Professional Documents
Culture Documents
Bernd Kalkum
Muehltalstr. 82
69121 Heidelberg
Germany
Improvement of District
Heating in Kosovo
Final report
TABLE OF CONTENT
1.1 Technical assessment 6
1.2 Financial assessment 6
1.3 Institutional assessment 7
1.4 Assessment of the current heat demand and heat demand development 8
1.5 Combined heat and power 9
1.6 Investment programs 10
1.7 Financial forecast 12
1.8 Subsidies and social assistance programs 13
1.9 Recommended liabilities of the DH Companies 13
1.10 Technical assistance 14
3.1 Technical assessment 17
3.1.1 Customer Interface 17
3.1.2 Networks 18
3.1.3 Boilers 20
3.1.4 Human Resources 21
3.1.5 Internal organization 21
3.2 Financial assessment 23
3.2.1 Pristina 23
3.2.2 Gjakova 25
3.2.3 Mitrovica (North) 26
3.3 Institutional and legal assessment 27
3.3.1 Law on Public Enterprises 28
3.3.2 Law on Central Heating 28
3.3.3 Supply contracts 29
3.3.4 Ownership issues 30
3.3.5 Tariff calculation 31
3.3.6 Subsidies 35
4.1 Pristina 39
4.1.1 Peak Load Estimate 39
4.1.2 Impact of Disconnections 39
4.1.3 Degree-day Adjustment 39
4.1.4 Other Adjustments 39
4.1.5 Energy Balance 39
4.2 Gjakova 41
4.2.1 Peak Load Estimate 41
4.2.2 Impact of Disconnections 41
4.2.3 Degree-day Adjustment 41
4.2.4 Other Adjustments 41
4.2.5 Energy Balance 41
4.3 Mitrovica 42
4.3.1 Peak Load Estimate 42
4.3.2 Impact of Disconnections 42
4.3.3 Degree-day Adjustment 43
4.3.4 Other Adjustments 43
4.3.5 Energy Balance 43
5.1 Pristina 45
5.1.1 Reconnections and new connections 45
5.1.2 Demand forecast with business as usual 47
5.1.3 Demand forecast with consumption based billing (DSM) 48
5.2 Gjakova 48
5.2.1 Disconnections 48
5.2.2 Expansions 49
5.2.3 Demand forecast with business as usual 49
5.2.4 Demand forecast with consumption based billing (DSM) 49
5.3 Mitrovica North 50
5.3.1 Disconnections 50
5.3.2 Opportunities for DH Expansions in the North 50
5.3.3 Expansion in the south 51
5.4 Mitrovica South 51
Improvement of district Heating in Kosovo 3
Definitions
Collection rate The collection arte is the collected bill amount in a year divided by
the issued bills in the same year. Collected bill amount comprises
also payments that are due for bills issued in former years.
The tables with financial indicators use a second definition of
collection rate, which takes only the collected bill amount into
account that refers to bills issued in the same year.
Current ratio Current ratio: current assets by current liabilities
Expenditures Expenditures comprises all costs in compliance with profit and loss
statement
This study was conducted in the period May 2009 - Sept. 2009 and has been done
by an independent consultant based on his own professional judgment.
The Consultant does not act in the name of KfW.
The report is based on information that was available by the end of August 2009.
Only newer information about charging for electricity in Mitrovica North has been
added in the executive summery.
Improvement of district Heating in Kosovo 6
1 Executive summary
(11) For the average household, DH costs are relatively low (approx. 7.5% while
it is typically assumed to be approx. 15%) and in average the expenditures for
DH are lower than the costs for communication, alcohol and cigarettes. The main
difference is, that communication and supply of alcohol and cigarettes will
immediately discontinue if bills are not paid. This is difficult to practice in case of
DH, but a consequent collection policy would allow much higher collection
rates.999
(12) As tariffs are not cost covering, general subsidies are needed. The
regulatory office justifies this by socio-economic reasons. Nevertheless, despite
high subsidies DH Companies generate losses.
(21) To cushion the effect of increasing energy prices, the Central Government
has provided fuel subsidies covering up to 70% in the last years. Such subsidies
reduce the “allowed revenues” that constitute the basis for tariff calculation.
(22) A requirement to install meters and using them for billing is included in the
licenses. However, given the tough financial situation of the companies, so far
ERO has not yet issued a deadline for the installation of the meters.
Nevertheless, the need for this installation was communicated to the regulated
companies in several meetings and occasions. There is also a provision in the
Law on District Heating, which obliges the companies to install meters. Article
32 of the Law on District Heating obliges the distributor to install meters on all
customers connected to the district heating system within one year from the
approval of the law.
(23) Metering at the building level the consumption and applying consumption
based billing is prescribed by ERO to be implemented latest in 2011, but DH
Companies will likely not achieve the deadline. The Law on Central Heating
even requires the installation of meters at customer facilities latest one year after
the Law came into force, i.e., by Nov. 2009. However, in face of the difficult
financial situation of the DH Companies, ERO did so far not insist.
(24) The alleged reasons are lacking funds for meters, but it also seems that
meters used not to be the most urgent priority of DH Companies. Provision of
technical assistance for metering and corresponding billing methods is
recommended for all three cities.
(25) It is a common practice that heat supply is metered at the building entrance.
There are different approaches how to distribute the heating costs among the
various parties in one building. In Western Europe, it is typically the responsibility
of the condominium association. In countries where condominium or housing
associations are weak or missing at all, the individual apartments are billed by
the DH Company. Such approach could be a transitional solution for Kosovo,
until robust housing associations have been created.
(26) CHP is a realistic option for Pristina, but so far, ERO did not issue
regulations for pricing heat and electricity generated in CHP. Such regulation is
urgently needed. To foster DH as requested by the Energy Strategy, (most)
benefits of CHP should be allocated to heat. In this way, the tariffs for DH could
be kept low and electric heating would be discouraged.
(27) Compares with other countries in Central and Eastern Europe, the DH
Regulation is clear and transparent. Cost can be recovered. Cost-
underabsorption in one year will be compensated by correspondingly increased
allowed revenues. Replacing the current cost-plus regulation by an incentive
regulation such as price cap would create incentives for the DH Companies to
improve the efficiency and performance. However, even more important in the
short term is a regulation for cost-allocation in CHP and feed-in tariffs.
regulatory agency ERO and for all DH Companies such tariffs have been
calculated and published. However, DH Companies are lagging behind with the
installation of meters and implementation of consumption based billing.
(30) The situation in the northern part of Mitrovica is even more difficult, as
electricity consumption is actually not charged by the Electricity Companies KEK
and EPS. Only if the regular tariff will be charged, customers could become
interested to reconnect to DH. According to updated information provided by
STANDARD Company in Dec. 2009, EPS. According to latest information from
Mitrovica, EPS will start charging consumers in Dec. 2009. Actual results will,
however, also depend on collection practices.
(31) Consumption based billing in combination with automated substations,
thermostatic valves and heat cost allocators results typically in energy savings of
20-30%. In view of the request of the regulatory to implement consumption
based billing in the near future, savings of about 20% has been used for the
demand forecast.
(32) Particularly in Gjakova and Pristina, many new buildings are under
construction or have already received construction permits and are asking to be
connected to DH. This requires larger investments in pipes and substations by
the DH companies. Due to existing overcapacities, heat generation facilities will
be sufficient for while, but after the project period (2010-2012) new capacities
could eventually be required.
(33) The probability that the new buildings will be connected to DH is high due to
lacking cost-effective alternative heating options. Electric heating, which is still
used by many households, became more and more expensive, but connection to
DH is hampered by high costs for installing the necessary indoor heating
facilities (piping and radiators).
(34) Accordingly, the heat demand forecast shows a significant increase despite
the effects of consumption-based billing and autonomous energy efficiency
measures implemented by consumers. A heat demand forecast for the Southern
part of Mitrovica has not been prepared, as there is actually no DH. DH could
become an option, but requires a more detailed analysis.
(37) Converting one block of TPP Kosovo B to cogeneration would be the most
suitable option for cogeneration. TPP Kosovo A is closer to the city, but its future
is uncertain. Moreover, it is unlikely that a future TPP Kosovo C could start
operation within the coming 6-8 years. TPP Kosovo B is a reliably operating
TPP, crucial for the stability of energy system of Kosovo, and could continue to
be operated for a significant period.
Improvement of district Heating in Kosovo 10
(38) Converting one block of existing TPP Kosovo B into a cogeneration unit
would ensure heating of the city of Pristine based on relatively inexpensive
domestic lignite, and release TERMOKOS (and Kosovo) of the need to import
expensive heavy fuel oil that is currently used for district heating of Pristine. The
conversion to CHP will reduce electricity generation of the respective turbines by
a few percent points, but this effect will be compensated by the conversion of
electricity heating to district heating
(39) The capacity of cogeneration should not be larger than 50% of the
maximum heat load, which is currently about 90 MW. This capacity should cover
approx. 90% of the annual heat consumption. While the CHP plant would supply
the base load, TERMOKOS would add heat produced by own heavy oil based
boiler capacities.
(40) The cogeneration concept should be based on steam extraction from one
block of TPP Kosovo B, construction of a heating station (heat exchangers and
pumps), and a transmission pipeline consisting of two DN 350-450 preinsulated
pipes. Despite the long distance, heat losses in preinsulated pipes would be low.
(41) Former studies proposed that steam would be extracted from the main
steam pipeline located between the medium and low-pressure sections of the
turbine. This solution is technically simple, but would result in relative high
electricity losses. Alternatively, the turbine could be modified. Two extraction
points would be added (by reconstruction of diaphragms), and steam should be
extracted with temperatures of maximum 135 °C (or less). Such a solution would
reduce electricity losses considerably.
(42) The optional size and design of the CHP facilities depend to a large extend
on the heat demand and due to economies of scale, heat produced in TPP
Kosovo B will be the cheaper the larger the heat demand. It is therefore
recommended to perform a market analysis for district heating. This analysis
should address the development of heat demand of existing buildings connected
to DH, existing buildings not yet connected to DH, and new buildings particularly
in new construction areas.
new areas which are mostly under construction and which are expected to be
connected within the period 2010-2012. There is also a need for rehabilitating
existing boilers and for new boilers. These investments are mentioned, but have
been allocated to phase 2.
(46) The viability of investing in the system expansion depends to a high degree
of the actual construction activities and requests for connections. This should
regularly be reviewed to update the investment plan if necessary.
(47) There are two alternative investment programs for phase 2. Option 1 is the
connection to Kosovo B and conversion of the plant to a CHP plant. This could
also be combined with DH expansion in Pristina. Option 2 would focus on heat-
only boilers and DH expansion.
(48) In Gjakova, most of the money would go to rehabilitation and modernization
measures. These are uncritical investments if the collection rate can be
improved, particularly through consumption-based billing. About 40% of the
proposed investment costs are caused by DH system expansion. Such
measures should only be financed under the condition that consumption based
metering will be mandatory for new buildings. Moreover, the additional customer
base has to be reviewed before any procurement activities are undertaken. The
projected new connections might be too optimistic and adjusting investment
needs could avoid unnecessary investments.
