that requires a lot of time, and now, preparing the tender for evaluation of the capital of EPS.

            Does the change of legal form presuppose the stakeholders?

Of course it does. With the change of legal form we will get the general meeting of stakeholders.  It is well known that the state remains the majority owner of EPS and that the 15 percent of the capital belongs to adult citizens of Serbia in a form of free shares. Also, 7-8 percent of the shares will receive the employees and the former employees of EPS. Small shareholders of EPA have founded their association a few years ago, so that there is an embryo of shareholding organization in EPS. Of course, this is far from the role that the general meeting of stakeholders should have in management of EPS. Practically, once the general meeting of stakeholders is established, all the management of EPS will be relocated there from the government. And that’s the biggest change that will occur by corporatization of EPS. At the same time, we should not forget that the government, acting as the owner on behalf of the state, has a majority in the general assembly. However, what interesting thing is who will become the owner of the part of the capital which shares will be found on the marker, apart from the state and small shareholders. Nevertheless, it is a question when we go through all the steps in corporatization of EPS, through which we will change not only the legal form and organization, but also increase the value of the company. That is the question for EPs on stock exchange.

Source; Serbia Energy

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