Studies to support development of new generation capacities and related transmission

European Agency for Reconstruction of Kosovo

Studies to support the development of new generation capacities and related transmission - Kosovo UNMIK FINAL REPORT

Contract nr. 05KOS01/04/005

This project is funded by the European Union A project implemented by

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EUROPEAN AGENCY FOR RECONSTRUCTION OF KOSOVO

REQUESTER

Contract nr. 05KOS01/04/005

Consortium of

Espoo, Finland

KOSOVO

Studies to support the development of new generation capacities and related transmission - Kosovo UNMIK

FINAL REPORT

November 2007

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EC funded project managed by the European Agency for Reconstruction

REQUESTER Contract nr. 05KOS01/04/005

KOSOVO

Studies to support the development of new generation capacities and related transmissionKosovo UNMIK

November, 2007

Key Experts:

Tuomo Marjokorpi, Kostandin Robo, Francesco Ruggiero, Herbert Hanke, Thomas Bonn, Jonas Lindholm and Sami Mäkinen Leader of the Consortium Pöyry – CESI – Terna - Decon Pöyry Energy Oy Tekniikantie 4 A P.O.Box 93, FI-02151 Espoo Finland + 358 10 33 24891 (tel) + 358 10 33 24358 (fax) www. poyry.com

This report was prepared with financial assistance from the Commission of the European Communities. The views expressed are those of the consultant and do not necessarily represent any official view of the Commission or the Government of this country.

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Executive Summary1

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Findings and Conclusions of the Experts: Task 1. Power market review 1. Domestic power total demand has gone up 2000-2006 at a rate of 8,2 %/a but the technical and non technical theft) losses account 50 % of the demand. The supplied energy in 2006 was 4270 GWh with a peak demand of 1050 MW. It has been estimated that additional 480 GWh/a was not delivered due to the unavailability of generating capacity or imports.

2. It is conservatively predicted that the losses can be gradually reduced down to 18 % by 2020.

3. Assuming medium growth economic scenario the household electricity consumption grows slowly as the loss prevention hits that sector, whereas the services and industrial sectors will grow at a brisk 5-6 %/a. The total growth rate is estimated to be a modest 2,1%/a by 2020.

4. In the medium growth scenario the domestic demand would go from the present 4600 GWh to 6100 GWh by 2020. The expected peak power demand will go up to 1410 MW 5. In case of high growth scenario the demand development is much faster and the average growth is 4,2 %/a resulting in an annual demand of 8500 GWh/a by 2020. The peak demand would be then 1890 MW. 6. The SEE electricity market has gone through profound regulatory changes after the Athens Memorandum – still there is political influence at high levels and the transmission organizations are not truly independent 7. Only few power exchanges have been formed – Greek and Romanian ones most advanced 8. Only few generation companies privatised – most still under strict state controls 9. Cross border trade of electricity in the hands of independent traders – exceptional in international comparison 10. Albania, Macedonia and Montenegro are the first tier of potential importers of Kosovo C capacity followed by the second tier of Croatia, Bulgaria, Romania and Bosnia-Herzegovina.

11. Potential investors may bring exports even to Greece, Italy, Austria and Turkey 12. Credibility of a sales contract to Kosovo weak due to low collection rate and high losses 13. Albania would be good export potential 2,8-4,8 TWh/a and balancing with her hydro would offer additional benefits to Kosovo – needs new 400 kV line connection 14. Montenegro and Macedonia are potential off-takers with a aluminium smelter in Montenegro.

Some 2,5 TWh/a could be exported in 2015 to both countries 15. Pan-SEE power exchange being considered and developed – currently the prices in Greek and Romanian exchanges approaching eac other 16. There are considerable price variations across the SEE region at HV level as the consumers were interviewed. The average was 33 €/MWh and the variation was from 22 to 47 €/MWh depending on contries´ generation structure.

17. The SEE-market survey also identified 108 potential clients within the first and second tier markets with the current consumption of 42 TWh/a. The first tier market alone could absorb the export potential of the new power plant in Kosovo.

18. The SEE electricity market was modelled for price estimation. The model includes eight countries plus Greece , Italy, Austria and Turkey through their interconnections.

