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Power Sector and Fiscal Issues: The Case of Kosovo

Power Sector and Fiscal Issues: The Case of Kosovo. Hajdar Korbi Ministry of Economy and Finance Kosova. Outline. Key issues Fiscal position/financial performance Budgetary support in the past Way out of the current situation/Future fiscal implications

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Power Sector and Fiscal Issues: The Case of Kosovo

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  1. Power Sector and Fiscal Issues: The Case of Kosovo Hajdar Korbi Ministry of Economy and Finance Kosova

  2. Outline • Key issues • Fiscal position/financial performance • Budgetary support in the past • Way out of the current situation/Future fiscal implications • Potential future risk for the budget

  3. Energy sector and current issues • Limited operational capacities • Technical problems • Old infrastructure • Limited Managerial capacities • Theft and inadequate billing and collection • As a result, no sufficient and/or stable energy supply

  4. Current/past financial performance • Unable to finance its operational cost due to: • Poor billing and revenue collection performance • Thefts • Technical losses • Delayed and insufficient maintenance • Overstaffing/Underutilization of its current staff • Import prices higher than domestic tariffs

  5. Years 2002 2003 2004 2005 2006 2007 Subsidies as a share to total budget spending 11.5% 12.5% 8.1% 8.5% 5.4% 6.4% The need for budgetary support • Subsidies in the form of Capital investments • Transmission, distribution and Power-plants • Subsidies in the form of Current spending • Import costs • Subsidies to social cases • Government bank guarantee • Opening new Lignite mine Table 1. Past budget spending (subsidies) in energy sector

  6. Prospects in Energy Sector(Way out of the current situation) • Improve billing and collection performance • Step-wise privatization • KEK restructuring • Vertical Disintegration (Power Generation, Transmission, and Distribution) • New entrants in the Power Generating Market • (Kosova C) • Potential supply of domestic and regional market • Export of Lignite coal

  7. Future fiscal implications • Additional capital spending • Infrastructure improvements for new entry incentives • Phase out current subsidies • Due to expected improvement in billing an collection • In medium-to-long term • From a budget liability to a revenue source • Revenues from corporate profits • Royalties on extracted coal

  8. Risks (including Contingent liabilities) for the budget remains • KEK financial performance • Rapid growth in energy demand-the need for higher imports • Inadequate and/or insufficient infrastructure improvement may deter potential new entrants • Coal supply and KEK generation capacity • Possible coal supply shortages • Fiscal risks associated with environmental issues • Government bank guarantees

  9. THANK YOU

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