The Italian Connection to Montenegro’s Power Company

A2A is an Italian multi-utility that entered the Montenegrin energy sector in 2009 after winning the tender for the privatisation of the Montenegrin national energy provider, Elektroprivreda Crne Gore, EPCG.

Today, A2A owns 43.7 per cent of EPCG. Although the government owns the majority, with 55 per cent, the executive management of EPCG is in the hands of A2A.

Last August, A2A signed a memorandum of understanding in which it withdrew from the previously agreed possibility of obtaining majority ownership of EPCG after 2015.

A2A, in consortium with EPCG, was also amongst the qualified bidders for the tender for the construction of Moraca dams. The tender closed unsuccessfully on September 30 after none of the qualified bidders, including A2A-EPCG presented offers.  The memorandum signed in August, however, predicts the possibility of assigning the concession for Moraca dams directly to EPCG – and the government now reportedly expects new expert studies to show if this is feasible.

A2A is controlled directly by the northern Italian towns of Milan and Brescia. Each holds 27.5 per cent of company shares, with a total of 55 per cent. Twelve of the 15 controlling board members are chosen directly by the two cities’ administrations.

The company was born on January 1, 2008, by merging the local energy and waste management utilities of Milan and Brescia [AEM Milan, ASM Brescia, and ASMA Milan].

The new company was reportedly formed to raise the competitiveness of Italian utilities in the expanding European energy market, and to save the Milan utility from the financial problems it was experiencing.

A2A is currently operating in Britain, Spain, Greece [waste management], France [cogeneration plants] and Montenegro [energy production and sales].

In Italy, A2A is the leading company in waste management. Amongst other sites throughout the country, since 2008 A2A has managed the Acerra incinerator in Naples, which was opened to handle the local waste disposal crisis. According to Italian media reports, A2A also has an interest in the nuclear sector. The president of A2A is Giuliano Zuccoli.

Elektroprivreda Crne Gore, EPCG

A former state monopoly, EPCG is a partially privatised energy utility that dominates Montenegro’s energy sector. It is responsible for electricity generation, distribution and supply to all electricity users in Montenegro - about 320,000 customers in total, 290,000 of whom are private households, according to government data.

[In recent years, Montenegro has entered the process of liberalising the energy market, but EPCG still has a monopoly, remaining the only company that brings electricity to households and companies in Montenegro].

Major shareholders in EPCG are the government of Montenegro [55 per cent], and the Italian multi-utility A2A [43.7 per cent].

The privatisation agreement of 2009 initially predicted a possibility for A2A to become the majority owner after 2015 if it met the government criteria, one of which was to record a total profit of 300 million euro by 2015.

The executive management of the company is, however, already in the hands of A2A, Enrico Malerba being its executive director.

EPCG has a total power generation capacity of 868MW. It owns two large plants, at Perucica [342MW], and Piva [307MW] seven small hydroelectric power plants, and one coal-fired thermal plant, at Pljevlja,[210MW].

A2A entered EPCG in 2009 after it won the privatisation tender. The government’s selection criteria for the tender, and the Italian company’s decision to use Prva Banka, a bank belonging to the family of the then prime minister Milo Djukanovic, to acquire EPCG shares, caused public debate.

This centred on the allegedly “un-transparent” privatisation process and the government’s allegedly special treatment of the Italian investors. The public’s largely negative views of the privatisation of EPCG prompted the opposition Pokret za Promjene, PZP, to file charges against Italian and Montenegrin government leaders last February, accusing them of “energy fraud”, and “secret deals”.

Furthermore, EPCG’s request to raise electricity prices by 78 per cent, presented to the National Energy Regulatory Agency, RAE, at the end of 2010, caused another public debate, which lasted for several months, until RAE turned down the request, saying there was no reason to raise the price of electricity.

EPCG owns 18 per cent of Prva Banka, which makes it the bank’s biggest shareholder, apart from Milo Djukanovic’s brother, Aleksandar “Aco” Djukanovic. The chief financial officer of EPCG, A2A’s Massimo Sala, is also one of the five executive board members at Prva Banka.

Energy deficit:
The energy produced by the plants owned by Montenegro’s monopoly provider does not fully satisfy the country’s needs. Gross consumption is about one-third higher than the total net power production of all the plants. The balance is imported from neighbouring countries.

Significantly, Montenegro’s largest power consumer, the aluminium plant KAP, consumes an amount of energy that is roughly equivalent to the country’s energy deficit - one-third of the country’s total consumption.

This has prompted environmentalists to argue that closing the financially troubled KAP might be an alternative to building new power plants. The government has rejected these proposals, stating Montenegro needs new energy sources, regardless of KAP’s consumption.

Energy consumption in Montenegro is rising at the rate of 3 per cent annually, according to government data. Environmentalists are urging the authorities to focus more on tackling the high levels of loss in the distribution system, which amount to 22 per cent, as well as another 4 per cent lost in the transmission system.

According to unofficial data, one in four energy consumers in Montenegro is illegally using power – that is, not paying for it. In 2009, the constitutional court declared that charging regular payers to cover the cost of the energy used by illegal consumers was itself illegal. It is still unclear, however, if and when EPCG will compensate its bona fide consumers for the money it has charged them to cover the stolen energy.

The Montenegrin authorities hope that their strategic agreements with Italian investments in the energy sector will help not only deal with the country’s energy deficit but make Montenegro the “energy hub of the Balkans”, thanks to the energy that will be exported from neighbouring countries to Italy via Montenegro.