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Energy Sector Energy Sector DevelopmentDevelopment in in MontenegroMontenegro: :

reforms, goals and overall strategyreforms, goals and overall strategy

Government of MontenegroMinistry of Economy

6 November 2009, Podgorica

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ENERGY SECTOR IN MONTENEGROENERGY SECTOR IN MONTENEGRO Energy sector in Montenegro is composed of:Energy sector in Montenegro is composed of:

• Electric Power Company of Montenegro, Holding company - Nikšić (EPCG)

• Prenos, Holding company, Podgorica

• Coal Mine, Holding company - Pljevlja

• Brown Coal Mine, Holding company, “Ivangrad” - Berane

• “Jugopetrol”, Holding company - Kotor

• “Montenegro Bonus” - Cetinje

EEnergy sectornergy sector recognized as recognized as significant driving force ofsignificant driving force of national economynational economy..

Development of energy sector Development of energy sector is is defined bydefined by::• Energy Policy of MontenegroEnergy Policy of Montenegro and and• Energy Development StrategyEnergy Development Strategy of of MontenegrMontenegro o byby 2025 2025

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GOAL AND STRATEGIC COMMITTMENTSGOAL AND STRATEGIC COMMITTMENTS

GOALGOAL:: EnsureEnsure sustainable, secure and competitive sustainable, secure and competitive energy supply by increasing energy efficiency and energy supply by increasing energy efficiency and increasing the use of renewable sourcesincreasing the use of renewable sources

STRATEGIC COMMITTMENTS:STRATEGIC COMMITTMENTS:

- - common marketcommon market for efor electricitylectricity and natural gas and natural gas -- efefficient energy consumption and generationficient energy consumption and generation - u- use of se of renewable energy sourcesrenewable energy sources

Montenegro, asMontenegro, as eecological state cological state and and activeactive participant participant in thein the EU integration process EU integration process, , supports the intention supports the intention of the EU to achieve the objectives set in January 2007 of the EU to achieve the objectives set in January 2007 by 2020by 2020::

Reduce greenhouse gases emission Reduce greenhouse gases emission by by 20%20%

Increase energy efficiencyIncrease energy efficiency and reduce energy and reduce energy consumption by consumption by 20%20%

Raise share of renRaise share of reneewable energy sourceswable energy sources toto 20%20%

RaRaiise share of biofuelsse share of biofuels to at leastto at least 10%10%

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MAJOR STRATEGIC COMMITMENTSMAJOR STRATEGIC COMMITMENTS RReasonable valorization of available potentialseasonable valorization of available potentials

through the construction of new facilities and through the construction of new facilities and increase of energy efficiency, towards better supply increase of energy efficiency, towards better supply securitysecurity

Achieving a Achieving a balanbalance between energy development ce between energy development aanndd environmental protection environmental protection

Regulatory, legislative and operational integration Regulatory, legislative and operational integration in the in the process of approaching the EU in the fields process of approaching the EU in the fields of energy and environmentof energy and environment,, including integration including integration in SEE and EU energy marketin SEE and EU energy market

Implementation of obligations Implementation of obligations underunder thetheTreatyTreaty eestablishstablishing theing the Energy CommunityEnergy Community,, as the first as the first legally binding document of Montenegro towards legally binding document of Montenegro towards the EUthe EU

Continuation of Continuation of energy reformenergy reform, , while while respecting respecting sustainable development and market operation sustainable development and market operation principlesprinciples

Ensuring Ensuring social protectionsocial protection in the process of reform in the process of reform changes in energy sector changes in energy sector

Support to investors for Support to investors for CDMCDM me mecchanihanism sm projectsprojects

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RREFORM OF THE ENERGY SECTOREFORM OF THE ENERGY SECTOR

Historic Record of Key Achievements:Historic Record of Key Achievements:

