ERS plans EUR 218 million capital injection to fund construction of HPP Dabar

State-owned power utility Elektroprivreda Republike Srpske (ERS) plans a EUR 218 million capital increase in its subsidiary Hidroelektrane na Trebišnjici in order to raise money for the construction of the 160 MW Dabar hydropower plant.

The capital injection would not result in a takeover of hydropower producer Hidroelektrana na Trebišnjici (HET), according to the company statement.

The decision on raising equity will be discussed at a shareholders meeting scheduled for January 21.

The EUR 222.8 million contract for the construction of HPP Dabar was signed with a Chinese construction company

HET is the owner of HPP Dabar, the firm in charge of the construction of the facility. HPP Dabar signed a EUR 228 million contract in May 2020 with China’s China Gezhouba Group Co. on the design, construction, and commissioning of HPP Dabar. In December 2021, HPP Dabar signed a loan agreement with the Export-Import Bank of China.

The EUR 189 million loan represents 85 percent of the investment. HPP Dabar said in its request for a capital increase that it has to secure the remaining 15 percent, but also all other funds for project implementation.

HPP Dabar claims that it is necessary to provide EUR 108 million for the completion of the project

The project firm estimates the required sum at EUR 108 million, which is a combination of the 15 percent of the value of the contract with China’s bank, funds for the construction of tunnels, expropriation, loan insurance premiums and the Republic of Srpska’s government guarantees for the loan.

The existing shareholders have the preemptive right

The existing shareholders have the preemptive right, and if they do not use it, the remaining shares will be the subject of a public offer on the Banja Luka Stock Exchange, the draft decision on the capital injection reads.

The share price for shareholders is EUR 0.15, and the recapitalization will be declared successful if at least 60 percent of the offered equity is purchased.

The majority shareholders of HET are controlled by the government

The largest shareholders of HET are ERS (65%), the Pension Reserve Fund Management Company of the Republic of Srpska (10%), the investment fund management company Kristal invest (5,3%), and the Republic of Srpska Restitution Fund (5%).

Of note, ERS earlier launched a tender for a EUR 50 million loan, but it was unsuccessful. The company recently received the entity government’s consent to issue bonds on the Vienna Stock Exchange, and secure funds for the construction of HPP Dabar and HPPs on Bistrica river.

HET: capital injection is not privatization

Some media in BiH interpreted the decision on the capital injection as privatization of HET, so the Government of the Federation of BiH reacted by recommending to state-owned power utilities Elektroprivreda BiH (EPBiH) and EPHZHB to participate in the recapitalization.

ERS has already provided money for the capital injection in order to save at least 65% of the shares

ERS has already secured the funds necessary for the capital injection and the use of preemptive right, which will provide at least the existing percentage of ownership, HET said.

HPP Dabar estimated the annual production at 272 gigawatt-hours and expressed the expectation the facility would come online in 2025.

The planned hydropower plant is part of the Upper Horizons project, which is intended to reduce the risk of floods, improve water supply and increase electricity production.