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Serbia, EPS should soon be transformed into a joint stock company

29.Jun 2022.

The public company “Electric Power Industry of Serbia” should soon be transformed into a joint stock company. According to Nova, practically everything has already been prepared for that, including the assessment of the property, which passed the Government of Serbia, and everything should be completed by the beginning of 2023. A similar situation happened a few years ago in Montenegro, and in the last few months, the local media reported allegations that the privatization of “Elektroprivreda Crne Gore” is certain. However, the Ministry of Capital Investments says that this will not happen, primarily because it is about the sale of only 10% of shares, for which an investor is wanted.

As Nova unofficially finds out, “Elektroprivreda Srbije” should become a joint stock company by the end of January 2023.

That decision will probably be made by the new government, which, according to President Aleksandar Vučić, will be formed by the end of July. One of the options mentioned regarding the privatization of EPS is the model from Montenegro, which in 2009 sold 40 percent of the shares to the Italian company A2A, but the state bought back the share from the Italian company A2A in 2019.

Since then, 10% of the shares of “Elektroprivreda Crne Gore” (EPCG) are owned by the state, which has until September 26 this year to find an investor. Otherwise, the shares will be canceled with an adequate reduction of the share capital.

What happened to EPCG?

In the previous days, the Montenegrin public had information that the privatization of EPCG was being prepared. However, the Ministry of Capital Investments states that EPCG needs foreign partners. For that reason, the mentioned ministry is in charge of forming a Negotiating Team that will represent “Elektroprivreda Crne Gore” in finding a strategic partner to whom 10% of shares will be sold.

This was confirmed for our portal by Dejan Mijović, economic analyst and former member of the EPCG Board.

“A2A bought 40 percent of EPCG’s shares in 2009, after an international tender, for which they paid a large sum, but also got the right to manage part of EPCG. When they left, part of the shares were bought by the state. The government then paid part of the shares.” and one part of the company ‘Elektroprivreda Crne Gore’ itself. If they are not sold to the investor on time, they are shutting down, but the state is trying to cash in the shares it owns. I personally do not believe it will find a buyer for 10% of Elektroprivreda’s shares, “Mijovic explains.

In case someone buys 10% of the shares, it means that he will not have the possibility to control and manage the company, which is why the former member of the Board believes that the necessary investor will not appear.

“Especially because of the experience that the previous company A2A had, which got the right to manage Elektroprivreda, they were managers and they had their own account, they were ready to invest, but with 10 percent you can’t do anything,” he says.

EPCG is now a joint stock company in which the state owns 88.65 percent of the share capital, and since September 26, 2019, it has 98 percent of the management and all other shares that arise from it.

“EPCG is on September 26, 2019. acquired 11,813,238 own shares worth 10 percent of the share capital. These shares do not give the right to vote, the right to dividends and other rights and are not counted in the quorum of the Assembly, so the State as the majority shareholder on that basis de facto acquires increased participation in EPCG “, states the Government of Montenegro.

EPCG acquired these shares by the decisions of the General Meeting of Shareholders – the majority owner – the State and the Board of Directors in the process of implementing the provisions of the Agreement on the exercise of the option option concluded between the state and A2A.

“EPCG is obliged, in accordance with the Companies Act, to dispose of them within three years – no later than September 26, 2022, or they will be annulled with an adequate reduction of share capital. On that occasion, Elektroprivreda is in charge of continuing the procedure of alienation of its own shares through the sale to a strategic partner, as a well-known acquirer, in order not to reduce the capital and lose the invested funds of the company. The Ministry of Capital Investments is in charge of forming a Negotiating Team that will represent Elektroprivreda in the process of finding a strategic partner with clearly defined criteria for the election, “the Government data concluded.

What is the fate of EPS?

The first model of EPS privatization is for the state to retain majority ownership and leave management to professional management.

This is how the Czech CEZ works, and it is the only example of successful privatization in Europe.

Another model is for the state to keep the majority stake and sell the minority stake, the one that remains after the shares are distributed to former and current employees and all citizens.

The third model would be for the state to give up its property completely, Nova writes.