The cost of the plant at 128.17 EUR/MWh is four times higher than the current cost of electricity in Kosovo under the system managed by KEK. The cost to produce electricity in the current system was $28.93/MWh in 2015 dollars, as reported by KEK. The current system is old. It is operated under a different set of business assumptions than that used for NKPP. Furthermore, although KEK also carries some debt on its books (see discussion of Risk Factors No. 5) the debt is managed flexibly including interest rate write-offs. The New Kosovo Power Plant model will carry profit on operations and substantial debt and equity costs that will need to be paid.
Kosovo’s economic development minister stated in November that the construction cost of the plant would be €1 billion. IEEFA finds that number dubious and has adjusted it to €1.35 billion, although it is likely that the final cost will be higher. Another way to consider the cost of the plant is to add up the cost of construction, financing and subsidies. This gives a clearer idea of how much the plant will actually cost.
The Economic Development Minister identified neither the source of the financing for the plant nor the source of any subsidy commitments, though presumably the World Bank would be a major source of subsidies. If the World Bank and other sources have a commitment to mitigating the electric price hikes caused by the plant, they will have to provide deeper subsidies than the €1.7 billion estimated above. Changing the interest rate on the loan to 2 percent would make the cost of electricity mor...
... middle of paper ...
... Kosovo Power Plant and its new financing demands.
The World Bank’s projections for Kosovo assume that the gross domestic product of Kosovo will grow by 4.5 percent per annum through 2025. However, the Kosovo economy has approached that rate of growth only once since 2010, with 4.4 percent growth in 2011. From 2010 through 2014 the average GDP growth rate was substantially below 4.5 percent and the rate is likely to remain below 4.5 percent in 2016 and 2017. The International Monetary Fund recently forecast Kosovo’s annual GDP growth rate through 2020 at 3.9 percent. While the government’s latest New Kosovo Power Plant announcement now refers to a 500 MW plant and a 16.6 percent reduction in the size of plant, even this may not be necessary.
Figure 8: Comparison of Actual Kosovo Generation 2004-2014 with 2011 World Bank Projections 2010 through 2025 in Gwh
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