Focus on Energy, 2010 - Karanovic & Nikolic

ENERGY SECTOR OVERVIEWIntroductionMacedonia imports more than 45% of its energy 1 ; this figure is burdensome, representing a significantproblem for Macedonian energy authorities. The need for new production capacities is something that isdiscussed on a daily basis by the energy experts and by the wider Macedonian public as well.The EU harmonization of the Macedonian legislation process continues during 2010, a year in whichMacedonia is expected to set a commencement date for the negotiations on EU full membership. Also,Macedonia is presiding with the Energy Community since 1 January 2010, holding the second presidencymandate until the end of the year.The climate for investment in Macedonia is one of the best in the region; partly because of the wellestablishedregulatory framework, and also because of the flat taxation policy which has set all profitand personal taxes at a 10% rate. However, there has been a serious lack of investment in new energyproduction facilities.The future of energy in Macedonia will revolve around regulatory amendments and regional cooperation,working towards the improvement and modernization of the sector. Investment in the Macedonianenergy sector is expected to increase in tandem with these changes.Electric Power42OVERVIEWFOCUS ON ENERGYThermal power plants (“TPP”) in Macedonia with an installed capacity of 800 MW produce more than80 % of the domestic energy, equalling 5,000 GW/h of electricity annually. Two of the three existingTPPs, TPP “Oslomej” and TPP “Bitola” are operated by “Macedonian Power Plants” JSC Skopje (“ELEM”)a 100% state owned company. The third power plant is the “Negotino” TPP, with an installed capacityof 210 MW and it is owned by a private foreign consortium.ELEM also operates the 5 most significant hydro power plants (“HPP”) in Macedonia. These are responsiblefor 16% of the total domestic electricity production. The last major investment in this sector wasthe construction of the HPP “Kozjak” which went into operation in 2004 after taking 10 years to build.Since 2004 there have been no new investments in either hydro or thermal power plants. There havebeen initiatives for small HPP projects, resulting in more than 20 concession agreements being signedand the construction of the first plants is expected during this year.The transmission system in Macedonia is connected to Serbia and Greece through 400kV lines. Thereare two 150kV lines to Kosovo which have not been operational since 1999. The Macedonian energysystem operator (“MEPSO”) is a 100% state owned company responsible for the transmission andimportation and exportation of electricity. During the last few years, MEPSO have improved the nationaltransmission grid and the connections to neighbouring countries through investment projects supportedby the EBRD and the World Bank. However, the transmission sector needs further development andthere have been announcements of new investment initiatives.With the unbundling of the distribution from the transmission and production of electricity, Macedoniagot its biggest energy investor through the acquisition of the state distribution company (ESM) by AustrianEVN (“EVN Macedonia”). The deal was closed in 2006, contributing more than 220 million Eurosto the country’s budget. Today, EVN Macedonia is one of the biggest companies, employing over 3,000and additionally investing over 108 million Euros into the distribution network 2 .1 Source: Energy Balance of the Republic of Macedonia for 20092 From EVN Macedonia’s web site: http://www.evn.com.mk