Overview of Kosovo Energy Corporation International Investors’ conference – Kosova e Re Pristina - January 20th, 2010 Arben Gjukaj Managing Director of KEK J.S.C. 1
A Brief History 1999, to Date •
1999 hostilities cease and employees that were dismissed during the 1990’s in the energy sector return to their old positions and begin operating the energy network, generation facilities and coal mines.
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Operations are performed under the name of Kosovo Energy Corporation (KEK).
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1999 – 2006: KEK has a series of international management teams.
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2005-2006, KEK undergoes ‘incorporation process’, and becomes a joint stock company owned by the Kosovo Trust Agency (on trust)
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2006 – Spin off of KEK Transmission business into a new public company, KOSTT.
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2006 – Kosovo Regulator issues licenses to KEK for generation, distribution system operator and public supplier of electricity for entire Kosovo.
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2008 – Kosovo declares independence and new constitution declares all publicly owned enterprises (including KEK) are wholly owned by the Republic of Kosovo. 2
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KEK Today • Kosovo Energy Corporation J.S.C (Joint stock company) is a publicly owned company under Kosovo law. • 100% shares held by the Government of Kosovo, on behalf of the Republic of Kosovo. • Vertically integrated utility, with operations covering open cast mining, thermal power plants, small HPP‘s, and the distribution and supply of electricity. • KEK has over 7,800 employees and is the largest employer in Kosovo. 3
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KEK Today Over 400,000 consumers, of which:
− About 340,000 residential, 60,000 commercial (mostly small commercial customers) − Only around 250 large industrial customers. Wholesale tariff for electricity is 3.35 € Cents/kWh, and average enduse tariff is about 5.7 € Cents/kWh 1072 MW internal peak demand (13 December 2009) 5,074 GWh domestic electricity demand (2009) 114 GWh Export (2009) 178 GWh Transmission Losses (2009) Demand was met by Coal generation (4,656 GWh), Imports (611 GWh) and hydro (121 GWh) generation (2009) 4
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KEK Today Total KEK installed capacity in the system is 1,478 MW: 800 MW Plant A (5 units – 65 to 210 MW each, 37 to 46 years old) 678 MW Plant B (2 units – 339 MW each, 24 & 25 years old) Total available operating capacity is 910 MW: 380 MW Plant A (A3 & A4 each 120 MW and A5 140MW) 530 MW Plant B (B1 & B2 each 265 MW) Total Coal production in 2009 was 7.8 million tons KEK has contracts with one Kosovo owned Hydro generation company (30 MW); and has placed on concession a further four small KEK owned small hydro plants (total 14 MW) KEK’s purchase power costs for 2009 was approximately 50 million, and is projected to be about the same amount in 2010.
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Service Territory
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KEK Corporate Structure
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Coal Production •
KEK operates opencast lignite mines: Two mines, Mirash and Bardh opened in 1950s. In 2008, KEK opened a 3rd smaller mine nearby (Sitnica).
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Estimated remaining Lignite reserves at above mines is about 10 million tons, and will be depleted in 2011.
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2008 - KEK commenced implementation of the major capital project for opening a new mine, the Sibovc South-West Mine (SSW Mine), which is part of the larger Sibovc coal field.
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Cost of opening the SSW Mine is estimated to be over 390 million Euros; the majority of funding is covered by several loans from Kosovo Budget to KEK.
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Estimated reserves at SSW Mine is over 123 million tons of lignite, which is sufficient to supply the existing power plants until 2024.
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Excavation of coal from SSW mine will begin in April 2010. 8
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Coal Production
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Transition from the existing mines to the new Sibovc Southwest Mine
Task
Overburden
Bardh / Mirash
Coal
Bardh / Mirash
Main Refurbishments
Sibovc SW
Sibovc SW
1st OB System 3rd OB System 2nd OB System 1st Coal Excavator 2nd Coal System 3rd C.S.
2006
2007
2008
2009
2010
2011
2012
Transition from existing mine to the new Sibovc SW Mine is a complex process with manifold dependencies 10
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Coal Production
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Coal Production
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Generation •
Almost 100% of the KEK generation capacity is designed as base load and is fueled by coal, which limits unit load reduction capacity by about 25%. Therefore KEK has limited flexibility to reduce load during low load period at night.
