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INVESTMENT OPTIONS IN THE ENERGY COMMUNITY

ELECTRICITY INFRASTRUCTURE
- PROJECTS OF REGIONAL PRIORITY

15TH Athens Forum


25 26 November 2009

Energy Community Secretariat


www.energy-community.org

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

CONTENT

INTRODUCTION

INVESTMENT OUTLOOK 2008 - 2009

THE TREATY AS A FRAMEWORK

PROGRESS UPDATE

THE CHALLENGE

CONCLUSIONS

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

INTRODUCTION
THE ENERGY POLICY IN EUROPE

Three common objectives:


sustainability
security of supply
competitiveness

One answer:

A real Internal Energy Market

European Community has identified the requirements for


achieving this:

Unbundling
Effective regulation
Transparency
Infrastructure
Network security
Adequacy of electricity generation and gas supply capacity
Energy as a public service

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

INTRODUCTION
THE ENERGY POLICY IN SOUTH EAST EUROPE

The same objectives as in the EC, but more stringent

One solution:

A common framework for regional energy market

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

INVESTMENTS OUTLOOK 2008-2009


Effects of the financial and economic crisis

Energy investments in most regions and sectors are expected to drop sharply
in 2009, mostly in the OECD countries.

The financing environment is getting tougher, the final demand for energy is
weakening and the cash flows are falling.

Both supply and demand side investments are being affected.

The energy supply infrastructure is being affected in three ways by the


financial and economic crisis:

Tighter credits; energy companies find it more difficult to obtain credit for
both on-going operations and new projects; in some cases, the cost of
capital has risen in absolute terms, making marginal investments
uneconomic;

Lower profitability of new power generation investments

Less need for capacity, with the falling demand for energy caused by
economic downturn.

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

INVESTMENTS OUTLOOK 2008-2009


The GDP growth and energy demand forecast

Electricity consumption across the Energy Community has varied widely, in


some cases indicating sharp decline during the past year on the year to year
comparison

15.0
10.0

BiH - RS
Albania

5.0

Serbia

[%]

0.0
Croatia

-5.0
-10.0

BiH - FBiH

-15.0
-20.0

Former
Yugoslav
Republic of
Macedonia

Montenegro

-25.0
Change in electricity consum ption in the Energy Com m unity [Feb. 2009 / Feb. 2008]
(source: Platts in SEE, 31 July 2009)

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

INVESTMENTS OUTLOOK 2008-2009


The GDP growth and energy demand forecast

Projected electricity consumption growth is set to moderate values by each


of the Contracting Parties

Projected average consumption growht for the Region set for 2009 is 2.33%

[%]

5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0

Albania
[ - 2020]

BiH
[ - 2020]

-3.0
-4.0
-5.0

Croatia
[ - 2012]

Former
Yugoslav
Republic of
Macedonia
[ - 2020]

Montenegro

Serbia
[ - 2015]

UNMIK
[ - 2018]

Projected annual electricity consum ption grow th


(source: Security of Supply Statements, July 2009)

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

THE ENERGY COMMUNITY A REGIONAL APPROACH


BENEFITS:
Economies of scale in energy investments and operations
Larger (regional) energy market for suppliers
Compatible rules and institutions with the European Union
Implementation of a harmonised legislative framework including:
9 Market rules
9 Third party access to networks
9 New infrastructure authorisation and licensing procedures
9 Mutual Recognition of licenses
9 Adoption of Generally Applicable Standards
9 Application of common Safeguard Measures, etc.

