Serbia’s criminal police and its organised crime unit have been checking the financial documentation of state-owned natural gas company Srbijagas after the state audit body established public procurement irregularities dating back to 2011, news agency Tanjug reported, quoting unofficial information.

The police control over the documentation of Srbijagas, a company involved in transport, distribution, storage and trade with natural gas, has began upon a request of the prosecutor’s office and is based on a report of the state auditors filed with the interior ministry.

The auditors have established that Srbijagas spent a total of RSD 46bn (EUR 401mn) in 2011 in breach of the law on public procurement. The company also imported gas without signing a foreign trade agreement.

Tanjug reminds that back in February the state audit institution filed a request at the Novi Sad magistrates’ court to open misdemeanor proceeding against Srbijagas’ CEO Dusan Bajatovic because of the violation of the public procurement law.

Srbijagas, its management and the company’s future have been in the spotlight in Serbia for months now – and especially under the criticism of energy minister Zorana Mihajlovic. Being a state-owned firm, Srbijagas has been for years under the control of the Socialist SPS party and its management has been appointed on political grounds (similar to the other state-control firms in the country).

Mihajlovic, who became a minister from the lines of the Serbia Progressive Party (SNS) following the May 2012 elections, has been since advocating for a more efficient way of management for Srbijagas, pointing to its mounting debts, and for a restructuring of the company into separate units, one of which involved in transportation. The current government coalition is made of SNS and SPS but early elections are already looming, probably in the first half of 2014, as SNS is expected to try to use its growing popularity to consolidate its position in power.

Regarding Srbijagas’ procurement law violations, Mihajlovic said in early 2013 that the company is a case for the prosecutor’s office, adding back then she expects the office will check its operations. Furthermore, she expressed surprise that an abuse of as much as RSD 46bn is a subject to only misdemeanor charges.

RESTRUCTURING AND DEBTS

Srbijagas should be split into two state-owned companies by end-2013 in two stages, Mihajlovic said in April. The first restructuring stage should be completed by end-October and comprise the financial and business consolidation of Srbijagas, including the reprogram of its debt and liabilities. After that, the distribution and gas trade activities should be separated from the transport and storage activities by the end of the year.

The company to be involved in distribution and trade will be called Srbijagas and the firm engaged in transport and storage Transgas.

Srbijagas turned to a RSD 35bn loss last year from a RSD 1.3bn profit in 2011 as its operating revenue shrank 7.7% to RSD 68bn and its operating costs rose 3.6% to RSD 80bn. Its executive director, Dusan Bajatovic, has said that EUR 56mn of the company’s liabilities will be transformed into public debt by the end of 2013. Srbijagas overall debt totals some EUR 1.1bn as around EUR 600mn of it is outstanding claims. Bajatovic said in July it was not clear how much of these claims would go to the public debt once the planned restructuring of the company begins.