Parallel to the development of renewable energy sources in Bosnia and Herzegovina and evolving energy law, the energy sector is facing the dual challenges of a green transition and an unpreparedness for the inevitable changes ahead. In recent months, Elektrodistribucija Republike Srpske has been grappling with serious issues. The most drastic example is that, due to insufficient coal supplies, the Ugljevik thermal power plant has failed to operate for several days on two separate occasions during the winter. This raises a fundamental question: Who really benefits from the Ugljevik coal-fired plant?
While Petar Đokić, the Minister of Energy and Mining of Republika Srpska, claims that it is cheaper to build a new power plant than to “keep the RiTE Gacko and Ugljevik plants alive,” a closer legal analysis of the situation in Bosnia and Herzegovina’s energy sector is both fascinating and alarming. (You can read more about his statement here: Balkan Green Energy News.)
How Did This Problem Arise—and Is an Energy Crisis Looming?
RiTE Ugljevik is currently confronting three major challenges, two of which have emerged from misguided legal counsel.
Resource Depletion – The primary issue is the lack of raw material—the near exhaustion of nearly all coal reserves.
Binding Legal Obligations – At the start of 2024, RiTE began executing a decision by the Arbitration Council in Belgrade, which mandated a payout of 125.2 million euros. Additionally, the company is now obligated to supply one-third of its produced energy to the Slovenian firm Elektrogospodarstvo Slovenije, Development and Engineering (EGS-RI) for the remainder of its operational life. Even without delving into the budgetary implications of this decision—which was communicated to the public without any detailed analysis—the permanent energy supply commitment to Slovenia represents a colossal problem.
Dubious Concessions and Legal Decisions – The third issue reads almost like a plot from a film, prompting anyone to wonder how accountability for such flawed legal decisions can be so easily evaded. In 2013, the government of Republika Srpska awarded a concession to “Comsar Energy Republika Srpska,” a company owned by Russian oligarch Rašid Serdarov, for the construction and operation of the “Ugljevik 3” thermal power plant, back in 2013. This contract was signed just before Europe’s energy transition began. However, the new block was never built. Publicly cited reasons include financing difficulties for projects that did not meet new energy regulations, internal changes within the company, and other issues. In the period following the concession, Comsar carried out numerous expropriations and even laid the groundwork for construction.
Instead of finding a legal exit from a contract that was clearly not being fulfilled—an option that exists in all well-regulated legal systems (though details on the governing law remain unclear)—an even greater absurdity unfolded. In January 2021, the government extended the concession period to 44 years. With the annexes to this extension, not only was the duration dramatically increased, but the Russian investor was also granted permission to export coal rather than being restricted to its exclusive use in electricity production. In practice, this change significantly boosts the potential future profits of the company. Under the old permit, even if the thermal power plant had been built, it would have generated little to no profit for years; now, with the new terms, the coal can be exported and sold to third parties.
What Is the Government of Republika Srpska Planning?
After RiTE was disconnected from the distribution network in January, the government publicly announced plans for the state-owned company Gas RES (fully owned by Republika Srpska) to acquire Comsar for 234 million KM. However, how exactly these funds will be secured remains unclear. Even more absurd is the minister’s simultaneous proposal to construct a new thermal power plant at a time when there is no access to credit for projects that are not aligned with the green transition—a situation that partly explains why the original concession failed! Ultimately, these misguided legal and strategic decisions will impact citizens the most, through higher electricity prices and increased fiscal burdens.
Bosnia and Herzegovina urgently needs to open its doors to the green transition, seeking alternative ways to generate electricity. While the minister expresses hope that new American policies might provide funding for thermal power plant construction, it is evident that these are mere hopes—not a concrete business plan for a budget already threatened by a 234 million KM liability and the uncertainty of financing further construction of a new block.
For more insights into energy law in Bosnia and Herzegovina, see our earlier article: Energy Law of Bosnia and Herzegovina – Connection with the EU, Investment Protection, and Transparency and Simplicity in Obtaining Permits for Renewable Energy Projects | IA Lawfirm
