Kosovo Looks For Energy Sector Investors Amid Challenges

By Muhamet Brajshori

Four consortiums are competing to land a massive energy contract in Kosovo that would allow the winning group to operate one of the country’s two main power plants, open a coal mine and build a new energy plant that officials hope will go a long way towards solving the nation’s energy problems.

The winning bid would build Kosovo’s first private, clean energy plant, between the southern Kosovo municipalities of Klina and Istog. The plant, which would have a capacity of as much as 300 megawatts, would serve the Pristina region and allow it to export power to Montenegro and Albania. Construction would begin as early as 2013.

The winning group would also take over one of Kosovo’s two state-owned coal power plants — Kosovo B — and would operate a new mine to take advantage of the country’s massive lignite reserves, which are estimated to be 14 billion tonnes.

The contract is being billed as Kosovo’s largest investment opportunity. The government concluded the first phase of the tender for the new plant on March 6th and now said it hopes to have an investor by year’s end.

“If we manage to announce the preferred bidder this year we will proceed with closing the [deal],” Economic Development Minister Besim Beqaj said.

Companies competing for the bid include Adani Power/PT Adani Global, a consortium from India and Indonesia; AES Electric Ltd/Demir Export A, a Turkish-American consortium; Park Holding, in Turkey; and PPC/ContourGlobal LLP, a constortium of Greek, British and US companies.

The World Bank will be a co-investor while the government hopes to hold some shares in Kosovo B.

Kosovo has long been plagued with energy shortages and frequent blackouts. Energy production at the local plants has been hampered by chronic technical problems, including some caused by multiple lightning strikes which have set back production.

The Kosovo A plant does not operate at full capacity and officials plan to shut it down when the new plant is built. The plants are also two of Kosovo’s worst polluters.

A culture of not paying electricity bills to the Kosovo Power Corporation (KEK) — collectable debt has reached over 400m euros — as well as widespread energy theft are exacerbating the situation.

Critics of the government’s plan to open a new private plant and to privatise Kosovo B say it faces significant challenges.

“The corruption level is very high and has a negative impact on investors’ perceptions,” Kosovo Centre for Governance and Public Policy head Arjeta Demiri told SETimes.

Energy researcher Florentina Krasniqi argued that the government should instead be promoting investment opportunities for renewable energy sources to meet EU standards.

“Kosovo needs to look forward not just to lignite, but also to meet the 20% criteria set up by the EU that the energy sector must be dependent on renewable energy. This should be an important priority — one which would easily attract investors easily,” Krasniqi told SETimes.

She mentioned the most attractive project Kosovo can offer to investors is to connect the heating system to the power plants. “It will offer a very practical solution to heating in Pristina,” she said.

Kosovo Economic Chamber expert Besnik Cecilia told SETimes that the current efforts have generated some interest.

“We see an increase in investor interest in the energy field of water resources, and also have interest in energy from urban wastes,” Cecilia said.