CEZ Wins Arbitration Case Over Gacko TPP Project in Bosnia

Czech energy group CEZ said on Tuesday it has been awarded around 7.5 million euro ($9.8 million) in damages as part of successfully completed arbitration proceedings over the Gacko thermal power plant (TPP) project in Bosnia and Herzegovina.

CEZ said in a statement it initiated the arbitration proceeding in May 2009 over a breach by the counterparty of obligations arising from the contract for the implementation of the project signed in 2007.

In 2006, an investment agreement was made between Bosnia's Serb Republic and CEZ, based on which a joint holding was to be formed with state-owned power utility Elektroprivreda RS for the purpose of reconstructing the existing 300 megawatt Gacko power plant, revitalizing the adjacent coal mine, and building a new TPP, Gacko II. CEZ held a 51% stake in the joint holding of Nove Elektrane Republike Srpske while Elektroprivreda RS held the remaining 49%.

The project was abandoned before the start of major capital investments.

The arbitration panel has imposed an obligation on Elektroprivreda RS to purchase from CEZ its equity stake in Nove Elektrane Republike Srpske for 2.0 million euro plus contractually defined interest, the statement said.

In addition, CEZ is going to receive the same amount of 2.0 million euro plus late-payment interest as liquidated damages, which together with the damages of 2.2 million euro already collected brings the total amount that the Czech company will receive to approximately 7.5 million euro.

"This is our second winning arbitration of the two we initiated, which proves that we are able to successfully defend our rights, even when investing outside the European Union," Tomas Pleskac, member of the CEZ board of directors and head of the group's international division, said.

CEZ won an arbitration case in Bulgaria in January 2009.

The Gacko energy and coal mining complex is located in the southern part of the Serb Republic, near the entity's borders with Croatia and Montenegro. Gacko is one of two coal-fired plants in the Republic. The other plant of the same capacity is part of the Ugljevik energy complex located in northeastern Bosnia.

The Serb Republic is one of the two autonomous entities that make up Bosnia and Herzegovina. The other one is the Muslim-Croat Federation.

Source: SeeNews