ENERGOPROJEKT: Hostile takeover is tantamount to dissolution of our company

Sistem Energoprojekt with all affiliates should implement the agreed activities worth about EUR 400 million. The plan for concluding new agreements in 2012, the value of which was projected at EUR 253.8 million, was exceeded by 10 percent as early as in November, given that they have already signed about EUR 280 million contracts this year.

Energoprojekt experts will soon start implementing a project in the Russian city of Rostov, where they are supposed to build a EUR 66.1 million International Congress Center with Hyatt Regency Hotel, after which they are to move to Ukhta, Russia to build a USD 43.8 million business building for Russia's Gazprom. They will also go to Aktau, Kazakhstan to implement new projects worth EUR 5 million, as well as to Peru and Ghana, where new agreements worth tens of millions of euros are expected to be concluded soon.

The management of this company also expects to enter the new year with all their plans regarding consolidated revenue and gross profit fulfilled because, as they say, despite the crisis, Sistem Energoprojekt's business situation was better at the beginning of this year than in 2011 and 2010.

However, all these figures seem not to be enough for Serbia to recognize the strength of Energoprojekt and enable its more active participation in infrastructure projects in our country. In an interview with eKapija, Energoprojekt Holding CEO Vladimir Milovanovic and Executive Director for Finance, Accounting and Planning Dr. Dimitraki Zipovski talk about how it is possible that it is easier for them to win a contract in Russia, Ghana, Kazakhstan, Peru or the Middle East than in Serbia, as well as about the underestimated share value, business transparency and possible changes in the company's ownership structure.

It is the hardest to win a contract in Serbia

Energoprojekt is not the first company to complain about unequal conditions for companies competing for a contract in Serbia, but it is definitely the biggest.

(Vladimir Milovanovic)

Dimitraki Zipovski believes that the strength of Energoprojekt is not sufficiently recognized in Serbia, probably because this company performs about 70 percent of its activities abroad. However, he as well says that "no big infrastructure project in our country could be implemented without Energoprojekt."

The CEO of Energoprojekt Holding is also not satisfied with the government's perception.

- Winning a contract in Serbia is always the hardest for us. We also participate in tenders abroad, submit our bids, negotiate and win contracts. However, we find it more difficult to do that in Serbia. Why? Because many current projects are financed from various sources, with certain restrictions set by lenders, and our investors fail to leave enough space for adequate participation of Serbian companies when negotiating project details. Even when Energoprojekt finds a solution and offers to participate in some projects as a member of a consortium, there is no required support for such offer of Energoprojekt and its foreign partner to be considered as seriously as a 100% foreign offer. There is always a need of individuals to find a flaw or a "conflict of interest" to eliminate Energoprojekt from the tender procedure - CEO Vladimir Milovanovic explains to eKapija.

Collecting receivables

The company management confirms to our web portal that the implementation of all projects they have informed the investment public about is either underway or about to start. They also add that they have no problem to get an advance payment for them. The only payment they expect to be made one of these days is the one for their work on Corridor XI, whereas the construction of aforementioned international congress center and a hotel in Rostov should commence in about one month.

- All projects that Energoprojekt implements, especially those abroad, are paid for on a regular basis. Certain difficulties arise from time to time, like it was the case in Algeria and Uganda, where bureaucratic procedures are quite complicated. However, it is nothing when compared to the situation in Serbia. The worst of all is that we don't know when it will be possible to collect at least part of these receivables in our country - says Milovanovic.

Getting closer to a contract for so far the biggest project in Russia

Although they do not want to reveal details, a project they announced a long time ago, worth about EUR 550 million, is still available and, as they say, negotiations are going very well.

- The value of this project has been increased to about EUR 625 million. The prospective investor is familiar with our restrictions in regard to bank guarantees, but, in spite of that, he is willing to help us to find a solution in case we sign an agreement.

Shares - acquisition influenced by different interests?

After a race for the acquisition of the biggest ownership stake possible has been ongoing forfew months now, and after speculations that the construction company Napred might try to take over a majority stake, it is not a secret that both top management and staff of Energoprojekt have joined the repurchase of own shares. However, they are blamed for any increase in the share price.

- Almost as a rule, every time we announce that we have concluded a new agreement, the value of Energoprojekt shares either stagnates or goes down. Unfortunately, we cannot control this, given that it is something the Belgrade Stock Exchange should deal with.

(Dr. Dimitraki Zipovski)

The man in charge of finance at this construction giant also believes that the share value is underestimated and that the company's market cap is inappropriate:

- From the viewpoint of the management, we do not buy back own shares speculatively, but in line with a strategic and long-term approach. It is true that we encourage our employers to buy back Energoprojekt shares, but we only do that by constantly stressing that the value of our shares is underestimated - says Zipovski.

100% transparent

Dimitraki Zipovski is standing more than firm in his claim that Energoprojekt is a 100-percent transparent company.

- Every relevant information is published on our website, and we are also open to all questions of existing shareholders and prospective investors. There is no secret information, except those concerning the amount of a bid for a future project, which is deemed a business secret.

On the other hand, investors believe that Energoprojekt's transparency would be higher if the company published quarterly consolidated reports.

- Energoprojekt is a system with a large number of affiliates, both in the country and abroad. We do make quarterly reports for our affiliates and present them on the Belgrade Stock Exchange. However, it is a serious problem for us to provide completely reliable data in consolidated semi-annual reports in the same time period - Zipovski explains.

Hostile takeover = dissolution of the company

Our interlocutors refuse to comment on the intentions or other shareholders, but they believe that the Republic of Serbia, as the holder of 33 percent of shares, should not make plans for selling its stake in Energoprojekt, especially in the period of large infrastructure investments, because every state should have a reliable construction company to rely on.

- The management is not talking with any prospective strategic partner, and we are not looking for a buyer either.... As the CEO, I strive to make it possible for Energoprojekt to double its revenues over the next three or four years, boost profits as much as possible, hire new people and expand the business to all the markets where it once operated - Milovanovic points out.

As they say, they are only aware of their strength and the fact that the value of Energoprojekt shares is currently underestimated, and they also believe that "the hostile takeover of Energoprojekt is tantamount to the dissolution of the company."

Jelena Djelic