Could you please give us a brief historical background on Energoinvest?
Energoinvest has had its 50th birthday this year. A lot of history happened within these 50 years and it is difficult to summarize it by only the most significant events and dates. The founder of Energoinvest, and the visionary of its development, was its first General Manager, Mr. Emerik Blum, and the concept in which he established Energoinvest at that time has proved correct during all these years. This concept was based on the creation of our own ideas and products in the field of electrical energy and their placement on the foreign market; I must add that this is still of crucial and vital importance for us. Energoinvest has based its core business in the electrical energy system, namely the generation, transmission and distribution of electrical power. In the development stage of Energoinvest, during the first two decades, besides these core activities, it has dealt with a whole range of other activities. In one hand, Energoinvest developed technologies dealing with gas and oil, and non-ferrous metals in Mostar, in the other hand. Growing beyond this initial idea, and beyond the local market, Energoinvest started expanding towards the foreign market as well. Before the war, the business group Energoinvest has experienced years with annual income up to 2,5 billion USD, and exports out of ex-Yugoslavia of about 800 million USD. This sort of profit was achieved in the fields of electrical energy, oil and gas, and non-ferrous metals; all this was done in the light of the core idea of Energoinvest to develop its own technologies, production and distribution network, together with building our own facilities. Energoinvest was a business group comprised of 104 subsidiaries active in different scopes of work; companies, branches and contracts were present in practically all continents.
What are your main export markets?
Our main markets are the countries of Northern Africa, Libya, Egypt, Algeria, Ethiopia, also the countries of the Far East, Thailand, Indonesia, Iraq, former USSR, USA, Mexico, etc.
As an overview of the stability of this company, I have to say that in these 50 years of its existence, I am only its sixth manager. The disintegration of the former Yugoslavia and the war in Bosnia and Herzegovina changed the business physiognomy of the country, and even though Energoinvest remained on the roof of business in Bosnia and Herzegovina, yet after the Dayton Peace Accords were signed and the entity level laws on privatization, ownership, etc. were passed, Energoinvest now looks completely different compared to what I have just presented.
Has this new situation had any influence on the former domestic market, on the business you ran in the former Yugoslavia?
Yes. As the republics of former Yugoslavia became independent states, they also became "foreign markets" as well. To illustrate this, once the war in Bosnia and Herzegovina ended, we never got a single contract in Slovenia and Croatia, though we are getting contracts in Turkey, Malaysia, Mexico, etc. When we are talking about the current structure of Energoinvest, all the events that caused the disintegration of former Yugoslavia and structuring of the existing Bosnia and Herzegovina to a great extent influenced the current structure of Energoinvest. By definition, Energoinvest is now active in multidisciplinary engineering, that still is competitive and getting contracts in the fields of transmission lines construction, electric energy plants construction, processing technologies, refined oil and complex facilities of other kind, as well as automatics and communications. Today, we do not have the auxiliary equipment production plants needed for all these engineering activities, which is the consequence of the rules in which Energoinvest is to be privatised - rules recommended to us last year by the International Privatization Advisory Group. So today Energoinvest is comprised of these two buildings that accommodate engineering staff and 26 companies all around the world, which are not all owned by Energoinvest, as some of them are of mixed ownership.
What opportunities can Energoinvest offer to foreign investors?
In the Bosnian environment, Energoinvest is a little bit of an awkward phenomenon for foreign investors. Energoinvest is an engineering company, competing at the international tender competitions in the field of transmission lines, electrical energy plants and complex facilities, against large international operators, such as ABB, Siemens, Alstom, etc. and we are quite successful in this competition. We are selling our engineering services, and when we get contracts, together with our services, we sell equipment produced by other multinational companies. The approach to strategic investors in the privatization of Energoinvest will be to an extent determined by the fact that Energoinvest is today present on the global market, and that it is competitive to these European companies. On the other hand in the privatization process, Energoinvest is being sold for a price based on the cost of its facilities and equipment, disregarding its potential income. The reality of the offered price of Energoinvest is questionable, as this is formed disregarding the value that is even higher in Energoinvest, i.e. the value of intellectual potential, markets, potential buyers, and all that "immaterial" value that Energoinvest has.