(49) The situation in Mitrovica North is particularly complicated, because
electricity, used not to be charged, bills will be consequently collected, and all
residential and most commercial consumers are disconnected. Even if
consumers will be charged with the regular tariff, competition with cost covering
DH tariffs would be hard due to the high costs of DH. Subsidies will likely be
needed for a couple of years. A pilot project for reconnecting the buildings
should be implemented, if at least the regular tariff is charged. This would allow
testing the willingness of consumers to reconnect.
(50) The DHC has sufficient heat generation capacity, sufficient to supply the
reconnected consumers. The distribution network does currently not cause
larger problems as the pressure is low due to low heat demand. With a growing
heat demand, however, some main pipes need to be replaced.
(51) Mitrovica South is not served by district heating so far. A few buildings are
physically connected to a pipe crossing the bridge to the Northern part of the
city, but heat is not supplied. The DH Company, located in the Northern Part of
the City, has larger overcapacities, which could be used to supply the south. The
mayor agrees to be supplied from the North. However, the administration in the
south has only some vague ideas about installing a DH system. A potential
service area has been identified by the City Development Department, but
potential consumers have not yet been informed, and the willingness to connect
to DH is unknown.
(52) To initiate and foster the project, the city administration should:
- Establish a DH department or enterprise, which should contact the
potential customers and sign preliminary agreements.
- If a reasonable number (at least 2/3 of the envisaged customers) of
preliminary agreements have been collected, a feasibility and design
study for the planned DH system should be performed. An alternative
would be to agree with the developer of new construction areas to equip
the buildings with centralized heating systems. However, such strategy
can hardly be realized in short term due to long planning procedures for
Improvement of district Heating in Kosovo 12
new building areas, i.e. the corresponding results can likely not be
achieved with the project period of three years. Another likely problem is,
that the share of small one- and two family buildings will increase, which
are not viable for district heating.
- Accordingly, the investment program could be implemented starting in
the second year, i.e., likely in 2011.
(53) Figure 1 summarizes the investment program by components,
rehabilitation/expansion measures, and by adherence to the project phase. It
should be noticed that the numbers given for the item “CHP or HoB” is just a
placeholder 1. It shall only indicate the magnitude of a potential contribution out of
the funds being currently available for the joint KfW-EU project. A feasibility
study will determine the least cost option and the corresponding investment
costs.
*) For position “CHP or Hob” please refer to the explanation in the text above
1
Very roughly estimated the costs could amount to € 10-15 million depending on whether e heat station in Pristina is
actually required. The high number given by the Slovenian Study covers two phases as well as VAT and interest
payments. The second phase consumes almost the same investment costs as phase 2; it foresees a significant
expansion and extension of the heat delivery system (heat stations and pipes) in the (farer) future..
Improvement of district Heating in Kosovo 13
(56) The cash flow analysis takes into account the current collection rates but
presumes that higher collection rates will be achieved in a couple of years, which
has already been experienced by a number of Serbian DH Companies.
(57) The current staff numbers are high compared with DH Companies in EU
and, correspondingly, productivity (in terms of MWh/cap) is extremely low. With
rising salaries, personnel costs will become crucial for the financial situation of
the Companies and the pressure to reduce these costs will increase. Therefore,
the financial forecast is based on the assumption that the staff numbers will be
reduced by two effects. First, the immediate impacts of the investment programs
allow reducing the staff. Second, it is presumed that staff numbers can also be
reduced by organizational measures.
(58) As the financial results will by definition (due to the tariff setting
methodology) be always positive, the impact on affordability will be nevertheless
important. Affordability is measured in terms of the share of heating costs in total
disposable household income.
(59) In the new membership countries, the threshold for affordability has
typically been set to be 15% (could even be increased to 25% to avoid too high
social assistance programs). In average, the share of heating costs is much
lower in Kosovo. Under the assumption that the general subsidies for DH will be
eliminated, the highest share is 7.5% in 2009 and thereafter the number is
successively going down.
(60) The average numbers do of course not allow showing the burden for low-
income households. Households that have only 50% of the average income will
spend up to 15% of the income for heating. Likely, there are many households
earning even less. Targeted subsidies for low-income consumers should replace
general subsidies and could be even more effective for low-income households
while the total budget for subsidies could be lower.
Retarded connections and low connection rates will cause high start-off costs,
which can be avoided by prudent planning.
(65) All DH companies shall be obliged to apply consumption based billing,
wherever meters are installed in the building substations or buildings. Technical
assistance might be needed to implement an appropriate billing system.
(66) The DH Company in Mitrovica shall separate the accounts for DH and the
other businesses.
(67) District heating companies should determine business plans. So far, not all
DH Companies have business plans covering more than the coming heating
period. The business plan shall also help to define reasonable performance
indicators. The business plan should be approved by the board, which will also
monitor the performance indicators. Technical assistance should be provided to
support the DH Companies in preparing business plans.
(68) STANDARD Company, which is in charge of DH in Mitrovica, is supplying
various utilities. To allow a clear and transparent DH business, DH should either
be established as a separate (child) company or, at least, accounts should be
unbundled.
(69) The city administration in Mitrovica shall establish a department or public
enterprise being in charge of developing and operating the local DH business.
Such entity has to start operation latest when a contract for financial support has
been signed. This could allow starting with procurement and installation in the
period of 2011-2012.
(70) All district heating companies shall adapt their organizations to the new
operational philosophy, i.e., demand driven operation. This requires the
establishment of a customer service department and program as well as
organizational changes, such as a special marketing and sales department
separated from the financial department.
2 Objectives
The main objective of this project (the “study”) is to prepare a larger investment and
institutional reform program (the “project”) for three cities in Kosovo.
The objectives of the proposed district heating project are:
- Reduction of pollutants and greenhouse gas emissions by reducing the loss
of heat and water and increasing the energy efficiency
- improvement of the supply for the consumers with heat from the district
heating network
- Institutional strengthening of the district heat provider
- Complementation of existing legislation (for example feed-in tariffs, law
enforcement)
KfW, in view of an envisaged cooperation with EC, assesses possible investments in
district heating - possibly complemented by accompanying measures - of 25 million
EUR tentatively (KfW-Loan: 5 million; KfW-Grant: possibly 6 million EUR; IPF grant:
14 million EUR) for the cities of Pristina, Gjakova and Mitrovica, if they qualify for the
program. In addition, a financial contribution from the municipality of Pristine could
be made available. The amounts are still to be negotiated.
The objectives of the study are:
- To prepare a reasonable assessment of the current district final heating
demand and prepare an energy balance of the DH system allowing identifying
losses and inefficiencies. In this way, a realistic basis for determining the
investment needs will be created.
- To prepare a demand forecast: The demand forecast can also include
reasonable new connections within the current service area.
- To prepare least cost analysis: The study will identify least cost options for the
rehabilitation and modernization of the DH systems in the three cities.
- To prepare a study, which shall serve as a basis for determining potential
grants and loan financing provided by KfW and the EC.? This includes the
development of a short-term priority investment plan in compliance with a
longer term prospective of the development of the respective DH system.
- To assess affordability: The assignment will assess the current and future
affordability of DH services in the three cities
The assignment will also include an assessment of the institutional framework and the
provisions of recommendation for institutional changes as a prerequisite for the
successful implementation of the investment program. Institutional reforms shall
particularly support improving the collection rates
The investment project will be divided into two phases. Phase 1 for the measures to be
implemented in the short term after the pre-feasibility study – as described in the terms
of reference – has been completed. Phase 2 for the remaining funds after a feasibility
study to be financed from EU TA IPF has been realized.
Improvement of district Heating in Kosovo 17
Regarding heat meters in substations, some 50 substations in Pristina still miss the
metering. In Gjakova, all large substations are with heat meters already. In Mitrovica,
heat meters exist in most substations.
Along with heat metering, the substations have been upgraded with temperature
control systems that automatically control the radiator water temperature according
to both the actual outdoor temperature and the adjusted characteristics of the
Improvement of district Heating in Kosovo 18
particular building. Many of the substations are equipped with control systems, as
presented in the below.
3.1.2 Networks
The average size of DH piping is relatively large in Pristina and Gjakova, whereas
pipe diameters are usually smaller in other systems of similar size and type abroad
(typically DN 125-DN150). With larger diameter of piping, the DH system can be
extended to new customers at lower incremental network costs, which is relevant in
both Pristina and Gjakova. On the other hand, higher capital and maintenance costs
incur as long as the expected load has not been achieved.
The water losses of the DH networks in Kosovo are high. The main reason for high
losses is likely the poor condition of the remaining old networks, because most of the
indoor water systems of buildings are separated with heat exchangers from the DH
network.
High water losses speed up both corrosion and blocking, if the capacity of the water
treatment system is insufficient to meet the need of large water flows, and cause
energy losses, since the water had been heated from about 10oC to above 70oC.
A relative performance indicator, as presented in the table below, shows how many
times the water volume of the network has been replaced during the heating season.
In modern DH systems, the number is much lower, around one revolution per year
only.
Regarding the water losses, one has to note that the heating season in the region is
about 6 months whereas the networks in most other European countries are
operated all year round. Therefore, the comparative values of the water losses of
Pristina, Mitrovica and Gjakova are 60, 24 and 34 revolutions compared to 1 in
Finland and Sweden, for instance.
In several Central European Countries, where comprehensive rehabilitation of
district heating has been carried out since the early 1990ies, the water volume
revolution values used typically to vary between 10 to 30 revolutions on the annual
level compared with the 34 and 60 in Kosovo. This also indicates that the water loss
is a substantial problem in the Kosovo systems.
The water losses in Pristina are rather constant during the day, which also indicates
that the basic reason to losses is the leaking pipes and heat exchangers. If there
would be a variation from hour to hour, one could think there could be some
commercial application taking water illegally to their needs. However, this seems not
to be the case. Since the heat exchangers in Pristina are mainly new, the remaining
major reason for water losses is the old underground piping located in the city
center.
In Mitrovica, there are no metered records of water losses but the personnel
consider the losses of the network insignificant.
Improvement of district Heating in Kosovo 20
The data of the table above is based on real data from Pristina but on estimates in
the other cities, since no real statistics is systematically collected. Therefore, the
accuracy of interviewed data remains uncertain. In Mitrovica, only one leakage has
been observed and repaired in the past three years. Therefore, the value is very low:
0.1 repairs per km. One reason to this is that, due to comprehensive disconnections,
the heat demand is low. Therefore, low pressures and water flows are used, which
saves pipelines from damages.
The general problem in the region is the hardness of raw water. The softening plants
in the boiler plants need be properly sized in order to prevent hard water entering the
network.
