Electricity

A2A and Government of Montenegro reach agreement

Published

June 16, 2016

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Published:

June 16, 2016

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Italian partner A2A will remain to be co-owner in Montenegrin Electric Power Company (EPCG), while the second block of thermal power plant Pljevlja will still be built. Domestic media reported only an official confirmation is expected from A2A about the agreement for the next five years.

The facility will cost EUR 340 million, mostly financed by the Czech Republic. The guarantees will be provided by EPCG, which set over EUR 150 million for the purpose. Pending government approval, a long-term contract can be signed with A2A. A put option will be provided for the Italian company to be able to exit from EPCG, with the obligation by Montenegro to pay it EUR 250 million in seven annual installments. The clause can be exercized in extraordinary circumstances such as inputs from foreign markets or a natural disaster.

Unofficial information appeared that the option was given in exchange of A2A’s waiver of the right to arbitration.

Earlier in June, representatives of A2A sent an official letter to prime minister Milo Đukanović in an attempt to accelerate the completion of the negotiations between the company and the Government of Montenegro, according to media reports.

Details of the letter weren’t revealed, but allegedly vice premier Vujica Lazović and minister of economy Vladimir Kavarić were criticized not only for stalling the resolve of disputes, but also for the reopening of some of the points that were agreed in the draft of an agreement.

A2A bought a 44% share in Montenegrin Electric Power Company (EPCG) for EUR 430 million in 2009. The agreement on how the utility is managed expired last year and a final deal on the basic elements of future cooperation remained out of reach after several rounds of negotiations. The bone of contention has been the construction of block 2 of thermal power plant Pljevlja.

The government in Podgorica claimed the project has the priority, that EPCG can finance the construction on its own because it has a significant amount of free assets, and that it could also get a loan arrangement. However, A2A disagreed, emphasizing that a third partner should be found.

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