The final quarter of the year is a period of increased energy consumption, as well as a time for reviewing business performance. Expert analyses indicate that the situation within the power sector in Bosnia and Herzegovina is far from promising.
Coal extraction at an all-time low
Mines are on the verge of collapse, with coal extraction at an all-time low. This is the consequence of decades of poor management and politically-driven appointments within the energy sector. Compounded by outdated technology, losses running into the millions, and thermal power plants facing closure, a trend has emerged where electricity imports now exceed exports.
“The two thermal power plants belonging to Elektroprivreda RS are in worse condition than the two plants owned by Elektroprivreda Bosna i Hercegovina. They are on the brink of collapse. They are buying coal on a day-to-day basis – it’s truly dire,” says energy expert Almir Muhamedbegović.
Edhem Bičakčić, an energy expert and honorary member of CIGRE, also points to unfavorable market conditions and the financial repercussions of such operations. He warns that there is a significant gap between market prices and the electricity rates charged to households, making it difficult for the state-owned power utilities to sustain this business model in the long term.
“Yesterday, the market price stood at 320 euros per megawatt-hour, whereas electricity is sold here to households at a price of 40 euros per megawatt-hour. In other words, there is a sevenfold difference.
Elektroprivreda RS has announced that it has prepared a request for a price increase. I do not have precise details, but I believe that the power utility companies in the Federation are also addressing this issue,” noted Bičakčić.
Losses in the millions and new borrowing
Expensive imports also mean higher electricity bills, which could trigger a new wave of price hikes. Bosnia and Herzegovina lags behind the rest of the region in utilizing its hydropower and wind energy potential – an area in which the Federation government, among other things, committed to action in 2019 through a decision on the reorganization of mines and a transition to green energy.
The gravity of the situation is further evidenced by the revised business plan of Elektroprivreda Bosne i Hercegovine, which includes provisions for the company to take on debt.
“Elektroprivreda Bosne i Hercegovine now intends to convert 119 to 120 million marks – paid to mines as advances for coal that was never delivered – into long-term loans. At the same time, the utility is attempting to maintain liquidity by borrowing 50 million marks from commercial banks at undisclosed interest rates, which are certainly not low,” points out Muhamedbegović. Bičakčić also draws attention to the issue of accumulated losses, suggesting that the final figure by the end of the year could be significantly higher than what is currently reported.
“Losses are currently reported at the level of 50 million marks, but I fear that by the end of the year they will be much higher. Even if certain financial transactions are carried out to present the situation differently, the reality is that the losses will be substantial – both in Trebinje and in Sarajevo,” warns Bičakčić.
Without an Electricity Exchange
Electricity is currently traded on exchanges in Serbia and Hungary, as Bosnia and Herzegovina is the only country in the region without its own electricity exchange. Such an exchange would allow for greater control over supply and demand, as well as price formation. This situation stems from a deadlock in the adoption of state-level legislation, as the HDZ BiH insists that the exchange must be located in Mostar.
Muhamedbegović warns that the absence of an exchange also means the lack of a transparent market, which creates room for potential abuses.
“When you don’t have an exchange, you essentially lack a transparent electricity market. And without a transparent electricity market, the door is open to various forms of malpractice,” Muhamedbegović points out.
Beyond establishing an exchange, Bičakčić believes that Bosnia and Herzegovina must also work on other mechanisms to better harness its green energy potential and ensure that revenues remain within the domestic budget.
“Bosnia and Herzegovina needs to establish a green energy certification agency and implement an Emissions Trading System (ETS) so that revenue from carbon credits flows into the domestic budget rather than the European one,” says Bičakčić.
As price hikes loom, the question arises: will the burden of bailing out loss-making entities and the cost of political compromises once again fall upon the citizens of Bosnia and Herzegovina? How has the country’s rich potential for the future been transformed into deficits and debt—where every additional kilowatt for citizens hits their personal budgets, while for the economy, it translates into the loss of a job?
