At the end of 2023, the Draft Integrated Energy and Climate Plan (INECP) of the Republic of Serbia for the period up to 2030, with projections until 2050, was adopted, a task “written” into Serbia’s arrangement with the International Monetary Fund (IMF).
This arrangement significantly dictated how the past year would unfold for the domestic energy sector and the most important company in that sector – the Electric Power Industry of Serbia (EPS). In the first half of 2023, EPS achieved a profit of up to half a billion euros, effectively offsetting the significant losses incurred over the past year and a half, but the company also lost its director responsible for the business recovery.
In order for EPS to recover, electricity prices were increased three times in a row for businesses and citizens – first on the first day of 2023, then in May by eight percent, and again in November by 9.28 percent.
Therefore, the latest IMF report on the arrangement with Serbia highlighted that, following three price increases and the recovery of production, the situation is such that it probably won’t be necessary for the budget to provide “additional liquidity” to our power utility company in 2024.
“Out of the total liquidity support provided by the state to EPS in recent years, which was recorded as fiscal expenditure, the Government has written off around 300 million euros (0.4 percent of GDP), while EPS is expected to repay around 200 million euros,” the IMF report stated.
Meanwhile, during 2023, EPS improved its operations where possible, invested in production, and revitalized plants and facilities. Additionally, the company announced a competition for a new director, attracting as many as 40 interested candidates.
They were apparently undeterred even after the dismissal of Miroslav Tomašević just before announcing the competition. Tomašević was responsible for steering EPS out of the troubles that occurred during the tenure of his predecessor, Milorad Grčić. Although the director has not been selected yet, speculation arose about seven candidates being in the final selection.
Despite a promising start, 2023 didn’t end well for EPS, which suffered a cyberattack in mid-December. As a result, they had to halt operations in certain parts of the system for electricity consumption calculation and billing, including the new portal “Uvid u račun” (Insight into the Bill), which had just been launched. The complete recovery from the consequences of that attack is still awaited.
Gas Interconnection with Bulgaria – key project in 2023
“One of the key energy projects for gas supply was completed in 2023 with the trial operation starting on December 10th. The inauguration ceremony took place in Trupale, attended by the presidents of Azerbaijan, Bulgaria, and Serbia, along with the Head of the EU Delegation in Serbia.
The construction project of the Niš-Dimitrovgrad-Bulgaria gas interconnector was financed partly through non-repayable EU funds totaling 49.6 million euros, and with a 25 million euro favorable loan from the European Investment Bank, which Serbia will repay for the section of the gas pipeline passing through its territory.
Serbia allocated 15 million euros for this project and an additional 7.5 million euros for preparatory work and design.
“The gas interconnector linking the gas networks of Serbia and Bulgaria will increase energy source diversification in Serbia and the Western Balkans region, providing Serbia with a more secure and stable supply from different gas network systems, particularly from Azerbaijan and the future LNG terminal in Alexandroupolis, Greece, which can receive gas from across the world,” highlighted the EU Delegation in Serbia on this occasion.”
Minister of Mining and Energy, Dubravka Đedović Handanović, stated at the beginning of December that gas deliveries from Azerbaijan to Serbia were secured for up to 400 million cubic meters by the end of the following year.
“We expect to triple the gas quantities from this country starting in 2027, making Azerbaijan an important gas supplier and a long-term partner for Serbia. We will become a transit country for Azerbaijani gas, as demand for it in Europe is significantly increasing,” added the minister. During those days, the topic in the domestic media was how much the Azerbaijani gas would actually cost.
Let’s not forget that the price of gas increased three times by 10 percent each in 2023, in line with the schedule agreed upon with the IMF.
What happened with the other energy projects?
Another extremely important and valuable project is the construction of Block B3 of the Kostolac Thermal Power Plant, a project worth 700 million euros. The funds for this project have been secured for quite some time. Although the construction contract with the Chinese company CMEC was signed back in 2013, the actual work didn’t commence until 2017.
In August 2023, EPS announced a tender for acquiring an integrated permit for that block. Although it was announced several times that successful tests and trials were underway, there is currently no information available regarding the official launch date.
Throughout the past year, EPS put the last revitalized unit of the Djerdap 1 hydroelectric power plant into operation. Additionally, strategic partners were selected in a tender for the construction of self-balancing solar power plants worth 1.4 billion euros under the “turnkey” system. The Serbian government opted for a joint bid from the group of bidders, Hyundai Engineering Co. LTD, Hyundai Eng. America Inc., and UGT Renewables LLC, as published in the Official Gazette on October 27.
The first auctions for “green premiums”
“We have initiated auctions for the allocation of market premiums for 450 megawatts from renewable sources. These are the largest auctions simultaneously conducted in the Western Balkans region. We are conducting them in line with the best global practices and transitioning to market premiums, enabling better cost management,” stated Minister Đedović Handanović in mid-June, symbolically marking the beginning of the procedure, which concluded in August with the selection of the most successful projects.
Meanwhile, the advisor to the minister, Rade Mrdak, told Biznis.rs that the ministry believes they offered a stimulating price at the auctions. The maximum offered price for wind farms in the market premium system is 105 euros per megawatt-hour, and for solar power plants, it is 90 euros per MWh.
“We believe that investors can comfortably go below the maximum price. On the other hand, they will have a limited quota, so the best ones will fill it. We think that strong competition compared to the number of ready projects and the allocated quota will motivate them to go far below 105 euros for wind farms, while for solar, we are testing the market,” Mrdak stated for Biznis.rs.
Ultimately, support through premiums was secured for four wind farm projects: Vetrozelena near Pančevo, Pupin in Kovačica, Čibuk 2 in Kovin, and Crni Vrh near Bor. Quotas for premium production were also obtained by three solar power plants: Novo Selo Power, Hiperion Sol, and Terra Solar.
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