Energy Law Energy Law (adopted in June 2003) (adopted in June 2003) Energy Regulatory Agency Energy Regulatory Agency (established in January 2004)(established in January 2004) Energy Policy Energy Policy (adopted in February 2005)(adopted in February 2005) Energy Efficiency Strategy Energy Efficiency Strategy (adopted in October 2005)(adopted in October 2005) Strategy for Small Hydro Power Plants Development in Montenegro Strategy for Small Hydro Power Plants Development in Montenegro (adopted in April 2006)(adopted in April 2006) Energy Community TreatyEnergy Community Treaty (ratified in October 2006) (ratified in October 2006) Kyoto ProtocolKyoto Protocol (ratified in March 2007) (ratified in March 2007) Assessment of Renewable Energy Resources (wind, solar, biomass) Assessment of Renewable Energy Resources (wind, solar, biomass) ((adoptadopted in April 2007)ed in April 2007) National Energy Development Strategy until 2025National Energy Development Strategy until 2025 (adopted in (adopted in DecemberDecember 200 20077) – ) – KEY KEY

DOCUMENT, IDENTIFYING INVESTMENT OPPORTUNITIES IN THE ENERGY SECTOR DOCUMENT, IDENTIFYING INVESTMENT OPPORTUNITIES IN THE ENERGY SECTOR OF MONTENEGROOF MONTENEGRO

Spatial Plan of Montenegro until 2020Spatial Plan of Montenegro until 2020 (adopted by the Parliament of Montenegro in March 2008) Energy Development Strategy and Spatial Plan of Montenegro are harmonized.Energy Development Strategy and Spatial Plan of Montenegro are harmonized. Action Plan Action Plan (2008 – 2012) (2008 – 2012) for implementation of for implementation of Energy Development Strategy of Montenegro by Energy Development Strategy of Montenegro by

2025 2025 ((adopted in October 2008adopted in October 2008)) Development of electricity marketDevelopment of electricity market (opening of electricity market - 1 January 2009) (opening of electricity market - 1 January 2009) LLegal unbundling egal unbundling of of Electric Power Company of Montenegro Electric Power Company of Montenegro -- PrenosPrenos was spinned off from the was spinned off from the

EPCGEPCG and established as a shareholding company in the end of March this yearand established as a shareholding company in the end of March this year

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Investment-related LegislationInvestment-related Legislation Investment-related laws in Montenegro are:Investment-related laws in Montenegro are:

• Law on Law on WWaters aters ((adopted in adopted in MayMay 200 2007 - 7 - Official Gazette of the RoM Official Gazette of the RoM 2727/0/077))• Law on Law on EEnvironmentnvironment ((adopted in adopted in August August 20020088 - - Official Gazette of Montenegro Official Gazette of Montenegro

4848/0/088))• Law on Law on Physical Planning and Physical Planning and ConstructionConstruction ((adopted in adopted in August August 2002008 - 8 - Official Official

Gazette of Montenegro Gazette of Montenegro 5151/0/088))• Law on Law on CConcessions oncessions ((adopted in January 2009,adopted in January 2009, Official Gazette of Montenegro Official Gazette of Montenegro

0808/0/099))• Law on Law on Exploration and Exploitation of Oil and Gas Exploration and Exploitation of Oil and Gas ((Law Proposal Law Proposal was was

submited submited to the Governmentto the Government for consideration and adoptionfor consideration and adoption)) • Energy LawEnergy Law ( (preparation preparation is in the finalization phaseis in the finalization phase;; The Draft Energy Law has The Draft Energy Law has

encompassed the provisions of the formerly prepared Draft Gas Law and Draft encompassed the provisions of the formerly prepared Draft Gas Law and Draft Renewable Energy Resources LawRenewable Energy Resources Law))

• Law on Energy EfficiencyLaw on Energy Efficiency (preparation (preparation is in the finalization phaseis in the finalization phase))

Next two laws are being applied from 1st January 2008:

• Law on Strategic Law on Strategic EEnvironmentnvironmentalal Impact Assessment Impact Assessment (Official Gazette of the (Official Gazette of the RoM 80/05)RoM 80/05)

• Law on Law on EEnvironmentnvironmentalal IImpactmpact Assessment Assessment (Official Gazette of the RoM 80/05)(Official Gazette of the RoM 80/05)

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EnergyEnergy potentials in potentials in MontenegroMontenegro

Potential for energy savingsPotential for energy savings ( (energy efficiencyenergy efficiency)) • Potential for energy savings is Potential for energy savings is very high very high in Montenegro in Montenegro (20%-30%)(20%-30%)..

RRenewable energy potentialenewable energy potentialss ( (hydrohydro, , windwind,, biomass, solid waste, biomass, solid waste, solar potential) solar potential)

• Hydro potentialHydro potential is one of the most valuable natural resources of Montenegro. is one of the most valuable natural resources of Montenegro.