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The generating units were designed for 30 year operating life. The KEK units are 24-46 years old. Plans are to retire A units by 2017 and B units by 2024.
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KEK refurbished A5 unit for reactivation in 2008 to reduce purchase power costs and provide better system reliability. Units A1 and A2 refurbishment has been stopped.
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New generation is planned to be operational about 2017 to replace the capacity of the retired A units.
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The A and B units (after planned repairs in 2010) will provide 960 MW of operating capacity, which is below needed capacity to meet Kosovo‘s demand until new generation capacity
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Generation – Hydro Plants • •
KEK‘s small HPPs are under concession; Projects aim to increase investments in HHPs that will increase the hydro power output:
HPP
Investment (EUR)
Capacities (MWh) Implementation
Istog
1.04m
0.8
13 months
Radavc
0.96m
0.65
12 months
Dikanc (rehab)
0.61m
1.4
6 months
Dikanc (expanded)
1.86m
2.66
24 months from the commissioning of overhauled Dikanc
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Distribution and Supply Business •
KEK operates over 5,200 km of distribution network covering the whole of Kosovo.
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Historically, commercial losses have posed a significant problem i.e. unbilled Energy as a percent of Energy Available for Sale.
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Commercial losses data for the years 2006-2009 is as follows: Year 2006 Year 2007 Year 2008 Year 2009
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31% 30% 20% 20%
Efforts to reduce commercial losses have focused on improving internal controls, and reducing corruption and poor performance by KEK employees. 15 15
Distribution and Supply Business •
From an overall commercial perspective, KEK must (1) Bill for Energy Available for Sale, and (2) Collect for energy billed. The table below shows the results for those two measures as well as the composite measure of Collection of Energy Available for Sale (EAFS).
Billed as % Energy Available Collection as % of Billed Collection % Energy Available
2006 69% 74% 51%
2007 70% 77% 54%
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2008 80% 76% 61%
2009 80% 81% 64%
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Distribution and Supply Business
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Minority Areas From 1999 to 2008 KEK was not allowed to disconnect consumers in minority areas (specifically Kosovo Serb areas) because of security concerns. BUT, nobody stepped up to compensate KEK for this usage. Minority areas consumption is about 10% of the total consumption in Kosovo. The average cost to KEK for unbilled minority areas was about 20 million Euros/year. In 2009, with the support of international community KEK started to address this issue. To date, KEK has regularized the supply of electricity to all minority communities in southern Kosovo. The only significant minority community that remains to be addressed is in northern Kosovo. 18
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Current Issues Facing KEK •
Payment for Electricity Consumed in northern Kosovo.
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Depletion of Existing Coal Mines, and opening the new SSW Mine.
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Aging Generation Capacity, need to implement capital projects in 2010.
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Energy Security problems: – Poor service quality. – Difficulties with enforcing disconnection of non paying customers. – Poor internal controls, which lead to corruption and poor performance by employees. – Interference, demands and expectations from external parties.
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Privatization • Two parallel transactions initiated by the Government of Kosovo: • Sale of KEK’s Distribution and Supply business: Process underway – expected to be completed in 2010/11. • Sale of Kosova B power plant and mines: Process underway – expected to be completed in 2010/11. 20
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Privatization – Legal Unbundling KEK J.S.C.
Mines
Generation
Unbundling
KEDS J.S.C.
Distribution
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Supply
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Privatization A successful Pre d leg ictable privatization reg al an fram ulator d outcome e y requires many work factors to be in place ‌
Upward performanc e trend or clear potential
R ta i o l an irp rp av eco t i z ta ss noi
Successful Privatization
g rin du ., ity n (e.g t bil e Sta nsitio g ass tra idin ping) avo strip
om te er p kr a dn M a yl p pu s
dnuoS lohekats red eganam tnem .e( )robal,.g
G o vern m en t w ilin g n esto su po rt co m m ercial p rin cip les
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Thank You!
Thank you for your attention!
Questions?
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