Montenegro energy security report: Chinese consortium submitted 275MEUR worth offer for the 220MW second TPP unit, owners will sell their electricity to local and regional market

4. March 2013. / SEE Energy News

Chinese Companies Consortium delivered to Elektroprivreda of Montenegro EPCG an attractive offer for construction of the second block of TPP Pljevlja, 220 MW strong. The value of the project amounts 275 million EUR and it is mostly in accordance with design project and Feasibility Study made for EPCG’s needs.

According to details of Chinese offer, this construction should last 50 months and plant should produce about 1,3 billion kilowatt-hours.  Output price will be 42 EUR what is more affordable than the first block was at the moment for 50 EUR per megawatt-hour approximately. The money for the project will come from Chinese fond for investments in South East Europe where the Chinese have provided 10 billion EUR so far.

The second block should be constructed according to “turnkey” system and Chinese will get lon-term contract for electricity delivery at guaranteed price by EPCG. The first block had been constructed according to “turnkey” system three decades ago and it is considered that the Chinese have directed the projects since the beginning until launching the second block. Chinese offer is mostly in accordance with ideological project and justification study that was made for EPCG’s needs by Slovenian Consortium.

Connection of Rudnik and TPP Pljevlja is the condition for investments: Precondition to this big investment is connection of the coal mine and TPP Pljevlja in one organization unit that will provide long-term electricity supply and production continuum.

Idea of connection of mine and plant is not anything new, it doesn’t represent some difference from international standards: all coal mines in the region do business within TPPs and mixed corporation it these capacities are similar like those in TPP Pljevlja and Rudnik. These two companies should be one technological unit because of their business on free market in the first place.

Government is deeply aware of this fact, so they will accelerate the connection process in accordance with positive orders.
Lex specialis is required for project acceleration: Some legal interventions will be required before project start up. State should define a special law (so called lex specialis) according to international practice with reference to European standards that will follow this project and other investments in the following period.

Chinese companies do international business within national contracts which means that Government and Parliament should declare about agreement. If the Chinese offer is accepted, a tender for construction of second block won’t be announced, it would be a form of agreement between two governments.

Construction of second block will respect ecological standards: Chinese study with technical, ecological and investment documentation for second block respects a set of goals for new block’s construction, 220 MW strong.

-Study absolutely respects a set of goals for Government- it provides electricity independence of the state, it eliminates current electricity deficit, improves safety of supply, as well as stability and sustainability of Montenegrin Electricity System, it was said in Montenegrin Government.

Lower coal price is required: One of the conditions for project profitability is decrease of current coal price for around 10 percent. On contrary, energy from TPP Pljevlja wouldn’t be competitive while Rudnik’s competitiveness would be problematic on free market also. Therefore, the usual practice is that these objects should become one technological unit because the project is sensitive on a sale price of electricity and purchase price of coal.

Construction of second block provides change for existing block which will be out of operation until 2025. According to Chinese plans, the construction of new energy object will be finished for 50 months.

25% of associated infrastructure for both blocks is constructed and this contributes the project a lot. New block is spatially set so it can be technologically connected to existing technological and infrastructure objects.

Three decades without new electricity source: Montenegro lacks around 30% of total electricity consumption and exactly this electricity lack crucially motivated the Chinese to invest in this project, as well as announced construction of underwater cable towards Italy.

That’s not all. Electricity import turned out to be the biggest energy problem, not only in Montenegro, in region also- electricity deficit is mostly followed by energy price increase at international market. Montenegro will finally have harmonized electricity system that would guarantee power supply to all consumers after the construction of second block. The town Pljevlja will also have large benefits except for state because several hundreds of mines will be hired within repro-chain with Rudnik.

On the other side, Chinese investment will have political repercussions also. The letter about intentions for second block construction had been sent from Czech and Slovakian companies what practically means than construction of second block is completely certain. The Government of Montenegro will have to make decision that won’t be so easy: is it better to accept attractive offer from China or wait for competitive offers to arrive from Czech and Slovakia EU countries?

Source Serbia Energy SEE Desk

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