Serbia: While tycoons are getting rich, EPS is getting destroyed

29. December 2019. / News Serbia Energy

According to the permits issued by the Ministry of Energy, renewable energy sources – RES will continue to increase, so EPS losses due to RES purchases with subsidized prices will already amount to 100-150 million euros annually in 2021 (unless drastically increased RES).

Electric Power Industry of Serbia is the most important company in Serbia, which has been put in a difficult situation due to many years of wrong policies of all authorities. A system that has shown exceptional vitality, even during the bombing of transmission systems, is now being used to make serious investments. The last significant power plant of the Pirot HPP was activated in 1991; since then, only a few hydropower plants have been revitalized. EPS also served to maintain social peace in the 1990s through symbolic electricity prices, which continued to a lesser extent beyond 2000. Household electricity prices remained controlled and below the level of simple reproduction. In addition, due to the large production from renewable energy sources (RES) and especially wind farms, EPS has financial and technical problems today.

EPS’s business results are a cause for serious concern: during 2018, EPS had a loss of 10 million euros on the consolidated balance sheet, with a minor gain on the regular balance sheet of approximately 12 million euros; In 2019, the loss will likely be much greater, hydrology is poor, and EPS is forced to buy an increasing amount of (over) expensive electricity from wind farms. Such business is caused not only by weaknesses within the enterprise (inadequate management, redundancies, transmission losses, or theft and old technology), but also by low prices for citizens.

An increase in the price of consumer goods by 3.9% since December 1, which was obviously forced by poor business results, will not be enough; only because of the enormous purchase of electricity from wind farms the price must be increased by an additional 7%. All other energy products have reached a “world” price; diesel and gasoline are even more expensive than the environment due to high excise taxes, while the price of electricity is the lowest in Europe and insufficient for necessary investments.

The EPS position is partially facilitated when, in the period from 2013 to 2015, under the Energy Act, all the economy that consumes more than 30,000 KWh annually is forced to switch to market supply in stages. These consumers, on the other hand, were given the “freedom” to buy electricity from other suppliers (with a price increase of a few tenths of a percent).

This also led to a small uprising of industrial companies owned by foreign companies accustomed to having low electricity prices (eg Messer-tehnogas in Smederevo and FIAT in Kragujevac), but they had to accept rules valid throughout Europe. At the moment, slightly less than half of its output is sold to the economy at market prices, while the rest is sold to households at guaranteed prices that are much lower than market prices (only consumption of more than 1,500 KWh in the so-called red tariff is paid more than the market price).

Electricity price increases in recent years have only “covered” inflation; EPS has remained at “zero” when considering the effect of inflation. The state showed its stepmother’s attitude to its most valuable enterprise when it introduced an excise duty of 7.5% on electricity; EPS has to pay the excise tax to the state for the electricity it does not collect from consumers. If the state had already had to collect certain revenues in previous years for financial consolidation, EPS was a poor choice; it would be incomparably wiser if the excise duties were burdened with virtual services (cable television, internet, etc.); in the end, they represent comfort, not need. The only consolation for EPS is that in recent years the financial discipline of customers has improved dramatically, so that the collection rate is even over 100% (some of the old debts are charged), and the biggest perennial non-payments – state losses, such as Smederevo ironworks and RTB Bor have been privatized.

Download as PDF :

Download PDF