19. The demand, generation capabilities, transmission capacities and fuel prices were estimated to develop as the updated GIS report indicates. Medium growth scenario with CO2-price of 20 €/ton was taken as the base case. The average wholesale price will gradually go up from 35 €/MWh to 55 €/MWh by 2020 and thereafter the increase is relatively moderate to 57 €/MWh by 2030. In case of more rapid economic growth the generation is forced to use more gas and the price is estimated to hit 95 €/MWh by 2015 and thereafter the increase is more moderate up to 110 €/MWh by 2030. In this case CO2-price of 40 €/ton is assumed. All the monetary figures are constant, early 2007 base.

Task 2, Transmission System Impact Assessment 1. This task comprised of analysis how the new power generating capacity fits into the SEE transmission system, identifying maximum possible unit capacity by its dynamic behaviour and establishment of the costs of connection (to be borne by the transmission system operator KOSTT in Kosovo).

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2. Currently there are three 400 kV lines of approximately 1000 MW transfer capacity each to Skopje (Macedonia), Nis (Serbia) and Ribarevina (Bosnia-Herzegovina). Additionally there is a 220 kV line to Fierza (Albania) with 250 MW transfer capacity. During the past years 20002006 these lines have transferred considerable volumes of power (700-800 MW) towards south.

3. The transmission model comprises of the grids in Slovenia, Croatia, Bosnia, Serbia, Montenegro, Macedonia, Romania, Bulgaria and Greece plus interconnections with Turkey, Ukraine, UCTE and Hungary. There are more than 4000 substations and 5500 lines in the model.

4. REBIS GIS figures have been used for further development of power systems. The bilateral transactions are expected to be in a range of 2700- 3600 MW. 5. 400 kV new lines Kosovo - Kashar (Albania), Kosovo – Skopje 4 (Macedonia) and Skopje 4 – Leskovac – Nis (both in Serbia) have been considered in the static and dynamic analysis.

6. Three basic plant configurations have been analyzed: 4 x 500 MW, 3-4 x 600 MW and 1 x 500 MW & 2 x 750 MW. All these capacities net at the 400 kV bus bars of the plant. The first unit is estimated to be on line in 2012 and the plant fully developed by 2018.

7. Two approaches have been calculated: The maximum power transfer from Kosovo to all directions and another method to graphically present three dimensional monogram illustrating the export transfer limits to each direction 8. Net Transfer Capacities of the lines are defined by calculating Power Transfer Distribution Factors (PTDF), Outage Transfer Distribution Factors OTDF) and Line Outage Distribution Factors (LODF). For example in 2012 100 MW excess power in Kosovo would go as follows: 12,3 MW to Serbia, 17,1 MW to Macedonia, 19,3 MW to Bosnia-Herzegovina and 49,4 MW to Albania (39,4 MW through the new 400 kV line) provided that all the lines are in operation.

Alternative figures have been established for cases where a 400 kV line is out of operation.

9. The export capacity to Albania is around 1000 MW during 2012-2015 and thereafter it will go down to a range of 750 MW provided that the new 400 kV line has been built. That line addition is the most critical one while considering the export possibilities from Kosovo 10. The export capacity to the south, Skopje is in 2012 over 1100 MW but gradually goes down to 600 -700 MW level by 2016 and stays there by 2020. The new Albanian 400 kV line boosts the capacity of that direction by 400 MW and it is included in the figures above.

11. The export capacity to the north is over 1600 MW in 2012 if the 400 kV line to Albania exists and without that slightly over 800 MW. Due to increasing loads the capacity will go drastically down to 400 MW by 2018.

12. Summarizing the Net Transfer Capacities it can be said that NTC from Kosovo will decrease during the study period and without new line additions can arrive at not acceptable levels.

13. The most important line addition to the existing system is the line Kosovo – Kashar in Albania, the next one is a new line to Skopje and that followed by a line fom Nish to Skopje.

14. Stability of the transmission system has been analyzed what regards to generator synchronism and voltage oscillations of the rotor angle, system damping characteristics and transient voltages and frequencies of the grid 15. The following disturbances have been analyzed: Generator trips, three phase short circuit and line trip close to Kosovo plant and critical clearing times have been calculated for the proposed plant concepts.

