Wind park construction totaling EUR 450 delayed - Lack of funds, banks dissatisfied with model of Contract on electricity purchase

(Photo: ge.com)

The construction of the first wind park in Serbia has been postponed again. This time the reason is the model of the Contract on electricity purchase from renewable sources which the Ministry of Energy adopted in July and which does not satisfy the investors. Namely, as investors claim, the problem is that the banks cannot provide a loan and risk from EUR 50 to 200 mil per project based on the current document model.

- In May and June, a couple of investors, members of the Serbian Association for Wind Energy (SEWEA), was already nearing the process of construction permit obtaining to an end and there were no trouble spots in starting the wind parks construction late this year or early next year. However, in July, the Ministry adopted a model of the Contract on electricity purchase in a form which is not acceptable for banks which means the investors cannot close funding of their projects. These projects are funded with 30% of own capital while 70% is financed from the loan which international financial institutions and commercial banks provide. If banks claim they cannot provide a loan on the basis of this Contract adopted by the Ministry, we cannot build - SEWEA says for eKapija.

Although after the adoption of the Regulation governing preferential electricity producers, the investors have been announcing the start of the first wind park construction by the end of 2013, SEWEA says that all investors are far from the beginning of the construction.

- We have completed our part of work to a great extent, we have construction permits and we are ready to step into the construction the moment the banks are ready. Up till now, investors which make SEWEA have invested nearly EUR 20 mil so far in Serbia but this is the moment all investments are halted until the solution for the Contract on the electricity purchase is found– SEWEA point out.

On the other hand, the Ministry of Energy claims that they provided all regulatory and institutional prerequisites for implementation of investments in renewable energy sources.

- The implementation of a couple of wind park projects is in progress. One of smaller capacity which has already been built, temporary status has been provided for six wind parks and 11 of them have valid energy permit. The limit was set to 500 megawatts so there will be competition in the speed and the quality of project implementation – the Ministry says.

Distrust of investor

In the Serbian Association for Wind Energy they mention that stability and predictability are two key factors which the energy sector in Serbia lacks.

Investors point out they often face with unexpected and important changes of business environment which result in deterioration of investment terms.

- We are listening about the announcements of new amendments of the Law on Energetics which means that within only eight months, one of the key, strategically important laws such as the Law on Energetics, will change two times. The deadline for our construction was changed from three to two years in December 2012 and after that, if we have not completed the construction of the first electric power plant and connected to the network, we are loosing temporary status of a preferential electricity producer, banking guarantee totaling 2% of the overall investment (which are millions of euros) and a place in the limited rate of 500 megawatts, i.e. we are loosing an overall investment - SEWEA claims.

The Association says that in July the Ministry of Energy and Elektromreza Srbije (EMS) informed SEWEA that EMS will be responsible for the construction of connection i.e. of connection distance pipelines.

- This means we absolutely do not have control over expenses we are paying for or time frame for the completion of connection distant pipeline construction and that it can easily happen that the entire investment fails because EMS did not succeed in constructing it on time – SEWEA points out.

CWP joins forces with General Electric

American Continental Wind Partners announced that by late 2013 it will start the construction of wind park at Kovin, an investment totaling EUR 450 mil. However, the investment has been postponed until issues with respect to model of the Contract on electricity purchase and connection construction.

As eKapija finds out, CWP started cooperation with General Electric (GE) with respect to wind park of 300 MW.

- CWP has a construction permit for wind park and a strong consortium for the construction has been set up with General Electric. For CWP it is especially important that this investment will bring the company such as GE to Serbia and we have great expectations when it comes to our cooperation with them. Together with GE, it represents one of the biggest American-German investments in Serbia. Still, as well as with other serious investors, CWP cannot start the construction until the Ministry finishes its part of jobs–Ana Brnabic, Sales Manager of Continental Wind Partners says for eKapija.

EPS is building wind park in Kostolac 2017

The Electric Power Industry of Serbia (EPS) has announced the construction of wind park in Kostolac in 2013. We asked the public company whether the project is still attractive.

- These days we should sign the contract with a consultant for previous feasibility study with the main design which should be finished and revised by mid 2014. After that, a preliminary design with a feasibility study would be ordered. Both steps are essential for the legislation in this field and EPS procedures. The power should total some 30 megawatts and the annual production should total some 93 million kilowatt-hours. KfW bank is interested in funding the project and EPS supported it – EPS said for eKapija.

The construction start was moved for early 2017 and completion in late 2017 or early 2018.

EPS claims that they are planning independent exploration of new, potential locations, they are also considering potential mutual investments and they are expecting more specific agreements with partners by late 2013.

Suzana Obradovic