Better conditions for stability and mutual assistance


Dispute settlement procedure
15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

PROGRESS UPDATE transmission lines


New investments in transmission infrastructure
UKR
SK
(source: SECI TSP Review, May 2008)

HU

Heviz

AT

Bekesaba

MD

Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica

Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

PROGRESS UPDATE transmission lines


New OHL 400 kV interconnection Tirana (AL) Podgorica
(CG)
UKR
SK

Construction progressing on both sides


- expected to be commissioned by mid 2010
HU

Heviz

AT

Bekesaba

MD

Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

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PROGRESS UPDATE transmission lines


New 400kV transmission line Tirana Elbasan (AL) UKR
SK

- Construction progressing
- expected to be commissioned by April 2010
HU

Heviz

AT

Bekesaba

MD

Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

11

PROGRESS UPDATE transmission lines


New OHL (2) 400 kV interconnection Ernestinovo (CR)
UKR Pecs (H)
SK

- Near completion, expected to be commissioned by June 2010


HU

Heviz

AT

Bekesaba

MD

Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

12

PROGRESS UPDATE transmission lines


New OHL 400 kV interconnection Tirana 2 (AL) - TPP
Kosovo B
UKR
SK

- MoU between TSOs signed in 2008, financial agreement with KfW signed
- construction expected to start in 2010 and finish 2012
HU

Heviz

AT

Bekesaba

MD

Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

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PROGRESS UPDATE transmission lines


New OHL 400 kV interconnection
SK
former Yugoslav Republic of Macedonia - Serbia

UKR

- Serbia completed construction of part I and II (Nish Leskovac),


- Former Yugoslav Republic
Heviz of Macedonia - the EIA study is under way and
HU
Bekesaba
AT
MD
financing agreement with the WB is closed
Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

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PROGRESS UPDATE transmission lines


New HVDC submarine interconnection Croatia ItalyUKR
SK

- Common feasibility study is under preparation by HEP-OPS and TERNA


HU

Heviz

AT

Bekesaba

MD

Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

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PROGRESS UPDATE transmission lines


New HVDC submarine interconnection Montenegro UKR
Italy
SK

- Feasibility study is completed in 2008 and project was accepted.


- Draft agreement for construction between TERNA S.p.A and Prenos AD
has been initialed
Heviz
HU

AT

Bekesaba

MD

Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

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PROGRESS UPDATE transmission lines


New OHL 400 kV interconnection Serbia - Romania
SK

UKR

- Feasibility study is finalized, other studies are under way


HU

Heviz

AT

Bekesaba

MD

Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

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PROGRESS UPDATE transmission lines


OHL 400 kV interconnection Sombor (RS) Pecs (H) UKR
SK

- In 2008 listed for technical assistanceunder IPF however with insufficient


political support
HU

Heviz

AT

Bekesaba

MD

Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

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PROGRESS UPDATE transmission lines


Interconnection
UKR
SK
former Yugoslav Republic of Macedonia Albania - Italy
- 2 part line [OHL 400 kV Bitola Elbasan]
[HVDC submarine
line
Heviz
HU Albania Italy]
AT

Bekesaba

-the feasibility study is under revision


(MEPSO) due to the decision for
Pecs
Udine
Nadab
development
of the interconnection Montenegro
- Italy
Cirkovce
SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

MD

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

19

PROGRESS UPDATE transmission lines


OHL 400 kV interconnection Skopje Kosovo B

UKR

SK

- old (decommissioned) 220 kV line to be refurbished to 400 kV interconnection


- under consideration by the TSOs
HU

Heviz

AT

Bekesaba

MD

Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila
to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

AL

Recently completed or
Under construction

Florina

GR

Candidate projects
to Italy

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

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PROGRESS UPDATE transmission lines


Transmission infrastructure development
UKR
SK

- status as of November 2009

HU

Heviz

AT

Bekesaba

MD

Pecs
Udine

Nadab

Cirkovce

SI
IT

Zerjavinec

Okroglo

RO

Sombor
Timisoara

Novi Sad

HR

Ernestinovo
S.Mitrovica

Constanta

Ugljevik

BA

RS

Konjsko

Nis

to Italy

ME

to Pasakoy
(TR)

