Serbia: Major energy FDI projects and their outcome, investors seek major ownership and electricity sales management rights, the report on major energy projects in Serbia 2008/2015

9. July 2013. / News Serbia Energy

Although we talk all the time that Serbia needs new capital projects in power generation and energy sector,  i.e. new production facilities in order to provide enough quantity of electricity for population and industry, and despite potential investments announcements that are “just arriving” from the dead spot that we haven’t moved from yet.

New facility for electricity production in Serbia has not been constructed since the period of socialist Yugoslavia. Expert population warns that if some new object is not constructed soon, situation will become critical and that Serbia as country will confront acute electricity lacks. In order to prevent this, many projects are imagined and the most of them had bombastic announcements, but neither of them has entered in the beginning phase of realization yet and it would be crazy to even talk about the construction of them. That’s the reality.

Delegations of powerful foreign energy companies are often guests in Serbia, similar delegations from Serbia are going abroad periodically and letters about intentions are being exchanged and agreements for investments in new production facilities in Serbia are being made during such meetings, but we haven’t reached that actual start up yet, unfortunately. Typical example are two investments that are being announced for a long time like construction of TPP Kolubara B and TPP “Nikola Tesla” B.

Preliminary contract between Serbian power utility company EPS as power state utility company and partner in this ventures and Italian company Edison, for construction of TPP Kolubara B was announced louldy in the period of former government’s mandate while EPS CEO from Democratic Party Dragomir Markovic was at the top of EPS. That happened exactly two years ago. Edison was the only company that applied for EPS’s tender. Edison is planned to become mayor owner of Kolubara B while EPS will be minor partner with Italians who predicted that the first block will be finished for 4,6 or 4,8 years. Medias speculated that the first KWHs can be produced in 2016 in the case works begin in 2012. Considering that it has not been managed, the date when facility will launch its work is postponed in the far future. Common company for construction of Kolubara B that should be formed by Edison and EPS was speculated to be formed until the end of January 2012. It also didn’t happen. Common company for construction of Kolubara B was announced in March this year to be formed during this year was announced in March and we shall see in the following six months if this will happen. When it comes to the project of TPP “Nikola Tesla” B3 construction, this situation is even more uncertain because tender for construction of this TPP has collapsed.

However, memorandum for strategic cooperation between German Company RWE and EPS that contains a possibility for Germans to participate in construction of TENT B3, was signed in Germany in September last year. We haven’t proceeded or concretize anything since then until today.

When we consider all of this, the question raises why investors decide so hard to invest in big projects in electricity sector. Reasons search could as follows, big economy crisis is secondary factor that causes lack of big investments in electricity sector of Serbia. We should remind that crisis began in 2008 i.e. in the period before investments in electricity production sector and so there are were no big investments in electricity system of Serbia before. We are always listening from our politicians that talk about billions of EUR investments in electricity sector. However, it turned out to be only a letter on the paper. Letters about intentions, cooperation memorandums and similar documents does not represent any obligation to those who sign them. In other words, they are not guarantors for investments. Potential investors only want to stress that they will reconsider if they will invest capital and nothing else. The real reason and answer why foreign investors avoid to invest in Serbian energy is that Serbian side accepts very hard to give a mayor part to the one who gives money.

Uncertainty of foreign investors

The problem is that foreign investors are not sure if they will have equal position in sale of produced electricity. They don’t want production facilities they construct to be one time use and they won’t be comfortable with someone’s monopoly position that would bring them losses. Only when conscious in Serbia that foreign investors are interested only in equal participation on electricity market matures, possibilities for eventual capital investments will open.

Surely investors in new power generation facilities have their own strategy and interest in Serbian unexplored potentials and ready to build projects but Serbian side needs to understand the reality. And reality says that JV projects in situation like this, no actual budgets for new projects, should be managed with majority foreign ownership, otherwise no investor will risk. The investors should allocate some time in advocating their interest to Serbian stakeholders and this accomplished task may speed up all foreign JV projects in energy sector.

Source; Serbia Energy

Download as PDF :

Download PDF