Djedović Handanović with the IMF mission on energy projects and reforms

Regarding the energy sector, the focus of the current review of the IMF's standby arrangement is energy security and safety, which is why the meeting discussed planned investments and diversification of energy supply sources and routes contributing to this goal.

"The state, in managing the process of decarbonizing the energy sector, in accordance with assumed international obligations, must act responsibly, ensure security of supply at all times and improve energy independence. We are making efforts to create a favourable environment for private investments, but the reality is that without significant investments from the state, it is not realistic to keep a pace with the decarbonisation targets that we committed to under the Paris Agreement and the Sofia Declaration on the Green Agenda for the Western Balkans. It is also necessary to increase the efficiency of state-owned energy companies, which need to manage their operating costs in order to ensure sustainable operations, as well as better planning and efficient implementation of investments," said Djedović Handanović.

She reminded that the Baseline for the Energy Infrastructure Development Plan, which was adopted by the government last year, outlines priorities in energy infrastructure development, the implementation of which is already underway.

"We have conducted a public call for a strategic partner for the construction of 1 GW self-balancing solar power plants and are now negotiating commercial terms with the selected consortium led by Hyundai Engineering. We expect the new unit of TPP Kostolac B3 to be online soon, and in the first half of next year, the first wind farm of EPS, in Kostolac, will also be operational. The construction of the desulphurization plant in TENT A, currently the largest environmental project in thermal power plants in Europe and the third largest in the world, is being completed and will be put into operation in the next few weeks," said the Minister.

She emphasized that good progress has been made in preparations for the construction of PSHPP Bistrica, which is a key project for balancing new capacities from RES. For this project, spatial planning is underway, and intensive discussions are being held on securing financing.

"The priorities include the revitalization of four existing hydro power plants within EPS, in which we plan to invest around 400 million euros. Regarding the PSHPP Djerdap 3 project, the hydrological study and the Pre-Feasibility Study have been completed. Based on these studies, we will make a decision regarding the scope and phases of continuing this project," said Djedović Handanović.

She stated that the Energy Community has identified Serbia as a leader in energy reforms and the decarbonisation process., Furthermore, she noted that the Ministry of Mining and Energy was recognized as the most successful in implementing obligations related to the process of accession negotiations for EU membership in the last published report on the implementation of the National Programme for Adopting the EU Acquis.

"Last year, the first round of auctions for market premiums was successfully conducted, securing a new 715 megawatts from wind and solar energy. At the auctions, we achieved prices that are lower than the market price, and we plan to conduct the second round of auctions this year, once we have assessed that the market is ready," said Djedović Handanović.

She pointed out that last year, the construction of the Serbia-Bulgaria gas interconnection, which connected our country with gas sources from Azerbaijan and the LNG terminal in Greece, was completed on time. "We plan to continue diversification in the area of natural gas supply, with priorities being gas interconnections with North Macedonia and Romania." The biggest challenge with gas projects is currently the limited availability of financing, due to the attitude of international financial institutions," she said.

Regarding the situation in the power system, the Minister stated that the coal stocks at the landfills of TPP Nikola Tesla A and B and TPP Kostolac currently amount to about 2.2 million tons, and that the current hydrological reserves are twice as large compared to September last year and almost 40 percent higher than the five-year average.

One of the topics discussed with the IMF mission was the reforming of EPS, whereas it was noted that the financial situation of EPS is expected to normalize in 2023 after the stabilization of the electricity market and a very favorable hydrological situation. "Last year, EPS made a profit of 114 billion RSD, which is a historic financial result. Alongside the improved financial situation, investments have started to be realized more efficiently, and we will focus on even better planning and efficient implementation of investments. As part of the EPS restructuring plan, efforts are underway for operational and financial restructuring, better risk management, and improving human resources management, to ensure the company's sustainable operations," said Djedović Handanović.  

It was stated at the meeting that a new methodology for calculating electricity and gas prices for the industry is being developed in cooperation with EPS and Srbijagas, with the aim to review improvements and create preconditions for flexibility in responding to market trends.

Establishing of the RS Commission for Energy Networks, in accordance with the latest amendments to the Law on Energy from 2023, as an independent authority for the controlling of electricity transmission system operator and natural gas transmission system operator, in accordance with European regulations, enabled the successful reform of the gas sector that will continue this year as well.