RWE Plans $1.35 Billion Investment in Bosnia and Expansion in Eastern Europe

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Researched by Industrial Info Resources (Sugar Land, Texas)--Utilities group RWE AG (OTC:RWEOY) (Essen, Germany), the second largest generator of electricity in Germany, hopes to tap into the growing energy market of Bosnia and Herzegovina through an investment of $1.35 billion during a period of 10 years. The investment will involve setting up thermal and hydroelectric power plants and grid operations in the Republic of Srpska, the Serbian region of Bosnia and Herzegovina. RWE is optimistic about generating 2,000 megawatts (MW) of power by harnessing the hydroelectric power-generation potential of the Drina and Trebisnjica Rivers in the east and the Vrbas River in the west of the region.

RWE expects to begin construction of the hydroelectric power plants in 2009, once the requisite agreements are in place and the feasibility of the projects has been ascertained. The firm has indicated plans to bring United Energy Group plc (FRA:UTX1) (London, United Kingdom) into the proposed hydroelectric projects.

Slobodan Puhalac, Energy Minister of the republic, indicated that the state's association with RWE would be a public-private partnership since the region is not looking to privatize its energy sector. State-owned Elektroprivreda Srpske of the Republika Srpska Power Company (Trebinje, Bosnia and Herzegovina) has recognized RWE as a strategic partner in the development of new power projects and distribution of power in the region.

Last month, RWE announced investment plans for setting up nuclear power plants in Eastern Europe and the Baltic states. The firm intends to partner with Polish firms in setting up a nuclear power plant in Lithuania at a cost of $5.4 billion to $6.8 billion. The project is expected to be commissioned in 2018. The announcement comes in the wake of increasing pressure from the European Union to reduce emission levels of carbon dioxide, causing utilities like RWE, which is mainly a developer of coal-fired thermal plants, to shift their focus to cleaner nuclear power.

In a bid to expand business in Eastern Europe, RWE is also participating in a consortium along with Societatea Nationala Nuclearelectrica (Bucharest, Romania) and five other firms to finance the development of the third and fourth units of the Cernavoda nuclear power project in Romania, which is based on Canada Deuterium Uranium nuclear reactor technology, a technology for pressurized heavy-water reactors that was developed in the late 1950s and early 1960s. The consortium has been given a provisional consent by the Romanian government to set up the proposed joint venture company. In Phase I of the project, the joint venture will firm up the technical aspects of the project in a period of 18 months. Phase II will involve the implementation of the project. RWE also is interested in acquiring a 49% stake in the Belene power plant of Bulgaria.

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