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The Government of the Republic of Serbia

In the service of citizens

No electricity price increase without industrial growth

Belgrade, 2 April 2010

Minister of Energy and Mining Petar Skundric said today in an interview with Vecernje Novosti that an increase in electricity prices will be considered only if industrial production grows by 2% and energy production by 3%, if there is no growth in these sectors the price of electricity will not be altered this year.

The Serbian government’s website presents excerpts of the interview.

Electricity Prices in Serbia:

Serbian people should know that electricity prices in Serbia are the lowest in Europe. Our price is 5.5 Eurocents per kilowatt hour whereas for instance in Croatia the price is twice as much.

By freezing the prices last year the electric power industry EPS took a great burden upon itself while struggling against the economic crisis. Prices have to be examined not just from a social standpoint but also from the perspective of the value of the company and planned activities. If electricity prices had been the same as in Croatia, EPS would have been worth €15 billion.

Fuel Prices:

Prices of derivatives are high. One of the reasons is indeed high state demand but there is also the fact that our refineries are not yet competitive at a regional level. I want to remind you of the level of damage caused to the refineries by NATO bombing. We have initiated capital repairs in order to become more competitive in the regional market. The state’s strategic goal is to establish the production of oil derivatives within the country and we will not abandon this goal.

Is it possible to lower fuel prices by reducing excise taxes?

A working group has been formed which will make an analysis and calculate what would happen if the excise policy were to be changed. If we were to reduce the excise tax on petrol by 10% and increase it for liquefied petroleum gas, petrol prices would fall by 5%. Sales would go up by 2.5% with proportional revenues going to the budget. This is one of the possible options.

The Ministry’s most important projects for 2010:

Work has started on the renovation of Kostolac thermoelectric power plant. Work will also take place on a new 500-600 megawatt power generation block and on increasing coal exploitation to 12 million tonnes per annum. We have a $1.250 million loan from China. The Chinese are providing 85% of the funds and everything will remain in EPS ownership. The value of the company will increase by €1 billion. By the end of this year we will choose a strategic partner for building the Kolubara B, TENT B3 and TE-TO power plants in Novi Sad. We will announce a tender for building a plant and coal exploitation in Stavlje, and for the revitalisation of the public coal exploitation company.

Project documentation for building 10 smaller hydroelectric power plants on the Ibar River will be completed by the end of this year and I expect that a joint company will be established by EPS and the Italian Seci Energia during the first half of the year. EPS will be co-owner of new hydroelectric power plants and funds will be supplied by the Italians. Work is also expected to begin on a feasibility study for the construction of a hydroelectric power plant on the River Drina together with Italy and Republika Srpska.

Possibility of linking South Stream and Nabucco gas pipelines:

None of our strategic partners has mentioned this subject and it is far more probable that South Stream will be developed as planned. Technically it is possible to link South Stream and Nabucco but that would require new agreements between all sides. That would imply fresh ratification of all agreements in parliament. I think that South Stream will be built according to established plans and dynamics.