Serbia to restructure and sell off oil, gas and power companies

BELGRADE – Serbia plans to restructure and privatize state-owned oil, gas and power companies as it moves toward fully opening its energy market by the end of next year, the deputy energy and mining minister said yesterday. Deputy Minister Slobodan Ruzic said a new energy law, expected to be approved by Parliament in May, would create the conditions for such an ambitious plan, despite being delayed a month by the killing of late Serbian Prime Minister Zoran Djindjic in March. The law will bring fundamental changes to the energy sector by scrapping the privileges afforded to state-held firms. «It will not be an easy job to do, but we must restructure our oil and gas and power companies and fully open our market by the end of next year,» Ruzic told Reuters in an interview. A decade of sanctions and wars in the 1990s under the rule of Slobodan Milosevic crippled Serbia’s two state monopolies – oil and gas firm Naftna Industrija Srbije (NIS) and power company Elektroprivreda Srbije (EPS). «The entire system in a fully deregulated environment should start to function as of January 2005,» he said. Last November, Serbia and Montenegro, Albania, Bosnia, Bulgaria, the Former Yugoslav Republic of Macedonia, Croatia, Romania and Greece signed a memorandum of understanding on a Regional Electricity Market (REM) to set up a unified power market in Southeast Europe. Although well cushioned by the State, NIS and EPS were hit hard by disinvestment, mismanagement and the low prices enforced by Milosevic’s government to avoid social unrest. NATO bombing in 1999 dealt an additional blow to the already exhausted and outdated oil and power sectors. The new bill provides a legal framework for private investments in the energy and mining sectors. It is closely linked to concessions and revised mining laws defining the rights and responsibilities of all market players. «The law, harmonized with European Union standards, equals the status of private and public firms,» Ruzic said, adding that the government has set an implementation plan with strict time limits for regulation of the market to meet EU directives. A detailed plan to restructure NIS and EPS, which is a state priority, must be presented no more than three months after the law has been adopted. NIS and EPS, which together employ around 70,000 people, will first shed all non-core businesses. «After that, we’ll tackle the sensitive problem of layoffs,» Ruzic said. Restructuring will prepare the two firms for privatization, with the sale of various parts of the oil sector expected ahead of those of the power sector. A major problem is how to organize refineries in order to privatize them in the most useful way for the State, Ruzic said. Foreign partners have already shown partial interest in buying gas stations or in constructing a natural gas storage facility. «But we are looking for a strategic partner. Refineries are an important segment for us and we want to link their sale with the privatization of certain parts of the sector,» he added. Regarding the power sector, the State aims to make EPS a healthy firm first to achieve better gains from its sell-off. «But parallel to that, we want to lure foreign investment into independent development projects, through joint ventures, build-operate-transfer deals, concessions,» said Ruzic.