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Hungary to participate in 11 Serbian hydroelectric power plants, causing a significant uproar in Serbia

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vízerőmű /Hungary to participate in 11 Serbian hydroelectric power plants
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The Serbian Ministry of Mining and Energy announced that no decision has been made regarding the separation of a portfolio containing a 350-megawatt hydroelectric power capacity from Elektroprivreda Srbije (EPS), the Serbian electricity industry, or the local power plants. The ministry thereby refuted speculations that eleven hydroelectric power plants would be transferred to a joint venture, led by the Hungarian MVM Group, to continue their operations.

Logical and illogical moves

In recent times, Péter Szijjártó, the Hungarian Minister of Foreign Affairs and Trade, has held multiple discussions with Dubravka Đedović, the Serbian Minister of Mining and Energy, although details about the planned Hungarian-Serbian energy joint venture have been scarce so far.

Regarding EPS, the situation stirred emotions due to reports suggesting that, at the instruction of the Special Department for Combating Corruption of the Serbian Public Prosecutor’s Office, four individuals (according to some sources) or six individuals (according to others) have been arrested for allegedly embezzling a total of precisely $7,458,050. If we were in a joking mood, we would say not a single cent less.

The puzzle is slowly coming together, with the first publicly visible piece being the transformation of the Serbian electricity industry (EPS) from a state-owned enterprise into a joint-stock company in April.

The Serbian opposition already expressed dissatisfaction at that time, suspecting that the Serbian leadership intended to sell off the Serbian electricity industry, but the grandiose “Kosovo issue” and the dual tragedy in early May diverted attention from almost everything else.

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Dubravka Đedović a Pinknek nyilatkozva csupa pozitívumokról beszélt (Forrás: Screenshot)

Đedović sought to appease the dissenters by assuring them that the “formal transformation” that occurred in legal terms would bring improvement to the management of Serbian power plants, resulting in increased revenues and the ability to retain the best personnel.

The Serbian minister also added that the benefits of this would be enjoyed by consumers as well, painting an overall positive picture of the transformation. This was likely facilitated by the fact that uncomfortable questions are not typically raised to government officials during their appearances on Pink Television.

“We need to attract them with competitive salaries so that they do not leave EPS to seek employment in private companies”

stated Đedović, who emphasized that another means of retaining professionals is to provide them with opportunities for advancement.

To further allay concerns from the opposition and others, the Serbian Minister of Mining and Energy made a promise not to sell EPS.

“As the state is the owner, and as we intend for it to remain so, EPS is a giant in our economy. It is in the state’s interest, intention, and desire to protect and improve its situation”

said the Minister, aiming to dispel suspicions. He also mentioned that coal currently forms the foundation of Serbia’s energy industry, but they are considering transitioning to cleaner energy sources. 

This particularly affected the coal miners in Kolubara, who felt threatened and began protesting, demanding the reversal of the transformation into a joint-stock company and the resignation of Dubravka Đedović.

Is Serbia Paying with Hydroelectric Power Plants for Orbán’s Friendship?

Following these developments, an extraordinary meeting of the EPS (state-owned) joint-stock company’s supervisory board was convened for May 18.

The fifth item on the agenda, before “other matters,” included a proposal for the establishment of a joint venture with the Hungarian MVM Group for renewable energy production, involving the participation of eleven Serbian hydroelectric power plants.

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The document, through unknown channels, reached the most significant Serbian opposition party, the Party of Freedom and Justice (SSP). Dušan Nikezić, the party’s vice president, made it public by attaching it to a statement, claiming that the privatization of EPS, the Serbian electricity industry, had secretly begun.

In the statement, Nikezić noted that this was a direct consequence of the “friendship” between Vučić and Orbán, “for which Serbia is paying with hydroelectric power plants and the privatization of EPS.

“The secret agreement placed on the agenda of the EPS Supervisory Board on Thursday obligates EPS to involve 11 hydroelectric power plants in a joint venture, in which the MVM Group will invest approximately 600 million euros in cash”

the statement read. It also stated that the Hungarians value the aforementioned hydroelectric power plants to such an extent and, on their part, they equalize the Serbian ownership stake through this investment.