The thermal losses of the networks are still relatively high, even though there is no
summer time load and many of the pipes have been replaced. The problem stays
with the old pipelines that are poorly insulated if at all. In Pristina, in particular, the
problem is the external water frequently covering the poorly insulated pipelines. In
Mitrovica, the high relative losses of the network, about 30%, are explained by the
low heat delivery, less than 25% of the designed. The network is all time hot during
the heating season regardless how much heat is delivered.
Heat losses of the state-of-the-art networks would range from 2 to 6%, depending on
the relative length and average diameter of the pipelines. Therefore, there is a way
to go for pipeline replacement and for optimizing the sizes while replacing old pipes
and improving the distribution efficiency.
Electric applications, such as DH circulation and static pressure pumps, the pumps
in substations and the fans at boiler plants are the main users of electric energy in
DH. Using frequency control systems will substantially reduce electricity
consumption.
3.1.3 Boilers
Some rehabilitation has been realized in the tree DH systems in an EAR financed
project. Such rehabilitation measures have covered new burners, water softening
systems, and replacement of burner tubes.
Improvement of district Heating in Kosovo 21
In all three systems, the boilers are equipped with heat energy metering. Therefore,
the efficiency measurements are based on produced heat energy per consumed
mazut energy. The annual efficiency of the three main boiler systems is given in the
table below.
Figure 13 Estimated boiler plant efficiencies from the past heating season
In the above heat sales numbers, all connections are as active per today, and the
sales normalized to correspond to an average year with no heat supply deficit
prevailing at any time.
For reference, the productivity is much higher in northern Europe, for instance. In a
modern DH system, the productivity should be higher than 10 instead of less than 1
as in the companies in the region. One of the reasons to the large productivity
difference is the extended maintenance responsibility of the local DH companies to
cover the indoor installations as well, whereas the responsibility in the northern
Europe stops usually in front of the substations already. Adjusting the staff to the
real need may not be easy, but the personnel development program, that includes
training, should be created in the companies.
Board of Directors
Procurement Office
Deputy
Managing Dir.
Cashier Yard
(1) Maintenance (1)
Cashier Cleaner
(2) (1)
Mitrovica
The DH division is part of STANDARD Company. For the time being, only 13-14
people work for DH. An official organizational chart is not available.
3.2.1 Pristina
Legal status of the company
“NGROHTOREN E QYTETIT TERMOKOS SH.A” (District Heating TERMOKOS
Joint Stock Company) is a public owned enterprise and is established as a joint
stock company registered and headquartered in Pristina. The company is registered
on the Kosovo Business Registry under No. 703253 dated Dec. 23, 2005 and used
to be administrated by the Kosovo Trust Agency (KTA). The company is the legal
successor of N.P.K. TERMOKOS, a public utility company. Since June 2009, the
Improvement of district Heating in Kosovo 24
Scope of business
The Company undertakes only one single business that is district heating service
comprising heat generation and distribution up to the final consumers.
Financial Situation
The account receivable days decreased by almost 50% in the period 2006-2008, but
are still high indicating larger collection problems. This is also illustrated by the fact
that the collection rate for 2008 is very low indicating the late payment of consumers.
However, TERMOKOST succeeded to collect money for bills of previous years.
Accordingly the overall collection rate was 67.5% in 2007 and 88.4% in 2008. In
2008, the company did not charge consumers for two months, in which the DH
system was not operated. Accordingly, a part of the fixed costs could not be
covered, although even the lump sum tariff is composed by a fixed and a variable
component.
Early in 2008, the combination of low collection rates and sharply increased heavy
fuel oil prices caused the discontinuation of the heating supply for about two months,
as TERMOKOS was not able to pay the fuel bills and the fuel supplier refused to
deliver the fuel.
The accounts payable days are in compliance with good business practice and the
current ratio is acceptable.
Losses amounted to 57% of total costs in 2006 due to high bad debts. In 2007 and
2008 losses have been reduced to 8%.
For the time being, billing rates cannot reasonably be determined for the following
reasons:
- Heat consumption of final consumers is not metered, neither in substations nor
anywhere else in the connected buildings. That means, physical losses in the
2
For decomposition of the Board, see chapter 3.3.1 “Law on Public Enterprises”.
Improvement of district Heating in Kosovo 25
distribution system are actually not known and are typically estimated
according to normative loss numbers or a combination of normative loss
numbers and some assumption. Occasional measurements may improve the
numbers, but could only to limited extent be extrapolated for a whole heating
period.
- There is likely a significant percentage of non-registered heat consumption,
either by illegal connections or by non-registered extension of the heated
areas. These are typical problems in quickly growing cities like Pristina, where
many new buildings are constructed or extended even within existing DH
service areas. TERMOKOS detected many such cases, but it is hard to
estimate the actual number of such connections.
3.2.2 Gjakova
Legal status
“NGROHTOREN E QYTETIT GJAKOVË SH.A.” (District Heating Gjakova Joint
Stock Company) is the district heating company of the City of Gjakova. It is
established as a joint stock company registered and headquartered in Gjakova. The
company is registered on the Kosovo Business Registry in 2005 and used to be
administrated by the Kosovo Trust Agency (KTA). Since June 2009, the Company is
owned by and under supervision of the Municipality of Gjakova in compliance with
the Law “On Public Owned Utilities””.
Scope of business
The company’s sole business is supply of district heating services comprising heat
generation and distribution up to the final consumers.
Financial status
Account receivable days are high (204-268 days) and the company was not able to
reduce them in the period 2006-2008. Accounts payable days reflect good business
practice, but increased from 15 to 37 days. Average collection rates of bills of the
current year were 30% in 2008. The overall collection rate was 30% in 2008.
The current ratio declined in the same period indicating again increasing problems of
the company to fulfill its payment obligations. Losses became lower in 2008, but are
still high amounting to 22% of the total costs.
Improvement of district Heating in Kosovo 26
Scope of business
The company is in charge of various utilities and its business comprises:
- district heating
- water supply
- market organization
All businesses are reported to one single accounting system, i.e., there are no
separate accounts for the individual businesses. The Company can, however,
separate the costs utilizing simple cost distribution keys; this has been done for the
DH business but not all cost items had been considered.
Financial Situation
Improvement of district Heating in Kosovo 27
The biggest part (about ¾) of the total income comes as subsidies from central
governmental budgetary sources. Thanks to this financial source, the current ratio is
acceptable with a value of 1.92(2008) and 1.1 (2007) as well as the as the accounts
payable days (45 and 69 days for 2008 and 2007). However, the company has big
collection problems, although goods and services are heavily subsidized. Accounts
receivables amount to 393 days (2008) and 261 days (2007).
STANDARD Company prepared a separate income statement for the DH business
in 2008.Total expenditures amounted to about 21 million RSD (approx. €237.000) 3,
while total revenues amounted to 12.2 million RSD (approx. 138.000 €). Accordingly,
the DH business generated a loss of 8.6 million RSD (approx. 97.000 €). The
numbers do even not include depreciation. The biggest expenditures were for
personnel (about 55% of total excluding depreciation) and for fuel (39%)
120,000
100,000
Other income
80,000
Income from subsidies etc.
40,000
20,000
-
2008 2007
The low collection rates have been explained by the electricity which used to be
supplied free of charge by the Serbian Electricity Company EPS. Free of charge
means that EPS did not bill the customers so far. However, it was stated that EPS
would start reading the meters on Dec. 1, 2009, and start billing the customers on
Dec.15, 2009.
The electricity price will play an important role for the financial development of the
company. Only if customers will have to pay a realistic electricity price, consumers
would be ready to reconnect to district heating. However, even then, collection rates
might be very low for some time, as final consumers have been accustomed to get
heating for free. On the other hand, if the DH Company would apply a stringent and
consequent collection policy, the reconnection rate could be low. Eventually, the
financial recovery of the DH business could become a difficult and time-consuming
process and subsidies might be required for a number of years.
3
The currency exchange rate was 88.6010 RSD/€ in December 2008 (Source: National Bank of Serbia)
Improvement of district Heating in Kosovo 28
reinforcement of the existing network can only be levied if the new load requirements
exceed 3% of the existing effective capacity at the relevant points of the network.
The General Conditions specify also the contract partner in case of DH services.
Article 17 stipulated:
17.1 In district heating, the customer – contracting party is considered the
owner or authorized user of facility equipped with the substation and
secondary internal heat network.
17.2 In case of multi-flat buildings consisting of several (numerous) individually
owned apartments, which are the end-users of the heat, the customer –
contracting party to the supplier – shall be considered any legal entity
performing duties of the housing administration (e.g. administrator, housing
association etc.) that will be established in the future.
17.3 Until the establishment of housing administration in multi flat buildings,
each owner of the apartment shall be considered as the customer – contacting
party to the supplier.
TERMOKOS applies a supply contract, which specifies in detail powers and
liabilities of the supplier (TERMOKOS) and final consumers. It also addresses
service quality, but does not offer compensation in case of service interruptions. The
supply contract is, however, only applied for customers, charged according to meter
readings. There are no written contracts for non-metered consumption.
Once consumption-based billing will be comprehensively applied, TERMOKOS will
conclude contracts with all individual customers, as long as the corresponding legal
representatives have not been established. TERMOKOS intends to implement
consumption-based billing in 2011.
The requirement to install meters and using them for billing is stipulated in the
licenses. However, given the tough financial situation of the companies, so far ERO
has not yet issued a deadline for the installation of the meters. Nevertheless, the
need for this installation was communicated to the regulated companies in several
meetings and occasions. There is also a provision in the Law on District Heating that
obliges the companies to install meters. Article 32 of the Law on District Heating
obliges the distributor to install meters on all customers connected to the district
heating system within one year from the approval of the law.
The allowed Rate of Return refers to the Regulatory Asset Base (RAB) minus
accumulated depreciation. The result in an allowed profit for the district heating
enterprise is considered to be a fixed component. The formula is:
Allowed Profit = RoR x [RAB - Depreciation]
Value of Reconciliation
In principle, any under-compensation or over-compensation of the allowed revenues
of the receding tariff review will be recovered in the allowed revenues of the
following tariff review.
ERO calculates the reconciliation value based on an assessment of actual data and
planned data, which is the by ERO accepted differences between the actual and
planned Allowed Revenues of DHC TERMOKOS for the heating season. €721,780
was deducted from the Allowed Revenues for the district heating season 2007/08.
However, ERO had also to deduct the amount regarding the reconciliation of DH
season 2004/05, which was spread over five years and is one fifth of €1,407,867 or
€281,573 without interest. ERO also charged the annual interest of 3.9%, which was
the equivalent of interest earned on a one year deposit account in Kosovo, by which
the amount to be deducted regarding the reconciliation 2004-2005 will be: €281,573
* 1.039= €292,554. This is then the third one fifth of the reconciliation 2004 -2005
including interest, that will be deducted from the allowed revenues for district heating
season 2006 - 2007 for DHC TERMOKOS.
