Croatian state-owned power utility HEP and its Serbian peer EPS are eyeing acquisitions abroad and Montenegrin energy firm EPCG is seen as a possible target, Zagreb-based news daily Vecernji List reported.
The Montenegrin government is the majority owner of EPCG with a 57% stake while Italian company A2A owns 41.75%.
According to the Vecernji List report published on Monday, the Italian partner is looking to exit EPCG.
Earlier this month, the Montenegrin government and A2A reached an interim agreement that will allow the Italian partner to continue managing EPCG in the following three months.
The move came after the five-year management agreement between the government and A2A expired on April 1. The interim arrangement, which is not an extension of the previous deal, aims to create a further negotiating framework for the conclusion of a new pact between the two partners as well as to ensure there is no interruption of the activities necessary for the completion of the second unit at EPCG-operated thermal power plant Pljevlja, which is the most important condition for the continuation of the cooperation with A2A.
In 2009, A2A signed a deal to acquire a minority stake in EPCG from the Montenegrin government while taking on a significant role in its management.
HEP has not started any acquisition negotiations but has interests in this respect in general, Vecernji List reported, quoting an unnamed government official familiar with the matter.
According to the news daily, HEP is also interested in investing in hydro power in Bosnia as well as in several companies in Serbia, Slovenia and Bosnia that would allow it to enter power distribution.
The daily quoted Serbian prime minister Aleksandar Vucic as saying that the government would not want to privatize EPS but to "broaden our impact" and that talks have been held in Montenegro and Bosnia.
In March, the Croatian economy ministry told SeeNews that the government will consider an option for an IPO of up to 25% of HEP, subject to market conditions, and that the proceeds from the IPO would be used to strengthen HEP's position on the local as well as on foreign markets, especially in the region.
Croatian media has quoted economy minister Ivan Vrdoljak as saying that HEP should be eyeing acquisitions in Slovenia, Bosnia, Montenegro, Hungary and Italy and that this expansion opportunity will exist only for one or two more years.
EPCG, which plans to raise output to 3,159 GWh this year from 3,036 GWh in 2014, operates around 870 MW of installed generation capacity. Its net profit rose 38% to 34.7 million euro ($37.8 million) in 2014.
HEP group owns and operates over 4,000 MW of installed generation capacity and 974 MW of heat production capacity, including 25 hydroelectric plants and eight thermal power plants fired by oil, natural gas or coal.
The total net output capacity of the EPS power generation facilities added up to 7,124 MW at the end of 2014.