Serbia, What does the transition of EPS to a joint-stock company mean

, News Serbia Energy

“EPS becomes a joint-stock company on July 1, 2016”. This is a newspaper headline from 2015 that later turned out to be fake news.

Not because of a journalist’s mistake, but because of a sudden turn in the state’s policy towards EPS, even though in 2014 the government decided to reorganize this public company into a joint-stock company.

Six years later, the Supervisory Board of Elektroprivreda Srbije adopted a decision and made a proposal to the Government to change the form of EPS to a closed joint stock company with 100 percent of the shares owned by the state.

In the explanation of this decision, it is stated that the transition to AD would contribute to “achieving maximum business efficiency, establishing an efficient management and business management system, more rational use of personnel potential and more favorable conditions for more efficient market opening and development, as well as the achievement of general and special goals defined by the Strategy.” 

NO EPS refers to the conclusion of the government from 2014, to the Law on the right to free shares, although it does not propose the distribution of free shares, as well as to the Strategy of State Ownership and Management of Companies Owned by the Republic of Serbia from 2021 to 2027 according to to which public companies should go either in the form of DOO (limited liability company) or AD (joint stock company).

Nemanja Nenadić, program director of Transparency Serbia reminds that there are state-owned public companies, joint-stock companies and joint-stock companies that are obliged to apply the law on public companies.

“For example, Telekom is state-owned and the Law on Public Enterprises does not apply to it, but other companies such as Railways, even though they are JSCs, must apply it.

Joint-stock companies for which the Law on Public Enterprises does not apply, for example, do not have to choose a director in competitions, the Government does not appoint him, the Government does not have to approve the business program. Organizationally, when the state is the only shareholder, the Assembly of Shareholders is represented by one person. “I think that as far as management is concerned, EPS would have to continue to apply the law on public enterprises,” Nenadić points out.

He adds that it is difficult to see how a mere change of form could improve the business of the company.

“In the explanation of the Supervisory Board, it is stated that the business will improve when it changes to AD.” It would be interesting how the Supervisory Board of EPS sees that there would be an improvement and what they could not do now as a JP, and what they will be able to do when it becomes an AD with one shareholder – the state,” Nenadić wonders.

He sees one difference between a public company and a joint-stock company that could be crucial for EPS.

“A public company cannot be privatized, but a joint stock company can. This is also the reason why the first thought of many upon hearing this news was that the privatization of this company was intended,” says Nenadić.

The energy consultant Dilojta Željko Marković believes that the transition of EPS from JP to AD could open the door to privatization.

“The transformation of Elektroprivreda Srbije (EPS) from a public company to a joint-stock company, apart from contributing to increasing business efficiency, opens the door to privatization and the search for a strategic partner, but whether this will be realized depends on the state, so far such a decision has not been made,” he said. is Marković for Beta.

Marković said that with the transformation of EPS into a joint-stock company, the production and supply of electricity are no longer communal activities.

“The privatization of EPS is a matter of political decision. “For now, EPS remains a closed joint-stock company, which means 100 percent state ownership, as well as energy systems in a large number of countries in the world,” said Marković.

He added that the greater efficiency of operations and the use of personnel potential is not the only reason for the transformation and that it was possible to strive for this in the form of EPS’s operations, as a public company.

Marković said that at the moment privatization would be difficult to realize even if such a decision were to be made, because EPS achieves the largest part of its production using coal, which should be phased out during the green transition, so it is difficult to expect that an interested buyer will appear for that company.

At the moment, he said, if a decision on privatization were to be made, EPS could perhaps look for a minority shareholder who would provide part of the necessary investments in the expansion and modernization of the company.

According to him, there is a possibility that, if the Government of Serbia makes a decision on privatization, EPS will be turned into an open joint-stock company and part of the shares will be listed on the stock exchange in order to get money for investments.

“EPS is an important resource and I think it should remain in majority state ownership.” If a decision is made to become a closed joint stock company, neither workers nor former employees who decided not to take shares of other companies, but are waiting for the privatization of EPS, will be able to become shareholders,” said Marković.

At the time when EPS was to become a joint-stock company for the first time, Branko Kovačević, a professor at the Faculty of Electrical Engineering in Belgrade, was at the head of the Supervisory Board.

He held this position from November 2014 to 2021.  He says for Danas that it was supposed to be finished in 2016, that 14 subsidiaries were centralized, but then it stopped.

“The main problem is the status of EPS as a public company. According to the Law on Public Enterprises, EPS had to pay 75 percent of the profit into the budget. In my time, EPS paid 900 million euros into the budget annually on all grounds. That’s why there were no funds for investments. And the electricity debt of 600 companies undergoing restructuring was also submitted by EPS. Public enterprises do not exist anywhere. That form was invented in the nineties. Professional management can’t do anything here, if the form doesn’t change,” Kovačević notes.

Attorney Branko Pavlović, former director of the Privatization Agency, points out that the mere transition from JP to AD, with the state being the only shareholder, would not change much in the company’s operations.

“If you have a minority partner, they could have at least some control over the management of the company.” Annual reports, business plans and other documents would have to be prepared and published, shareholders could set agenda items at the Assembly. If the citizens had 15 percent of the shares, they could have some form of control over EPS. However, in our country, even that is meaningless because even where the shares are divided, the state manages the Share Fund”, assesses Pavlović, Danas writes.