16. The only plant concept being stable throughout the investigation period of 2012-2020 is 4 x 500 MW. 600 or 750 MW net capacity units typically cannot bear possible faults of the 400 kV lines close by. The proposed 400 kV line additions will not change the situation in this respect.

17. The short circuit analysis of the Kosovar system revealed that the existing 220 kV circuit breakers at Kosovo B are undersized what comes to the predicted short circuit loads at that network.

18. The last part of the task identifies connection concepts of the new plant to the existing Kosovar 400 kV system depending on the plant site alternative (Kosovo A, Kosovo B or Bivolak). There are equipment lists, blockdiagrammes and drawings to illusrate the proposed concepts.

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19. There is also a cost estimate on the connection cost – the part to be borne by the transmission operator according to the current rules. The cost estimates are: Kosovo A site 18,5 million € Kosovo B site 23,0 million € Bivolak site 26,9 million € It is also proposed to have a back-up connection at 110 kV and its cost is estimated to be 1,5/1,9/2,7 million € depending on the site.

Task 3, Plant siting and technical analysis Task 3.1.A, Lignite Quality Data Collection 1. Eight separate drillings were made by INKOS quite evenly distributed over the entire Sibovc field.

Every drill yielded three lignite samples: one from the top, one at the middle and one from the bottom of the lignite seam.

2. The samples were analyzed by a ISO accredited laboratory for normal fuel parameters as well as for harmful elements.

3. The Sibovc lignite is almost free from chlorine and mercury – its corrosive behaviour can be considered relatively low 4. The ash fusion temperature is low, 1200-1300 °C, and that will need special attention in the boiler furnace / combustion design.

5. Five samples were analyzed for radioactivity – the results are at a normal level and no special precautions are needed in this respect Task 3.1.B, Ash utilization 1. Ash from lignite combustion can be utilized for various purposes: cement manufacturing being the most popular use, filler in road construction and minor uses for brick making etc.

2. Unburnt carbon, chlorides and alkalis in the ash are typically undesired elements and their contents have to be periodically tested. The unburnt is the most critical and its testing is required once a day as the combustion conditions may change rapidly.

3. A cement plant can mix fly ash 20 to 50 % of the final weight of its product depending on the quality produced.

4. The fully built 2000 MW plant will produce some 8000 t/d ash (2,5 million tons/a) and there is no off-takers for that whole volume – therefore ash dump at Mirash should be organized.

5. In case of gypsum production by the wet flue gas desulphurization a local company has expressed its interest to use that for board making Task 3.1.C, Plant maintenance practises 1. A brief presentation of current maintenance issues on pulverized or circulating fluidized bed fired plants is made 2. Current philosophy is not to build huge maintenance organization for the plant whereas a core team with good preplanning would take care of the plant.

3. All major repairs or maintenance interventions eg. annual shutdown are contracted to the service providers – thus keeping the number of own personnel low 4. A good risk analysis is recommended during the plant design phase what regards to critical components with long delivery times or their availability should be confirmed with their suppiers Task 3.1. D, Technology review 1. The climate change challenge is pushing utilities to look for highest attainable efficiencies and even to consider CO2-capture – this is real market driver 2. The lignite from Sibovc field is relatively good if compared with the lignites around the world (low moisture – medium in ash) 3. European utilities are currently building or planning coal/lignite/brown coal plants having supercritical steam parameters in the range of 270-300 bar/600 °C. These parameters yield an efficiency of 46 % for ordinary coal or 43 % for lignite – the difference is due to the moisture in the fuel and higher required auxiliary power.

4. Supercritical CFB-boilers (Circulating Fluidized Bed) do not exist in operation, one 460 MW unit is under construction in Poland and will start in 2009. That combustion concept is considered as it would do desulphurization directly in the furnace while the fuel contains limestone – the boiler plant would be simplified.

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5. There are projects to introduce better Ni-based materials for 700 °C steam and get the efiiciency up by 2 percentage points – commercially available for plants commissioned around 2020 6. Lignite drying is under development and the German utilities are currently building pilot scale plants to verify its functionality before employing it in full scale in the new (or rebuilt) plants by 2015. The concept improves the plant efficiency by 0,5-,07 percentage points and makes the boiler slightly smaller.

