MANS warns that the state has little benefit from the private hydropower plants
The benefit of the state and local communities from the construction of small hydropower plants (SHPPs) is negligible compared to the huge profits of private investors, which is best illustrated by the example of the company “Hidroenergija Montenegro” from Berane, which has built six hydropower plants in the area of that municipality.
According to data of the MANS Investigative Centre, from the sale of electricity from these power plants, “Hidroenergija” has earned €7.1 million in the past four years, of which the subsidies of citizens and businesses amount to as much as 3.8 million, which is more than half. The amount of subsidies at the beginning of each year is determined by the Government, and they are shown at the consumer’s bills as a special fee for electricity produced from renewable energy sources.
On the other hand, in the same period – from 2013 to the end of 2017 – ” Hidroenergija” spent 16 times less money for concessions and income tax compared to the revenue that it acquired by selling the electricity. Thus, the cost of the concession was 375 thousand, and the income tax was €58 thousand. At the end of 2017, it employed 4 people.
Berane-based company is now owned by businessman Ranko Radović from Podgorica, who has 60% of the shares, and Podgorica-based company “Hemera Capital”, which owns remaining 40%. The owner of “Hemera” is Oleg Obradović, a controversial businessman, against whom the Special State Prosecutor’s Office has recently filed an indictment for abuse of business in the “Telekom” affair.
Back in September 2008, the Ministry of Economy concluded two concession contracts with “Hidroenergija”, which won the right to build 13 SHPPs on rivers Bistrica and Šekularska in Berane. Obradovic’s “Hemera Capital” was then the majority owner of “Hidroenergija”.
Power plants were to be built by the end of 2011, after which the period of their exploitation would begin in the next 27 years, while in return, the investor will pay a concession fee of 4% and 5% of the total electricity production annually, and allocate a fee of 0.5 % for the Municipality of Berane.
State business used for the construction of small HPPs
In first years, “Hidroenergija Montenegro” was late with the construction of SHPPs, and the start of the implementation of the investment is related to entering of Bemax into its ownership structure at the end of 2011, when it bought 60% of the shares, while the current owner Ranko Radović was then appointed Executive Director.
In June 2012, the first building permit for the construction of the first SHPP was obtained, and already in August, “Bemax” participated in the tender for the state business of reconstruction of the Berane-Lubnica road section, which later installed the SHPP pipeline, while the entire business was marked by a series of controversies.
Namely, “Bemax” appeared on the tender as an independent bidder and announced that as a subcontractor it would hire the Podgorica company “Arso Milić”. For the reconstruction of the road it offered the price of €2.9 million, and the Traffic Directorate assigned it the job in October of the same year.
However, the decision was soon annulled by the State Commission for the Control of Public Procurement Procedures, which found that Bemax as a sole bidder had to have a license for plumbing and hydro-technical work. This license had its subcontractor “Arso Milić”.
The Traffic Directorate then annuls the tender and announces the new one at the end of the same year, and already at the beginning of 2013, Bemax gets the job again. At the new tender it appeared in a joint consortium with “Arso Milić”, which again secured the necessary license. However, “Bemax” increased the job price by as much as two million Euros at the new tender, i.e. to €4.9 million.
The reasons for this increase in prices are not known, and the Traffic Directorate did not annul the tender, although it had a legal possibility for this. Moreover, over the next two years, the value of the contract for the reconstruction of Berane-Lubnica road was increased by annexes for €1.5 million, based on contingencies and subsequent works.
According to official data, “Bemax” installed the water pipes for SHPs into the hull of that road, but it was never announced for how much this state business reduced its actual costs for the construction of power plants in Berane. In any case, reconstruction of the road was an excuse for “Hidroenergija” to write off one of the annexes to the concession contract, which requested the extension of the deadlines for the construction of the SHPP.
Those contracts alone guaranteed “Hidroenergija” connection to the distribution network and purchase of electricity, and in the meantime it built six SHPPs, for which it gained the status of a privileged producer. This status, in which it has the right to subsidies, lasts for a full 12 years, and in the remaining term of the concession, electricity will be sold at market prices.
According to data of the MANS Investigative Centre, concession contracts have been changed twice and extended the deadlines for construction, as well as individual provisions that make the position of “Hidroenergija” easier, to the detriment of consumers and the public interest.
Thus, the basic contract stipulates that the Government may deny the concession if there is a change in the water regime on the watercourse or in the electricity market, but the words “electricity market” are subsequently deleted. This practically means that during the period of the concession for almost three decades, the government guaranteed production to the investor, regardless of the conditions in the energy market.
“Hidroenergija” finished the construction of the first SHPP in Berane in 2013, by the beginning of 2015 it had four more, and in 2016 another one. The money for construction was provided by the Investment Development Fund, which granted it five million Euros of favorable loans a few years prior to it, as well as loans from the Podgorica-based company Bemax, which also built power plants.
The latest data from the Registry of Pledge reveals that at the end of the last year, “Hidroenergija” loaned all six SHPPs at Prva banka and Zapad banka. The value of the loaned SHPs is €18.4 million.
If it is known that in just 4 years from the sale of electricity from six SHPPs, €7.1 million has been received, and if assumed that the electricity price and the amount of subsidies will not be lower, but will only grow, it can be realistically estimated that the investment will be repaid in the next few years, and in the remaining concession period the investor will receive a net profit.
And while in this way private investors can “rub their hands” and be happy, SHPPs have already become a “nightmare” for many people in Berane, who literally lost rivers, because “Hidroenergija” placed pipes and diverted water towards their power plants, in order to produce more electricity.
Instead of the promised prosperity of the local community and employment, dry riverbeds have been left to the people who are mainly engaged in agriculture, while roads and forests are destroyed in places where the power plants are constructed.
Ines Mrdović
Iva Vučinić
MANS Investigative Centre