Cost coverage
The preliminary rules for tariff setting stipulate that costs have to be recovered:
“In accordance to the principles of RoR Methodology, district heating
enterprise is entitled to recover its justified costs and the allowed Rate of
Return on its Regulatory Asset Base. “
Tariffs will be approved based on a proposal submitted by the DH Companies:
“In the application the district heating enterprise shall include its proposal for
the tariffs and prices for the heating season, which officially starts on 15
October 2005 and ends on 15 April 2006.”
Actually, ERO refused or corrected only a few cost items. In 2007, the difference
was only about 3 % of the costs. The main difference stems for the reconciliation
values related to non-justified income from previous year due to differences in actual
and planned costs, which will reduce the allowed revenue for the current year.
It should also be noticed that fuel subsidies reduce the allowed revenues. If they are
given in advance (or are known at the time of tariff application), they will reduce the
allowed revenue for the respective year. If they are given after tariff approval, they
will reduce the allowed revenue of the following year (including interest payments).
Improvement of district Heating in Kosovo 33
Subsidies are obviously not given to fill the gap between approved tariffs and actual
costs, but to reduce tariffs. The amount of subsidies used to be based on a political
decision of the central government. How this will be handled after municipalization of
the DH Companies has to be watched.
Figure 21 shows the costs presented by TERMOKOS and approved by ERO for the
heating season 2007/2008.
Major differences refer to:
- Costs of mazut: ERO argued that both the consumption and the projected
fuel price were too high. ERO reduced the mazut price to 289 €/tonne.
However, the actual price was 312 €/tonne according to financial statement
of TERMOKOS and information given on Mazut consumption)
- Staff costs: Differences refer mostly to the division amongst fixed and
variable costs, but in total costs have been approved.
The profit was reduced, as ERO did not accept the proposed value of the Regulatory
Asset Base presented by TERMOKOS. ERO reduced the number from € 9.98
million to 9.37 million. This difference referred to the book value of existing fixed
assets and the validation of new assets (that would be installed in the coming
heating season)
An interesting aspect is that ERO accepted bad debts in contrast to the stipulations
of the rules for tariff calculation, although ERO emphasizes that this will be accepted
only under certain conditions:
- if the sum corresponding to bad debts is included in the revenues
- If such debts are written off from the bookkeeping as void
- If exists adequate evidence of essential unsuccessful efforts for collection of
debts.
In total TERMOKOS was able to provoke this for a total amount of € 668.047 out of
total debts shown in the expenditure statement of € 2.4 million shown in the
expenditures statement.
Improvement of district Heating in Kosovo 34
3.3.6 Subsidies
Fuel subsidies have been provided by the Central Government. The subsidies
covered a substantial part of the fuel costs (see Figure 22). Fuel subsidies have also
been provided for 2009 and, according to TERMOKOS, have been promised for
2010.
TERMOKOS Gjakova
2007 2008 2007 2008
Fuel subsidies 2,636,220 1,914,402 189,692 335,589
Total expenditures 7,597,525 5,845,567 1,354,143 1,164,327
Fuel costs 3,331,661 2,735,508 574,222 475,251
Subsidies per fuel costs 70% 70% 33% 70%
Source: DH Companies and own calculation
Direct subsidies tend to support wasting resources, as incentives to save energy are
reduced and the subsidized prices do not reflect the true costs. From an economic
point of view, replacing the direct subsidies by targeted subsidies for the low-income
households would be more efficient. It is recommended that TA should be provided.
The actual tariffs are below the real costs as illustrated by the next table, which is
based on the financial statements of TERMOKOS. The table shows:
- Average costs (ERO): total cost that are accepted by the tariff regulation
divided by total supplied heat
- Average costs (total): Total costs divided by supplied heat. The main
difference to the previous item is that bad debts are included. Bad debts are
not accepted by ERO as justified costs.
- Actual average revenue: revenues from heat sales divided by total supplied
heat (average and by consumer group)
Due to high costs of bad debts the allowed costs (i.e. cost determined in compliance
with ERO rules, but excluding a reconciliation value) plus return on capital used to
be far below the total costs. However, due to quick reduction of bad debts in the past
years, the gap became smaller and in 2008 both numbers were very close.
It should be noticed that the first table (Figure 23) shows the tariffs by heating
season, while the second one (Figure 24) shows numbers for the financial year
starting on January 1. However, the big difference is caused by the subsidies, which
are included in the tariffs but not in costs. Actual average revenues are closer to the
numbers in Figure 23, but cannot directly be compared due to the different time
period and due to the fact, that many customers are still charged by lump sum tariffs.
5
The average tariff was calculated as Energy Charge (€/kWh) + Fixed charge (€/kW)/)/(Load duration hours per
year)
6 Ideally, lump sum tariffs and tariffs for metered consumers should be equal. However, the actual heat demand is
different and accordingly the actual heating costs per MWh can substantially differ from the tariff for metered
consumers. Actual differences can only be determined through metering.
Improvement of district Heating in Kosovo 37
The approved tariffs are far below real costs as illustrated by the next table, which is
based on the financial statements of the DHC. Unlike in case of Pristina, a significant
difference between average revenues and approved tariffs occurred. There are
several reasons for the differences:
- Particularly the high bad debts, which are costs in the income statement, but
are not costs that are accepted by the tariff regulation used to be very high.
- As the tariff is based on a forecast and the regulator my underestimate input
price increases or the may try to cushion inflation by accepting only modest
input price increases.
- In 2008, the average total costs are below average allowed costs plus return
on capital, which shows that the return on capital would more than
compensate losses for bad debts.
7
The numbers, particularly for 2008, could be misleading. In 2008, the heat production increased, but fuel costs
went down. This might be explained by fuel purchased in 2007 but consumed in 2008. However, precise num bers
do not exist..
8
This number shows only those costs that have directly been allocated to DH. STANDARD does not allocate
indirect costs.
Improvement of district Heating in Kosovo 38
4.1 Pristina
9
Degree days are calculated as the difference between normative indoor temperature and actual average outdoor
temperature during heating season times annual operational hours
Improvement of district Heating in Kosovo 40
regarded to be a year without any significant fuel shortage problem and with
relatively high degree days (above 3.000 days). Nevertheless, the heat production is
14% lower than the normative one, which could indicate that the normative heat
consumption figures are too large. The high normative heat consumption could be
caused by an extremely low design outside temperature of -18 oC that occurs only in
for a few hours in a few years.
Heat production
147.8 GWh
DH water network
4.2 Gjakova
10
This number is calculated as the weighted average of the specific heat load numbers for residential
(100 W/m²)and non-residential customers (120 W/m²). These numbers are used by the DHC of the city of Gjakova.
11
Actually, temperature below -12 oC are achieved very seldom, typically only once or twice a year.
Likely, such low temperature occur also during the night. Therefore the question should be raised, whether a design
outdoor temperature of -18 oC is still a reasonable basis for designing the heating system.
Improvement of district Heating in Kosovo 42
Fuel
25,0 GWh of mazut
Boiler plant losses
13,0 % 3,2 GWh
Heat production
21,7 GWh
DH water network
Network losses
9% 2,0 GWh
DH sales
19,8 GWh
Residential
11,2 GWh 56 %
The heat losses have been estimated by using average temperatures of 80oC, 50oC,
and 5oC for the supply, return and soil respectively. The thermal losses of the old
pipelines is assumed to be 30% higher than the modern preinsulated ones, because
the old woolen thermal insulation is much worse than the polyurethane of the
modern pipes.
The energy balance above corresponds to
• the specific heat consumption of 136 kWh/m²,and
• the specific peak load value of 108 W/m².
Both numbers refer to final consumption (apartment level).The numbers should be
used prudently, as both are significantly higher than the corresponding numbers
from Pristina, although the climate is somewhat milder than in Pristina.
4.3 Mitrovica
substations of 54 in total. The total area of the building stock that is physically
connected to the 54 substations amounts to about 130.000m² in total.
Heat production
3.9 GWh
DH water network
Network losses
30% 1.2 GWh
DH sales
2.8 GWh
Residential
0.0 GWh 0%
5.1 Pristina
Ulpiana, Dardania and Sunny Hill districts, however, where the DH network exists,
some 70% of the potential heated area is already connected to the DH.
The municipality is in process to prepare urban plans to districts in accordance with
the city strategy ranging until year 2020. At present, only the urban plan for Dardania
exists. The urban plan for Qentra is expected by the end of 2009, but the plans for
Sunny Hill and Ulpiana (including Calabria) are in an initial stage.
During the next three years, 2010-2012, some 258.000 m² extension, which is 27%
of the actual connected heat area of TERMOKOS, is expected to be connected to
the DH system. This will comprise:
• 116.000 m² in Calabria, a residential area being a part of
Ulpiana district, of 160 000 m² in total being under construction
nearby the boiler plant. The half of the 12 buildings in total are in
completion stage and the remaining ones will be completed by
2011.
• 14.000 m² elsewhere in Ulpiana,
• 14.000 m² in Dardania,
• 91.000 m² in the Qentra (center), which comprises the theater,
business centers and other mainly public buildings, and
• 25.000 m² of residential load in Sunny Hill being currently under
construction.
According to the plans of TERMOKOS, all these buildings will be connected to the
existing network with short (50 m per building on average) connection branch
pipelines. In view of lacking cost-effective alternative heating systems, the probability
is high, that these buildings will actually be connected to DH.
Figure 32 shows the new connections envisaged by TERMOKOS for the period
2009-2012.
Improvement of district Heating in Kosovo 47
180.0
160.0
140.0
120.0
100.0
80.0
60.0
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
140.0
120.0
100.0
80.0
60.0
40.0
Heat sales GWh/yr
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
5.2 Gjakova
5.2.1 Disconnections
In Gjakova, disconnections amount to 26.3% of the total customer stock connected
to the district heating system. The DH Company believes that there is no reason to
expect the disconnected customers be largely reconnected in the near future, say 3-
5 years, because either they have constant affordability problems, due to high level
Improvement of district Heating in Kosovo 49
of unemployment and low salary levels in general, or they have an alternative heat
source already. Representatives of the municipality, however, have a different
opinion. They believe that the high disconnection rate is caused by lacking
consumption-based billing. Therefore, the business-as-usual scenario assumes no
reconnections, while the alternative scenarios assumes that 2/3 of the disconnected
area will be reconnected until 2013. Reconnections will start once consumption
based billing is applied, which is assumed to start in 2010/2011.
5.2.2 Expansions
Along the existing network, there are some 400.000 m² of buildings either already
existing or being under construction that can be connected in the next five years.
Realistically, 60.000 m² per year in the years 2010-2014 is expected comprising
80% of residential and the balance of 20% of public customers. The potential
customers are in the old downtown located on both banks of the river as well as east
of the main pipeline heading south from the boiler plant.
In addition, a new Rezina area with the planned 300.000 m² is expected northeast of
the boiler plant, but little or nothing is expected to DH by year 2014.
