Serbia: Against shutting down the old plants until new ones are built

4. July 2017. / News Serbia Energy

As previously has been announced, Electric Power Industry of Serbia should shut down next year the first production unit at thermal power plant “Nikola Tesla” in Obrenovac that is outdated, and the expert public thinks that this should not be done until the replacement capacities are built.

Otherwise, shutting down the five outdated units in EPS production system is also being asked by the international financial organizations in addition to a number of moves aimed at implementing reforms in that company so as not to financially burden the state budget. Regardless of the commitments made to the International Monetary Fund, the expert public in Serbia categorically opposes to shutting down the old production units (which are unprofitable and polluting the environment) until new plants for the electricity production are built.

– Firstly, EPS should disconnect from the network two units in TENT. The first one should be disconnected next year, and the next one year after that. The shutdown of these two units coincides with the construction of the new unit B3 in TPP Kostolac. Only when the construction of a new production facility in Kostolac is completed, two outdated units in TENT should be disconnected from the network. It just makes sense at that moment. If that would occur earlier, Serbia would face an acute shortage of electricity – said for Danas Vojislav Vuletic, Secretary General of the Gas Association of Serbia. He adds that in this regard, EPS should disregard the proposals of the international financial organizations.

– These are their desires how the things should work, and sufficient amounts of electricity are essential need for consumers in Serbia, and regarding this matter one should not make compromise, says he.

Slobodan Ruzic, a former Deputy Minister of Energy agrees with his opinion.

– It is absurd even to think about shutting down the production units in EPS at this moment. First, it is necessary to construct new production plants and to maintain the existing ones and then shut down the plants that are unprofitable or outdated. However, shutting down such facilities is not a priority when it comes to reforms in EPS. On the other hand, we can conclude that the company’s restructuring process is not taking place at a satisfactory pace and it is necessary to do much more in order to make it more efficient than it is now. It is commonly mistaken that restructuring in EPS solely implies going to an early retirement with thousands of retirees and that thus all problem are solved. However, this is just one of the necessary steps to be undertaken – explains Ruzic.

According to him, the departure of a thousand employees from the company is insufficient when it comes to rationalizing the workforce, i.e. reducing the costs of business operation, and that figure should be much higher. In addition, Ruzic believes that it is also necessary to take into account who leaves the company.

– It is necessary that EPS employs new staff in deficient categories, and here I primarily refer to those structures that are directly involved in the production of electricity. In fact, it means that the structure of employees should be taken into account, i.e. the surplus should be eliminated primarily from the administrative lines that resulted from the so-called political employment – says Ruzic. He adds that for smooth operation of EPS, it is necessary to invest in the construction of new production facilities, and in order to achieve this, it is necessary that the company has sufficient amounts of own funds, which can only be achieved if the electricity price is raised or if it reaches an economic level that guarantees profit.

Danijel Cvjeticanin, a professor at the Singidunum University, told for Danas that when it comes to EPS the basic IMF requirement is the rationalization of workforce and costs.

– It is a completely legitimate and reasonable request that should certainly be implemented. The reason for such request by the IMF, as the legal representative of global capital, is to free EPS from all unnecessary costs before it is given to the management by a foreign owner. The IMF believes that it is more convenient that all these reforms take place before EPS gets a foreign management. From my point of view, all these reforms need to be considered, they are necessary and useful, but the only thing that is not good in the whole story is that eventually EPS will be privatized. Everything else stands and needs to be done – says Cvjeticanin.

Otherwise, two days ago we contacted the authorities in EPS to find out their plans regarding the shutting down of unprofitable units as well as what has been done so far regarding the reforms in the company, and where are delays, but we have not got the answers to our questions until the conclusion of this publication.

What is known is that the international financial organizations insist on three things. It is a gradual rise in the price of electricity, a reduction in the number of employees and investments. In the second category of requests, which do not have the same priority as the three already mentioned are the shutting down of five unnecessary units, internal restructuring, better public procurement system, reduction of transmission costs and electricity theft.

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