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Thursday, September 10, 2009
EFT unveils Balkans new build

Published in Platts Energy in Eastern Europe 

Energy Financing Team, EFT, is pushing ahead with plans to build up a portfolio of power generation assets across the Balkans. The Anglo-Swiss power trader, which is currently preparing for the start of construction of a 420-MW lignite-fired thermal power plant at Stanari in the Bosnian Serb Republic, announced early this month that it had been awarded a 30-year concession by the government of Republika Srpska to build a 35-MW hydropower plant on the Neretva River. 

The company, last month, also submitted an unsolicited proposal to Slovenia’s Ministry of Economy to build a 200-MW combined cycle gas turbine plant at Trbovlje and is interested in developing two hydropower plants in Albania and Macedonia, Nenad Savic, company spokesman told Platts September 9. Studies, meanwhile, are continuing into the eventual construction of a 132-MW lignite-fired plant at the Cukara mine in the central Serbian province of Lucani, he said. 

Savic would not be drawn to reveal EFT’s investment budget for its planned new build projects but said that its eventual plans would hinge on the final structure and cost of developing its principal project – the Stanari supercritical lignite-fired thermal power plant near the northern Bosnian Serb town of Doboj. At the time of the award of a 30-year concession for the construction and operation of the project in February 2008, EFT estimated the project would cost upwards of €650 million, including €100-120 million to be spent on increasing the production capacity of the adjacent coal mine, which it acquired control of in 2005, and which will feed the new plant. 

However, times have changed. “The cost of capital and equipment has grown while the cost of electricity has dropped sharply which has made the payback period much less attractive,” said Savic. “But there have been other positive developments. For example the cost of steel has dropped, which makes up a sizeable share of the overall project”. 

Savic said that EFT’s future investment plans would depend on the Engineering, Procurement and Construction contract it will sign for Stanari. EFT signed an exclusivity agreement for the EPC contract with Canada’s SNC Lavalin in April 2008 but the company has still to finalize the EPC contract as a result of a failure to procure key equipment within the required timeframe. “It is delaying our investment plans for two reasons: One is the market conditions; it is very much a seller’s market and the offers we have so far received have been unacceptable in terms mainly of timescale from several manufacturers and secondly the cost of capital has made the whole project more difficult to complete,” he said. “We have revised our plans and now expect to complete the plant in Q1 2013. The project was originally to have entered commercial service by the end of 2012. “The EPC contract will tell how we will develop the project, whether on our own or with a potential partner,” he said. “Parallel to negotiating the EPC contract we have had negotiations with potential partners. Savic would not reveal the names of these partners, other than to say that they are major Western utilities. 

“We need to be realistic about our potential and capacity. We have identified a number of projects in the region which we would like to pursue and if we are to develop Stanari on our own then I think our ability to develop other projects which we ideally want to would be substantially reduced. Bringing in a partner at Stanari would enable us to develop our own portfolio they way we want to for one thing and secondly assist with the equipment suppliers. If you have a strong respected partner which has established relations with the equipment manufacturers then you are looking at far more favourable timescales for delivery of the necessary equipment,” he added.

Next up on its list of projects to develop is the Ulog hydropower project, for which it was awarded a concession this month. EFT intends to invest €100 million in developing the project, which will comprise two turbine-generators and a dam, and is scheduled to enter service in 2013. When operational, the peaking plant is expected to generate average annual output of 76 GWh, Savic said. “The hydropower project should be viewed in the context of our combined portfolio with the Stanari plant; it will give us greater flexibility as well as the ability to create production synergies which will maximize the commercial effect,” he added. 

EFT is also hoping to gain Slovenia’s approval to build a 200-MW CCGT plant in Trbovlje, which has been hard hit by the closure of its coal mines and coal-fired thermal power plant. “We have sent a letter of intent to the Ministry of Economy and we have had very positive feedback,” said Savic. “We feel that developing a 200-MW CCGT unit there would be a solution to its problems. This is an idea that we brought to the table based on preliminary studies and the capacity to supply gas to the project. The idea is that we would form a joint venture with the Trbovlje coal and power plant complex, which is part of the state power producer, Holding Slovenske Elektrarne, and they would gain an equity stake based on the land they provide and all the required licenses while we would bring in the capital and know-how to develop and run it,” he said. EFT has estimated that the project would cost between €100-150 million based on a prefeasibility study and would take two and a half years to develop once it has secured a concession and all the requisite licenses. 

“We are in negotiations with the national gas pipeline operator Geoplin. Most of the gas infrastructure is there; we would need just to build a spur to the main pipeline and the supplies are there regardless of whether South Stream is built across Slovenia or not,” he added. 

“We are also very keen on the 70-MW Boskov Most project in Macedonia and we are also looking at another hydropower project in Albania which I cannot reveal at the moment and of course the Cukara project in Serbia,” he said. EFT, in a consortium with Macedonia’s leading civil engineering company and Slovenia’s Turboinstitut, was one of 14 companies prequalified in a tender launched in September 2007 for a build, operate, transfer concession for the Boskov Most project on the Mala Reka River near Debar in western Macedonia but the tender was subsequently cancelled as a result of technical flaws. Savic said that EFT now expected a new tender to be launched early next year. “We feel that we can probably offer a very strong bid,” he said. 

Development of the Cukara coal-fired project in Serbia is, however, not a priority for the trader. We are proceeding with the Cukara project but in the present economic climate we have had to revise our plans and Cukara is at the bottom of our priority list. We remain very interested in the project; we think it has potential but it is still in the very early stages of development,” he added. 

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