Elektroprivreda RS Hides Information: How Did Hungarians Get the Concession for SE Trebinje 1?

(Patria) - Elektroprivreda Republike Srpske (ERS) rejected the request of Transparency International in BiH (TI BIH) to provide the contract that enabled the Hungarian company Lugos Renewables (LREN) to take over 70 percent ownership of the public company "Solar Power Plant Trebinje 1". Through this contract, the Hungarian investor obtained the concession for the construction of a solar power plant without public bidding, under conditions that ERS does not wish to disclose to the public. In its response to TI BIH, the management of ERS states that the contract has not yet been concluded, but only "its content has been determined".

- In any case, and in relation to the determined content of the contract, ERS determined that there is an exception to the Law on Access to Information which includes the confidential interests of a third party, and after an examination of the public interest, it was determined that the information is not of public interest, ERS stated, adding that the Hungarian investor does not agree to the content of the contract being made public.

How did the Hungarian investor get the concession?

The concession for the construction of a solar power plant in Trebinje was awarded on October 19, 2020, to Elektroprivreda RS without a public call, because the Law on Concessions of RS allows for the contract to be awarded through a negotiated procedure if an initiative offer comes from a public company engaged in an activity of general interest. The entire project, worth over 100 million KM, was supposed to be completed by ERS by October of this year, according to the concession agreement.

However, this public company clearly had no intention of building this solar power plant, because just ten days later, ERS established the company "SE Trebinje 1" at its address, to which the concession was first transferred, and then 70 percent of that company was transferred to the Hungarian company LREN. In this way, the Hungarian investor entered this business without public bidding, and the conditions under which the entire project will be financed and realized are being hidden from the public.

For all of this to be realized, the Commission for Concessions of RS first had to give its consent for the concession agreement to be transferred from ERS to the new company "SE Trebinje 1", which is possible by law if "ERS cannot realize this project for financial or other reasons". Before approving the transfer of this concession, the Commission, according to the regulations governing this area, had to examine the financial status of the new concessionaire "SE Trebinje 1", as well as evidence of its technical equipment, previously performed work, and proof of secured financial resources.

In May 2021, the Commission approved the transfer of the concession to the new company "SE Trebinje 1", which had revenues of only 800 marks in 2021. For this reason, TI BIH requested proof from the Commission by which the financial status of this company was determined, as well as that it has secured financial resources.

Then, as stated in the response to TI BIH from "SE Trebinje 1", the Government of Republika Srpska approved on December 30, 2021, the transfer of 70% of the stake in that company from ERS to the Hungarian LREN.

Under what conditions was LREN brought into the business?

Since ERS does not want to publish the content of the contract with the Hungarians, it is officially impossible to verify the claims from the contract that appeared in the public, according to which ERS transferred 70% ownership to the Hungarian investor for about 5 million KM, which is the value of the concession and technical documentation related to investment. It states that the Hungarian LREN still has the right to sell back to ERS the 70% stake for a price of as much as 16 million marks, if two conditions are not met. One is that an annex to the concession agreement is signed and the deadline for the construction of the solar power plant, which expires in October this year, is extended by another 24 months, and the second is that the obligations from Article 16 of the concession agreement are fulfilled.

Article 16, according to the content of the original concession agreement that the Ministry of Energy and Mining of RS provided to TI BIH, refers to the provision of bank guarantees in the amount of 4% of the project value (over 4 million KM), by which the concessionaire guarantees that they will fulfill the contractual obligations.

Given that the company "SE Trebinje 1" does not want to publish the content of the concession agreement it currently has, it is not known whether the aforementioned annexes have been signed. In the response to TI BIH, the director of this company also states that the Hungarian investor does not agree to the concession agreement being made public.

The publication of all conditions under which this significant project is being built is particularly important due to negative experiences with similar projects, such as the construction of the HPP Bistrica, where ERS transferred the concession to this company, sold 90 percent of the stake to the Laktaši company Kaldera Company for 6.8 million KM, and then repurchased 51 percent of that company for 10.6 million KM, it was published on the website transparentno.ba