7. CO2-capture technology is partly known and employed in chemical industries but its application and testing for power generation will take still time and it is expected to be commercially available beyond 2025 – highly depending on international agreements on the climate change.

8. For power generation oxyfuel firing and CO2-capture with amine appears to one of the favourites at the moment – the plant initial cost per net kW will go drastically up and its efficiency will drop below 35 % due to huge additional auxiliary power demand – the cost of generation may go up by 70 % according to one US study (Gas Turbine World, February 2007).

Task 3.2.A & B, Carbon market 1. Greenhouse gases are controlled by the Kyoto protocol and within EU Directive 2003/87/EC 2. The current annual CO2-emission of the Kosovo power generation is around 7 million tons and the new 2000 MW plant would add some 12-13 million tons of CO2 more. The envisaged shutdown of Kosovo A in 2016 will reduce the emissions by 3-4 million tons. Anyhow the emissions will be double with the new capacity and stay at 15-16 million annual tons.

3. Addition of the new capacity for exports makes it very difficult to find any mechanism to benefit (Clean Development Mechansim or Joint Implementation) 4. There are three approaches to CO2-reduction: A. Kosovo has not ratified Kyoto protocol – there are no limits for CO2-emissions B. Kosovo will ratify Kyoto protocol but will not accept any cap as developing country (like Brazil, China, India etc.) – CDM project associated with the new plant is possible but it is unlikely to find a real reduction of greenhouse gases in comparison without the project C. Kosovo will ratify Kyoto protocol with cap on the emissions. JI projects are possible but the unknown item is the cap set for the country 5. At the moment approaches A and B are the most probable ones in near term and it is assumed that neither CDM nor JI can be applied in the project

Task 3.2.C, Baseline design 1. The following plant configurations were found to be of interest:

4 x 500 MW net applying pulverized firing 4 x 500 MW net applying CFB-combustion technology 1 x 500 MW plus 2 x 750 MW net applying pulverized firing The decision was made on these concepts before the maximum unit size limitation by the transmission system stability was known. Anyhow the large plant with 750 MW units will demonstrate the savings potential in the generation cost.

2. The plant can have “standard European steam parameters” i.e. 270 bar/600°C/47 bar/600°C as the lignite was not found to contain excessive amounts of corrosive elements.

3. The steam boiler is assumed to be designed for 6,0-9,5 MJ/kg heat value lignite – a tighter range would save in the fuel handling equipment capacities provided that the mine can control the heat value of the delivered lignite by blending.

4. Special emphasis has to be paid onto burner/combustion design as the ash fusion temperature is low and in pulverized fired furnace the ash will be in liquid form in the hottest section 5. The plant emissions will be according to EU LCP (Large Combustion Plants) directive – NOxemission is typically controlled by combustion in the furnace on lignite without any additional measures – SO2-emission will need FGD (Flue Gas Desulphurization, wet type assumed to be applied) plant in case of applying pulverized firing technology whereas the limestone in the Sibovc lignite would do desulphurization in CFB-firing – particulates are controlled by an electrostatic precipitator.

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6. The flue gases will be taken to the centre of the cooling tower and the thermal lift of the cooling air is used to disperse the flue gases – typically this approach doubles the effective stack height – estimated height of the cooling tower 110-120 meters.

7. Wet lignite produces large volume of flue gas compared with ordinary coals and efficient heat recovery from those wet flue gases will be done by installing heating surfaces for condensate and boiler feed water parallel to the conventional combustion air preheater plus a special heat recovery surface after the electrostatic precipitator to provide heat to the combustion air prior to its introduction to the rotary air heater – these heating surfaces push the boiler and plant efficiency up.

8. The lignite yard, good for 14 days´ full load operation, is proposed to comprise two stockpiles of approximately 45 x 230 m per 500 MW unit. There is a stacker-reclaimer between the stockpiles to fill/reclaim the piles. There will be also possibility to deliver lignite directly from the mine conveyor system to the boiler silos.

