Serbia’s IMF standby arrangement revision with energy security focus

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Serbia’s Mining and Energy Minister Dubravka Đedović Handanović spoke on Friday (15 March) with the IMF mission, led by Donal McGettigan, as part of the third review of a standby arrangement with Serbia.

The focus of the current revision of the IMF standby arrangement is energy security and safety. Planned investments and diversification of sources and routes for energy supply were discussed during the meeting.

“When managing the process of energy sector decarbonisation, in line with the international commitments undertaken, the state must behave responsibly, ensure supply security at all times, and enhance energy independence,” said Minister Đedović Handanović. “We are working to create a favourable environment for private investments, but the reality is that without significant state investments, it is not realistic to pursue the decarbonisation goals 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 must consider their operational costs to ensure sustainable operations, as well as better planning and efficient implementation of investments.”

The Serbian minister noted the Initial Foundations of the Energy Infrastructure Development Plan, adopted by Serbia’s government last year, which set out priorities in energy infrastructure development.

“We have issued a public call for a strategic partner for the construction of self-balancing solar power plants with a capacity of 1 GW and are currently negotiating commercial terms with the selected consortium led by Hyundai Engineering. We expect the new block of TPP Kostolac B3 to be connected to the grid soon, and in the first half of next year, the first EPS wind farm in Kostolac will be connected to the grid. The construction of desulphurisation facilities at TPP A is also nearing completion, which is currently the largest environmental project in thermal power plants in Europe and the third-largest in the world, which will be operational in the next few weeks,” the minister said.

The minister emphasised that good progress has been made in preparations for the construction of HPP Bistrica, which is a key project for balancing new capacities from renewables, for which a spatial plan is being developed and intensive discussions are underway on financing.

“Among the priorities is the revitalisation of four existing hydropower plants within EPS, in which we plan to invest around 400 million euros. The hydrological study and Preliminary Feasibility Study for the HPP Đerdap 3 project have been completed, and based on that, we will decide on the scope and phases to continue this project,” said Minister Đedović Handanović.

Speaking about the situation in the energy system, the minister mentioned that coal reserves in the dumps of TPP Nikola Tesla A and B and TPP Kostolac currently amount to about 2.2 million tonnes, and that current hydrological reserves are twice as high compared to September last year and almost 40 per cent higher compared to the five-year average.

The meeting also covered the reform of Elektroprivreda Srbije (EPS), where it was noted that the financial situation of EPS normalised in 2023 with stability in the electricity market and very favourable hydrological conditions. “Last year, EPS achieved a profit of 114 billion dinars, which is a historic financial result. Besides the improved financial situation, investments have started to be implemented more efficiently, and we will insist on even better planning and efficient implementation of investments. As part of the EPS restructuring plan, work is underway on operational and financial restructuring, better risk management, as well as improving human resource management, to enable the company’s sustainable operation,” said Minister Đedović Handanović.

It was further noted that a new methodology for calculating electricity and gas prices for the economy is being developed in cooperation with EPS and Srbijagas to identify improvements and create conditions for flexibility in response to market trends.

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