Montenegro: A2A remains stakeholder in power utility EPCG

, SEE Energy News

According to unofficial sources, year-long negotiations between the Montenegrin Government and the Italian company A2A regarding the management of Montenegrin power utility EPCG have been successfully completed. The epilogue is that A2A will remain in EPCG and the second unit at thermal power plant Pljevlja will be built.

A2A will remain in EPCG for another five years and that will not in any way endanger the project for the construction of second unit at TPP Pljevlja. An integral part of the new agreement will be the option in which the Italians, under certain circumstances, could leave EPCG and sell its stake to Montenegrin Government for 250 million euros, payable in seven annual installments. This option could be activated under certain circumstances, such as inputs from external markets, extremely bad weather or droughts. According to unofficial sources, A2A waived its right for arbitration in case of termination of the contract due to this option. The draft agreement should now be approved by the Government, followed by the signing of a new long-term agreement on the management of EPCG with A2A.

However, the biggest stumbling stone in these negotiations was the construction of second unit at TPP Pljevlja. Last year, the Government selected the offer of Czech company Skoda Praha as the best on public tender for the construction of the second unit at TPP Pljevlja. Skoda Praha offered to build 254 MW unit for 338.5 million euros, and to secure a loan for 85 % of the required investment. The loan for the construction will be provided by the Czech Exim Bank, which previously argued that special purpose vehicle (SPV) company established by the Montenegrin Government and A2A was not good enough guarantee for such large investment and insisted that the guarantee for the loan should be either the Montenegrin Government or the power utility EPCG. In April, EPCG agreed to issue a corporate guarantee for the project.

A2A currently holds 41.7 % stake in EPCG, while Montenegrin Government owns 57 % of the share capital. In 2009, the company paid 435 million euros for its stake in EPCG, transmits