Serbia, Bosnia: Challenges for state owned power utilities in liberalized electricity market

, News Serbia Energy

Serbia and Bosnia are within the process of full and actual energy market liberalization. State owned power utilities which are managing power generation units in countries of West Balkans have a bourden of electricity price being considered as social category. Power utilities lack needed investment funds for modernization of its outdated power gen facilities.

Despite the ongoing process of market liberalization, actual and effective measures still did not produced business environment suitable for actual competition based market. Foreign direct investments in energy sector, electricity production with goals for regional trading and electricity exports, are existing but with a lot of challenges for investors.

The region of South-East Europe has been marked with non-cost-reflective energy price levels which, in general, cannot support new generation investments and attract foreign investors. At the same time, the responsible behaviour of consumers, in areas such as energy efficiency, has been offset by artificially low prices.

Due to the existence of cross subsidies, wholesale electricity prices are not properly coupled and transparently transferred back to the price being paid on a retail level, especially by domestic consumers.

The economic crisis, which started in 2009, has led to a more defensive financial strategy of the largest foreign investors in the region, mainly Czech, Italian and Austrian companies. Some of them are either leaving, or exploring international arbitration.

Many new conventional power plants which were announced in the region of SEE prior to 2009, have, in the meantime, been put on hold or completely cancelled. Not only the decrease in wholesale price levels, but also an uncertain regulatory framework, plays an important role in the region. Foreign companies have recently been faced with many problems, among them a sudden tax increase and withdrawal of licences. At the same time, the recession hit the energy-intensive sector across the Balkans.

Large state-owned, energy-intensive metal plants, whilst providing jobs, caused difficulties by adding to government’s debts. Although governments can point to at least one successful sale to a private company in the region, privatisations have, in several cases, ended in bankruptcy or renationalization.

In such an environment, the countries of South-East Europe are struggling to implement the European Target Model for Electricity which would allow for local generation companies to explore more opportunities on the open electricity market. , transmits