.^ I Energy Community r r ' "'i'" - .,i 211,1 Energy Comm u n ity Secretariat v)f^' u'v/l K/ ' Am Hof 4, level 5, 1010 Vrenna,Austna I ;.,i-r-'',-:.-' I -lll - :":' -1--* -:1.'':^ il +43 (0)1 535 2222 li contact@energy-communrty org www.energy-communrty org Opinion 3/19 pursuant to Article 3(1) of Regulation (EC) No 714l2OOg and Article 10(6) of Directive 20091721EC - North Macedonia - Certification of MEPSO On 27 March 2019, the Energy and Water Services Regulatory Commission of the Republic of North Macedonia (hereinafter, 'ERC') notified the Energy Community Secretariat (hereinafter, "the Secretariat") of a preliminary decision (hereinafter, "the Preliminary Decision") on the certification of the joint stock company Electricity Transmission and Power Sysfem Managemenf, JSC MEPSO (hereinafter, "MEPSO"), the transmission system operator for electricity (hereinafter, "TSO"). The Preliminary Decision was adopted on27 March 2019 based on Article 75@) of the Energy Lawl and Article 5(1) of the Rulebookon Certification of an ElectricityTransmission System and NaturalGas Transmrssion System Operator.2 Pursuant to Article 10 of Directive 2009fi21EC3 (hereinafter, "the Electricity Directive") and Article 3 of Regulation (EC) No 714120094 (hereinafter, "the Electricity Regulation") the Secretariat shall examrne the notified Preliminary Decision and deliver its Opinion to ERC as to the compatibility of such a decision with Article 10(2) and Article 9 of the Electricity Directive On 16 June 2019, the Secretariat received an Opinron on the Preliminary Decision by the Energy Community Regulatory Board, as requested pursuant to Article 3(1) of the Electricity Regulatron. L The role of the State in energy undertakings in North Macedonia 1. The applicant MEPSO The electricity TSO MEPSO was initially part of the State-owned vertically integrated company for production, transmissron and distribution of electricity, Elektrostopanstvo Makedonija (hereinafter, "ESM'). ln 2004, a Law on Transformation of ESMs has been adopted, based on which the Government, representrng the company's sole shareholder in the assembly, adopted a decision 1 Offrcral Gazette of the Reoublrc of Macedonia. No. 96/18. 2 Offrcral Gazette of the Reoublrc of Macedonia. No. 146/18 3 Dtrecttve 2O09l72lEC of the European Parlrament and of the Council of 13 July 2009 concernrng common rules for the internal market in electrrcity and repealing Drrective 20O3l54lEC, as Incorporated and adapted by Decision 20111021MC- EnC of the Mrnrstenal Council of the Energy Community of 6 October 2011 a Regulation (EC) No 71412009 of the European Parliament and of the Councrl of '13 July 2009 on conditrons for access to the network for cross-border exchanges rn electrrcrty and repealng Regulatron (EC) No 122812003, as rncorporated and adapted by Decrsron 20111021MC-EnC of the Ministenal Council of the Energy Community of 6 October 2011 5 Offrcial Gazette of the Repub|c of Macedonia, No 19/04, as amended bv No 84/05 ./-'-\ Ir Energy Community Energy Commu n ity Secretari at Am Hof 4, Level 5, 1010Vrenna, Austna +43 (0)1 535 2222 conta(t@energy-communrty org www.energy-communrty org separatrng ESM on 27 September 2004.6 The following State-owned joint stock companies have been established accordingly: - ESM, active in production, distribution and supply of electricity and - MEPSO. in charge of transmission of electrioty and management of the electricity system of Macedonia Under the Law on Transformation the assets, the employees, the rights and obligations related to the activity of transmission and management of the electricity system have been transferred to MEPSO. On 24 July 2018, the Government adopted a DecisionT for transfer of MEPSO's shares from ownership of the Government to ownership of the Ministry for Transport and Communications. The shares of MEPSO have been registered on the Ministry of Transport and Communications as owner in the Macedonian Central Securities Depository on 1 August 2018. As a joint stock company, MEPSO has the following corporate bodies: - The shareholder assembly's competences include amendments of the statute, approval of annual account, financial reports and annual operations' report, decision-making on the distrrbution of the revenues or on covering of losses, appointment and dismissal of the supervisory board members, modification of the rights related to certain types of shares, appointment of a certified auditor, as well as transformation or liquidation of the company. The rights and obligations of the shareholder assembly are exercised by the Ministry of Transport and Communications as a sole shareholder of MEPSO, pursuant to the Company Laws and the Statute of the company. The Minister of Transport and Communications personally represents the Ministry in the shareholder assembly and signs the dectsions adopted by it. - The supervisory board controls and supervises the operation of the management board, and has a broad mandate wide to decide and manage the company. The supervtsory board members are appointed for four years by the shareholder assembly, i.e. by the Ministry for Transport and Communications. The supervisory board is composed of seven members, two of which are independent. The supervisory board, with majority votes of its members appoints a president of supervisory board from among its members, 6 Based on Artrcle 51 8 (4) and Article 417 paragraph (3) of the Company Law and Arttcle 4 of the Law on Transformatton of " Elektrostopanstvo Makedoniia" 7 Government Decision, No.44-6841/1 ,24 07.2018 B Offrcral Gazette of the Repubhc of Macedonra, No 2812004, as amended last ttme by No 120/18. 