45.0
40.0
35.0
30.0
25.0
20.0
15.0
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
40.0
35.0
30.0
25.0
20.0
Heat sales GWh/yr
15.0
Heat load required from sources MW
10.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
5.3.1 Disconnections
All residential customers have disconnected, only 15 of 54 substations are in use,
the pipeline to south part of Mitrovica is not in use at all, not even to the nearby
buildings on the street. Of those 15 that operate 9 supply commercial customers and
6 supply public customers.
The breakdown of the 54 substation is as follows:
• Residential: 18 substations exist in residential buildings, but there is
neither primary nor secondary connection piping to supply them heat from
the network. Due to electricity free of charge, the customers are not
connected even in cases the physical connection would exist.
• Commercial: 9 commercial substations operate
• Public: Of 27 substations in public premises, 6 operate but 21 are
disconnected. Those 6 customers pay in kind: mainly by giving mazut
against received heat.
The disconnections are most typical in line 2 of four lines in total. In line 2, some
80%of the customers are without secondary networks. In line 1, the main customer
is the medical center situated at the end of the 1 km long pipeline, whereas most
buildings near the pipeline are not connected.
In the long term, there may be natural gas available in Kosovo, since the pipeline
from Skopje to Pristina already exists but has not been used in some 20 years.
However, the world market prices of natural gas and mazut are strongly interlinked:
sometimes gas is more expensive than mazut, at the other times vice-a-versa.
Regarding Mitrovica, the nearest gas connection point is in Kraljevo, 150 km away
and without pipeline now. Therefore, individual gas heating when coming afterwards
to a district heating area, will not economically overrun mazut-fuelled district heating.
Additionally, district heating has the unique advance to both use alternative fuels
and be connected to CHP that individual gas heating does not have. Therefore,
strategically individual gas heating would be a poor option while excluding
alternatives in case either availability or price of gas becomes a problem.
In the short term, there is no alternative to district heating in urban areas other than
electric heating, as now, and individual lignite/wood heating. The latter shall be
deemed not to come due to environmental reasons: individual solid fuel firing in
densely built urban areas would lead to disaster with bad air quality and serious
health problems.
Under the prevailing tariff system, there are various options for private households.
With a 2-rate meter consumption during day and night time is charged with different
rates. A 1-rate meter does not distinguish between time of consumption and non-
metered consumers have to pay a lump sum according to the estimated
consumption. Accordingly, private households have to pay the fixed charge
independently of whether they use electricity for heating and they will pay the lowest
charge for their normal electricity consumption. If electricity is used for heating, most
consumers will likely have to pay the higher tariff for consumption higher than 200
kWh/month. Assuming that ¾ of the consumption is during daytime, they have to
pay at least
0.75 * 6.43 cts/kWh + 0.25 * 3.22 cts/kWh = 5.63 cts/kWh.
If total consumption exceeds 600 kWh/month, the additional consumption will be
charged with the highest tariff.
Although tariffs have not substantially been raised in the past years 12 customers
started to look for alternatives, which is district heating. The costs of electric heating
depend mostly on the price of electricity.
The following figure shows the results of a model calculation for electric heating.
Since the price in the future is unknown, the price ranging is varied from 6 to 10
cts/kWh. In addition, the costs of heating devices have to be taken into account,
which is estimated to amount to equipment costs of € 250 per apartment. Applying
an annuity of 10% (covering interest rates and maintenance costs) the annual fixed
costs would amount to € 25. The fixed charge of € 25.00 for electricity supply (see
Figure 36) is not taken into account, as this charge does not represent incremental
costs caused by electric heating (the fee have to be paid anyway for lightning etc.).
Heat consumption is based on assuming an apartment area of 60 m² and a heat
consumption of 0.145 kWh/m², yr and the size of the apartment is 50 m².
16
14
12
Heating costs €/m²,yr
10
0
50 60 70 80 90 100
electricity energy charge €/MWh
There is a rule of thumb, based on a large number of heating cases in Europe and
Asia, stating that the heat load densities higher than 3 MWh/km of heat sales per
network length are sustainable for DH, whereas those being lower than 1 MWh/km
are seldom. Pristina exceeds the value of 3, whereas the numbers in Gjakova and
Mitrovica are very low. The low heat load numbers in Gjakova and Mitrovica are
largely caused by buildings that are either disconnected from the DH system or that
have never been connected to DH before, although there was an intention to
connect them. After having those connected, the heat load density values would
achieve the value of 3 MWh/km, which is the common rule of thumb for a
sustainable DH system. Actually, expanding DH to areas with heat load density even
lower than 1 MWh/km is under consideration in several countries in Europe.
To assess the competitiveness of DH in the longer term, some issues have to be
taken into account:
12
In 2000, the tariff for residential consumers was 6.39 cts/kWh independent of the size of consumption.
Improvement of district Heating in Kosovo 54
- Current prices and (specific fixed) costs are distorted. Tariffs are highly
subsidized and costs are burdened with the high rate of disconnections,
particularly in case of Gjakova and Mitrovica.
- Final consumers make their decisions typically based on current prices
rather than considering longer-term developments. That means they will
look for the current subsidized prices. DH Companies will do the same, as
long as the difference between actual costs and tariffs is covered by
subsidies. Under the current conditions, there is a clear advantage for DH
at least for new buildings. The figure below shows the costs for heating of
domestic consumers in dependence of the energy charge (the so-called
active energy charge. Even if DH tariffs would be increased to a cost
covering level, there would be an advantage for DH. Current cost prices
(i.e., total costs excluding bad debts divided by total heat supply) amount
to about 77-88 €/MWh (but about 100 €/MWh in Mitrovica due to the
currently low connection rare) 13, which is below the electric heating option.
These costs can significantly be reduced by the proposed investment
programs and by fostering reconnections.
- above and a current electricity charge of 6-7 cts/kWh total heating costs
using electricity would amount to 9-11 cts/kWh. This is significantly higher
than the current DH tariffs.
- Owners of existing and new buildings may have a different view about
cost of electric heating. While owners of apartments in new buildings have
to invest in electric heaters, those in the existing building stock are already
equipped with them. These consumers will only compare the electricity
tariff with the DH tariff. Nevertheless, the current DH tariffs are below 50
€/MWh, which is substantially below the electricity price.
- Increasing demand for electric heating would result in increasing
electricity generation costs as additional plants have to be built or
expensive electricity imports would be necessary
- From the point of view of energy security, it could be argued that electric
heating would be advantageous as national resources are used. However,
this argument is not reasonable as long as electricity has to be imported.
Moreover, at least in case of Pristina, heat supply could be based on CHP
in future and in this way, the national resources would be used.
- A disadvantage for DH is the lacking internal centralized heating system in
many buildings. Costs for a corresponding reconstruction are estimated to
be in the range from 15-22 €/m² 14. Adding this to the proper DH costs,
total costs would likely be still below the costs of electric heating
13
See Annex 11.11
14
This number is based on experiences of TERMOKOS and DHC Gjakova
Improvement of district Heating in Kosovo 55
7 Investment Strategy
substation takes heat from the network as much as needed, neither more nor less,
thus providing the system with demand driven control. In the demand driven mode,
the heat sources have to follow the actual needs caused by the individual
substations continually and to adjust the heat production accordingly.
Supply T
from DH T
Floor
heating
elements
or
room
radiators
T
The control
Return to DH T
valve!
Flow meter
Figure 40 Operation with individual (left picture) and joint dispatch (right
picture)
0,9 0,9
0,8 0,8
Heat Production
0,7 0,7
0,6 0,6
0,5 0,5
0,4 0,4
0,3 0,3
0,2 0,2
0,1 0,1
0 0
0 1000 2000 3000 4000 5000 6000 7000 8000 0 750 1500 2250 3000 3750 4500 5250 6000 6750 7500 8250
CHP Boiler 1 Boiler 2 Boiler 2 CHP Boiler 1 Boiler 2 Boiler 2
In the figure the load curves for the various heat sources are shown assuming a DH
system with various service areas. The left diagram shows the load curve for a
system where each service area is supplied by its own heat source and the total
load curve of the DH system is the sum of the individual load curves. The diagram
on the right shows the same DH system, but the various heat sources supply the
whole system (usually according to a merit order), i.e., the plant with the lowest heat
price (or lowest costs, usually a CHP) supplies the base load, and the one with the
highest price (or costs) the peak load.
Radial Looped
measures carried out as well as the visual observations done should be recorded
for adjusting further the maintenance planning.
In order to face out corrosion, blocking and energy losses due to excess use of poorly
treated water in large volumes, the below picture is to present the logical steps to proceed.
Objectiv e Elimination of
Elimination of internal corrosion external
corrosion
Measures Improved
Preinsulated capacity of Preinsulated
pipes w ater pipes
softening
Ox ygen
Plate heat
removed from
ex changers
w ater
Losses
72
103 (=31/0.3)
Thermal Power
CHP: 5 MW Natural gas
TPP Fuel Plant Electricity 31
Efficiency η=30% Combustion Turbine
Total Efficiency = 83%
El (=31+52/100)
ec
tri
cit
y
100
Total Efficiency = 49%
(=31+52/103+65) CHP Plant CHP Fuel
t
ea
65 (=52/0.8)
Losses
17
Boiler Fuel Heating Boiler
Plant Heat 52
Efficiency η=80%
Losses
13
Every CHP application involves the recovery of otherwise wasted thermal energy to
produce useful heat. As CHP is highly efficient, and it reduces emission of air
pollutants and carbon dioxide, the leading greenhouse gases associated with global
climate change. Optimal conditions for implementing cogeneration occur when the
price of electricity is relatively high and rising, and the price of fuel is low.
The disadvantage of cogeneration is that the time wise demand of heat and
electricity of the customers can deviate strongly from each other, whereas heat and
electricity are always generated at the same time.
To use cogeneration in the most efficient way, the heat demand is separated into
base and peak load. Only the base load should be covered by CHP plant, while the
peak load demand is provided by peak heat-only boilers. Additional heat storage
systems are sometimes used to get longer utilization periods and higher efficiencies.
The heat storage system can be a special hot water tank as well as the network that
can be charged during the time of lower demand and discharged later on.
CHP and DH
District heating (DH) is one of the three main applications of cogeneration. The heat
provided by cogeneration is well suited to provide space heating and hot water for
domestic, commercial or industrial use. A feature of cogeneration driven district heat
is the option of fuel diversity to meet environmental, economic or strategic priorities.
For example, DH systems are sometimes based on the incineration of municipal
waste, and with adequate emission controls is a better environmental solution than
disposing waste to landfill. DH systems are also able to use biomass.
Improvement of district Heating in Kosovo 61
The use of natural gas as a fuel gives added flexibility to district heating systems.
Engines, providing electricity and heat, in combination with boilers, can introduce
more cogeneration into existing DH networks.
The operation of a DH network faces a unique set of challenges. Modern distribution
pipes have made it economic to transport heat over considerable distances but the
costs are still pretty high. New networks require extensive civil works, and the
appropriate permissions for planning and access are expensive and time
consuming. Historically the costs of connecting building networks have been
subsidized by local or national government but this type of funding is no longer as
readily available as it has been in the past.