BG

Kosovo B

Podgorica
Chervena
Mogila

In operation
Under construction
Completed preparation

to Italy

Skopje
Tirana

to Italy

Maritsa
East I

Durres

Bitola

MK

Stip
N. Santa

TR
Babaeski

Elbasan

Advanced preparation

AL

Florina

To be reconsidered
Candidate projects

15th Athens Forum, 25 26 November 2009

GR
to Italy

Energy Community Secretariat Investment options in the Energy Community

21

PROGRESS UPDATE power generation


Investment planning in power generation scenario
source: SECI - GIS Update - EIHP / EKC (USAID), November 2007

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

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PROGRESS UPDATE power generation


Investment planning in power generation - scenario
source: SECI GIS Update - EIHP / EKC (USAID), November 2007

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

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PROGRESS UPDATE power generation


Investment projects currently advancing in implementation
status as of November 2009

Petrol / gas fired CC TPP [97 MW] Vlore (Albania)


-

commissioned in 2009 and operated at partial capacity (2530 MW)


expected to be fully operational by 2010

HPP on Drin River watershed, [50-80 MW] Ashta (Albania)


-

BOT concession attributed to Consortium of Austria (Verbund and EVN) in


September 2008, mechanical equipment contracted in September 2009 expected to be operational in 2012

HPP storage cascade [up to 340 MW] on Devoli river (Albania)


-

BOT tender awarded to Joint Venture EVN / Statkraft in January 2008 construction expected to start late 2010.

15th Athens Forum, 25 26 November 2009

Energy Community Secretariat Investment options in the Energy Community

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PROGRESS UPDATE power generation


Investment projects currently under reconsideration
status as of November 2009

Lignite fired TPP [2000 MW] Kosovo C staged-out as


TPP [2 x 500 MW] New Kosovo (UNMIK)
-

In October 2009 the Ministry of Energy and Mining announced decision to


build 2x500 MW TPP with a first stage of 500 MW EIA prepared,
negotiations with the investor are expected to be closed in 2010

HPP [450 MW] Buk Bijela on Drina river redefined to a reduced


capacity [150 MW] HPP Gornja Drina (BiH)
-

In October the utilities EP RS (Bosnia and Herzegovina) and EPS (Serbia)


decided to reduce the capacity of the HPP project Buk Bijela [450 MW] on the
river Drina and define a new HPP project Gornja Drina [150 MW] feasibility
study is under way

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Energy Community Secretariat Investment options in the Energy Community

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KEY CHALLENGES

Uncertainty of the greenhouse gas emissions treatment

Additional alignment of legislation including concession law, water


law (for hydro power plants) and support schemes/incentives to
stimulate renewables

Project documentation: quality and up to date issues

Procurement costs and lead times are much higher

Access to cross border transmission is still a barrier in investments


(CAO is advancing, but still too slowly)

Prices and tariffs are too low and do not reflect costs

Unbundling is not effective and becomes a barrier in private


investments

Market reform is too long work in progress

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Energy Community Secretariat Investment options in the Energy Community

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CONCLUSIONS (1)

The progress with investments has been slowed down by the financial

and economic crisis


Many investment priorities announced by companies and
governments, but limited capacity (both financial and administrative)
constrain the achievements in a timely manner
Long delays in announcing tenders and selecting the investors; in
many instances, decisions are reversed and projects re-tendered,
Projects costs were significantly shifted upwards after the feasibility
studies were updated
Turn key contracts are currently difficult to secure given the many
uncertainties

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CONCLUSIONS (2)

Equipment contracting becomes more problematic; prior to the crisis,


prices went significantly up and so did lead time for manufacturing energy
technologies
Tender documentation is in many cases not sufficiently well prepared,
There are concerns about the natural resources availability in case of
hydro power plants, where water is also use for irrigation purposes
Concession or association terms are often unclear this concern may
be the case for often very low number of expressions of interest from the
leading investors in the region
The markets remain small and fragmented and the investment decisions
are still influenced by the energy nationalism;

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THANK YOU

Simon Uzunov
www.energy-community.org

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