9. The fly ash will be pneumatically collected from the plant hoppers into an equalizing bin.

Thererfrom it will be fed to a mixing tank to produce slurry with water (ratio 1:1). That slurry can be pumped to the ash dump at Mirash. The slurry mixture is such that it will gradually solidify at the dump. Slag from the furnace will be cooled and crushed before taking it also to a mixing tank. The slurry transfer systems are common for fly ash and slag. (Kosovo B has been experimenting on this type of system for a year) 10. The plant will need 1,4-1,5 m3/s fresh water and that is assumed to be drawn from the IberLepenc system. The raw water treatment is conventional flocculation and filtration process. The consultant proposes to use acid regenerated softerners with gassifiers to produce make-up water to the evaporative cooling tower instead of the currently used lime process to reduce problems with sludge.

11. There has been some public notes on the availability of water. Therefore a calculation has been made on the additional cost of water if the new plant would apply entirely dry cooling for dissipating the turbine exhaust heat (2100 MW). One 500 MW unit would loose 10,5 MW as an annual average from its net power while applying Heller-type dry cooling if compared with a conventional evaporative cooling tower. The plant would save annually 36 million cubic meters of water out of otherwise used 45 million cubic meters. The dry plant is estimated to cost 25 €/kW more. (2 %). The plant efficiency goes down by 2 % i.e. from 42,3 % to 41,5 %. The cost of the saved water in sents/m3 results the following by discounting at 10 %/a the loss of revenue and additional operating costs: Sales price of electrity No CO2-charge 20 €/ton CO2-charge

€/MWh

40 12 61

50 36 sent/m3 85 sent/m3

12. The electrical system of the plant is outlined in general form and a black start-up gas turbine of 40 MW is proposed to ensure auxiliary power in all possible emergencies. A 110 kV connection to Kosovo grid is proposed to provide auxiliary power in case of a failure of a unit auxiliary transformer – those three winding transformers are only for needs of one unit 13. The auxiliary power distribution voltage is proposed to be 10,5 kV due to large motors for pumps and fans. In a case of 750 MW units the electric boiler feed pumps are proposed to be only 25 % instead of 35 % for 500 MW in order to keep the start-up currents under control.

14. Every unit will have a small diesel emergency generator for safe shutdown of the plant and for lights in plant blackouts 15. The boilerhouse with pulverized fired concept would be of tower type and its height is estimated at 140 meters - the foundations are made on a solid concrete slab some 10 meters below the existing ground level.

16. The estimated efficiency of the plant in different concepts is as follows: Unit size Combustion Efficiency %

500 MW PF CFB 42,3 42,1

750 MW PF 43,0

The combined efficiency of 1 x 500 MW & 2 x 750 MW plant at its full capacity is 42,8 %.

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Task 4, Site selection Subtask 4.1. Environmental and social impact assessment 1. During the early phase of the study work sites to be investigated were named: Kosovo A (old fertilizer-gasification plant area), Kosovo B and Bivolak. Grabovc valley was one of the potential sites during the pre-feasibility study but it was replaced by Kosovo A. 2. Preliminary site plans were established for those sites: In Kosovo A the new plant, 400 x 1000 m is placed parallel to the railroad on its eastern side and the lignite yard will use the existing yard as Kosovo A is expected to be closed while the first new unit will start. At Kosovo B the new plant would be stretched from the Sitnica River to the bordering railroad (the length of the four units with CO2-capture space reservation is such that the open space between the existing plant and Plementina village in the north is not sufficient). The lignite yard is located behind the new plant where the existing fly ash pile stays. In Bivolak there is complete freedom to locate the plant. The lignite yard is in line with the plant i.e. the site occupies a space of approximately 500 x 1500 m.