TPP KOSOVO B
TPP KOSOVO B, shown in Figure 42, is a thermal power plant with two blocks of the
same design (B1 and B2). The total nominal power capacity is 2x339 MW(el) and
net nominal output is 618 MW(el). The plant is located about 10 km from Pristine by
road. The plant uses lignite from the "Belacevac" mine.
Figure 43 shows the technical scheme of TPP Kosovo B. TPP Kosovo B is still a
relatively modern subcritical plant with still actual parameters. The two blocks of TPP
Kosovo B were, when constructed, the largest thermal blocks in former Yugoslavia.
P-30
E-19
E-5
P-7 P-9
P-28
P-12 P-13
E-1
E-7
E-16
E-17
P-11 P-5 P-2 P-25
P-27
P-26
Source: KEK
Improvement of district Heating in Kosovo 62
TPP Kosovo B uses five surface regenerative feed water heaters and a de-aerator.
According to the turbine supplier, some of the regenerative heaters can be
eliminated and such options were examined by IBE 15.
TPP Kosovo B is certainly the most important electric energy generating facility in
Kosovo. Figure 44 shows the relative production of electricity of TPP Kosovo B for
the period 2004 – 2008. It is obvious that TPP Kosovo B participated during the
whole period between 2004 and 2008 with more than 60% in total production, import
and exchange of electrical energy in Kosovo. The peak was during 2005 when TPP
Kosovo B participated with 73%. In later years the participation dropped to slightly
over 60% because of the improvements of the reliability of TPP Kosovo A, increased
import and deterioration of performances of TPP Kosovo B.
Figure 45 shows the basic technical scheme of heat supply from TPP Kosovo B as
proposed by two studies (IBE and the ESTAP 16) study, The main components are
the steam extraction from the turbine, heat exchangers, and a pump station located
close to TPP Kosovo B, two pre-insulated pipes pipeline with a length 2 x 10.5 km
15
IBE, Kosovo Combined Heat and Power Feasibility Study, Ljubljana, 2005
16
ESTAP, ENERGY SECTOR TECHNICAL ASSISTANCE PROJECT (ESTAP) KOSOVO, World Bank
Grant No. TF-027791, Module H “District Heating“ Final Report, 2002
Improvement of district Heating in Kosovo 63
and heat exchanger and pump station located in Pristine downtown (location of
TERMOKOS).
DH Network
TPP Kosovo B
Termokos
The detailed study performed by IBE proposed that steam should be extracted from
the main steam pipeline between medium pressure and low-pressure turbine
cylinders, as it is schematically shown in figure 19. This solution is technically simple
because it requires only cutting the main steam pipeline and installing a throttling
valve. The extraction of steam would be regulated by opening and closing the
throttling valve. However, such solution has an inherent disadvantage. This is
related to fact that steam is extracted at pressure of 2 bar and temperature of 220 -
240 °C. This implies a technically unnecessary loss of exergy, because steam with
high potential is used for producing low temperature heat for district heating. This
has some essential practical and economical aspects. The practical aspect refers to
the importance of TPP Kosovo B for electricity generation in Kosovo. Historically,
TPP Kosovo has been contributing between 60 and 70% of the total electricity
balance (including import and exchange) of Kosovo. Practically, each MWh is
important, and consequently all viable possibilities for minimizing electricity losses
caused by cogeneration should be considered. For the time being, such losses could
only be substituted only by imported electricity. Moreover, due to the coincidence of
electricity and heat demand, the price of imported electricity will be high during most
part of the heating seasons.
Improvement of district Heating in Kosovo 64
Source: KEK
- the share of heat that shall be produced by the proper CHP facilities and peak
boilers (HoB)
The “ESTAP” study proposed that the capacity of steam extraction and heat stations
should be 90 MW(th). This capacity would exceed the heat load, when outside
temperature is -13 °C that is the temperature IBE proposed to be used as design
temperature. In their study IBE proposed a capacity of cogeneration of 58 MW(th),
which represents, according to their estimate, 70% of the load at an outside
temperature of -13 °C. If the average rate of new consumers to district heating in last
a few years is taken into account, it becomes evident that both figures are too
optimistic and overestimated.
The ESTAP study proposed that both units, B1 as well as B2, should be enabled for
extraction of 90 MW(th). This should be understood as a means to improve the
reliability of heat supply by using redundancy. It sounds reasonable, at first glance.
However, in view of the fact that TPP Kosovo B operates very reliably, and that the
Improvement of district Heating in Kosovo 65
7.1.8 DH Strategy
The proposed strategy can be broken down into several phases, which describe the
conversion from the outdated supply-driven business model to a sustainable
demand-driven one.
Improvement of district Heating in Kosovo 66
Two of the three cities (Pristina and Gjakova) are already taking the 3rd step in the
above diagram.
Regarding the 4th step, the centralized DHW has suggested to be a pilot project in
Pristina that would provide valuable experience to the whole country. CHP becomes
more viable the longer the plant can operate in cogeneration mode. Space heating is
only needed during the heating season, while DHW is needed all over the year.
There are some cities in Europe that did not have centralized DHW in the past. One
of them is Krakow, Poland. The district heating company of Krakow, MPEC, started
to introduce centralized DHW services to their customers about ten years ago, and
by today, almost all customers are with DHW served by DH. As heat sources, there
are two CHP plants, EC Skawina and EC Krakow, that sell heat to MPEC, which
takes care of heat distribution and sales to the DH consumers in Krakow.
The centralized DHW, as is the common practice elsewhere in Europe, is integrated
with DH supply. The same two pipes that are connected to the buildings provide hot
water both for room space and DHW heating. The difference is in the substations:
instead of having one heat exchanger for space heating, there are two heat
exchangers in parallel, one for space heating and the other one for DHW. Both heat
exchangers are equipped with separate control systems and circulation pumps, of
course.
The increment investment costs of having one more heat exchanger in the
substations are relatively low. There are no investments needs in networks, because
DHW if delivered to the whole customer stock of the DHC, could increase the peak
load by some 10% and the water flows in the network hardly at all, because the
increased temperature difference, due to DHW production in substations, will keep
the water flow at the level it used to be. So no additional investments in the networks
are needed due to DHW introduction.
In order to phase out the economic impact of high summer time losses of centralized
DHW, the heat energy should be a kind of waste heat that has little or no economic
value. Such is the case very much with the heat produced by the CHP plant: there is
no CHP electricity production if there is no place where to put the waste heat. District
heating with DHW offers the desired and continuous need for such heat.
Supply of DHW also in the summer period could reasonable be combined with
offering cooling services for selected larger commercial buildings. An absorption
chiller installed in the customers` premises would use the DH as the energy source.
Thereafter, residential consumers could successively be converted to DH supported
DHW supply.
Improvement of district Heating in Kosovo 67
Item Unit
Personnel costs €/cap, yr 6,000.00
Average electricity price €/MWh 80.00
Mazut price €/tonne 350.30
€/MWh 31.00
Light heating oil price €/l 0.70
€/MWh 60.00
7.2.3 Benefits
Benefits accrue mostly from
- Heat and corresponding fuel savings
- Electricity savings
- Water savings
- Savings of personnel costs
- Accelerated investments in pipe replacement
Accelerated investments in pipe replacement refer to avoided excess investments in
network rehabilitation.
There is no doubt that a larger fraction of the pipes is in a bad condition, which
materializes in high heat and water losses. A DH Company has two pipeline
replacement policies to choose:
a) Business as usual policy: replacing the pipes according to the (reduced)
lifetime, which has the advantage of lower interest payment, but the
Improvement of district Heating in Kosovo 68
disadvantage that heat and water savings can only be realized gradually in
compliance to the speed of replacement investments. In practice, at least a
part of these investment costs could be covered by the depreciation
charges and interest payment could then even be lower.
b) Accelerated replacement policy: replacing the (worst) pipes quickly,
which has the advantage that heat and water losses go down immediately,
but which has the disadvantage of high interest payment (assuming that the
investment will be financed by a loan)
To assess both strategies, a sample calculation has been performed (see Annex
11.3) utilizing the data for the pipeline program in Pristina. The calculation shows
that the accelerated investments option (b) has a small financial advantage
compared with option a) (“business as usual”). The calculation does not take into
account impacts on the other components of the DH system (such as boilers and
substations), which will benefit by improved water quality and thus increase their
service lifetime. Taking this into account would increase the advantage of the
accelerated investment policy, because the corrosion and blocking of boilers and
substations would stop much earlier and than in the business as usual case.
Therefore, the accelerated investment policy instead of the business as usual has
been chosen. On the other hand, as mentioned before, actual interest payment
could be significantly lower than as assumed in the calculation.
- The program could start in 2010 and would be finished in 2012. Like in
case of Pristina
- A yearly review of the building stock development and the
corresponding adjustment of the investment program is required.
- Mitrovica North
- The program could start as soon as the electricity tariff is adjusted to the
Serbian tariffs. As this has not yet been confirmed it might happen in
2011
- Mitrovica South
- The investment program could start after the feasibility study for the
new DH system has been prepared. The program has likely to be
extended beyond the year 2012.
Feasibility study
Investment program phase 2
Mitrovica South
Investment program phase 1
Feasibility study
Investment program phase 2
7.2.5 Pristina
Corrosion of the pipes in the city center combined with the technical deficiencies of
the water softening facilities is the main technical problem of TERMOKOS.
Insufficient heating in Sunny Hill and inability to meet the increasing heating needs is
the other. High prices of heat due to mazut firing strongly supports introduction of
CHP as soon as possible.
is reduced as well resulting in poor circulation water quality. Due to high water
losses and technical treatment problems the water quality cannot be maintained at
the required level. The fast corroding pipes in the city center and Dardania is the
most serious technical problem in TERMOKOS. Insufficiency of treated make-up
water corrodes the pipes inside. In the past some preinsulated pipes have collapsed
in less than ten years due to serious corrosion while they should last more than 30,
even 50 years. Water softening capacity is 27 tonnes per hour at 6 bar water
pressure. The water pressure however constantly varies and goes as low as 2-3 bar,
which reduced the capacity to 12-13 t/h. Sometimes there in no water supply at all
and water from the reserve tank has to be fed to the DH system. In order to face out
the problem, the steps are
- a booster pump prior to the softening system to keep the inlet pressure
constant at 6 bar; and, a waste water treatment system to supply technical
water to the existing softening system; and
- when the water losses have fallen to level of some 10 revolutions a year,
oxygen removal system should be adopted.
System Expansion
258 000 m² expansion in the heated area is expected by 2012 in various parts of the
city center where the DH network already exists and the connection pipes of the new
customers remain relatively short.
Operation
In the coldest days TERMOKOS has started to supply heat 24 hours a day that has
improved heating quality. Due to lacking remote monitoring there is no much
information available at TERMOKOS at the moment: Therefore the problem
identification and corrective actions are only based on customer complaints.
