slide set 1 wb scott sinclair
DESCRIPTION
Scott Sinclair World Bank Pristina Kosovo 20 January 2010 1 • Critical need to open new Sibovc lignite mine before lignite runs out in old mines – power imports – lignite mine development 2 2 • Although performance is improving, there is still a critical need to improve the credit worthiness of the sector • Because Kosovo A Power Station is highly polluting, there is a critical need to replace it • The energy sector has faced a number of challenges: 3 3TRANSCRIPT
Investors Conference
Scott SinclairWorld Bank
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Pristina Kosovo20 January 2010
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Kosovo energy sector
• Kosovo is an emerging economy with a GDP per capita of €1760
• Population is about 2.1 million; 400,000+ electric customers
• The energy sector is a major drain on the central budget, principally for:– power imports– lignite mine development
• Critical need to open new Sibovc lignite mine before lignite runs out in old mines
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Kosovo energy sector
• The energy sector has faced a number of challenges:– Energy theft– Nonpayment of bills– Antiquated equipment– Lack of funds for maintenance and repairs– Weak governance; cumbersome procurement rules– Overstaffing – Political interference
• Although performance is improving, there is still a critical need to improve the credit worthiness of the sector
• Because Kosovo A Power Station is highly polluting, there is a critical need to replace it
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Kosovo energy sector
• Electricity demand is about 4900 GWh and expected to grow at 3-4% per annum
• Electricity generation in Kosovo is about 4400 GWh• Import of 500+ GWh is expensive at about €85-100/MWh (2007-09)
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current institutional structure
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KEK Mining
KEK Kosovo A Power Station
KEK Kosovo B1/B2 Power Station
Small hydro plants
KEK Distribution and Supply
Division
Mining Regulator
(ICMM) Energy Regulator (ERO)
Transmission System
and Market Operator (KOSTT)
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key issues and initiatives
• Development of new lignite mine is a large fiscal drain– Transfer capital funding requirement to a private owner/operator
• Distribution and supply business is poorly performing– Introduce a private owner/operator with incentives to improve efficiency
and cash flow so DiSCO can pay for all costs including imports– Build capacity and independence in Energy Regulatory Office– Implement effective adjudication of theft/nonpayment
• Power supply is inadequate today and gap is growing– Introduce a private owner/operator for Kosovo B– Rehabilitate Kosovo B for life extension– Add a new private generation unit to replace Kosovo A– Solicit developer for Zhur hydroelectric
• Pollution– Decommission Kosovo A– Rehabilitate Kosovo B to meet EU directives
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develop a new lignite mine
• Existing Bardh / Mirash mine to be partially exhausted 2010 with partial supply (~3.5 mmt) from Sibovc SW through mid-2011, thereafter full lignite supply from Sibovc (Kosovo A and B demanding 7-8 mmtpa)
• Sibovc Field contains 900 mmt lignite (8312 kJ/kg) with low (0.85) overburden to lignite stripping ratio
• Sibovc SW development guided by main mine plan (Steag 2005 / 2006)• 2009 mine development improved through a reinforcing truck-and-shovel
operation on overburden removal• KEK holds an exploitation license for sufficient coal for Kosovo A and B
through decommissioning dates. • Donors have funded refurbishment of three overburden BWE’s• Incoming investor will decide actions around existing coal production
equipment• Incoming investor will have access to Mirash / Bardh for (a) dumping of
over-burden and ash, (b) potential water storage, and (c) reclaimed outside dumps to the south for agricultural purposes around land swaps
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privatization of the distribution and supply business
• Government has launched the privatization of the distribution and supply business (KEK DiSCo)
• A private distribution company will bring– New skills and funding– New governance and regulatory compact
• Cash flow improvement is key to the sustainability of the sector
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rehabilitation of Kosovo B
• Poor operations and maintenance in the past has led to de-rating of units– New rotors will improve output
• Not currently in compliance with EU directives on air emissions
• Study is underway to establish the feasibility of rehabilitation of Kosovo B1 and B2– Meet EU directives by 2017– Life extension to 2030+
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retirement of Kosovo A
• Kosovo A Power Station is not in compliance with EU directives and must shut by 2017
• Government has committed to closing it by 2015• New generation unit (KRPP1) will replace power
from Kosovo A• Plan for decommissioning of Kosovo A is being
developed
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New unit
future institutional structure
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KEK Mining
KEK Kosovo A Power Station
KEK Kosovo B1/B2 Power Station
Small hydro plants
KEK Distribution and Supply
Division
Mining Regulator
(ICMM) Energy Regulator (ERO)
Retired
Privatized
Rehabilitated
New mine
Transmission System
and Market Operator (KOSTT)
Public-Private Partnership
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sector development
• The two major private-sector initiatives will run in parallel• Coordination between transaction teams
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Project Implementation Plan (PIP)
Task Name
2010 2011
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1 Lignite Power Project
2 PSC decision PSC
3 Expand short-list short list
4 Prepare rehabilitation feasibility study feasibility
5 Prepare RFP RFP (2 stages)
6 Bid preparation bid preparation
7 Bid evaluation/clarifications evaluation
8 Negotiation/financing contracts/financing
9 Closing
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11 Distribution and Supply Business
12 Select transaction advisor select
13 Diagnostic report diagnostic
14 Prepare RFP prepare RFP
15 Bid preparation bid preparation
16 Bid evaluation/clarifications evaluation
17 Tariff negotiation/financing tariffs financing
18 Closing
Project: KS Energy Sector PIP
Date: Wed 01/20/10
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key support from the donor community
• European Commission– Study on the decommissioning of Kosovo A– Transmission substations– Support to Energy Regulatory Office
• KfW– Transmission line to Albania; transmission studies– Peja substation; overhead lines– Excavator upgrading– Energy efficiency for households and small businesses
• USAID– Advisory services to KEK (PA Consulting) and Ministry (Deloitte)– Feasibility study on rehabilitation of Kosovo B1/B2– Support to Energy Regulatory Office
• World Bank Group– Technical assistance (generation expansion; energy efficiency; strategic
environmental and social assessment (SESA); regulatory compact (proposed); greenhouse gas strategy (proposed); renewable energy study (proposed))
– Cleanup and Land Reclamation Project for Kosovo A ash dump– Public Expenditure Review– DiSCo privatization advisor (IFC)
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WBG financing instruments for the Lignite Power Project
World Bank and MIGA• Prospective providers of loan guarantees to winning
bidder
IFC• Prospective lender and/or equity investor to winning
bidder
RFP will contain guidance on appraisal requirements including environmental and social assessment
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