Srbijagas Needs $484 Million to Pay Back Debt, Boost Liquidity

Srbijagas JP, Serbia’s state-owned gas monopoly, wants the government to help pay back 120 million euros ($157 million) of debt this year and secure a further 250 million euros to improve its financial liquidity.

The Novi Sad, Serbia-based company, which owes 1.2 billion euros ($1.57 billion) to commercial lenders, won’t be able to service its debt payments without the government help, General Manager Dusan Bajatovic told reporters in Belgrade today. The biggest “financial strain” will come in 2014 and 2015, when “most of our debt matures,” Bajatovic said.

The company posted a $410 million net loss in 2012, while its operating loss was 12 billion dinars ($141 million), he said. Bajatovic said the European Bank for Reconstruction and Development declined to provide financing, while Credit Suisse Group AG and Deutsche Bank AG “wants their money back.”

Serbia seeks to curb losses at state-owned companies and stopped backing their loans, trying to narrow the budget gap to

3.6 percent of gross domestic product this year from 6.7 percent in 2012 as it plans to start talks next month with the International Monetary Fund on a new precautionary loan agreement. The IMF wants Serbia to overhaul its public sector.

Price Cap

Srbijagas has relied on sovereign-backed loans to bolster liquidity as the government kept gas prices below market levels amid recession and rising unemployment. The company has sold gas “on average 25 percent below the cost” of imports to all consumers and had to take over its biggest debtors to save 12,500 jobs, Bajatovic said.

“Those are clear subsidies and this is a hidden fiscal deficit,” Bajatovic said. Of its total debt, the government must take over “at least 500 million euros” or nearly 2 percentage points of GDP as its own.

Energy Minister Zorana Mihajlovic presented a plan this week to overhaul Srbijagas, separating trade and distribution from storage and transportation through 2014, to meet European Union requirements. She also wants to ban Srbijagas from taking new loans.

Bajatovic asked the government to consider an alternative scenario to financially consolidate Srbijagas and develop it into a “highly integrated holding company” in control of separated units.