3. A thorough investigation was made on air pollution around the proposed sites – the current situation is dominated by the sources near ground – above all ash tips – PM10 and Niimmission maximal values exceed allowable limits multifold – SO2- and NOx-immissions are far below the limits 4. The air pollutants emitted by the new plant and refurbished Kosovo B will not cause any harm and the ground level concentrations will be extremely low by these sources 5. Municipalities Kastriot and Fushe Kosove are the most affected areas. They have some 17.000 inhabitants 6. There is heavy soil contamination by airborne heavy metals for some 18 km2 and that area may be unsuitable for growing foodstuff 7. A considerable increase in occurrence of health problems were detected in some municipalities close to the ash dumps – not necessarily depending of the power plant sites – this issue is considered to be legacy of the past but it cannot be solved overnight – anyhow it is not considered to be decisive factor in site selection 8. The Sitnica River was found to be highly contaminated with heavy metals and suspended solids exceeding EU and WB limits multifold – for site selection handling of the surface waters is relevant 9. For Fauna, Flora and Habitat Bivolak site and its surroundings were found to contain significant biodiversity values and its protection is recommended 10. Items with cultural, historical or archaeological values have not been found during the inspections of the sites by the experts 11. In Bivolak site resettlement of 30-40 households will be required. Kosovo A and B site are free in this respect 12. Compensation of the agricultural land is required in Bivolak. KEK controls the sites Kosovo A & B. 13. Landscape impact of the new plant is most significant in Bivolak where 100-140 high structures are introduced in open agricultural land. Kosovo B site will have considerable landscape impact and Kosovo A slightly less visible. All the sites are flat and the new plant will be visible at a distance of 10-15 kilometres.

14. Phenols are found in the Sitnica River in various locations – there is no information whether it is from natural sources (lignite9 or from old lignite treatment processes – natural phenol degrades in soil within one day and in surface waters within a week 15. Kosovo A soil and phenols are investigated separately, Kosovo B site has the huge ash pile and Bivolak is of virgin agricultural soil. Anyhow foundation work for the plant will excavate the topsoil off and that can be transported to safe dump area if found to contain hazardous elements.

Other site selection aspects 16. Lignite supply from the mine: Kosovo A and B are quite equally located if the first lignite to new plant will originate from the SW Sibovc development. The routes of the existing conveyors can be utilized as the route over the new Sibovc mine area is transferred to the bottom of the existing mines Bardhi and Mirash. Bivolak site will need longer conveyors from that starting point. If there would be two independent mining operations and that new one would start in Sibovc valley the distance to Bivolak would be very short – the time required to start that operation might push the plant start by few years.

Assignment n°: 05KOS01/04/005 Page 11 (14) 17. Ash dumping from the new plant should be also possible at the existing Mirash dumping area.

That would need agreements with the entity taking care of the dump. In this respect Kosovo A has the most ideal location (short distance) followed by Kosovo B and the Bivolak site being the most distant. The route for the conveyor belt/pipe should follow the lignite conveyor(s).

18. There is no major difference in water supply possibilities between the investigated sites. IberLepenc can supply water to the all sites. In Kosovo A there is a possibility to utilize the existing non Iber-Lepenc system from Lap and Batlava. City of Pristina may be interested in taking over that source of water.

19. Regarding to accessibility of the sites Kosovo A and B need just short paved accesses to the new area. In Bivolak a new two lane road with a bridge crossing the Sitnica River has to be built from the main road pristine-Mitrovica.

20. Connection to the 400 kV Kosovo system is short, Kosovo A having the lowest cost followed by Kosovo B. Bivolak is a little bit further away and that pushes the connection cost up by 4 million €.

Subtask 4.2. Preparation of drawings and diagrams 1. Topographic review was made and topographic maps from 1970´s were found to exist.

Additionally NATO/KFOR has produced orthophoto based maps on the area few years ago.

Those ones have been used in the study work.

2. KEK does not have complete site plans for Kosovo A or Kosovo B in electronic format 3. As the site selection is made detailed mapping survey of the selected site should be launched to produce firm data base for further actions 4. What regards to seismic activity at the sites all those sites are fairly equal in this respect and are under category VIII.

Task 5, Economic and financial analysis 1. Financial model on the power plant alternatives has been developed. It includes three capacity/technology options as presented above.

2. There is a separate site cost part where proposed sites can be compared what comes to the site specific lignite delivery, water supply, ash disposal or electrical connection costs. The sheet also includes the costs of different access arrangements as well as the possible site cleaning/levelling cost. The differences are marginal between the sites: Kosovo A site appears to be the lowest cost what comes to the initial cost as well as to the operating costs. The Bivolak site is the lowest cost to construct but the operation is 2-3 million €/a more expensive due to the longer distances. A big unknown for Kosovo A is the cost of vacating the site and its clean-up.

