The effects of last year's operations will still partially reflect on the financial result, primarily through obligations from credit debt for investment projects. That is why the financial picture this year is complex - we expect a positive operating result, but still with challenges that require careful liquidity and cost management, the executive director of Elektroprivreda (EPCG) told "Vijesti" Zdravko Dragas.
He points out that last year was marked by the reconstruction of the Pljevlja Thermal Power Plant, which had a direct impact on the business result, primarily through increased electricity imports and associated costs. As a result of these activities, EPCG ended the year with a negative result of around 90 million euros. This year, Dragaš expects the company to enter a recovery phase, and projections indicate a planned profit of approximately 38,7 million euros.
"It is for this reason that we have initiated the process of refinancing liabilities, in order to stabilize cash flows and overcome problems that are possible in the second half of the year. At the same time, we are working on a long-term financial analysis that, based on the implementation of new investment projects and market trends, will serve as the basis for the preparation of future projections and strategic planning of the company's development. The business results are also significantly affected by hydrology, which was unfavorable last year, while this year is much more stable so far. If the hydrological situation remains favorable, that will give us a wind at our back," explains Dragaš.
What is the current situation at the Nikšić Steel Plant and what are the further plans for the factory? Is the project currently viable and economically justified, considering the various information and criticisms that have appeared in the public since EPCG took over management?
At this moment, the Steelworks does not yet perform its core business - steel production, but functions as a support for EPCG projects, primarily in the solar infrastructure segment. In order to ensure long-term sustainability and a serious future, it is necessary to expand the range of services and develop a more stable business model, because relying on one activity is not enough. Currently, both the Steelworks and Solar Construction are on the verge of profitability, which clearly indicates the need for more efficient management and a more active presence on the market, especially when it comes to contracting jobs outside the EPCG system. The moment when the Steelworks manages to secure projects with other investors, outside the EPCG system, we will be able to clearly say that it has justified the trust and opportunity given to it.
What would be the best solution for the Steelworks in your opinion?
The best solution is to return to the core business - steel production, with the parallel development of the processing and management of secondary raw materials segment, which we have already announced. It is positive that there is interest from investors in the Steel Plant, both from the region and from Europe. However, having learned from previous experiences, in the coming period we will insist on clear conditions - primarily on adequate bank guarantees and credible business plans. We will enter into negotiations only with those who are willing to provide bank guarantees for the planned investments and create a serious business plan.
Has EPCG Solar gradnja met expectations regarding the dynamics of solar system installation and what are the concrete effects of its work so far? What can you say about the current situation in that company?
Solar gradnja was formed as an operating company for the implementation of the “Solari 3000” and “Solari 5000” projects, and in that segment it has made a significant contribution through the mobilization and organization of capacities, especially in the part of hiring quality fitters and electricians. However, when we talk about the market dimension of its business, the company has not yet made a breakthrough in terms of contracting deals with other investors outside the EPCG system, which is unacceptable. In this context, the upcoming period will be a kind of test for Solar gradnja. We expect a key breakthrough through potential cooperation with “Masdar” within the framework of joint projects, where the company will have the opportunity to demonstrate its competitiveness in the real market. All decisions in the joint company will be made by consensus, without the dominance of any party, which further enhances the importance of market readiness and operational capabilities of all participants, including Solar gradnja. If Solar gradnja does not demonstrate the ability to position itself outside the framework of the EPCG system, it will be necessary to make organizational changes and improve management in order to ensure long-term efficiency and sustainability of the business.
EPCG and Abu Dhabi Future Energy Company PJSC - Masdar, a global leader in clean energy, signed an agreement last month to establish a joint venture to develop large-scale renewable energy projects in Montenegro. How will this partnership work and how will joint renewable energy projects be implemented?
The partnership with Masdar is based on an equal relationship (50:50) and long-term strategic cooperation. For each individual project, separate project companies will be formed, with the same ownership share, which enables efficient management, clear accountability and transparency. Through the mechanisms of the Agreement on Cooperation in the Field of Energy between the Government of Montenegro and the United Arab Emirates, EPCG will gain access to new sources of financing. In practice, the participation of Masdar and their guarantees will further strengthen our credibility with financial institutions and facilitate the closing of the financial structure. What is particularly important is that through this partnership we gain access to knowledge, experience and global practices in the development of renewable energy sources, which significantly reduces business risk. Profits will be shared in accordance with the ownership shares in each project.
Which renewable energy projects will be the focus of cooperation with Masdar - solar, wind, energy storage or combined models?
“Masdar” is a global leader in the production of electricity from solar power plants, with around 65 GW of installed capacity and ambitious plans for further growth. In this sense, solar energy will be the focus of our cooperation. However, a modern approach implies the integration of solar projects with energy storage systems, because without battery systems their full value cannot be exploited. One of the directions of development is the integration of solar power plants, battery systems and data centers, which would be a significant energy consumer and an important development project for Montenegro. In parallel, “Masdar” is also interested in other renewable sources, as well as cooperation with renowned partners such as EDF.
How far has the formation of the joint venture progressed?
The signing of the contract marks the first step towards the formation of a joint venture. We expect the management to be selected within the next 30 days. When it comes to specific projects, solar power plants are already being developed in the locations of Slano, Krupac and Štedim, with a plan to connect them to the transmission system. Our goal is to complete the detailed development this year and to start work on one of the locations next year.
