EP BiH Facing Increasing Difficulties: Profit in 2017 Almost Non-existent, Layoffs and Salary Cuts Expected

Following the same principle as the report on BH Telecom's operations, the office of the Prime Minister of the Federation, Fadil Novalić, has prepared a report for Elektroprivreda BiH, writes the news agency Patria.

It states that during 2016, the FBiH Government faced significant problems and obstructions in managing EP BiH, which led to delays in investment implementation and a lack of restructuring activities in the mines. It was noted that the extremely poor and slow management of projects and investments results in delays in the realization of significant infrastructure projects.

The report also states a dramatic drop in Elektroprivreda's profitability and calls for an urgent and decisive reaction and change in management's approach to stop the negative business trend and improve profitability and productivity parameters.

- After achieving around 3 million KM in profit in 2014 and 2015, profit in 2016 was 3 times lower, and according to current projections proposed by EP's management, an even lower profit of only 538,000 KM is expected in 2017. Essentially, the Business Plan 2017-2019, which has been offered, does not propose any measures to improve the situation regarding either profitability or productivity, which is a key measure for stabilizing operations - the Report, which Patria agency has access to, states.

Judging by all that has been stated, it is possible that the FBiH Government will initiate the dismissal of those responsible for such a poor situation, which is devastating and different from how it is presented by Elektroprivreda BiH.

The FBiH Government also listed strategic goals in the document that should be included in the Business Plan, including, among others, a five percent reduction in the number of employees, a five percent reduction in the total number of sick days, a five percent reduction in workplace injuries, a ten percent reduction in the proportion of administrative staff, a ten percent reduction in total costs, a ten percent reduction in salary and benefits costs...

The reliability of financial reports is also questionable, as confirmed in the reports of external auditors and the Office of the Auditor General.

- Audit reports for 2015 were issued with reservations for the unconsolidated report (EP BiH only), and without an opinion for the consolidated reports (EP plus mines), which means that the credibility of certain material items in the report could not be confirmed. A disclaimer of opinion is the most severe qualification that can appear in an audit and practically means that the auditor could not confirm the credibility and reliability of the report. The disputed items amount to hundreds of millions and fall into classic categories where accounting "manipulations" are performed, such as inventory value, work in progress value, procurements, service contracts, advances - the analysis states.

Mine productivity is at its lowest level compared to the region, with no plan for improvement in this area.

- Management is not taking measures for an active approach to mine restructuring, but is transferring accumulated problems, of an operational nature, to the FBiH Government. EP BiH must be an active participant in mine management, through systematic and consistent planning and implementation of measures in the best interest of the company and its owners.