Elektroprivreda BiH to Increase Electricity Prices for Households to Fund Investments

(Patria) - After recording a record loss of 140 million KM in 2023, Elektroprivreda BiH plans to operate profitably in the next three years and invest heavily in new energy facilities, but this also entails an increase in electricity prices, writes BiznisInfo.ba.

Among other things, EPBiH plans to increase electricity prices for households in the Federation of BiH.

This is evident from the JP Elektroprivreda BiH Business Plan for the period 2024 – 2026, which will be considered at the Shareholders' Assembly, and which BiznisInfo.ba has had access to.

The plan envisages achieving profit in the planned years (2024-2026), based on planned projections and assumptions. In addition, significant borrowing from international and domestic financial institutions is planned to secure financing for investments in the planned period, which amount to over 1.7 billion KM, with some projects extending beyond these years.

– It is certain that most of the necessary financial resources, especially for projects related to renewable energy production, will have to be secured from external sources, which will lead to a significantly higher level of the Company's indebtedness compared to the current level. Given the persistently low rate of profitability and significant outflows related to coal mines, the Company does not have sufficient accumulated funds to finance investments primarily from its own sources – it is stated.

The plan envisages the start of construction of several new energy facilities. The start of construction of the Janjići Hydroelectric Power Plant is planned, as well as the start of construction of other new production facilities, including the Vlašić wind farm and several solar power plants, for the construction of which funds from international financial institutions and own funds from cash flow based on internal CO2 emission charges would be used.

Basic elements of operations in the next three years (according to the plan)

Production is planned to begin in several new solar power plants during this period: Gračanica 1, Gračanica 2, Gornja Breza, Banovići Selo, Podveležje 3.

In accordance with available possibilities and plans for restructuring mines, investment in coal mines within the EP BiH Concern will continue, in order to ensure stable and sustainable coal production in the volume required for the planned operation of thermal power plants in the long term, not only in the planned period but also in the remaining operational period of individual units.

In line with EP BiH's strategic goal to significantly increase the share of electricity production from renewable sources, funds are also planned for the purchase of renewable energy projects that are already in operation and projects under development, as well as the purchase or lease of land suitable for the construction of solar power plants. Additionally, activities and investments in already identified solar energy projects are planned, recognizing them as a development opportunity.

This plan envisages significant investments of own and borrowed funds in the development and implementation of these projects, and the next three-year period should be marked by the construction of several solar power plants in several prospective locations.

However, the problem lies with the prices of electricity sold to customers.

– When finalizing this Plan, the valid prices (as of early January 2024) for sales to public supply customers were used as an input assumption, with the assumption of an average increase of 10 percent from June 1, 2024. Furthermore, negotiations regarding the Branch Collective Agreement with SEER of FBiH are announced, the outcome of which may affect labor costs in the planned period. In the event of a correction of several significant input and output prices and energy elements in the coming period, a revised plan will be prepared – the document states.

It is planned that the largest part of the planned profit will be retained by the Company and used as a source of financing for future investments. Existing and potential creditors will analyze the cash flows of the Company and the Concern as one of the key bases for approving credit arrangements.

Price Increase for Households

One part of this extensive document clearly states that the goal is to increase prices for households as well, not just for businesses, and that efforts will be made to prepare the public for such a decision.

– It is important to convince customers and the public that a gradual increase in energy sales prices, especially for households, taking into account production costs and market conditions, is necessary if we want to count on domestic electricity sources that will be more environmentally and climate-friendly than existing ones in the long term – the document states.

As stated, the largest portion of planned electricity sales to end customers relates to the Household category, for which an increase in energy tariff rates is planned for 2024.

It is certain, they emphasize, that in the next 2-7 years, fees or similar charges for CO2 emissions from thermal power plants in BiH will be introduced, and it is up to the State and EP BiH to ensure that this is done gradually and with minimal costs.

An increase in the number of end customers by about 1% compared to 2023 is planned, as well as a small (similar to 2023) amount of energy that a portion of end customers will procure from other suppliers in BiH, with EP BiH (i.e., the distribution activity) only earning revenue from network fees.

The plan envisages that EP BiH will retain over 99% participation (in terms of sold energy volume) in supplying end customers.