Fuel supply
Sufficiency of fuel supply is sometimes critical in winter due to slippery roads from
FYR Macedonia to transport fuel. Therefore, more fuel storage capacity could
improve the reliability of heat supply.
Maintenance facilities
The current facilities are poor both in the main workshop as well as in the four local
workshops. Tools and equipment are urgently needed as a means to monitor and
maintain the performance of the DH system. Small excavators are needed in order
Improvement of district Heating in Kosovo 71
to dig in the narrow lanes in the densely built city center. A maintenance vehicle
equipped with pressurized air device, power aggregate, welding, etc. is needed as
well. New welding equipment and a maintenance car, which contains the main
facilities and which can function as an ad hoc repair shop on the field, are needed.
Expansion
TERMOKOS has to expand the DH system to connect the many new buildings
being constructed and planned for the coming years. The current status is as follow:
- So far, TERMOKOS has contracted 70.000 m². Some of them are collective
buildings nearby TERMOKOS headquarter, which are expected to be
connected in three phases (because some of the buildings are still under
construction).
- Until now under construction are 100.000 m². It is not yet clear, whether the
buildings are going to be finalized for connection until the end of 2009.
- In Sunny Hill there are over 400 apartments with 22.500 m² to be connected.
- There are close to TERMOKOS buildings with 116.000 m² planned by the
municipal urban planning department. They have already applied for DH.
They are under construction.
Improvement of district Heating in Kosovo 72
- There are also other newly constructed collective buildings that are in the
areas, which are difficult to connect in DH, because the supply pipe does not
have spare capacity, and the heat source of DH is very far away.
Before building developers start to construct the building after getting the initial
construction permit, they should ask TERMOKOS to ask they can be connected to
DH. For all the buildings that are possible to be supplied with DH, TERMOKOS will
provide the permit and starts the procedure for connection.
The investment program is based on the assumption that in average about
60.000 m² per year can be connected.
Investment needs
Therefore, TERMOKOS needs to
• invest in prevention of corrosion as first priority, which means replacing the
worst pipes that are vulnerable to external water corrosion as well as
improving facilities to supply well treated make-up water to the network;
• extend the DH system, mainly in Sunny Hill but in the downtown as well to
connect new customers that are near to the existing pipelines already;
• support connection to the power plant in order to obtain waste heat of power
generation to cover the base load of district heating in Pristina;
• complete the substation rehabilitation with heat metering and temperature
controllers in order to improve energy efficiency and facilitate consumption
based billing; and,
• Introduce computerized billing and collection, and consecutively financial
planning and maintenance database systems.
There has been no hydraulic analysis of the network. Therefore, a hydraulic network
analysis should be performed before any pipes will be ordered. The analysis may
provide substantial savings both in investment and operation costs due to optimized
diameters and routes of pipes.
Figure 50 summarizes the priority investment program for Pristina. Regarding Phase
2 two options are indicated. Option 1 refers to a future heat generation by Hob, while
Options 2 related to a CHP solution. Costs for option 2 have still to be determined
and even this of option1 could be revised in accordance with the results of the CHP
study. Total investment costs of the CHP component depend to a large extent on the
optimal capacity of the CHP facilities 17. This will also determine the optimal diameter
of the transmission line, but total costs can only be determined when the route has
been fixed. Moreover, the cost of the needed turbine modification has to be
analyzed.
The turbines are owned by KEK and so it makes sense that the heat station (heat
exchangers) would be the property of KEK. Transmission pipes could be owned
either by KEK or by TERMOKOS. In case that KEK would be the owner, the
company could commission TERMOKOS to operate and maintain the pipes.
17
According to mention CHP study, the total investment costs amount to about € 43 million. This number could,
however, be misleading. First, it includes VAT and interest payments. Second, it covers 2 phases. The fist phase
would allow supplying Pristina in the near future, while the second phase envisages an extensive expansion of the
CHP supply system. Finally, the investment costs for the proper phase would amount to about € 19 million. By
optimizing the system and applying a realistic heat demand forecast, this amount could likely be reduced.
Improvement of district Heating in Kosovo 73
In order to estimate the benefits of the investment plan above, the investment items
have been allocated to three groups as presented in the table above.
The rationale and benefits of the investment groups can be stated as follows:
as well as hydraulic analysis of the network. The maintenance and the hydraulic
network analysis systems would be linked with geographical information system –
GIS - to be procured as a part of the MIS as well. Such a MIS is vital for effective
management of the heating business, and TERMOKOS in particular, is well
prepared for introduction of such a computerized management environment already.
Tools include two small excavators to be used in the city center to replace pipes and
install connection pipes in tight environment, water analysis laboratory equipment,
facilities to the mechanical workshop.
The benefits of such DH system and substation rehabilitation accrue from reduced
energy sales, since the customers will be motivated to reduce their heat
consumption (18%) and the ordered capacity (9%) in order to keep the current
heating conform. Moreover, the heat losses of the network are assumed to drop
from 15% to 11% of the produced heat, equal to 6.5 GWh.
New pipelines replacing the old and leaking ones are expected to reduce 70% of the
current water losses. All substations are with plate heat exchanger already, so the
main reason for leaking water is the old network part. The remaining 30% of the
purchased water will be converted to free-of-charge available wastewater that tat will
be treated for DH make-up water. Thus, after the project, no water is needed to be
purchased, but the reduced water consumption can be served by wastewater
treatment.
Due to the automation of substation and modern pipelines as well as due to MIS
implementation, conservatively some 20% of the current staff can be reduced in a
few years to come, equal to 36 staff. The control of receivables will be on-line, thus
expected to shorten the delay of receivables. The hydraulic analysis will optimize the
new pipelines, which will reduce both investment and operation costs of the network.
The maintenance system will reorganize the maintenance routines from expensive
repairs done after the damage occurred towards preventive maintenance with lower
costs and less damage.
The new pipelines will have a lifetime of 30 years at least whereas the old ones
maximum 12 years. Replacing the old pipes quickly instead of being evenly
distributed to the years to come provides accelerated investment benefits equal to €
0.09 million a year.
II Boiler rehabilitation
The boiler rehabilitation is expected to raise the overall efficiency from 85% to 90%
due to flue gas O2 content optimization, new burners and accessories.
The burners of boiler one, despite being some 7 years old only, seems to function
badly. For instance, according to the director responsible for the boilers, the
efficiency difference of the burners of the two boilers can be demonstrated as
follows: With the same fuel flow to both boilers, the boiler 2 generates 60% and the
boiler 1 the remaining 40 % of $the total heat production of the plant. Thus,
assuming the efficiency of the boiler 2 is 95%, the efficiency of the boiler 1 would be
only 70%, which seems incredibly low. Anyway, 5% increase in the overall efficiency
is assumed realistic.
Improvement of district Heating in Kosovo 75
Figure 54 IRR
Item
I DH substation rehabilitation 12.9 %
II DH network rehabilitation 13.1 %
III Boiler rehabilitation 12.4 %
IV System expansion 4.8 %
18
The request is in compliance with the ERO Rules 02/2004. Connection fees are regulated by
„Temporary Instruction No. 02/2004 On the Terms and Procedure for New Connections to the District Heating
Distribution Network
Improvement of district Heating in Kosovo 76
7.2.6 Gjakova
In Gjakova the main technical and economic problems of district heating are as
follows:
• Main problems and bottlenecks: The circulation pumping capacity is
insufficient to meet the heating needs, especially in the new branch. New
circulation pumps are needed to supply more heat to the already
rehabilitated southern branch of the network. The existing pumps may
remain for the old branch, in which low-pressure levels can be used. The
plan is to install new frequency controlled pump to supply the modern
branch, and leave the existing pumps for the old branch where the pressure
tolerance is restricted until the old pipelines have been replaced as well.
• Water losses and quality: The network water replenishment rate is 29
times in a half year, equivalent to 58 times a year, which is a high value.
However, the water softening and oxygen removal seem not to be sufficient
to the high level of water losses, and therefore, internal corrosion and
sedimentation of the pipes is considered a major problem in Gjakova. The
pressure level of the city water is sufficient during the heating season in order
to provide reasonably well treated make-up water to the network. Urgent
measures should be taken to reduce the water losses.
• DH network: Some 59% of the 11 km long network is already with modern
preinsulated pipes, implemented by the EAR project. The condition of the
remaining pipes, especially the consumer branches with tar paper and
mineral wool insulated pipelines of 4 km length of 4.5 km in total, is
considered bad due to high age and poor water quality. The pressure
tolerance of the old ones has reduced, so reduced pressure level have to be
used for that part of the network. The estimated repair frequency is 6 per km
a year, which is extremely high, and also telling of the poor quality of the
remaining old pipelines.
• Operation: Due to neither lacking remote monitoring there is neither much
information available nor on-line nor real time at the DHC. Accordingly, the
problem identification and corrective actions are only based on customer
complaints. Heat is supplied during 12-15 hour periods during the whole
heating season, which helped cut costs while applying lump-sum tariffs on
the one hand, but required high heat loads to restart heating in the morning.
With consumption based billing practice should be changed and adjusted to
real consumer behavior.
• Maintenance facilities: The current facilities are poor in the technical
workshop. Tools and equipment are urgently needed as a means to monitor
and maintain the performance of the DH system. New welding equipment, for
instance, is needed.
• Boiler efficiency and availability: There are two boilers of 18 and 20
MW capacity and commissioned in year 1981, one of which has been partly
rehabilitated in 2004 by means of new tubes in the economizer but using still
Improvement of district Heating in Kosovo 77
old burners, but the other one not yet. Boiler condition is poor, the flue gas
duct leaking and the second boiler with no rehabilitation. The efficiency of the
old boiler plant is approximately only 87%, since the operation is fully manual
and the equipment is old. The capacity of the DH circulation pumps is
inadequate to boost the hot water to the end of the network at required
pressure levels. The flue gas duct is leaking, which hampers the boiler
operation.
• Consumer substations and heat metering: The number of substations
is 224 of which 151 are small one-family house units with plate heat
exchangers, 41 are institutional (public and commercial) and 32 are for
residential blocks. Some 70% of the large substations of 73 are with old tube
heat exchangers whereas 30% with modern plate ones. Only the large
substations are equipped with temperature controllers and heat meters. The
remaining 190 of 224 substations need upgrading with heat meters and
weather controllers in order to be ready for consumption based billing.
However, not all existing weather controllers function and need to be
repaired. In some 50 cases the current old and spacious tube heat
exchangers shall be replaced by small plate heat exchangers to reduce
water leakage. Many substations need to be thermally insulated as well to
save energy.
• System expansion: In the city area, which is with DH networks already,
the city is expanding. About 180.000 m² is expected by the year 2012 to be
connected. In addition, the city is expanding to north east where a new city
area Rezina is under construction to inhabit the population of 20.000.
Therefore, new pipes are needed but the current production capacity seems
to be sufficient to meet the growing need.
