According to the documents at the disposal of MANS Investigation Center, one of the conditions set out by the Czech company Skoda Praha for the construction of Unit II of the thermal power plant in Pljevlja is that the newly established company, which would be in charge of Unit II, has no right to distribute the dividend within 15 years, which is the grace period and loan repayment period. This may be one of the matters of dispute with A2A and one of the reasons why the Italian company is not willing to enter Unit II construction project.
At the end of March this year, Skoda Praha submitted this bid to Elektroprivreda Crne Gore (EPCG) and two months later it turned out to be the most suitable one. In the meantime, EPCG entered into negotiations with the Czech company in order to define final requirements regarding the development of the controversial project, but negotiations are still underway. Negotiations are stopped, as reported by the media, due to the fact that there is no guarantor for the loan which would cover the whole project.
According to MANS Investigation Center data, Skoda Praha has required fulfillment of a number of conditions regarding the construction of Unit II under the model of strategic partnership. The most important one concerns the requirement under which EPCG and the strategic partner must give consent for providing a loan guarantee.
Instead of finding a strategic partner, the government has recently announced the implementation of Unit II project by establishing a separate company in which the state and not the strategic partner, will have 51-percent ownership, whereas 49 percent will be under the ownership of EPCG. The state-owned energy company would then purchase electricity from this new company at a price determined according to the cost principle so as the new enterprise could be sustainable.
According to the estimate in the Czech company’s offer, the construction of Unit II is €338.5 million, out of which a maximum of 85 percent, or 287.7 million, would be provided through the loan of the Czech Export Bank. Grace period is three years and the repayment period is 12 years at the interest rate of 2.5 percent, plus the six-month Euribor.
The bid submitted by Skoda Praha has called for a definite business plan for Unit II of the thermal power plant for a 15-year period (including guarantees which will provide entry and exit fees and quantities), as well as a 15-year EPCG business plan. One of the demands was also to precisely define the assets of current Unit I and future Unit II and what would happen with the Unit I assets after its closure. The government has announced that Unit I will be active until 2024.
It is also emphasized in the offer that the Czech Export Bank will not allow paying dividends to the future joint company, which would be the proprietor of Unit II, until the full repayment of the loan within a 15-year period (a three-year grace period and 13 years of loan repayment).
Moreover, the Czech company pointed out that the price of €338.5 million for the Unit II construction has been based on the feasibility study and other documents provided by EPCG before submitting final bids and it reserves the right to adjust the price if necessary. The price does not include a value added tax (VAT), since the government amended the Law on Value Added Tax at the beginning of the year, thus making energy projects of strategic importance tax free.
The Czech have based the price on the exchange rate of euro and Czech koruna (one euro for 27 Czech korunas) which would be specified on the date of signing the contract. In case that between that date and the final notice the exchange rate fluctuated by more than three percent, the price would be calculated at the new exchange rate.
The working group consisting of the government representatives, representatives of EPCG and Rudnik Uglja Pljevlja (coal mine) have been negotiating with Skoda Praha behind closed doors since the beginning of June. Basic information about determining conditions for the construction of Unit II have not been provided to citizens, so it is likely to be a new cost imposed on taxpayers and an introduction into state aid to energy companies.
Although the government claims that the construction of Unit II is economically justified, they have not provided a single relevant information that would confirm such claims. What is outrageous is that the costs of health care and environment protection have not been included into overall costs of the project. Earlier analysis of MANS Investigation Center showed that total costs of the project could exceed a sum of one billion euro and that it is in contrast to the public interest and that it will considerably burden already “damaged” public funds.
Long-term Contract with Rudnik uglja Pljevlja Set Out
Skoda Praha offer shows that the company to which the management of Unit II will be entrusted will conclude a long-term contract on coal supply with the Rudnik uglja Pljevlja. Yet, the contract conditions remain unknown.
MANS Investigation Center has earlier published an analysis which shows that Rudnik uglja Pljevlja, where major shareholders are the Italian company A2A, the government and the prime minister’s brother Aco Djukanovic, could not support the implementation of Unit II project without subsidies. In this sense, recent amendments to the Energy Law, according to which coal exploitation for electricity production is of public interest, have created room for granting government subsidies.
Moreover, MANS has published that commercially viable reserves of coal in inner Pljevlja basin would be exhausted in only 20 years of Unit II operations, as long as it is constructed in accordance with the offer submitted by Skoda Praha. Unit II project has envisaged 40 years of operation of the future thermal power plant, so at one point a new coal ore deposit would be necessary at the site Maoce, dozens of kilometers away from Pljevlja, what would significantly increase the costs of the whole project.
However, at the moment, EPCG and Rudnik uglja Pljevlja are negotiating, through the direct agreement, the coal delivery for the needs of the current unit of the thermal power plant in Pljevlja. What we are dealing with here is a €40 million worth annual public procurement without any control from the competent institutions in the country. The prime minister’s brother, Aco Djukanovic, owns 11.8% of shares of Rudnik uglja Pljevlja, A2A owns 39.5%, while the government owns 31.1%.
Author: Ines Mrdovic
This text has been made with the support of the European Union within the project „Zero Tolerance to Corruption“. Network for Affirmation of Non-Governmental Sector – MANS is solely responsible for the contents of this article, and the views taken herein shall not in any case be considered as those of the European Union.
