11 Feb 13

Serbia Power Company Faces Bankruptcy

Indebted state-run power monopoly says it needs to borrow 450 million euro or it may go bankrupt within the next month or so.

Beta, BIRN Belgrade

Aleksandar Obradovic, acting manager of the Serbian electric power monopoly, EPS, said the company needed to borrow 450 million euro or face bankruptcy in March.

He appealed to the EPS Management Board to schedule a session and take a decision that will allow EPS to avoid such a scenario.

EPS is owed about a million euro by customers while total losses last year were about 300 million euro, mainly because the company had to to absorb the cost of subsidised tariffs.

The Finance and Economy Minister Mladjan Dinkic said on Thursday that EPS would not be given any guarantee of a state loan.

"EPS needs to help itself because the company has the opportunity to use its own reserves and become a stable company," Dinkic said on Thursday.

He added that the state could give EPS only moral support because the budget did not contain any extra money earmarked for the company in the form of loans.

The government routinely uses energy prices as a welfare policy tool.

However, when the government in December announced a potential 10-12 per cent power price hike in the first quarter of 2013, the central bank warned that the rise might boost inflation to unacceptable levels.

Investment Advisor Mahmud Busatlija believes the problems in EPS are not exclusively connected with the price of electricity, but with the uncontrolled outflow of money due to political influence and poor collection of debts.

According to Busatlija, recapitalization is the best way ahead for EPS, which employs about 30,000 people.

The recapitalization of each company within the EPS system would enable each of them to operate better, and citizens would also benefit because there would no longer be a monopoly in the production, distribution and sale of electricity in Serbia," Busatlija told the news agency Beta.

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