Coal resourcesCoal resources ( (In addition to hydro potential, coal is the most In addition to hydro potential, coal is the most important energy resource in Montenegro)important energy resource in Montenegro): :

• Pljevlja area - total exploitation reserves amount 184.5 million tons Pljevlja area - total exploitation reserves amount 184.5 million tons • Berane area - Berane area - ggeological reserves amount around 158 million tonseological reserves amount around 158 million tons and and total total

presumed exploitation reserves have been estimates at only approx 18.5 million presumed exploitation reserves have been estimates at only approx 18.5 million tons.tons.

Oil and gasOil and gas potentialpotential (submarine zones in Montenegro) (submarine zones in Montenegro) • Potential Potential oil oil reserves reserves amount approx 7 billion barrels, while potential amount approx 7 billion barrels, while potential

natural gas reserves amount 425 billion mnatural gas reserves amount 425 billion m33. .

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Action Plan (2008 – 2012)Action Plan (2008 – 2012)

Action Plan Core Contents::

CC 1: CC 1: Increase energy efficiencyIncrease energy efficiency and and use of renewable energy sourcesuse of renewable energy sources in in consumptionconsumption

CC 2: Increase efficiency of the CC 2: Increase efficiency of the existing generationexisting generation and and transmission facilitiestransmission facilities

CC 3: Design a plan to CC 3: Design a plan to mitigate climate changemitigate climate change effects effects

CC 4: Creation of the institutional framework and the public involvement in the CC 4: Creation of the institutional framework and the public involvement in the development of a development of a competitive and market oriented energy sectorcompetitive and market oriented energy sector

CC 5: Development and CC 5: Development and exploitation of renewable energy sourcesexploitation of renewable energy sources

CC 6: Increase CC 6: Increase cleaner energy productioncleaner energy production from fossil fuelsfrom fossil fuels

CC 7: Create the basis for long-term CC 7: Create the basis for long-term energy industry developmentenergy industry development in Montenegro in Montenegro

CC 8: Creation of mechanism for effective CC 8: Creation of mechanism for effective monitoring and follow-up of the Actionmonitoring and follow-up of the Action Plan implementationPlan implementation

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Programmes and ProjectsProgrammes and Projects in in Action Plan Action Plan – (I)– (I)

1.CC: 1.CC: Increase energy efficiency and use of renewableIncrease energy efficiency and use of renewable energy sources in consumption in Montenegroenergy sources in consumption in Montenegro

1.11.1 Energy Efficiency ProgrammeEnergy Efficiency Programme

1.2 1.2 Project on energy management (Energy Management System) inProject on energy management (Energy Management System) in the public sectorthe public sector

1.3 1.3 Project on energy saving in the public sectorProject on energy saving in the public sector 1.4 1.4 Project on promoting and performing energy auditsProject on promoting and performing energy audits

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Programmes and ProjectsProgrammes and Projects in in Action Plan Action Plan – (II)– (II)

2. CC: Increase efficiency of the existing generation 2. CC: Increase efficiency of the existing generation and transmission facilitiesand transmission facilities

2.1 2.1 Programme for developing electric power networks Programme for developing electric power networks 2.2 2.2 Project for revitalisation of small HPPsProject for revitalisation of small HPPs2.3 2.3 Project for revitalisation of HPP PivaProject for revitalisation of HPP Piva2.4 2.4 Project for revitalisation of HPP Perućica – phase IIProject for revitalisation of HPP Perućica – phase II2.5 2.5 Project for revitalisation of TPP PljevljaProject for revitalisation of TPP Pljevlja2.6 2.6 Project for recovery and expansion of electric powerProject for recovery and expansion of electric power transmission network transmission network 2.7 2.7 Project for recovery and expansion of electric powerProject for recovery and expansion of electric power distribution networkdistribution network

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Programmes and ProjectsProgrammes and Projects in in Action Plan Action Plan – (III)– (III)

3. CC: Designing a plan to mitigate climate change effects3. CC: Designing a plan to mitigate climate change effects

3.13.1 Project for energy inclusion in mitigation of climate change effects in MontenegroProject for energy inclusion in mitigation of climate change effects in Montenegro

