Montenegro: HPPS Moraca system, what are the realistic gains for the state and investor

Published on 3. September 2014., SEE Energy News

Government of Montenegro recently adopted the proposal of the energy strategy until 2030. The revised strategy proposal is actually the added stream line of unfulfilled energy strategy until 2025. As it was stated, energy sector is the key pillar of Montenegro sustainable development. Numerous data in the strategy state that if all advantages and resources are explored economy will boost. It was calculated that production of 1Gwh of electricity from domestic sources of energy generation could lead to GDP increase for 33.000Eur.

The only problem is that all governments failed to realize any energy power generation project since three decades. The power plant Pljevlja was constructed back in 1982 and no new facility since then.

Local MNE experts rounded in NGOs and opposition party pools are saying that there is no clear approach of strategy toward energy projects. Even the strategy itself as well as its methodology is outdated. As one of the problems they see is that strategies are being developed by foreign experts and consultants without any professional or other responsibility while domestic experts are not included.

During several years there were several public hearings on which local experts gave different remarks on the strategy. NGO MANS remarks key points were is that strategy is not realistic as it projects unrealistically the investments of incredible 4.3billion euro in the energy sector until 2030.

As one of the key lacks in the strategy local pool experts are stating that the state is not managing well the direction of sustainable energy sector development. Strategy projected the construction of at least two new coal fired power plant, five big new hydro power plants and dozens of small hpps, two large wind parks, biomass power plants and gas pipeline network. This list of projects if realized would have huge impact on the environment, people and animals as well as the impact on the property of MNE citizens.

According to the strategy first large projects which may happen are hydro power plants on Moraca river. Project of Moraca HPPs is the best evaluated and documented project. What still remains to be done is the selection of appropriate offer for JV partnership and construction of the HPPs.

Tender for construction of HPP Moraca failed several times as none of the potential investors did not sent the offer for construction of the hpp with lover level solution than existing HPP Andrijevo. Ministry of economy had several talks with potential investors from China, Turkey, Italy and Azerbaijan and still not single offer arrived to Ministry.

System of hydro power plants would include 4 hpp: HPP Andrijevo, HE Raslovici, HE Milunovici and HE Zlatica. Foreseen period of construction of all four hpps is 6 years and estimated total costs would be 540MEUR.

Despite the huge investment costs most of the energy experts from the region, hydrology engineers from region of Balkans, do agree that this HPP system is the gold mine and that it would be reasonable for state to lend the financing for this investments. Key aspect is that 60km of upper Tara river is to be utilized for HPPs Moraca system. According to this projection electricity got from Moraca HPPs would be expensive without inflow of water from Tara, and electricity price would also influence the construction of lower damn on Andrijevo.

State, as the concession giver, should construct energy power generation facilities with biggest possible ownerhship. Local experts warns that state may lose if it gives all to new investor who will invest 500MEUR and return the facility after few decades of exploration. MNE Gov would get concession fee of annual less than million eur. That means that the profit will leave the country.

NGOs are announcing campaign against the construction of HPPs on Moraca river. According to the NGOs the impact on the environment would be huge in comparison with economical parameters and benefits for the state and its citizens.

NGO MANS believe that the projected profit is exaggerated. According to the gov plans the investor concessioner would get 25 years of exploration of HPPs and for that would have clear profit of almost 1 billion euro. The investments of the state would be 150MEUR. The gov is hiding risk data from seismic point of view claim from MANS.

Civil construction faculty professors already raised this question, their remarks were focused on the serious issues made in preparatory phase. The environment impact study developer did not paid attention to the seismic zones of accumulation, as well as the existing and foreseen land slide zones. In later version of planed documents, some areas were redone but still the seismic areas are underestimated. HPPS on Moraca river belong to seismic zones of VII and VIII area which means that capital of Podgorica would be jeopardized with potential earthquakes. There are already some examples of mismanagement of EPCG power company accumulation in Niksic and Zeta areas, MANS stated. The damage was covered by state and citizens and profit of EPECG went to A2A.

CEE Bankwatch recently warned Montenegro that three new planed energy projects, TPP Pljevlja second unit and HPPS on Moraca and Komarnica are too ambitious. The damns of Moraca and Komarnica are controversial due to the negative impacts on the environment.

Transferring of rights to the concessionaire for period of 25 years of exploration of new facilities seems to be the biggest problem in Montenegro public. The energy strategy projects the FDI inflow of capital in level of 2.3 billion eur and the state in level of 1.1 billion eur. One of the promoted goals of the strategy is that Montenegro becomes an electricity exporter by 2030.