'New Kosovo' Powerplant leads Kosovo into bankruptcy, while doubling the energy price
Pristina, February 14, 2019 - The next infographic from Balkan Green Foundation (BGF) and the Institute for Development Policy (INDEP) deals with the Power Purchase Agreement for the New Kosovo Power Plant contract. The agreement signed by the Government of Kosovo and Contour Global foresees that the Republic of Kosovo should pay to the company all the expenses but also the installments of the loan, interest, profit and profit tax for 20 years.
New Kosovo Power Plant has a guaranteed price of €80/MWh.
To secure selling the energy produced by New Kosovo Power Plant, the Government of Kosovo has established a public company - New Kosovo Electricity Company (NKEC), which will serve as a mediator between Contour Global and the rest of the energy market in Kosovo.
NKEC is obliged to buy 100% of the production capacity of New Kosovo Power Plant which will produce 3,370,000 MWh a year, even if the market does not demand it. That energy NKEC will sell to KEDS or someone else at a cheaper price than its cost - the average local and regional price is €50-60/MWh.
With New Kosovo Power Plant, the final price for consumers (households) is €115/MWh.
This is because:
- a) New Kosovo Power Plant produces at a price of €80/MWh
- b) KOSTT transmits at a price of €3/MWh
- c) KEDS/KESCO distribute at a price of €32/MWh
€80/MWh + €3/MWh + €32/MWh = €115/MWh
This price is approximately 50% more expensive than the current price of €60/MWh. Kosovo's Government will be forced to artificially lower the price to keep consumers satisfied. This is achieved by subsidizing the difference between the real price and the current price: €115/MWh - €60/MWh = €55/MWh.
How much will this subsidy cost us if New Kosovo Power Plant is implemented? When multiplying the annual electricity production by New Kosovo Power Plant (3,370,000 MWh) with the difference (€55/ MWh) that the Kosovo Government will have to subsidize through NKEC, it turns out that Kosovar citizens will have to pay €185 million per year or €3.7 billion for 20 years. Subsidies will come from Kosovo's budget and increased electricity tariffs in order for NKEC to honor this contract for 20 years. Subsidies of €3.7 billion for 20 years from the Kosovo budget mean less investment in infrastructure, security, economic development, education and health.
NKEC will carry out unlawful activities that hamper competition, isolate the energy market, and increase electricity tariffs for consumers to the benefit of the private investor. As such, its establishment constitutes a violation of Law no. 03/L-087 on Publicly-Owned Enterprises and bylaws related to the economic justification of the establishment of public enterprises.
With the establishment of the new NKEC company, the Kosovo Government is creating intentional and unnecessary project expenditures. The government is abusing the budget by already paying salaries to the five members of the NKEC board which was appointed on 21.05.2018. In addition, political influence seems to greatly impact the appointment of the Chief Executive Officer of NKEC. British experts and the Kosovo Government have come out with different assessments concerning the most successful candidate for this role which indicates an open tendency to politically influence the outcome in the end. (Refer to links for more information on both parties' estimates)
Balkan Green Foundation (BGF) and the Institute for Development Policy (INDEP) demand immediate withdrawal from the contract for the construction of the New Kosovo Power Plant. This project will bankrupt Kosovo economically, will prevent the liberalization and integration of the electricity market, and represents a critical blow to the environment, health, and human rights. By disrupting this harmful project, Kosovo has the ability to build a European future through the transition of energy to renewable sources, energy efficiency and an integrated and liberal market in function of price affordability and consumer protection.