Prishtina, 17 September 2011 Having conducted a comprehensive analysis of the respective document, the Ministry of Economic Development (MED) considers that the assessments and conclusions contained in the KIPRED, FIQ and GAP report, titled Energy Projects in Kosovo, does not represent the real state of the energy sector, makes no clear division of institutional responsibilities, in unprofessional, not credible and unfounded factually, and thus provides wrongful information to the public.
The MED conclusions are a result of a thorough analysis of the document performed by Ministry officials and relevant experts of the energy sphere, and are aimed at providing the public with correct information in relation to the assessments and conclusions presented in the document titled Energy Projects in Kosovo, published by the Kosovo Institute for Policy Research and Development, Forum for Citizen Initiatives and GAP Institute.
The development of the energy sector in Kosovo is being lead by the detailed studies conducted and is aimed at ensuring long-term sustainability of the operations of the electricity market and of the installed assets. The main objectives of the energy strategy are to accomplish independence and sufficient supply of electricity, preservation of the environment and self-sustainability of the energy market, by eliminating the necessity for Government subsidies and providing for such tariffs that are bearable for the citizens of Kosovo.
The concrete results of the implementation of the energy strategy are:
Commissioning of Kosova e Re Power Plant, to be funded by private capital and to operate on the basis of the most recent environmentally-friendly technologies;
Complete rehabilitation of Kosova B Thermal Power Plant, to enable its operation while meeting the criteria set forth by the European Union Directives;
Decommissioning of Kosova A Thermal Power Plant, which will positively impact on mitigating pollution;
An open electricity supply market, in which the consumers will be able to select their supplier and thus provide for the lowest market prices;
Investments in the distribution system, aimed at bringing technical losses to the level of advanced European countries; and
Elimination of subsidies and commercial losses, by ensuring the financial self-sustainability of the energy sector.
At the same time, we wish to inform the public on certain misplaced information presented in the KIPRED, FIQ and GAP document.
The Government of Republic of Kosovo is managing the public property transfer process pursuant to the highest transparency and competition standards. There are clear legal and procedural provisions that stipulate the terms under which the processes are conducted and under which the decisions that will ensure the long-term sustainability of the energy sector should be taken.
Decision-making and commenting of documents is conducted through structured groups that include participation of competent experts from the relevant energy agencies and enterprises, including KEK, KOSTT, ERO, ICMM, the Transaction Advisors, expert members delegated by the Ministries comprising the KEDS Privatization Committee and the Kosova e Re Thermal Power Plant Steering Committee, and experts hired by donor, including World Bank and USAID.
After complete harmony is ensured on all details, decision-making procedures are conducted. In the KEDS privatization project decisions are taken by the Privatization Committee which comprises of MED, MF, MTI, MESP and MLSW Ministers. The Kosova e Re Thermal Power Plant Steering Committee includes the participation of the abovementioned ministers and representatives of ERO and ICMM.
Decision-making is very transparent, as taking part in these committees are also foreign organizations, including the ICO, European Commission, World Bank, USAID, KfW, etc. The public is regularly informed with the decisions.
Certain civil society groups have requested access to draft-documents, the publication of which would have an adverse impact on the interest of investors and would diminish the competition in this project.
Focus-groups with journalists, public information campaigns and meetings with worker trade union representatives and other informative meetings with the public and various sector-specific stakeholders were organized, in an effort to ensure transparency. Meantime, a wide-spread debate was lead on the Kosova e Re project with the affected communities (included over 60 public meetings).
MED has invited civil society representatives for meetings in a number of occasions, and they were postponed at the request of the civil society representatives.
The Government of Republic of Kosovo considers diversification of energy sources and promotion of renewable energy its special priority. As a result, the energy laws are entirely compliant with the second package of European Union directives, and even with the third package of such directives (in the case of renewable energy).
These laws make renewable energy a priority, adopting the procedure for authorization and guaranteeing the sale of energy with stimulating tariffs, to be envisaged by the Energy Regulators Office. At the same time, the Government of Kosovo conducted studies and plans to conduct additional studies in an effort to identify potential projects. The result of such reforms is visible, because within a period of less than one year from the entry into force of the energy laws, the energy regulator received applications for obtainment of authorizations for the development of wind-powered and hydro electricity generation facilities, with installed capacities of up to 200 MW.
Independence and security of supply represent key principles for electricity system planning, operation, utilization and development, whereas in the Kosovo case the only the available coal reserves can ensure a high level security of supply of electricity for the consumers in the long-term. This a result of the conducted studies which show that Kosovo does not have sufficient renewable energy resources to meet its long-term energy requirements or to provide for a cost of energy which would be affordable for Kosovo citizens.
The Government of Kosovo is managing its procurement processes, while acting in accordance with the laws in Kosovo and the best international practices, in an effort to ensure competition and equal treatment. The interest of foreign investors on these projects was reviewed by the transaction advisors, and calls for expression of interest were issued. The selection of prequalified companies was performed through an international bidding process, with advertisements published in the most prestigious international magazines, including The Economist, Financial Times, Wall Street Journal, Infrastructure Journal and UNDB. Only the companies that met the clearly delineated criteria were prequalified. In order to prequalify, the companies had to prove their sufficient experience in operating companies that are much larger than those in Kosovo, that are able to obtain financing for their projects and that meet the legal and corporate management requirements. This is also proven by the fact that the companies that prequalified for the Kosova e Re project cumulatively operate over 40,000 MW of installed capacity.
Technical and commercial losses
The Government of Republic of Kosovo continuously supported the Kosovo Energy Corporation in diminishing its commercial losses, by supporting rule of law. This is proven by the fact that the level of billing to energy ready for sale ratio improved from 70% in 2007 to 81% (projected) in 2011. Similarly, the collection rate, which was 77% in 2007 is planned to reach 81% in 2011. In regard to decrease of technical losses, large investments are required in modernizing the distribution system. The Kosovo Budget is limited, therefore, the Government of Kosovo is conducting the KEDS privatization process, in an effort to ensure the introduction of sufficient private capital to bring these losses to European levels.
The adoption of the Law on Energy Efficiency by the Parliament of Kosovo represents a very important step, which will provide for the adequate measures to be taken in fulfilling international obligations. The Ministry of Economic Development has already compiled a National Energy Efficiency Plan, in which it is aimed to ensure energy savings of 9% by 2018 (which would mean 20% of the average energy consumption for the previous five years 2003-2007). Kosovo is required to meet this energy saving target, similar to the other member states of the Energy Community Treaty, pursuant to Annex 1 of Directive 2006/32/EC.
Fulfilment of obligations deriving from the Energy Treaty
The Energy Strategy and energy laws of the Republic of Kosovo are entirely compliant with Kosovos obligations towards the Energy Treaty, and aim to ensure the approximation of Kosovos electricity system with the systems of most advance European states. The Ministry of Economic Development remains in consultation with the Energy Treaty Secretariat and the European Commission, and decision-making on all significant processes is always dependent on their full support.
The Government of Kosovo extends its gratitude to all donors for their continuous support and commitment to the stabilization of the state inherited from 1999, as well as for their contribution to developmental projects. The development of the Kosovo energy sector requires continuous support from the donor community, including USAID, World Bank, European Commission and many other donors that have severely contributed in improving the legal framework and procedures that provide for the attraction of capital investments in key assets.