4. CC: Creation of the institutional framework and the public 4. CC: Creation of the institutional framework and the public involvement in the development of a competitive and market oriented involvement in the development of a competitive and market oriented energy sectorenergy sector

4.1 4.1 Programme for the energy sector restructuringProgramme for the energy sector restructuring - market opening and social policy- market opening and social policy

4.2 4.2 Programme for the energy sector public relationsProgramme for the energy sector public relations

4.3 4.3 Programme on education and training in energy and ecologyProgramme on education and training in energy and ecology

4.4 4.4 Project for EPCG JSC restructuring and capital increaseProject for EPCG JSC restructuring and capital increase

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Programmes and ProjectsProgrammes and Projects in in Action Plan Action Plan – (IV)– (IV)

5. CC: Development and exploitation of renewable energy sources5. CC: Development and exploitation of renewable energy sources

5.1 5.1 Programme for development of renewable energy sourcesProgramme for development of renewable energy sources (hydro potential excluded)(hydro potential excluded)5.2 5.2 Programme of hydro potential use in MontenegroProgramme of hydro potential use in Montenegro5.3 5.3 Project of building small HPPsProject of building small HPPs5.4 5.4 Project of using wind energy for electricity generationProject of using wind energy for electricity generation5.5 5.5 Project of using biomass for heat and electricityProject of using biomass for heat and electricity cogenerationcogeneration5.6 5.6 Project of using municipal waste for heat and electricityProject of using municipal waste for heat and electricity

cogenerationcogeneration5.7 5.7 Project of building HPP KomarnicaProject of building HPP Komarnica5.8 5.8 Project of building HPP on the Morača riverProject of building HPP on the Morača river

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Programmes and ProjectsProgrammes and Projects in in Action Plan Action Plan – (V)– (V)

6. CC: Increase cleaner energy production from 6. CC: Increase cleaner energy production from fossil fuelsfossil fuels

6.1 6.1 Project of TPP Pljevlja II with heating system for Project of TPP Pljevlja II with heating system for town of Pljevljatown of Pljevlja

6.2 Project of LNG terminal close to town of Bar6.2 Project of LNG terminal close to town of Bar

6.3 Project of gas system for town of Podgorica with 6.3 Project of gas system for town of Podgorica with thethe distribution gas networkdistribution gas network

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Programmes and ProjectsProgrammes and Projects in in Action PlanAction Plan – (VI)– (VI)

7. CC: Create the basis for long-term energy industry development 7. CC: Create the basis for long-term energy industry development in Montenegroin Montenegro

7.1 7.1 Programme of oil and gas exploration in Montenegro's mainland Programme of oil and gas exploration in Montenegro's mainland

7.2 7.2 Programme of international agreement on the use of hydro potentialProgramme of international agreement on the use of hydro potential7.3 7.3 Project of oil and gas exploration in Montenegro's seabed – block 1 i 2Project of oil and gas exploration in Montenegro's seabed – block 1 i 27.4 7.4 Project of oil and gas exploration in Montenegro's seabed – block 3Project of oil and gas exploration in Montenegro's seabed – block 37.5 7.5 Project of coal exploration in Pljevlja area Project of coal exploration in Pljevlja area 7.6 7.6 Project of coal exploration in Berane areaProject of coal exploration in Berane area7.7 7.7 Project of the Ionic-Adriatic gas pipelineProject of the Ionic-Adriatic gas pipeline

8.8. CC: Creation of mechanisms for effective monitoring and follow-CC: Creation of mechanisms for effective monitoring and follow-up of Action Plan implementationup of Action Plan implementation

8.1 Programme of Action Plan monitoring and follow-up8.1 Programme of Action Plan monitoring and follow-up

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ACTUAL PROJECTS IN MONTENEGROACTUAL PROJECTS IN MONTENEGRO (I) (I)

OOverall national project “Year of Energy Efficiency” verall national project “Year of Energy Efficiency” ((17 concrete programs17 concrete programs)) Project of privatization and capital increase of EPCGProject of privatization and capital increase of EPCG ((project is realized;Italian

company A2A S.p.A owns 43,7073 % of EPCG)

RRevitalievitalissation of ation of the existing generation facilitiesthe existing generation facilities Project for revitalisation of Project for revitalisation of HPP PivaHPP Piva Project for revitalisation of Project for revitalisation of HPP PerućicaHPP Perućica – phase II – phase II Project for revitalisation of Project for revitalisation of TPP PljevljaTPP Pljevlja Total generation will be increased by additional 400 GWh per year.

