Kosovo's economic chaptering with New Kosovo TC

Next is an analysis of the agreement reached for the construction of TC “New Kosovo”, which became public last week. Although the MZHE's act of publishing this agreement should be welcomed, the same cannot be said in terms of the contents of the agreement in question.

Before I start with the analysis, I have to stress that commercial contracts, part of the deal, have not been fully published. Just research the word “reved” into each of the contracts, and you realize there's a large number of cases where the information is removed from the publication. However, from what is published in these contracts and from what has been said in public by Government representatives, it is sufficient to conclude whether this agreement is favourable or not. For this writing, the analysis will focus on the Energy Buying Agreement, since I consider it to be the essence of content.

How unfavourable for Kosovo is this agreement, it is enough to compare punishments in case of secession before the start of its implementation Kosovo is punished at 19.7m euros, while the investor is punished at the maximum of 8m euros. Those who believe in saying that the good day is seen in the morning, I believe they are prepared for what you're about to come to.

Under the deal, investor HINAContour Globalʹ secured the sale of all energy produced with the Sywarned Price of 80 euros/MWh (Recial F). This award actually represents increases compared to the agreed price in the Understanding Agreement signed in December 2015, which was 78.6 euros/MWh. So the self-Praisement of the Minister of Economic Development, Valdrin Luka, has achieved a more favourable agreement than what has been before remains. This is because, although the domestic return rate has been reduced to the equation (IRR) from 21.5% to 18.5%, the increase in construction costs from 1 billion euros to 1.3 billion euros has the greatest negative effect on price definition. (How it has been reached this level of targeting has been analyzed in the following scripture).

Although in an interview Minister Luka referred to the 80-euro/MWh price for ceiling price, this is unfortunately not correct. In fact, if the Contour Global manages to produce more electricity than expected amount, then for each additional MWh produced, the company gets a 20% bonus on the target price (Schedure 1, paragraph 2.3.1.) and thus very easily reaches 96 euros/MWh.

Based on higher figures, the annual cost for electricity consumers alone will be at least 240m euros if it operates at 75% capacity (about 3 GWh), which could reach up to 340m euros if it operates at full capacity (about 4 GWh, of which 1 GWh counts at a 20% bonus. In other words, for the period of 20 years, Kosovo citizens will pay 5-7 billion euros for the deal.

If these figures are translated into consumer tariffs, the amount of 240-30m euros is added to existing fatification (with the exception of “T C Kosova A”), then we can talk about an increase of 46%-81% from the current level of tariffs, depending on resource composition from “T C Kosova B” and “T C Kosova e Re”.

But such an enamel increase in tariffs would not be welcomed by consumers, and it would be difficult to reason with Z. RRE, which determines the rate of tariffs based on Maxenal Licenses, “Maximium Allowed Reventor” So to overcome this problem as well, there is a solution that, in my opinion, represents the most scandalous part of the deal called “New Kosovo Electricy Company” (NKEC).

“Kosovo Electricy Company” and “Revenue Requirement”

Under the deal, the Government of the Republic of Kosovo is forced to establish a public company (NKEC), which will serve as mediator between Contour Global and the rest of the energy market in Kosovo. In other words, NKEC will be tasked with buying out the entire production capacity of the new thermal power plant, Kosovo's market had or did not need it. That energy then NKEC will return and sell KEDS or anyone else at a price cheaper than the cost, and therefore the state takes over the loss, while Global Contour has secured the profit.

The production capacity must be purchased at that price, so as to make sure that the needy Enterors are met (Revewe Requirement) for Global Contour. Under the deal, the needy inflows consists of the payments needed to pay the borrowed loan and its interest, payment for return to equity, other operational expenses, and even profit taxes.

Albanian translation, NKEC or the Republic of Kosovo will pay Contour Global -- all expenses, plus loan installments, plus interest, plus profit, as well as profit tax. All of this, it's estimated that we would be covered with a price set at 80 euros/MWh, but which can be increased if we overtake the loan interest comes out to be higher than anticipated.

Based on this, it is evident that the annual cost of the thermal power plant will not be reflected immediately, but gradually on consumer tariffs, because it will be paid by NKEC, which will be financed/subvented by the Government. But to say that's better, it's like saying you're cheaper to pay off your left pocket than out of your right pocket. If it's paid through electricity bills or through taxes, it has little role.

The good thing about this is that when the time comes to pay this money out of the budget, this Government that signed the deal will have passed its mandate forever.

Public Company contracted

To ensure investors prosper at work, the Government of Kosovo has forced public companies such as KEK to sign contracts that may not be in their best interest.

According to the Count for the Outcome of Ash and Gipsy, let's get him, KEK is obliged to provide Global Contour spaces for ash storage and gipsy without a penny, totally free.

While in the Commission's supply contract, I couldn't find the supply price, maybe this information was the victim of rereading with “reserved” from the company.

But the most surprising is the contract for Earth's Barting (The Transmission Site) with which the agreement for KEK to sell land (KEK property) Contour Global, in which the new thermal power plant will be built. The sale price is 10 (ten, yes ten) euros, for about 15 acres [15 ha] of land, a price in extreme distribution at the price of land paid for expropriation in Shipil.

There are many pearls like these above but I believe they will be treated by others over the next few days.

Finally, I consider that this agreement was not to be signed under these conditions. The deal is so harmful that no minister is The PDK didn't have the courage to sign it, even though it was in the drawer for two consecutive terms. This fact shows a lot, when it is known from the past that the PDK does not hesitate much in such cases.

Kosovo has been able to build such a thermal power plant with self-finance, without the help of any foreign investor, and even with much better conditions. 300m euros per year are huge for a people where half live in poverty. But luxury vacations can also affect perception. /Cashho. com/

It says: Iron Murati

The author is financial analyst and consultant in the financial sector.