3. The actual power plant model assumes that the lignite is delivered to the plant by the mining operator at a fixed cost. The same applies to the ash: The plant builds the ash pipeline to the dump but the actual ash pile is taken care by the mining/ash dump operator at a fixed fee.

4. The electrical power is sold at 400 kV bus bars at the plant. The sales prices can be freely adjusted as per Task 1 price projections Low – Central – High..

5. The plant costs has been established for all three options: the first unit is estimated to cost 640680 million € excluding interests and frinancial charges during construction i.e. 1350 €/kW. The following units are estimated to be 12-15 % cheaper per kW installed as the infrastructure and mobilization costs are included in the first unit. Anyhow the current boom in the power plant costruction is pushing the prices up considerably.

6. The model assumes a construction schedule where the units follow each other in an optimal way – no need to demobilize the construction teams i.e. the whole 2000 MW plant will be completed in 5-6 years from the first unit start commercial operation. The model makes possible to manually adjust these construction & disbursement schedules.

7. The personnel sheet outlines the necessary personnel required to manage the construction of the plant as well as to operate and maintain it. The first unit will employ some 130 persons and the following units need around 70 additional persons each. Periodic maintenance is assumed by contractors as there is no need for continuous employment of such personnel. The total direct employment of the plant when fully developed is 270 – 340 depending on the number of units (3 vs. 4).

8. The variable operation cost of the plant is estimated at 11,7-11,9 €/MWh based on 8 €/t lignite cost delivered to the plant.

9. The financial analysis allows the user to define leverage, equity cost, interest rate, loan repayment period, asset depreciation period, tax rate and it calculates the weighted average cost of capital (WACC). Additionally inflation and CO2 –cost can be introduced into the model.

Assignment n°: 05KOS01/04/005 Page 12 (14) 10. The license costs (income to Kosovar government) can be introduced in a form of lignite fee (€/ton), mine rent (€/a) plus the ash disposal cost (€/a).

11. The model includes a reference base case as a guideline but the user can key in his own variables as a deviation % from the base case.

12. The result sheet presents NPV, IRR, EVA for Kosovo (Economic Value Added), Tax income in various formats.

13. The presented base case with the central electricity price scenario produces 14 %/a IRR. The CFB-combustion technology with 500 MW units gives the highest return but the difference is very marginal.

Task 6, Work plan 1. Some remarks have been made on the contracting methods of the proposed plant: Typically signle lump sum turn-key contracts are slightly more expensive as multi-contract type EPCM (Engineering, procurement and construction management) implementations. However, the lenders prefer single responsibility by a turn-key contractor especially in cases where the plant owner/developer does not have solid risk taking capability or the project financing is searched.

2. Typical organizational diagrams for large power plant construction projects are presented for understanding the complexity of those activities.

3. The investor selection process and timely contract award is of utmost importance as the investor needs to make his firm commitments on the plant construction contracts as soon as possible in this hot market situation. After the investor selection he will need around one year to get permitting (EIA) and financing in place to start the actual construction (assumed to take place late 2009). There is no indication that the market would cool off. A 500 MW plant precontracted within 2008 will not be in commercial operation before mid 2014. A relatively detailed time schedule on the first unit construction is presented in the report 4. The site selection is of crucial importance for: 1. Clean-up planning, contracting and execution before the actual plant construction can commence. 2. Detailed topographic mapping of the selected site and its surroundings has to be done to have a firm base for further planning nad development. 3. The investor shall know on which site to start to prepare EIA or the actual soil surveys for the plant structures.

5. When the site is selected the process of transfer of ownership/control/liabilities of the site to the investor should be clearly defined.

6. Decision on the lignite supply arrangement/mining operation structure has to be made in order to guarantee fuel for the new plant. The same applies to the ash disposal arrangements.

7. The investor has to discuss and agree on the terms and conditions of the water supply with Iber-Lepenc, the electrical connections with KOSTT. 8. The investor shall establish his organization and after winning the selection process immediately start to establish his organization in Kosovo, contract/confirm his possible precontracts on other services for the plant.

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Signature of Key experts: