The Government of Serbia is not going to privatize the remaining companies with state-owned capital at any cost. Its primary goal is to find strategic investors that will provide additional value for both Serbian market and the companies they buy. Of the seven biggest companies whose ownership structures are planned to be changed, this year we can expect the privatization of airliner Jat Airways and, possibly, Galenika. Mining Smelter Basin (RTB) Bor and Petrohemija are, probably, not going to get new owners within next few years, while the privatization of EPS will not be taken in consideration before 2015. New tender for JRB and the call for strategic partner for IMT should be announced soon, while the potential buyer and the date of sale of Telekom are still kept secret.
This is how Serbian Deputy Minister and Minister of Economy Mlađan Dinkić
explained the government's privatization strategy in the interview for eKapija.
RTB Bor and Petrohemija - first investments and then privatization
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RTB Bor and Petrohemija will be sold only if a serious buyer appears. Until then, we will have the equipment in these two companies modernized and wait for the investors from their sector - Dinkić said during the Business Forum on Kopaonik.
According to his words, there are, currently, no interested companies that the state desires since only the mid-rank companies have been emerging as potential buyers.
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The companies that submitted queries were not adequate because these companies are among Serbian top exporters at the moment. Petrohemija's annual export amounts to 200m EUR, while Bor significantly raised the level of goods it exports, especially after the copper price in the global market recovered. Construction of a new smelter is ins the pipeline, as well as exploitation of new ore deposits and procurement of equipment. We are sure that that strategy will, sooner or later, increase the value of the company and enable us to find a serious partner -
Dinkić explained.
He also said that Petrohemija had been registering big losses and that the process of its recovery was still underway. As he pointed out, the most important for that company is modernization related to energy efficiency.
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We are speaking to two potential creditors about the funds we would invest in new equipment. We are talking about the loan of about 70m EUR, which would make Petrohemija much more profitable. Also, I spoke to the partners from Algeria about the delivery of oil derivatives that are used as raw materials in production.
Let us remind that the Government of Serbia made the Conclusion on May 14, 2009, about the need for commencement of the restructuring process in Petrohemija.
When it comes to investments in RTB Bor, Dinkić said at the end of the last year that the state's investment of 160m EUR in Mining-Smelter Basin was in the pipeline. Of that amount, 135m EUR will be set aside for construction of new smelter and sulfur acid factory, which should be built in two or three years. The state will invest 25m EUR in procurement of mining equipment and, as Dinkić stated on that occasion, the Export Development Canada (EDC)
had already offered the loan under favorable terms.
According to earlier information provided by the Ministry of Economy, RTB should finance the construction from the loan that would be guaranteed by the Government of Serbia. Let us remind that even the third tender for the sale of RTB Bor was not successful.
EPS not to be sold before 2015 – privatization trhough additional capitalization
Minister Dinkić confirmed the statement given by the CEO of the Electric Power Company of Serbia (EPS), Dragomir Marković, that that company would not be offered for sale before 2015 and that one of the possible models of privatization was additional capitalization.
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We are not thinking about privatization of EPS, but we do plan investments in the new capacities and we are open for public-private partnerships. Therefore, EPS will not be offered for sale, but big companies will be enabled to invest in the Serbian manufacturer.
The cooperation will be realized in the projects for construction of new hydroelectric power plants.
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The Memorandum of understanding was signed with German company RWE during President Tadić's visit to Germany. I can not tell you now whether they will realize the contract.
As the CEO of EPS, Dragomir Marković, explained to eKapija, privatization of the company should be carried out through additional capitalization, which will start with the distribution of free stocks that represent 15% of the ownership. Marković also said that EPS planned significant investments in 2010 and that it was considering to take part in construction of a hydroelectric power plant in Bulgaria, for which about 200m EUR should be set aside.
Galenika – two-phase sale is possible
When it comes to Galenika, Minister Dinkić said that the state would consider the offers of strategic partners in the following period and pointed out that several models should be taken in consideration in case of privatization of that company.
- Galenika is a significant player in Serbian market, especially because it registers growth of export thanks to the international standards for production of drugs.
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It is for sure that we are not going to sell Galenika below the price that would seem adequate to us. What is also for sure is that we will not accept the partner that does not belong to the first league of the global pharmaceutical industry. It is possible that the privatization of Galenika will be carried out in two phases. The first phase would include the application of the model of joint investment through minority participation of the adequate partner and production of new brands in Galenika, while the majority package would be sold in the second phase. We are now in the process of evaluating non-binding bids, while the model of privatization will be selected after the talks with potential investors. Therefore, we will decide if the majority package will be offered for sale or the minority package with mandatory investments and production of new brands will be the option offered to the strategic partner - Dinkić explained.
He said that several large pharmaceutical companies had expressed interest in Galenika. The Minister also confirmed that German Stada and Greek Alapis were interested and added that another two companies were in the game and that they were significantly bigger than the first two.
As far as deadlines for "closing the deal" are concerned, Dinkić said that it depended on the privatization strategy.
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If a serious strategic partner expresses interest in the procurement of minority package, the process of privatization may start very soon, and I expect to have more information prior to end of April - said Minister.
He pointed out that the state's "appetites" for Galenika had grown for the reason that the company was achieving significantly better business results at the moment than two years earlier and because it had the new drugs factory.
- We once thought to offer it for sale at the minimum price of 200m EUR, but we are now of the opinion that that price is too small. I repeat, the players who can not take part in that race are not serious candidates.
There are companies interested in Telekom Srbije
Dinkić said that the Government was currently considering the possibility of privatization of Telekom, after which the public would be informed on all decisions.
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There are interested companies, but I would not like to reveal their names now. The information on that will be available the moment we consider the participation of these companies in the process of privatization.
According to the media, one of the most probable buyers of the Serbian operator is German Deutsche Telekom, which already owns 20% of stocks of Telekom Srbije through Greek OTE as the co-owner of that company. According to the recent writings in Belgrade's weekly magazine NIN, the state-owned package of stocks in Telekom Srbija will be sold on a tender in October 2010 at the starting price of 1bn EUR.
The Director of the Directorate for Commercial Affairs in Telekom Srbije, Vladimir Lučić, said yesterday that Telekom Srbija had successfully started the new business year, during which about 20bn RSD would be invested in the telecommunications infrastructure, and reminded that Telekom had ended year 2009 with the record profit of about 15bn RSD.
Jat Airways – urgent renovation of the fleet is necessary
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I think it is high time for some serious step towards restructuring and modernization of Jat Airways to be made and I expect a public call for the strategic partner who would run the national airliner together with the state to be announced very soon. Our share in the new ownership structure will be a minority share.
According to his words, the aim is that minimum 10 airplanes be bought within next year, that the costs of operations be significantly rationalized and that the losses be finally eliminated.
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We want to find the strategic partner in the first half of the year. We do not have time to wait because Jat's fleet is very old, while the overhaul of engines is expensive and it burdens the operations, so that the only wayout lies in the procurement of new airplanes. We have already got the offer from manufacturer Airbus on the basis of its earlier contract with Jat. Airbus owes us about 23m USD for the airplane that was not delivered at the time, and that money can be used as the base for procurement of some new airplanes of the U.S. manufacturer on lease.
As Dinkić explained, the Government has two options - either to find the strategic partner with whom it can start the negotiations with Airbus and procure new airplanes or to find the right model by itself for the delivery of Airbus' airplanes.
- In any case, Jat will be modernized, that is, it will procure new airplanes.
It would be ideal if we had the first new airplane already for the summer season in 2010. The prices of new airplanes are currently very low, so that now is the right time for procurement.
IMT- strategic partnership for the sake of modernization
Dinkić confirmed to eKapija that the Government was preparing the offer for strategic partnership with tractor factory IMT and said that several companies had expressed interest in that investment.
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We will soon announce a public call for strategic partnership and the investment will concern the relocation of current factory from New Belgrade to a new location in Barič. We also have several options in case of privatization of IMT, but the state will certainly remain the co-owner of that factory and try to modernize our tractor.
Dinkić
said that the new tender would be announced for JRB as well. He added that there were some interested companies, but he was unable to specify when the public call would be announced.
T.S.
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