The electricity supply industry in Kosovo is currently not able to meet Kosovo’s demand for power. Insufficient investment in new plant capacity and inadequate maintenance of existing plant capacity has led to a substantial shortfall in the supply of power in Kosovo. Some of the existing capacity is reaching the end of its useful life. At the same time, demand for power has been growing, increasing the pressures on the system. The overall result is that Kosovo is currently importing power and has to pay high prices to do so. Securing a reliable and affordable electricity supply in Kosovo is a fundamental objective established for the Project.
At the same time, Kosovo is endowed with substantial reserves of lignite. The optimal development, effective use and realisation of value for Kosovo of the Sibovc lignite resource is a further, fundamental objective established for the Project. Kosovo must be satisfied that decisions taken now will continue to meet this objective many years into the future.
It is evident that lignite is monetised through its use as a fuel source in the generation of electricity. Since lignite is not readily substitutable or transportable it is appreciated that a generator of power from lignite needs an assured supply.
It is recognised that the relevant markets for the sale of power from the Project include neighbouring export markets in addition to the market in Kosovo. The Kosovo Government recognises that permission to export and the practical ability to transport power to the border of Kosovo are important to the economics of the Project. Equally, it is recognised that electricity sales will need to be supported by contracts. However, consideration will have to be paid to such arrangements from the perspective of Kosovo’s policy commitments regarding the competitive development of electricity markets.
The Kosovo Government recognises the need to continue with further transformation of KEK, reform of the Kosovo electricity market and to address security of supply issues. With respect to existing generation assets in Kosovo (Kosovo A and Kosovo B), the Kosovo Government intends to progress initiatives outside of, but co-ordinated with, the KRPP project,
Kosovar stakeholders recognise that significant environmental improvements are required across the mining and generation sectors, both from an investment perspective and in operational processes. This Project enables “best environmental practices” and standards to be applied to the development of the Sibovc mine and Kosova e Re Power Plant (KRPP). Consideration will be given to identifying the most appropriate means of achieving these improvements.
The Kosovar economy is currently under-developed and unemployment rates are high. Whilst the PSC recognises that KEK personnel levels are high, and that the company has identified plans to reduce employment to targeted levels, it is concerned to ensure that the Project creates employment opportunities in the sector. The age profile within the mining and power sector is skewed towards older age groups, and the PSC will want Bidders to consider issues such as retraining, retirement allowances and retention schemes as part of their investment package.
The Project represents an important demonstrator of the potential for Kosovo to attract private sector foreign direct investment. Success in running a fully transparent and competitive process is a very important objective for the Project.
Communities directly impacted by the development of the Sibovc mine are: Hade, Palaj, Latisht, Janjina Voda and Sibovc, although additional communities are also likely to be affected to some degree and may be added to this list. The PSC believes that it would be appropriate for the investor to fund a development project for the communities concerned. The PSC wishes to ensure that the mechanism and quantum of this is predetermined at the point of bid and will give consideration to the appropriate type of project to be funded and the associated cost.
Accordingly, the principal objectives sought to be achieved by Kosovo through the successful implementation of the Project can be summarised and categorised as follows:
Fundamental objectives
i. Security of supply of electricity for Kosovo on acceptable terms;
ii. Optimal development and value realisation for Kosovo of its lignite resources.
Highly important objectives
i. Development of a competitive energy market in Kosovo and support to the development of a competitive energy market in the broader region;
ii. Improvement and protection of the environmental and safety aspects of lignite mining and electricity generation in Kosovo;
iii. Further development of prospects and conditions for employment in the mining and power industries in Kosovo;
iv. Demonstration effect of successfully securing large-scale foreign capital and expertise into Kosovo;
v. Transfer of benefit to the local communities in which the lignite and power plant operations reside.
Kosova e Re Power Plant project has three key components:
b. Immediate development of the Sibovc Lignite Field to provide lignite fuel for both the existing lignite fired generation in Kosovo (Kosovo A and Kosovo B) and the new KRPP generation unit(s) as they enter service; and
c. Private sector participation in Kosovo B, an existing lignite fired electric power generation plant.
