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Montenegro, director of EPCG energy company: energy sector faced serious challenges last year but problems have been overcome

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The projection of the management of Elektroprivreda (EPCG) for this year are optimistic, because they indicate positive results, mostly due to the expected more favorable ratio of imports and exports, but also the benefits expected from the Solari projects, announced the company’s executive director, Nikola Rovčanin.

He said that benefits are expected from the Solari 3000+ and 500+ and Solari 5000+ (70 MW) projects in terms of freed surplus electricity and preservation of citizens’ and consumers’ standards, which ensures a high level of billing.

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– We can expect more precise preliminary data on EPCG’s operations in the last year only in the second half of January. Until then, we are obliged to remain reserved, because, until the end of the year, a number of circumstances and important elements of balancing will still appear, which, to a considerable extent, will determine the sign of the business results for the last year – said Rovčanin in an interview with the Mina-business agency.

Business results

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He said that, despite all the objective circumstances that were reflected in the unpredictable disruptions on the electricity market and extremely high energy prices on the stock exchange in a period of highly pronounced import dependence and unfavorable hydrology – with precipitation during the last weeks, the total amount is only 83% in relation to the annual average – it is evident that EPCG will succeed in mitigating the negative consequences of the mentioned circumstances to a large extent by the end of the business year.

As he stated, the hydrological situation improved at the end of November and the first half of December, when the company, in a little more than 30 days, earned more than EUR 80 million from exports, so it is realistic to expect significant positive effects in terms of the relationship between exports and electricity imports and, to the greatest extent, rehabilitate the expressed deficit and losses from the second, and especially from the third quarter of last year.

– Whether that success will be reflected already on December 30 or January 15, I appreciate that it is less important than the fact that we successfully overcome the effects of the crisis, especially since the similarity of the structure of production in the countries of the region, to a significant extent, also dictates movements on the stock market: prices are, logically, higher during the second and third quarters, when everyone deals with hydrology, and they go down during the first and fourth, when others also have less need for imports – Rovčanin explained in response to the question of the environment in which the company operated last year.
Speaking about the claims that new hires have burdened the business, he said that EPCG currently has 1.15 thousand employees, of which 146 are temporary employees, while employee wages account for 4.4% of total costs, which is less compared to last year.

– In 2021, 6.35% fell on employees’ wages, 6.57% in 2020, and 6.71% in 2019, so we consider claims about excessive employment and burdens on business to be unfounded, especially since we, after four decades of stagnation, which is reflected in the fact that from 1982 to last year, not a single new MW was installed, a large investment cycle has begun, for which we also need a new workforce – said Rovčanin.

Regarding employment in the coming period, EPCG will, in accordance with the company’s business plan, that is, following the needs of production and the organization of the work process, in workplaces that are already in deficit, or will be in the coming period, due to the retirement of employees – these over 20 employees are ending their employment by force of law due to reaching retirement age – hire new executors in accordance with the law and company procedures.

Speaking about the situation in the energy sector of Montenegro, due to the global energy crisis, Rovčanin said that the energy sector faced serious challenges last year, especially in the field of weaker hydrology and high electricity prices during the second and third quarters, when we , due to the structure of their production, forced to increase imports.

– Nevertheless, we managed to overcome those problems and to drastically correct the minuses based on the import/export ratio in the fourth quarter, and all this in a situation where we neither increased the price of active energy for households nor resorted to restrictions, and we are one of the few countries in Europe where the entire burden of the crisis was borne by the energy sector – said Rovčanin.
Electricity prices

He stated that in the coming period, by improving the production portfolio of EPCG, through investment in new projects and the installation of new MW, they expect to diversify the sources from which they produce electricity, which would achieve a multiple effect: strengthening the company itself, less dependence on hydrology, i.e. on imports in the second and third quarters, but also benefits for the state budget.

– In this year, the key challenges are such that, until the commissioning of the new facilities, we will depend on the same factors that made it difficult for us to work last year, and the mentioned development and implementation of new projects, to a significant extent, also depends on the readiness of the competent state authorities institution to, recognizing the strategic importance of the energy sector, modernize procedures and provide a contribution to the energy transition and, more broadly, to the stability of our system – said Rovčanin.

He said that last year EPCG exported 879 gigawatt hours (GWh) of electricity worth EUR 207.88 million.

– Last year, EPCG imported 709 GWh of electricity worth EUR 208.71 million – specified Rovčanin.

He stated that, for the next period, electricity prices have stabilized at around 200 to 250 EUR per MWh. Prices, to the greatest extent, depend on the availability of energy sources, primarily gas, which is one of the main energy sources in Europe, as well as on the needs and available electricity – if the winter is “harsher”, prices can be expected to reach the level of mid-December – around 450 to 500 EUR per MWh.

– In this year, citizens should not be afraid of restrictions or price increases, with a fence related to the fact that EPCG affects part of the bill (active energy), while for pricing in other segments, such as network services, our company is not competent – announced Rovčanin.