What investment cycle do you expect through the partnership with "Masdar" and can Montenegro really become an exporter of green energy to the region and the EU?
From the very beginning of the talks with “Masdar”, our strategic goal has been for Montenegro to become an exporter of green energy. By implementing the projects we are planning, Montenegro has the potential to position itself as a significant digital and energy hub in Europe. The development of a large consumer, such as a data center, would enable the energy produced from renewable sources to be largely placed on the domestic market, thus closing the circle of production and consumption. At the same time, the implementation of a second submarine cable in cooperation with the Italian company Terna would open up the possibility for Montenegro to become a serious exporter of electricity from renewable sources to the European market. Initial investments in three solar power plants at the locations of Slano, Krupac and Štedim are estimated at around 150 million, while the total investments that “Masdar” plans in Montenegro exceed one billion euros.
How realistic is it to accelerate the implementation of large energy projects in Montenegro through an agreement with the UAE and what are the priorities?
It is realistic to expect that the agreement with the UAE will significantly accelerate the implementation of large energy projects in Montenegro. Several years ago, private investors began preparing project documentation and obtaining urban planning conditions, but in practice it has been shown that most of them did not have sufficient financial capacity or operational strength to bring the projects to completion. These are investments that often exceed 100 to 200 million euros, and an additional challenge is the sale of the produced energy without relying on the system that EPCG has. This is precisely where space for acceleration opens up - through the partnership between EPCG and "Masdar", which combines financial strength, technical knowledge and experience in the implementation of complex projects. In this way, projects that have already started get a real chance to be completed, while overcoming administrative challenges more efficiently. Additionally, "Masdar", through this model, opens the door to other companies from the UAE, which can participate in the development of individual projects, in accordance with the intergovernmental agreement. The Government of Montenegro has designated EPCG as the central institution for the implementation of this agreement in the field of energy, which has further strengthened the coordination and operational role of the company.
In addition to the partnership with "Masdar", EPCG plans to cooperate with the French EDF, with which a memorandum of cooperation has already been signed, on the "Kruševo" HPP project - how could this project be implemented and what partnership model is in play? Apart from the "Kruševo" HPP project, is the French EDF interested in other projects in Montenegro, especially in the field of renewable energy sources and energy storage systems?
The cooperation model with EDF will be based on joint investment, similar to that with “Masdar”. The focus of the cooperation will be the construction of hydroelectric power plants, in which EDF has extensive knowledge and experience. The key project is the “Kruševo” hydroelectric power plant, which is planned as a reversible hydroelectric power plant, i.e. a plant that can both produce and store energy. The “Kruševo” hydroelectric power plant will become the first reversible hydroelectric power plant in Montenegro, which will provide us with a kind of “mechanical battery”, which is extremely important for the stability of the system. EPCG is currently conducting geological surveys from its own funds, the completion of which is expected in the next four months, followed by the development of a preliminary design. It is realistic for the preliminary design to be completed in the first quarter of next year, which will provide us with a more precisely defined value of the investment, as well as all the key technical and economic parameters necessary for making a decision on the implementation of the project.
We must find a compromise for the Komarnica HPP
Last year, EPCG withdrew the study on the environmental impact assessment for the “Komarnica” HPP. Has the project been redefined in the meantime and what stage is it in now, that is, have you given up on it or are you still planning its implementation?
The “Komarnica” HPP has significant potential in terms of valorization of Montenegro’s hydropower resources, but at the same time it is one of the complex projects that require a special level of attention due to its environmental sensitivity. Our approach is based on finding the optimal balance between ecology, economy, energy independence and preserving the “wild beauty” of the area. I am not in favor of destroying nature in order to have electricity, but we cannot survive without electricity today. That is precisely why it is obligatory to seek every solution through a professional, responsible and long-term sustainable framework. EPCG has not given up on this project, but we do not view it through an exclusive or simplified approach. The project is currently in the phase of additional development of conceptual solutions, with the aim of finding a model that will be both energy-justified and environmentally acceptable. Based on previous experiences with hydropower facilities, the view is that they, when properly planned and constructed, can have a broader positive effect, not only in terms of energy, but also in terms of tourism and development. The best indicator of this is Piva Lake, which is today recognized as both a tourist attraction and an important energy resource. A similar example is the meanders in Pljevlja, where an artificial lake was formed that has not yet been fully valorized, although it has significant potential. In the surrounding area, we also have the example of Uvac, where the formation of the reservoir contributed to the return of certain bird species, precisely because of the change in the water regime and the creation of new natural habitats. Our goal is a clear, serious professional discussion and quality solutions, not an approach based on populism.
First new state kilowatt after 44 years
When can we expect the trial operation of the “Gvozd” wind farm, whose construction is nearing completion, and what is the phase of the implementation of the “Otilovići” small hydropower plant?
The official start of trial operation is planned for May 9, symbolically on Europe Day. The Gvozd wind farm is the first major state energy project after the commissioning of the Pljevlja thermal power plant in 1982. The project was supported by the European Bank for Reconstruction and Development, while the contractor is the company Nordex, with which we have a contract that includes the procurement, delivery, installation, commissioning and long-term maintenance of wind turbines, including the Gvozd 2 project.
Regarding the small hydropower plant “Otilovići”, the contract has been signed and the project documentation is being prepared. It is expected to be online within 20 months from the signing of the contract. This is an important project for EPCG, considering that hydropower facilities represent a long-term stable and reliable source of energy.
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