The vice president of SSP added that despite the equal ownership stake, the Hungarian side proposed that a Hungarian company take control, even though they have little to no experience in the field of hydroelectric power plants. Their first power plant on the Tisza River was opened in December 2021, and they currently have a total of three such power plants, one in Hungary and two in Romania, with a modest combined capacity of only 50 MW.

According to Nikezić, this is not Hungary’s first attempt. Nearly nine months ago, the Hungarians made an even worse proposal by offering “non-existent know-how” instead of cash as their own contribution.

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Dušan Nikezić tiszta vizet öntene a pohárba (Forrás: Screenshot)

The opposition politician also reminded that just a month ago, every representative of the Serbian government repeatedly stated in unison that there would be no privatization of EPS. However, it has now been revealed that the new statute was adopted precisely because of privatization, as the provision prohibiting alienation was excluded from it.

According to Nikezić, following this “harmful proposal,” the decision can ultimately be made with a single vote, which can be cast by Dubravka Đedović, the Minister of Mining and Energy, as the state becomes the sole owner after the transformation into a joint-stock company.

Therefore, the Party of Freedom and Justice has called on the management of EPS to reject the deemed harmful proposal, and demanded that the government declare a state of emergency in the bankrupt energy sector and “finally ensure professional management at the company.”

The Ministry denies and accuses

In response to this, the Serbian Ministry of Mining and Energy, which regretted the leak, announced that no decision had been made at the mentioned meeting regarding the separation of 350 megawatts of hydroelectric power plant capacity from EPS. They also denied that this capacity would be transferred to the joint venture with the Hungarian MVM Group.

The Ministry’s statement emphasized that anyone who speaks publicly about the alienation of the company’s assets spreads “false news and creates panic.”

The ministry stressed that while the agenda of the extraordinary meeting of the supervisory board included information on the establishment of a joint company with the MVM Group, no decision was made regarding the creation of such a company.

Meanwhile, further details have also been leaked, indicating that the Ovčar Banja, Međuvršje, Kokin Brod, Uvac, Potpeć, Pirot, and Vlasina power plants would be included in the Serbian-Hungarian joint venture. However, the initiative does not extend to the Đerdap 1 and 2 power plants, although the Serbian opposition includes them as part of it.

Parallel to this, Željko Marković, the leader of Deloitte’s Balkan Green Energy News project, stated that the establishment of joint ventures in the region can be considered legitimate. This is evidenced by the fact that the Serbian electricity industry, i.e., EPS, and the Serb Republic in Bosnia and Herzegovina have a joint company engaged in the construction of hydroelectric power plants, named Gornja Drina.

The energy expert noted that no one rebelled when it was established in the first place, and the real problem now is not the establishment of the joint company, but rather the fact that EPS would bring hydroelectric power plants, i.e., a portion of its core assets, into the joint venture and provide land for the construction of renewable-based power plants, while the Hungarians would only invest a mere 600 million euros in this.

According to Marković, EPS needs to collaborate with the electricity industries of the region, but this should be done on an equal basis, meaning both parties should invest assets and money.

MVM is already present in Serbia, as it concluded an agreement in March last year to acquire 33.4% of Energotehnika-Južna Bačka and Elektromontaža, both belonging to the Serbian Maneks group.

The Hungarian electricity provider previously revealed its intention to strengthen its presence in Southeast Europe through a series of acquisitions and agreements, considering Serbia as its base for expansion into Bosnia and Herzegovina, Montenegro, North Macedonia, and Bulgaria.

The Serbian opposition is not pleased

Similar to the center-left Party of Freedom and Justice, the right-wing Dveri party is also unhappy with MVM’s offer. Borko Puškić, a parliamentary representative of the party, stated that the establishment of a joint venture between EPS and MVM would raise not only energy-related but also security concerns.

Puškić believes that the replacement of Zorana Mihajlović, who was considered pro-Western, as the head of the Ministry of Mining and Energy, has not brought any changes, as Dubravka Đedović continues where the former minister left off, furthering the policy of liquidating EPS.

The opposition politician believes that Đedović is an “agent of foreign interests” since she would hand over the leadership of the joint company to the Hungarians, who only possess a single hydroelectric power plant, and Norway would delegate two members to EPS’s seven-member supervisory board.

Puškić added that in this way, Norway, which has no connection to lignite and thermal power plants, and Hungary, which has no connection to hydroelectric power plants, would lead certain sectors of the Serbian electricity industry.

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