The companies HSE, Elektrogospodarstvo Slovenije (EGS-RI), Ugljevik Mine and Thermal Power Plant (RiTE Ugljevik) and Elektroprivreda Republike Srpske (ERS) today signed contracts that regulate the start of the supply of electricity and the method of payment of EUR 67 million in compensation for the unsupplied electricity in the 2011-2021 period, which HSE has been awarded in an arbitration procedure. Today’s agreement envisages that RiTE Ugljevik will begin to fulfil its obligation to the company EGS-RI and start supplying electricity through HSE, specifically as early as this Thursday, while the seven-year payment of compensation will begin on 30 June 2024.

After a break of more than three decades, the supply of the owed third of electricity from RiTE Ugljevik is thus being re-launched. Due to regulatory and technical reasons, the supply to HSE on the orders of EGS-RI will take place through ERS. The planned annual amount of electricity supplied will be 500 GWh, which is enough to power 123,000 Slovenian households. The concluded agreement regarding the supply of electricity is valid until RiTE Ugljevik ceases to operate.

In relation to the unsupplied electricity for the period from 31 December 2021, RiTE Ugljevik is also obliged to pay EGS-RI EUR 67 million in compensation and the corresponding default interest. The repayment of the principal in the amount of EUR 67 million in instalments begins on 30 June 2024, and will be carried out over seven years in 14 instalments, which also come with additional contractual interest. The result of the negotiations led by HSE is that, in addition to RiTE Ugljevik, ER is jointly and severally liable for the payment in question. In addition, the contract was concluded in a form that enables direct enforceability in favour of EGS-RI in the event of violations.

Today’s signing concludes the first stage of the negotiations between HSE, EGS-RI, RiTE Ugljevik and ERS, which will continue. It is also necessary to agree on issues related to the payment of the remaining interest, as follows from the issued arbitration decisions, payment of compensation for the unsupplied electricity after 1 January 2022, and the payments related to the claims EGS-RI asserts against Bosnia and Herzegovina in an international arbitration at the International Centre for Settlement of Investment Disputes (ICSID) in Washington. We also expect constructive negotiations at this stage and the conclusion of agreements that HSE and EGS-RI would find appropriate.

Background information: In the 1981-1991 period, i.e. more than thirty years ago, the company EGS-RI participated in the construction of the Ugljevik Mine and Thermal Power Plant (RiTE Ugljevik). The beginnings of the arbitration procedure against RiTE Ugljevik date back to June 2014. At that time, HSE filed on behalf of EGS-RI a request for ad hoc arbitration against RiTE Ugljevik, based in Belgrade. It is a dispute initiated by EGS-RI regarding investments in the construction of the mine and thermal power plant.

In July 2023, the arbitration tribunal based in Belgrade issued a partial decision in the Ugljevik case on the payment of compensation in the principle amount of EUR 67 million in relation to the unsupplied electricity from the Ugljevik Thermal Power Plant, together with the corresponding default interest. In October 2023, the tribunal issued a final arbitration decision, ordering the respondent party to pay EUR 58.2 million in interest accrued up to 31 December 2021. The company Elektrogospodarstvo Slovenije – razvoj in inženiring (EGS-RI), which is the holder of the claims in question, was successfully represented throughout the arbitration proceedings by Holding Slovenske Elektrarne (HSE).