1 Energy Community r--\ Energy Community Secretariat Am Hof 4, Level 5, 1010Vlenna, Austna Phone +43 (0)1 s35 2222 Email contacl@energy-communrty org Web www.energy-comm unlty.0rg The Mtnistry for Transport and Communications in its capacity as sole shareholder of MEPSO, adopted on 19 October 2018 a decision dismissal the prevrous and appointing new members of the supervisory board.e - The management board is competent to adopt the annual programme and financial plan (without approval from the supervisory board up to 50.000 EUR, and above that sum subject to its approval), to appoint management persons for daily operatrons at the company, to adopt investment decisions, decisions to grant/revoke loans, and to decide on internal organisation. With prior approval by the supervisory board rt can close or transfer the company, reduce or expand the scope of operation, or establish other companies. The members of the management board are appointed by the supervisory board for four years. The management board is composed of a PresidenUGeneral Manager, the Deputy General Manager and sectors and subsidiary managers within MEPSO. The new supervisory board on 13 December 2018 appointed the new members of the management board, including the General Manager and his Deputy.10 MEPSO is a member of the European Network of Electricity Transmission Operators (ENTSO-E). 2. State activities in generation and supply of electricity and natural gas a) ELEM and TEC Negotino Based on the Government Decision of 200511 and a decision of the management board of ESM of July 2005,12 the two State-owned joint stock electricity production companies ELEM and IEC Negotino were established. ELEM owns several companies,l3 among which ELEM Irade founded in 2009, which is licensed for supply with electricity. After the separation of ELEM and TEC Negotino, ESM continued to perform the activities of electricity distribution and supply. In 2006, ESM was pnvatised. The majority of its shares (90%) is now owned by the Austrian company EVN AG.14 1Ao of the shares remain in State ownership. The joint stock company EVN Macedonia performs activitres of distribution and supply. EVN Macedonia e Appendix 33 to prelrmrnary Decision submitted to the Secretariat by ERC 10 Appendrx 33 to prelimlnary Decision submrtted to the Secretariat by ERC 11 Government Decision No 19-2626/'1 from 30 06.2005 12 Decision for Confirmatron of the Plan for Divislon of JSC ESM by Separatron and Foundrng UO No, 02-385611511 adopted by the Management Board ofJSC ESM Skopje on 04.07 2005 13 The other compantes owned by ELEM are: Company for tourrsm, catering, recreation and sport ELEM TURS SMLLC Skopje, founded n2012 to which jorned DUT Mo|ka SMLLC - Brtola and DUT Popova Shapka SMLLC - Tetovo from 1st of November 2012, Equipment and parts factory FOD SMLLC- Novaci, JSC ELEM SKOPJE, founded in 1997 and Maintenance, repair and transport factory FORT SMLLC- Oslomej, JSC ELEM SKOPJE, founded in '1996 14 ERC, Prelimrnary Decrsion, pp 11-12 .^ Ir Energy Community Energy Com m u n ity Secretariat Am Hof 1, Level 5, 1 0 I 0 V'enra, Arstria +43 (0)l 535 2222 contact@energy-communrty org www.energy-communrry 0rg owns also a company EVN Macedonia Electrani DOOEL, licensed for generation of electricity. Majority ownership is in the hands of the Austrian company EVN AG. Pursuant to Article 3(1) of the Law on Use and Disposal of the State-Owned Property and Municipal Property,l5 the State-ownership shallbe exercised by the Government unless decided differently by law. The Government thus owns 100% ol the shares in ELEM and TEC Negotino. The Government also owns the minority shares of 10% in EVIV Macedonia, The corporate governance of ELEM and IEC Negotino comprises a shareholders assembly, a supervisory board and a management Board. The members of the supervisory board are appointed by decision of the sole shareholder, the Government (signed by the Prime Minister as President of the Government, or a Deputy Prime Minister presiding the respective session), 16 while the members of the management board are appointed by the supervisory board.17 b) GAMA The gas transmission operator GA-MA has been established in June 2006 and is at 50% of the shares by the Government, and at 50o/o by the private company MAKPETROL.