From Rehabilitation to Reform

1
From Rehabilitation to Reform EC support to the
energy sector European Agency for
Reconstruction May 2006
2
Energy EC funding of 879m 1999-2006
3
Energy three phases of support

• Crisis management
• Emergency imports
• Rehabilitation
• Power plants
• Coal mines
• Transmission and distribution
• Reform
• Creating a market based energy system
• Facilitating investment
• Developing a regional energy market for SEE

4
Energy starting situation for the Agencya
regional crisis

• 10 years of little or no investment, but heavy
  use
• Conflict damage
• Mines were unsafe and operators disregarded the
  long term consequences to keep supplies running
• Serbia kept cost of electricity artificially low
  (one fifth of economic costs)
• A vacuum of experience in Kosovo
• Output was in decline power cuts were common

5
Energy in Kosovo rehabilitation

• Emergency electricity imports 1999-2001 48
  million
• Overhaul of Kosovo B power plant 174 million
  (including repairing of fire damage in 2002)
• Rehabilitation of coal mines74 million
• Rehabilitation of electricity transmission
  distribution 19 million
• Refurbishment of district heating systems 8
  million
• Management training to energy company KEK,
  Turnaround Management appointed

• EU funds have made a difference
• Kosovo B Power Plant availability and capacity
  increased, life expectancy extended
• Managers and operators better trained
• Environmental impact improving
• Efforts underway to creating sound institutions
  and a sustainable future

6
Kosovo B fire damage and repair
7
Energy in Serbia rehabilitation

• Electricity imports 2000-2002 67 million
• Energy for Democracy 45 million
• 37 of thermal power capacity overhauled 148
  million
• Rehabilitation of transmission lines
  distribution network - 25 million
• Coal mines equipment and spares 24 miliion

• EU money makes a difference
• Productivity improved at major power plants
• Life expectancy of major power plants extended
• Power cuts reduced to zero in 2004
• In the coal mines, overburden removal up 70 from
  2000 to 2003
• Energy Law passed, prices increased close to cost
  recovery levels, collections improved

8
Energy Montenegro and FYR of Macedonia

• Montenegro
• Support for the Government in energy sector
  reform
• Support to develop energy efficiency policies and
  programme
• Assistance training for the electricity utility
  EPCG
• Delivery of electricity distribution equipment to
  critical sub-stations (Podgorica, Berane, Niksic)
• FYR of Macedonia
• Repairs to the power distribution and
  transmission
• Support for the establishment of the independent
  Energy Regulatory Commission

9
Energy the regional context

• Energy Community in South East Europe Treaty was
  signed in Athens on 25 October 2005
• Treaty has major significance for the region
• creates a single electricity and gas market
  covering whole of SEE and EU
• power plant investments could be cut by one
  -third if regional market fully operational
• will increase economic integration and stability

10
Supporting reform and the regional market

• Agency working closely with DG TREN
• Strengthening regulation
• EAR providing assistance to independent energy
  regulators in Serbia, Montenegro, Kosovo, FYR of
  Macedonia
• Encouraging Unbundling
• EAR providing TA for establishment of separate
  transmission system operators in Serbia, Kosovo,
  and Montenegro
• Promoting reform
• EAR providing capacity building to Ministries in
  Serbia, Kosovo, Montenegro
• Revenue collection in Kosovo remains a serious
  problem a project is underway to assist KEK
• Projects in Serbia and Kosovo to protect the
  environment
• Assistance to promoting energy efficiency in
  Serbia (Energy Efficiency Energy created) and in
  Kosovo and Montenegro

11
Supporting reform, assisting investment

• Facilitate investment
• Close collaboration with the EBRD, the EIB, World
  Bank and KfW
• EAR funded preparatory work secures 67 million
  from EBRD/ KfW for Tamnava West lignite mine and
  57 million from EIB for transmission system in
  Serbia
• Mapping future needs with Least Cost Investment
  Plan in Serbia
• Support for investment in new power plant and new
  mine in Kosovo with studies and support for
  rehabilitation of urgently needed mining
  equipment
• Creating conditions for private sector investment

12
EU and Energy from rehabilitation to reform

• In summary, EU support for the energy sector in
  South Eastern Europe has
• Stabilised the supply situation
• Helped to improve the financial viability of the
  utilities and the conditions for needed new
  investments
• Helped to mobilise substantial IFI investment
  funds from EBRD, EIB, and KfW
• Much work has been done, but more remains on
  reform, unbundling, regulation all crucial for
  creating conditions for private investment in
  this capital intensive sector
• Supported the Regional Energy Market

13
From rehabilitation to reform a teamwork effort