Development Development of electric powerof electric power transmission networktransmission network Project of Project of cconstruction of 400 kV transmission power line Podgorica – Tiranaonstruction of 400 kV transmission power line Podgorica – Tirana Project ofProject of u undersea connectionndersea connection between the electric between the electric power systems of power systems of ItalyItaly and and

MontenegroMontenegro (Cooperation (Cooperation EPCGEPCG ––TERNATERNA))

Projects for recovery and expansion of electric power distribution network

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ACTUAL PROJECTS IN MONTENEGROACTUAL PROJECTS IN MONTENEGRO ( (III)I)

Project of Project of building HPP on the Morača riverbuilding HPP on the Morača river Four hydro power plants: Andrijevo, Raslovići, Milunovići and

Zlatica Total installed capacity 238 MW and annual generation 693 GWh Letters for expression of interest in the construction of HPPs on

Moraca river have been submitted by some 20 prospective investors. A prequalification tender is planned as a next stage of the bidding

process by the end of this year.

Project of Project of buildingbuilding HPP Komarnica HPP Komarnica Installed capacity 168 MW and average annual generation 231,8

GWh Feasibility Study was was preparedprepared

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ACTUAL PROJECTS IN MONTENEGROACTUAL PROJECTS IN MONTENEGRO ( (IIII)II)

Project ofProject of building small HPPs building small HPPs Public Invitation forPublic Invitation for Awarding Concession for Exploration of 43 Awarding Concession for Exploration of 43 (forty three) (forty three) WWaterater Streams Streams

and Construction of the Small Hydro Power Plantsand Construction of the Small Hydro Power Plants ((published published in in NovemberNovember 200 2007)7) Government awarded concessions for 8 water flows for exploration and construction of small

HPPsHPPs Contracts were signed on September 26th, 2008 New Public announcement for prequalification for awarding concessions for exploitation of 10

water flows for construction of small HPPs was published on September 15th, 2009 Prequalification tender procedure is underway

Project of Project of using wind energy for electricity generationusing wind energy for electricity generation Detailed measurementsDetailed measurements on potential locations on potential locations areare underway Preparation of legislation and tender documentation is underway Invitation for Expressions of Interest to Investors for Construction of Wind Energy Power

Plants was published on September 30th, 2009

Project of Project of using biomass for heat and electricityusing biomass for heat and electricity cogenerationcogeneration Feasibility studies for biomass exploitation in Berane and Nikšić were prepared

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ACTUAL PROJECTS IN MONTENEGRO (IV)ACTUAL PROJECTS IN MONTENEGRO (IV)

Project ofProject of coal exploration in Pljevlja area coal exploration in Pljevlja area PPrequalification requalification documentation and Public announcement for prequalification for

awarding concessions for exploitation of coal in the Maoče Maoče bbasin were prepared were prepared Construction of a thermal power plant with installed capacity 500 MW was was

envisaged

Project of Project of coal exploration in Berane areacoal exploration in Berane area Geological exploration of reserves, review of available documentation, analyses are

underwayunderway

Project ofProject of oil and gas exploration oil and gas exploration in Montenegro's seabedin Montenegro's seabed – – BBlock 3lock 3 Elaboration of Contract Model and Tender for Block 3 is underwayTender for Block 3 is underway

Project of the Project of the Ionic-Adriatic gas pipelineIonic-Adriatic gas pipeline Preliminary preparation of feasibility study and conceptual project and selection

of potential routes are underway

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CORE NCORE NEXTEXT STEPSSTEPS IN MONTENEGROIN MONTENEGRO

MMeasure for easure for increasing security increasing security of of energy energy ssupplyupply

InvestInvestment activitiesment activities and realiz and realization of priority ation of priority energy energy projectsprojects

Continuation of theContinuation of the energy sector reform energy sector reform

Improvement Improvement of of regionalregional cooperation cooperation

IIntegration in SEE and EU energy marketntegration in SEE and EU energy market

GeneralGenerallyly, , implementation of implementation of national national Energy PolicyEnergy Policy,, Strategy Strategy and and Action PlanAction Plan

20THANK YOU FOR THANK YOU FOR YOUR ATTENTIONYOUR ATTENTION!!