Serbia, What are the consequences of the energy crisis

, News Serbia Energy

An important part of the budget for 2023 is represented by expenses for covering the losses of companies in the energy sector. This primarily refers to Elektroprivreda Srbije and Srbijagas.

In the analysis of the budget proposal for 2023, the Fiscal Council estimated that EPS losses in 2022 could reach 850 to 900 million euros, after a loss of 680 million euros was recorded in the first three quarters.

In the last quarter of this year, a loss is expected, but less than in previous quarters.

On the one hand, the consumption of electricity has been increasing for the last three months, but the reduction of losses will be affected by an eight percent price increase for the population in September and from 75 to 95 euros per megawatt hour for the economy.
Thanks to this and the increase in electricity prices since January, the loss of EPS could be reduced to 300 million in the next year.

In the analysis of the effects of the energy sector on the budget, the Fiscal Council notes that it is difficult to assess the factors that affect the result in the next year, such as the price of imported electricity, weather conditions, coal quality…

The increase in the price of electricity in 2023 compared to 2022 will amount to more than 20 percent, the Fiscal Council estimated.

They pointed out that the increase in the price of electricity in September amounted to a total of about 11 percent, plus eight percent since January, while the price for the economy jumped from 75 to 95 euros per megawatt hour.

“The increase in the price of electricity will significantly reduce EPS losses in 2023, but also provide funds for investments in the medium term – which is why it is justified.” “Although the fundamental reason for EPS losses in 2021 and 2022 was not low prices, but poor management that led to the collapse of domestic production,” the Fiscal Council assessed.

According to their analysis, the priority for EPS is to open a new coal mine in order to secure its own quality coal.

They also state that the execution of EPS investment plans has been delayed for more than a decade in both electricity generation and coal mining.

“Late realization of investments in 2022, which may jeopardize the opening of the new mine in the planned period. Just like in previous years, investments in 2022 are executed more slowly. It was planned that EPS would invest 80 billion dinars in 2022, however, in the first nine months of the year, only a little over 30 billion dinars were realized, which makes up 70 percent of the plan for that period,” the Council warns that this could lead to further delays opening of coal mines.

The Council warns that the EPS reform must not be reduced to price increases. “For EPS, 2023 is a turning point, when decisive steps must be taken to restore production. The sooner this happens, EPS will be able to start making a solid profit by selling electricity at higher prices, and thereby provide funds for the investments that are necessary. Namely, EPS’s new sales prices have the potential to create 500 to 600 million euros of profit per year,” concludes the Fiscal Council, which believes that EPS could become profitable in 2024. As they add, these companies have about 10 percent of their employees in excess of about 20,000 employees.

Turbulence in the natural gas market began in mid-2021.

Since the end of 2021, Srbijagas has been recording huge losses, and the budget support for this company so far has reached as much as 1.3 billion euros.

For the import of gas, the state gave Srbijagas 300 million euros in December 2021, and 200 million euros in January.

Then, in March, it gave a guarantee for a loan of 200 million euros, and the Fiscal Council estimates that in June and July, the state paid another 600 million euros to fill gas storage facilities in Banatski Dvor and Hungary.

According to the Council’s assessment, this 1.3 billion euros is by far the largest cost of the state in connection with the management of the energy crisis so far.

The main reason for the loss is the too low retail price of gas, which is determined by the Government, not the company itself.

The contracted price of gas with Russia was increased from 250 to 400 dollars per 1,000 cubic meters, but in this way about two thirds of consumption was covered, while the rest was bought on the market for 500 to 550 euros per 1,000 cubic meters. On the other hand, the state kept the price for domestic consumers frozen at 300 to 350 euros per thousand cubic meters.

At the same time, other European countries mainly helped energy-dangerous customers.

The assessment of the Fiscal Council is that next year the state could continue subsidizing Srbijagas with 400 to 500 million euros after two price increases of a total of 20 percent, Danas writes.