Stability Pact: Environment Task Force

Regional Energy Market

Conclusions of the 2nd Industry Round Table on the Regional Energy Market in South Eastern Europe

The second Industry Roundtable on the SEE Regional Energy Market (REM), organised in Sofia jointly by the Stability Pact for SEE and the European Commission and generously hosted by the Bulgarian Ministry for Energy and Energy Resources, provided the private sector participants with a further opportunity to familiarise themselves with progress underway towards the establishment of the REM, encompassing electricity and gas, and its integration into the European Internal Market. Information was given, among others on the commitments of the MoU participants to establish national and Regional Electricity and Gas Market Action Plans and to draw out regional investment optimization plans. Participants were told that the Memorandum of Understanding (MoU) signed in Athens in November 2002 would be revised, among others to include the gas sector, and would be transformed into a legally binding international agreement.

Furthermore participants were briefed on three very important dimensions of the creation of the regional energy market:

Progress towards reducing regulatory risk and ensuring fair competition, in particular through the creation of independent regulatory agencies;

Steps initiated by the UCTE towards reconnection the SEE electricity zone with the rest of Europe as well as priorities proposed by South Eastern Europe Cooperation Initiative (SECI) for cross border transmission lines;

Strong support provided by international financial institutions (World Bank, EBRD, EIB, European Agency for Reconstruction, etc.), the European Commission and bilateral donors (USA, Canada, Germany and others) towards financing investments or technical assistance in the REM.

The Round Table provided the opportunity for major SEE energy operators (e.g. NEK and Bulgargaz, the Electric Power Company of Macedonia, the Romanian Transelectrica and KEK from Kosovo) to present their restructering and investment programmes. International electricy companies active in the region presented also their views. In particular, the CEO of Union Fenosa Internacional, which operates three electricity distribution companies in Moldova, stressed the key conditions to attract international investment in the energy sector of SEE countries, including the professionalism and independence of energy regulators and the strict implementation, the rule of law. More generally the importance of implementation of the reforms, good corporate governance and financial discipline was emphasised. Reference was made to the problems of tarification and affordability for vulnerable social groups. It was found that many of the problems raised could be addressed through a judicious design of the market and of regulations as well as through appropriate sequencing in market liberalisation.

A special session was devoted to private sector financing of investments in the SEE Energy Sector and to Risk Mitigation Strategies. Particularly innovative formulas were presented among others by EPIC, Austrian Power Trading (new green products, such as RECS, generated through the regulatory framework) and Euroheat and Power (Public-Private-Partnership financing schemes for district heating projects).

Given the interest shown by the participants for developments in the SEE Energy Market, it was decided that contact would be maintained in the future, possibly through a new Industry Round Table in 2004 to brief investors and other private companies involved in the energy sector about the proposed legally binding international agreement that would underpin the REM and its integration into the EU internal market.

Contact: Stability Pact for South Eastern Europe, rue Wiertz 50, 1050 Brussels, Belgium, Bernard Snoy and Peter Houzer +32 2 401 8717, peter.houzer@stabilitypact.org - www.stabilitypact.org/energy