For the sake of comparison, it can be said that the price of active energy, according to the two-tariff model, in 2021 and last year was 5.2424 cents per kilowatt hour (kWh) for the higher and 2.6212 cents per kWh for the lower tariff. The price of active energy, according to the single tariff model, in 2021 and last year was 4.2686 cents per kWh. These prices will not change this year either.
– On this occasion, we are obliged to mention that, precisely on the basis of maintaining the existing price for electricity, we have saved citizens EUR 737.83 million in 11 months. Because, if the prices for them were harmonized with market changes, the average bill would not amount to EUR 33.38, but EUR 141.9 – said Rovčanin.

Purchase of Ironworks

Speaking about the purchase of Željezara Nikšić, he said that the second phase of the process refers to the formation of a daughter-company, Željezara Solar Nikšić, which could deal with activities that are part of EPCG’s activities.

– This would be followed by the realization of the idea of building a solar power plant, which represents a great development opportunity, bearing in mind the strength of the connection. At the same time, substructures for the needs of EPCG would be built on the area covered by the purchase agreement – explained Rovčanin.

Regarding the other activities, as he said, for now he can only say that any subsequent activity in terms of expanding their business in the Ironworks would take place in phases, that is, in accordance with the needs of EPCG, so it is premature to talk about those activities.

– Basically, the most important thing for us is that, due to the fact that the state bought part of EPCG’s shares, at a price of EUR 15 million, we got the opportunity to use those funds to buy very valuable land and thus gain a chance to expand the company’s production portfolio. Had it not been for that buyout, we would now be in a position where the entire contingent of our own shares – a process which, by force of law, had to end on September 26 last year – would be cancelled, as it already happened once, three years ago – he said.

Investments in RES

Speaking about projects from renewable energy sources (OIE), he said that, after the launch of the historic Solari 3000+ and 500+ project, worth EUR 30 million, which EPCG is realizing in cooperation with the Investment and Development Fund (IRF), which foresees installation of 30 MW of newly installed capacity, with an expected annual production of 44 GWh, the implementation of the Solari 5000+ project (70 MW) is planned for this year.
– That project envisages the installation of new 70 MW of solar capacity with an expected production of around 100 GWh and a value of around EUR 70 million – added Rovčanin.

He announced that this year they will continue to expect the start of construction of the Gvozd wind power plant (WE), with a capacity of 54.6 MW and an expected annual output of 150 GWh.

– The project is implemented in cooperation with the European Bank for Reconstruction and Development, with which we will sign a credit arrangement worth EUR 82 million. The estimated construction time is 18 months from the start of work, so we expect VE Gvozd to be online in 2024. In addition to the implementation of the reconstruction and modernization project with the Austrian company Voith worth 29.4 million EUR, this year, in cooperation with the German Development Bank, activities related to the installation project of the A8 hydroelectric power plant (HE) will also be initiated. Perućica, where, without any significant impact on the environment, we will reach the newly installed 58.5 MW of power – specified Rovčanin.

In this year, as he said, they are also expected to sign a new arrangement with KfW bank, worth 30 million EUR, and sign a contractor’s contract for the installation of the A8 unit, the installation of which requires 36 months.

– In addition, in the spirit of promoting solar potential, this year we will implement the project of installing solar panels on our dams Slano and Vrtac with a total capacity of four MW, and there are also preparatory activities for the projects of floating solar power plants (SE) on Slano and Krupac – said Rovčan.

As he announced, they are especially pleased by the fact that this year they will complete the activities related to the preparation of the study for HPP Kruševo in two variants of preliminary energy assessments of the power plant from 90 to 100 MW with an expected production of about 265 GWh and create preconditions for the further development of this of a significant project in the field of hydropower, that is, the development of a preliminary project.
Project Solari

Ročvanin, speaking about the implementation of the Solari projects, said that the quality of the Solari 3000+ and 500+ projects is best expressed by the fact that, with the recent announcement of a public call for citizens and businesses, as well as a public call for domestic and international financial institutions to participate in the Solari 5000+ project ( 70 MW), showed that it is a very successful concept.

– Until the last week of December, our agents visited 3.14 thousand potential customers, where the total installed power of their facilities is 34.47 thousand KW, where it was established that 1.5 thousand facilities meet the technical requirements, with a power of 21.17 thousand, and the contract was signed with 1.34 thousand clients with a power of 14.9 thousand KW, while photovoltaic systems were installed on 930 objects with a power of 7.5 thousand KW – he said.

– We expect that, in the context of the Solari 5000+ (70 MW) project, this year we will reach the indicated figure, which would relieve the energy system quite a bit, and citizens would be given the opportunity to, in accordance with the slogan “Produce where you consume”, achieve a significant level of energy independence, with huge savings – added Rovčanin.

He assessed that It was, without a doubt, a win-win combination, and the correctness of the decision to delay the project is best illustrated by the fact that the energy companies from the region are now following a similar path, with the expression of interest in their already trained installers, which, in perspective, , indicates a chance for additional earnings, and the fitters themselves, in a very short time, have acquired qualifications that make them competitive in any market, local media reports.

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