Serbia exclusive: New Serbian PM announces new politics course toward GazpromNeft?

21. April 2014. / News Serbia Energy

What the statement of Aleksandar Vučić about the distribution of profit with the majority parter of NIS means in terms of the economics and politics. In his speech delivered before the reporters after the meeting of the SNS Presidency on 5th April, the leader of the progressives Aleksandar Vučić was unexpectedly specific when he mentioned the Petroleum Industry of Serbia, emphasizing that Serbia, as the owner of 29 percent of this company with the majority of shares belonging to the Russian Gaspromnjeft, also wanted a corresponding portion of the profit achieved by NIS.

More precisely, on this occasion, Vučić said: “It is nice that NIS has earned 300, 400 or 500 million euros. And now, 100 million from the profit will be used, not for the development, but for returning the debts of Srbijagas towards Gasprom, and this bad debt now amounts to 800 million. Now, this is how a serious country will behave. It is not 29 percent so that we have a little pebble, we want NIS to be as successful as possible, but we want our money, our share. These 29 percent of NIS are our money and they belong to Serbia, and it is my job to take this money for the people.” All serbian medias reported on new PM statements toward GazpromNeft and interpretation was more or less the same, messages came thru toward Russians.

This interesting and insufficiently precise statement of Aleksandar Vučić represents a certain novelty with respect to the previous politics of the Serbian Government towards Gasprom and its business operations through NIS in Serbia within the last five years. It could be noted that this statement of Vučić is even to an extent contrary to the statement given by the Minister of Energy Zorana Mihajlović only three months ago, when she said to Beta (2nd January 2014) that “we [wanted] NIS to expand, to create the possibility for young people to become employed” and she added to this that it was “a priority of the Serbian Government to invest in both refineries of NIS, in Pančevo and Novi Sad”, because “the extent of refining must be increased, as our extent of petroleum products refining at the moment [was] much smaller than before the 1999 bombing”.

Zorana Mihajlović added that, at the moment of privatization, NIS had had 11.000 emplyees, whereas [on that day] it [had] 4800″. In the quoted statement, the Minister of Energy and the Chairman of NIS Shareholders Assembly also pointed out that “the document of the Serbian Goverment on the strategy and plans for the development of NIS [had] been amended and agreed with the company’s management, except for the issue of the debt of Srbijagas amounting to 200 million dollars which [had] yet to be solved”.

If we go back to the above quoted words of Aleksandar Vučić, it is notable that he did not specify the exact amount of the profit of NIS in 2013, although he is probably familiar with the Kiril Kravčenko’s statement (of 18th February) about its volume. Namely, on this occasion, the General Manager of NIS said that the net profit of NIS amounted to 51 billion dinars at that moment, and he also added that, within the previous year, this company’s investments had amounted to 57 billion dinars, which means that they were higher by 6 percent with respect to the year 2012. In this context, Kravčenko said that, within the previous five years, since they had bought NIS, Gaspromnjeft invested two billion euros in this company, and that the plan was to invest 1.5 billion euros more within the following three years.

Hence, if we try to be somewhat more precise than Vučić, last year, the profit of NIS amounted to around 450 million euros, therefore, speaking generally and in layman’s terms, Serbia, with its ownership share, could consider around 130 million euros of the profit as its belonging. If we convert these euros into dollars, it turns out that around 178 million dollars could be fetched from the profit of NIS, which is the amount close to the debt of Srbijagas towards NIS in the amount of 200 million dollars, to which the minister Mihajlović referred.

However, there is also a series of legal knots in this matter, and possibly even business and developmental consequences, if NIS Shareholders Assembly, also responsible for the distribution of the company’s profits and losses, should make such decision on “offsetting” the debts of Srbijagas against the Serbian state share in the profit.

NIS Shareholders Assembly, in which Serbia now has 29 percent of votes, is responsible for the distribution of profits and losses, which is decided by a simple majority. At that, the general clause is interesting – that “as long as the Republic of Serbia possesses at least 10% of the share capital of NIS, the affirmative vote of Serbia shall be necessary for making the decisions of the Shareholders Assembly on: adopting financial reports and Auditor’s Reports, amending the Incorporation Act and the Articles of Association, increasing and decreasing the capital, status changes, acquiring and disposing of the high-value property “. So it is obvious that, in this clause of the Articles of Association, it is not explicitly stated that “the affirmative vote of Serbia” is also needed for the decision on the distribution of the profits and losses (and this decision is explicitly the responsibility of the Shareholders Assembly according to the Articles of Association), although probably, through the right that financial reports cannot be adopted and crucial decisions about the capital and property of NIS cannot be made without it, Serbia may also influence the decision about the “purpose” of use of the profit of NIS. I suppose that Vučić had consulted legal experts if he announced to NIS that he would demand the money from its profit to repay the debts of Srbijagas.

That the decision on the distribution of profits and losses of NIS should, among the rest, also depend on the point 8.1.3 of the agreement of sale and purchase between the state of Serbia and Gaspromnjeft (concluded during the sale of 51 percent of the capital of NIS) did not escape the journalist eye going over the main documents of NIS either (those available on the Internet). In this point, it is said that “within the period of four years continuously as from the Date of the transfer, the buyer hereby undertakes to provide the distribution of NIS dividends for each fiscal year in the amount not smaller than 15 percent of the available net profit per year”. Why is this clause mentioned? Because it can be surmised from Vučić’s speech, which has opened this narrative, that Serbia could have demanded a share of the profit of NIS in the previous years, too, but that Serbia seems not to have done this.

By the way, those more familiar with the law governing companies and their business operations emphasize that the right to the dividend of a minority shareholder is not a typical claim which can be arranged in court– if it has been defined by the company’s Articles of Association that the shareholders’ competent authority which makes the decision about the purpose of profit and if this authority makes the decision that the entire profit should be invested into the increase of the company’s capital, that is, invested into the company’s development. Because, simply said, it is considered that the value of the capital of all shareholders is increased by such decision.

Finally, as there is no use in becoming more entangled in legal issues, we must go back to the political-economic field again. In this context, there is the impression that Vučić’s, emphatically, precise statement about the distribution of the profit of NIS could have several targets. The first impression could be that, cornered by the lack of money plaguing the country, he is not satisfied with the negotiations with NIS about the distribution of profit and the debts of Srbijagas, and so he wants to push the Russian partner into accepting his suggestions about the “offsetting” of debts and claims, and thus put an end to the perpetual talk about development investments – from which Serbia can not seem to get any jingling gain. The other impression could be that, in front of our public, Vučić also wants to present himself as a good Serbian householder who is not affraid to pick a quarrel with the Russians when it comes to money – and, by such public speech, to also relativize the rumours that, once again, he has failed to resist the Russian pressures to admit the socialists into the new governement in any way again so that they are not thrown into the “far-reaching” political graveyard.

Source; Serbia Energy

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