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IEEFA Review: Proposed ‘New Kosovo’ Coal-Fired Plant Would Drive Electricity Costs Higher

December 01, 2015

CLEVELAND, Dec. 2, 2015 (IEEFA)—The government of Kosovo should abandon its plans to build a new coal-fired power plant, the Institute for Energy Economics and Financial Analysis (IEEFA) has concluded in a review of the project.

“Introduction of the New Kosovo coal plant would likely cause electric rates in Kosovo—a country whose people are already paying too much for electricity relative to their income—to rise by up to 50 percent,” said Tom Sanzillo, director of finance for IEEFA.

Sanzillo noted also that the New Kosovo plant has been under consideration off and on for over a decade and that the size and scope of the project has changed repeatedly and without explanation, including as recently as two weeks ago. Sanzillo questioned in particular the World Bank’s support for the project.

“The World Bank is committed to assisting the poor, but this plant—under any of the various scenarios that have been put forth thus far—would leave the poor paying more for electricity,” Sanzillo said. “It would also harm national economic growth by encumbering the public with large loans for decades to come. It is an unnecessary burden, at a significant expense, with unreasonable terms and extravagant subsidies.”

IEEFA, a U.S-based group that studies coal finances globally, is working with the Kosovo Civil Society Consortium for Sustainable Development (KOSID) to research the project.

“The proposed ‘New Kosovo’ coal plant, if built, would cause the price of electricity in Kosovo to rise to unreasonable levels and would place unnecessary burdens on the Kosovo economy, its businesses and residents,” said Visar Azemi, KOSID’s coordinator. “Any bank considering subsidizing this wasteful and expensive project should invest instead in supporting the development of renewable energy and energy efficiency in Kosovo.”

IEEFA’s research suggests also that the cost of the plant could be significantly higher than the government of Kosovo has acknowledged.

Among the project’s red flags:

  • Reliance on a sole bidder (U.S.-based ContourGlobal, which apparently is seeking a high return on its 30 percent equity stake) poses numerous risks and shows that the project is a weak candidate for investment.
  • Financing for the project, at any likely size or terms, would put Kosovo’s banking system outside its loan-to-deposit credit benchmarks, which would slow economic growth, raise interest rates and make Kosovo a generally unattractive investment on other fronts.
  • Neither the government nor any potential investors in the project have come forth with publicly available information on how the project would affect ratepayers.
  • The project runs the risk of high costs related to public opposition to the forced dislocation of residents, higher rates of air pollution and higher electric rates.
  • Earlier plans for the plant have been based on economic and energy growth assumptions that have failed to materialize.

IEEFA issued these additional warnings:

  • No investment bank has come forward publicly with financing, and the government’s most recent disclosures lack mention of how the plant would be financed, a sign that the deal is not creditworthy and that the government of Kosovo would be dependent upon government-sponsored lenders for deep subsidies.
  • Recent statements of support for the project by the World Bank and the U.S. Treasury suggest that outsiders who stand to gain will drive up costs.
  • Even with considerable improvements in billing, collections and loss-management processes over the past few years, Kosovo’s electricity system continues to suffer from long-standing weak management controls—a history that would suggest cash flow problems for the new project that would jeopardize repayment to equity investors and lenders.
  • Information published thus far on the proposed plant lacks timely, relevant, detailed or consistent technical data on the construction, financial, operational, energy, utility management or social data necessary to formulate baseline measures or forecasts. The proposals published to date, which do not consider a full range of energy options, also illustrate how Kosovo’s electricity system lacks a reliable, uniform system of financial presentation with transparent rate setting, cost and revenue reporting.

Media contacts:

For KOSID: Visar Azemi, [email protected], Tel.: +377 44 116 296
For IEEFA: Karl Cates, [email protected], Tel.:+1 917-439-8225 or Tom Sanzillo, Tel: +1 518-320-0271



The Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy and to reduce.



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