MINI HYDRO POWER PLANTS-MAXIMUM PROFIT

Magdalena Mihajlovska 

All countries in the region of South East Europe have developing economies, which means that their need for energy will be permanently growing. For investors in the electric energy sector, that means a long term safe market for the sale of electricity.

The Macedonian government has recently decided to invite tenders for the building of mini hydro power plants at certain locations. About 406 locations are in question, situated all around Macedonia, which are registered as potential places for building mini hydro power plants in the Study of the Ministry of Economy. Interested domestic and foreign companies wishing to be included in that business, should pay for the land as well as a concession for water usage. Great interest has already been shown in the small hydro power plants, in fact eleven companies have already sent requests for locations. The Granit building company from Skopje, in consortium with one foreign power company and a foreign bank, is asking for 200 locations, Czech Hidropol for 140, Ve Ve Group from Skopje for 62, and German RSS has requested 35 sites suitable for the construction of hydro power plants. Slovenian Turboinstitut is asking for 32 locations, the consortium composed of Bulgarian company Finance and Canadian Hatsh for 7, and Ingmark from Skopje for 3. Additionally, six locations were demanded by the Association for Development of Small Hydro Power Plants from Kicevo, the Grof company of Strug is interested in four sites, and Tani Impeks from Debar is looking for three locations.
The real war is expected to occur during the allocation of locations, because several companies are often interested in the same site. The electricity generated in these mini power facilities will be sold on both national and foreign markets. However, data on the hydrology of the locations has already been registered by the investors as a big problem, because the Ministry for Agriculture has old indicators. The experts, however, reply that river basins are not measured in advance anywhere in the world, but only where there is a need, and on the grounds of statistical hydrological methods.
Macedonia already has small hydro power plants under the ownership of ESM Distribution and Supply, a part of the former Makedonska Elektroprivreda, where privatization is on-going. That company possesses 11 small plants, which overall are rated at 37 megawatts. However, they are also to be included in the privatization, but at different dynamics. In fact, the hydro power facilities Popova Sapka, Bogomila, Belica and Turija, with overall installed power of seven megawatts, will be given immediately to the future buyer of Macedonian Electricity Distribution to manage. The mini hydro power plants at Pesocani, Zmovce, Pena, Sapuncica, Dosnicas, Matka and Kalimanci, already have a concession holder for the next seven years, and Czech company Hidropol claims them by 2009.
These hydro power plants have an overall installed power of 30 megawatts, and ESM buys back their total production at a price of 3.4 eurocent per kwh. After expiration of the concession rights, they will also become the property of the buyer of Makedonska Elektroprivreda.
Remember, the mini hydro power plants are the only production facilities within Makedonska Elektroprivreda that will be sold together with the distribution net.
Malaysian company Hisniaga has also offered the Government a project for building the Bosko`s Bridge hydro power plant and five small hydro power plants- Gari, Tresonce, Sveta Petka, Kosovrasti and Selce in the western part of Macedonia.
Bosko`s Bridge, where 70 megawatts is to be installed, will have the greatest capacity. The installed power of Kosovrasti will be 5 megawatts, Tresonce 8 megawatts, Gari 2.9 megawatts, Sveta Petka 1.2 megawatts, and Selce 3.3 megawatts. According to the business plan of Hisniaga, 100 million euros will be invested in the construction of the plants.
Malaysian Hisniaga is also interested in investing in the hydro power plants Cebren and Galiste. The construction of the latter two systems is estimated at 600 million euros.
The agreement with Hisniaga has not been signed yet, because the company demands a long term contract with Macedonian transfer system operator MEPSO on the repurchase of electric power, which is, according to unofficial sources, unacceptable for the Macedonian government.
There is another alternative for the construction of Bosko`s Bridge hydro power plant. It has been suggested that the state forms a joint stock company which will be quoted on the stock exchange. In order to provide financial means, 70-80% of shares will be sold to private investors interested in such a project.
Apart from all this, the process of preparing legal regulations which have to exist to enable the realization of the government decision on the invitation for tenders for building mini hydro power plants, is still on going. It is clear that this sector will be very attractive to investors. This is helped by the formation of a regional energy market, where trade will be without customs barriers, as well as by transforming electricity into a stock exchange product.
Remember, since the beginning of this year, large consumers in Macedonia, those consuming more than 20 gigawatts annually, can freely choose from whom they will buy electricity, and at what price. By 2007, all commercial consumers, regardless of annual consumption, will have become qualified consumers that can supply themselves with electric power directly from the market. By 2015 households will have this privilege too.
The experts emphasize, as an additional motive for investment in mini hydro power plants, increased demand for electricity in the region.
Namely, the energy balances show that most countries import electricity, meaning that they produce less than they require.
For instance, this year Macedonia will spend about 100 million euros on the import of electricity, and electric power consumption, in comparison to 2005, looks set to increase by 12 per cent. The forecasts say that this trend is going to continue. All the countries in the region of South East Europe have developing economies, which means that their need for energy will be permanently growing. To investors in the electric energy sector, that means a long term steady market for electricity trade.

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