Montenegrin power company EPCG faces lawsuit over planned Rudnik Uglja acquisition

Montenegrin power company EPCG faces lawsuit over planned Rudnik Uglja acquisition
By bne IntelliNews February 4, 2017

Montenegro’s Network for Affirmation of the NGO Sector (MANS) said on February 3 it has filed a claim with the special prosecution against top executives of the power firm EPCG, objecting to their intention to acquire a majority stake in Rudnik Uglja coal mine.

On January 31, EPCG said it was interested in acquiring the stakes of Italian utility A2A and Aco Djukanovic, brother of former Prime Minister Milo Djukanovic, in Rudnik Uglja. However, the NGO claims that EPCG will suffer multi-million euro damages and that there is no economic rationale for the investment.

Currently, A2A owns 39.5% of the coal mine, and Aco Djukanovic 11.8%. Both shareholders have reportedly offered to sell their stakes to EPCG. According to MANS, EPCG plans to pay €17mn for the shares. The state owns a 31% stake in Rudnik Uglja. 

MANS has filed the claim against EPCG’s former CEO Srdjan Kovacevic and unknown individuals who took part in presenting the proposed acquisition to EPCG’s shareholders.

“[T]here is a reasonable doubt that they have committed the criminal offence abuse of office in business operation by attempting this and EPCG will buy a company with huge losses at a price significantly higher than its true value,” MANS said in a statement.

According to MANS, if EPCG acquires the stake, it will also have to repay Rudnik Uglja’s outstanding debts of around €10mn.

“The realisation of this transaction could push the state energy company [EPCG] into the zone of bad companies and become a “trigger’ for its financial staggering in a future period,” MANS said.

However, in response to the news, EPCG said that MANS was trying to deceive the society with populistic statements that would harm the image of EPCG.

“It is simply incredible that MANS does not know the meaning of ‘showing interest’ and that they have filed a claim against the respective individuals just because they have shown interest in the offer,” broadcaster RTCG quoted EPCG as saying in a statement to the media.

The company added that its shareholders meeting took a decision, reacting to a letter by Rudnik Uglja’s shareholders, but that the power firm will now analyse the offer.

However, the January 31 extraordinary shareholders meeting of EPCG, small shareholders accused A2A of entering into a conflict of interest, as it is also a shareholder in the power firm. They accused A2A of trying to get rid of its stake in the coal mine as it is operating at a loss.

A2A acquired stakes in EPCG and Rudnig Uglja in 2009 and now owns 43.7% of EPCG. Since then, the Italian company has managed EPCG under an agreement with the state, which holds 57% stake in the power firm.

The Italian company is expected to exit EPCG as it did not agree with the state on the planned construction of a second unit at the Pljevlja thermal power plant.

The project aims to extend the capacity of TE Pljevlja, which now has only one unit of 210MW. The new unit must have a capacity of 220-300MW and a net electricity efficiency of no less than 38%. The project also envisages providing heating for the town of Pljevlja in cooperation with the local administration.

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