This country has very skilled labour, and, as you mentioned, that is also one of the qualities that Energoinvest has.
Here, we do not speak of merely skilled labour, we speak of highly educated personnel. Today; Energoinvest has about 460 staff with university degrees in all areas, among them we have three with doctorate degrees, sixteen with master degrees, and a large percentage with degrees from various international schools of trade and economy. Those are the values of Energoinvest. | In what way is Energoinvest faced with the challenges of globalisation?
We have a clear picture of what are the target markets for us. We can be present in the countries that consider Bosnia and Herzegovina as "the West". So, beyond the river Sava, across the western border of Bosnia and Herzegovina, it is impossible for us to sell anything. The global actors are not yet present in the countries that we consider ourselves as potential markets today, as these companies can enter these markets only with considerable risks, so their offers there can still not compete with ours. However, if any of the global companies sees us as a threat, they have the mechanisms, both political and financial, to either buy or shut Energoinvest down.
Do you have plans to spread your activities into other services?
The main limitation we have to face when we want to have a better offer and better visibility on the current and potential markets, are the limits of the financial players in Bosnia and Herzegovina. There are no local banks that can support the activities of Energoinvest in all their stages, from applying to tender competitions, to the final stage of contracting, as banks operating here have small basic capital, disposable percentages clearly prescribed by the Banking Agency based on the basic capital, and the branches of foreign banks active here in Bosnia and Herzegovina for decisions of this kind have to get approval by their headquarters abroad. We recently gave up a contract in Kuwait worth 60 million USD because we could not get support by the consortium of banks here in Bosnia and Herzegovina. And when we add to our regular costs, the costs of financial services are really enormous compared to the costs accrued by the competition for the same activities.
Do you think the situation will change as the economy in Bosnia and Herzegovina further develops? Do you think that domestic banks will have enough capital to support your activities, i.e. that foreign banks will enter this market with enough capital?
Domestic banks - I doubt; foreign banks will purchase most domestic banks. The issue with foreign banks is not the lack of capital, but their risk assessments. You are aware of all the political events in Bosnia and Herzegovina; these political events are the very issues foreign banks take into consideration when assessing the risk of cooperation with domestic companies. Recently, beginning of this year, we got a contract in Northern Iraq, area controlled by the UN, worth about 45 million DM, and the investor asked for guarantees to be provided by a 2A rated bank. In the process of reaching a 2A rated bank, we had to have another bank acting as a mediator that would be recognized by the 2A rated bank, which in our case was a Slovenian bank, as they took over a part of the risk related to Bosnia and Herzegovina. We provided these guarantees that were pretty costly. We tried to provide them by addressing a BH branch of one of the foreign banks for these same guarantees. This bank had to ask its headquarters for approval and was denied for two reasons: first was that the requested amount to be guaranteed was quite high, and the other reason was that the main competitor for the same contract was a company originating from the same country as the bank.
You have mentioned that you are the sixth manager of this company. Where would you like to lead this company?
I think that my task, compared to the tasks of other five managers, is the most difficult one. I am the manager leading the company through an important transition period. The transition brings a lot of questions for which there are no answers. I cannot influence a lot of processes and a lot of events that will define the future of this company. I will just mention two things: the social system and political structures in Bosnia and Herzegovina, and the process of privatization of Energoinvest and privatization in general. These two factors will define the basis of Energoinvest's future. Of course, we have defined some guidelines of what it is that we want: we want to be competitive in the four core activities, we want to go through the privatization in such a manner as to keep Energoinvest the way it was, and not to be shut off by buyers, and we plan to reach annual sales per work place of 250.000 DM as soon as possible, which, in this environment, provides for the good existence of our employees, and opens possibilities for the development of Energoinvest. Through this development Energoinvest will be able to focus on production activities and spreading of markets. In short, it is still not the moment for huge projects, as a lot of things are still undefined, and just remaining present on the markets that we hold now would be a great success in this environment. We should be realistic.
How would you define the values of this company?
Intellectual potential, staff potential, markets, buyers, and at the end, all other components that a company is comprised of.
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