Therefore, the DHC of Gjakova needs to invest in
• new DH circulation pumps to enable the supply of more heat to the already
rehabilitated southern branch of the network. The existing pumps may
remain temporarily for the old branch, in which low pressure levels have to
be used;
• the old customer branch of the northern part that comprises old and corroded
pipelines;
• new pipelines in order to serve the growing city, which is expanding to north
east, where the settlement “Rezina” for 20.000 people is being built. The
DHC intends to extend their networks to the new area that will be relatively
densely built;
• invest in completion of the substation rehabilitation with heat metering and
temperature controllers in order to improve energy efficiency and facilitate
consumption based billing.
Improvement of district Heating in Kosovo 78
Equipment and installation costs for indoor heating facilities of the new buildings to
be connected are assumed to be included in building costs.
After the reconnection will have started to materialize, the old district heating
pipelines should be replaced, not necessarily with same size of pipes. A network
optimization is needed, which may show that smaller pipes could be more cost
efficient.
A larger investment amounting to € 2.4 million for a new 30 MW boiler could be
required for the period following 2012 provided that the heat demand increases as
currently projected.
In order to estimate the benefits of the investment plan above, the investment items
have been allocated to three groups as presented in the table above.
Item Unit
I DH substation rehabilitation
reduced energy sales of 15% equal to GWh/yr 2.6
reduced capacity savings of 7% equal to MW 1.1
reduced water losses by 50% equal to 000 m³ 2.3
reduced electricity consumption MWh/yr 50
reduced staff, estimate 7% of the actual cap 2
II DH network rehabilitation
reduced heat losses in the network equal to GWh/yr 0.2
reduced staff, estimate 3% of the actual cap 1
accelerated investments in pipe replacement k€/yr 10
III Boiler rehabilitation
reduced fuel consumption, 1% GWh/yr 0.7
IV DH system extension
increased heat energy sales GWh/yr 15.6
incremental fuel consumption GWh/yr 18.5
increased capacity sales MW 15.9
incremental boiler plant capacity need (after 2012) MW 16.2
The rational and benefits of the investment groups can be summarized as follow:
DH network and substation rehabilitation
The network and substation rehabilitation comprises the completion of
substations with plate heat exchangers, heat meters and temperature
controllers, thus converting the whole DH network to demand driven operation
mode and ready to consumption based billing. The average size of the
pipelines to be replaced is DN150 with the route length of 2.2 km in total.
The benefits of such DH system and substation rehabilitation accrue from
reduced fuel consumption, as the customers are expected to reduce their heat
consumption (approximately 18%) and the ordered capacity (9%). Such
savings are possible without a deterioration of the heat comfort, due t the
combined effect of improved heat control and room temperatures adapted to
the actual need. Such estimate is supported by vast experience in the
completed DH rehabilitation programs in other transition economies in Europe.
Moreover, the heat losses of the network are assumed to drop from 10% to 7%
of the produced heat, equal to 0.7 GWh.
New pipelines replacing the old and leaking ones are expected to reduce 70%
of the current water losses. All substations are with plate heat exchanger
already, so the main reason for leaking water is the old network part.
Due to automatic operation of substation and improved network and boilers,
conservatively some 10% of the current staff can be reduced in a few years to
come, equal to 18 staff.
The new pipelines will have a lifetime of 30 years at least whereas the old ones
maximum 15 years. Replacing the old pipes quickly provides benefits in
accelerated investments equal to €0.01 million a year.
Boiler rehabilitation
The boiler rehabilitation is expected to raise the overall efficiency from
86% to 87% due to rehabilitated burners and accessories.
The new pumps will reduce electricity consumption in DH circulation.
Improvement of district Heating in Kosovo 80
DH system extension
The DH system extension will provide additional heat sales revenues,
whereas the main changes in the operation costs will be caused by the
incremental fuel costs and depreciation charges.
The existing boilers will be sufficient to increase the peak load from the
current 15 MW to 32 MW due to 180.000 m² of new customers.
Therefore, new boiler capacity is justified after year 2013 at earliest. The
average size of the extension and connecting pipelines is approximately
DN125 with the route length of 2.5 km in total.
Benefits for the DH Company will only accrue from the rate of return on
the regulated assets. The rate of return is determined by the Regulatory
Agency ERO and amounts currently to about 11.6%. However, the
company will only experience additional profits (or reduced losses) if the
collection rates of the new consumers will be sufficiently high. This
requires at least that all new buildings have to be equipped with meters
and that consumption-based billing is applied. Ideally, the buildings
should have horizontal heating pipes, which would allow switching off
non paying apartment owners.
A macro-economic advantage will accrue due to reduced fuel
consumption and CO2 emissions, if electric heating would have to be
applied instead of district heating.
Figure 57 IRR
Item
I DH substation rehabilitation 10.3 %
II DH network rehabilitation 3.8 %
III Boiler rehabilitation 5.0 %
IV System expansion 5.1 %
All investments (except the preheater) however, would only be reasonable after
electricity will actually be charge and customers become interested in reconnections.
In that moment, information campaigns are needed to attract customers to decide
and co-financing mechanisms in order to lower the financial barrier of reconnection.
There are some rumors that the Serbian electricity company EPS will charge
consumers with a cost covering tariff, but so far nothing has been officially
confirmed.
Pilot Project
To stimulate the conversion from electric to DH heating, a pilot project should be
implemented. Such pilot project would require that the vast majority of the apartment
owners in the singly buildings agree to be reconnected. These buildings should
preferably be located close to each other and close to those pipes that are still
operated. The potential is roughly estimated to amount to 120.000 m2. The pilot
project will provide an investment contribution of 50% of the planned conversion
costs (12 €/m) for about 1/3 of this potential. It should be evaluated whether the
financial capacity of the consumers allows a repayment; in this case the contribution
could be repaid as a surcharge on the monthly heating bill over a period of several
years. The monthly charge would actually be relatively low Assuming a repayment
period of month the monthly costs (during heating season) would amount to 600
€/apartment *50%/30 months = 10 €/month.
The DH Company will have no direct benefits from the proposed pilot project.
However, specific (fixed) production costs will go down, which would reduce the
need for subsidies or financial losses and which would eventually stimulate more (re-
)connections.
Improvement of district Heating in Kosovo 83
Institutional issues
Legal or regulatory changes are needed to ensure reconnected customers to pay
their heating and reconnection bills. Introduction of consumption based billing that is
technically possible already due to heat metering of the substations could pay an
important role in improving the payment discipline.
It should be a condition for financial support that STANDARD Company will (i)
establish a proper cost accounting for the DH business and (ii) consumption-based
billing with a two-part tariff system will be applied for all consumers.
Before investments in new pipes will be done, the electricity prices and actual
collection policies of the distribution company will have to be checked to review the
rationale for investments in DH. In case that the result of this analysis proves the
competitiveness of DH, a deeper analysis for connecting and reconnecting the
buildings to DH should be performed.
The pilot project will be started as soon as electric heating is charged by normal
electricity tariffs. Under this pilot project, STANDARD Company will finance the
reconnection and internal heating facilities under the condition that all apartment
owners in the respective buildings agree. Moreover, the reconnected buildings will
be charged according to the consumption. For this purpose, a two-part tariff has to
be applied. The two-part tariff system may not lead to higher heating costs for
normal heat consumption than the lump sum tariff.
Improvement of district Heating in Kosovo 84
*) The cost of the proper preheater is estimated to be €20.000, but a lump sum of €200.000 has been
assumed to cover other repairs that could be required once the storage is accessible. This has to be
assessed in detail during project implementation.
Figure 58 shows the internal rate of return. Due to lacking data an IRR cannot be
calculated for the preheater. A preheater is, however, an indispensable technical
prerequisite for the operation of a boiler using heavy oil. Costs for this measure
could amount to some € 200.000. The preheater is below the oil tank. That means
the oil should first be removed to get access to the preheater. This would allow
assessing the technical state of the equipment. In other words, STANDARD only
knows that there are problems (low reliability of the equipment). However, costs can
only be specified once the preheater is accessible.
The main assumption for the pipeline component are (i) the existing pipes have a
50% higher heat loss than new pipes in concrete channels, and (ii) annual water
losses would be 30 times the volume of the pipes when operated under normal
pressure. These assumptions are only valid for a normal operation with normal
supply temperatures and pressures. However, the IRR is low (5.4%), which is typical
for proper replacement investments.
The internal rate of the DH network rehabilitation is shown in the following table. An
IRR for the boiler rehabilitation component (preheater), , which constitutes only a
small part of the total investment costs (less than 10%) cannot be calculated for the
time being.
Figure 60 IRR
Item
I DH network rehabilitation 5.4%
II Boiler rehabilitation ?
Item Million €
DH network 0.2
Substations in buildings 0.2
Indoor piping, radiators and thermostatic valves 1.0
Total 1.4
In a second step, which would start after 2012, the 200 m network branch of
DN 150 size of Standard entering the bridge could be complemented with a
single DN 200 pipe to be added parallel to the existing one as a new supply
pipe and the existing DN 150 double pipe would act as return pipe. In such a
way, the distribution capacity could be doubled to some 10 MW.
In the third step, a new heat source would be built to extend the DH system
toward the southern part of the city to supplement the heat supply from the
Standard boiler plant located in the north. Thus heat would be supplied from
two directions, from the north and the south.
The envisaged project (joint EU-KfW Project) would only finance step 1.
Improvement of district Heating in Kosovo 86
• at the full cost coverage tariff of 68.50 €/MWh as mentioned above, reflecting
the financial IRR at the moment, the IRR would be only about 3%
• at the incremental fuel costs covering the flue gas and network losses as well
as the investments of the new customers to STANDARD, reflecting the
economic IRR, the IRR would be 28%.
Therefore, the project is economically sound, but its commercial viability vitally
depends on the success of the commercial negotiations.
Institutional measures
It is presumed that under the prevailing political conditions the DH service in
Mitrovica South cannot be provided by STANDARD Company. In order to organize
the installation and operation of the future DH system, the city administration should
establish a department or public enterprise being in charge of DH. The main tasks of
this entity would be:
- assess the willingness of apartment owners in the targeted buildings to connect
to DH
- prepare and conclude preliminary connection contracts
- support the preparation of a feasibility study and design study
- assist the consultant in procurement
- conclude final connection contracts with targeted customers
- conclude a contract with STANDARD Company about heat delivery
- operate and manage the DH system.
t
Improvement of district Heating in Kosovo 88
*) Item “CHP or Hob” indicates only the magnitude of a potential contribution out of the funds being currently available for the joint KfW-EU project
8 Financial impacts of the investment programs
and affordability
8.1 Model description and assumptions
A spreadsheet model has been developed for the financial forecast.
Fuel Demand
The basis for calculating future fuel consumption is the current structure of fuel
consumption and corresponding efficiencies. Because investments in heat
generation will have impacts on capacity, applied fuel type, and on efficiencies, the
numbers are adjusted in the spreadsheet correspondingly.
Staff
The staff number is affected by two factors:
- A personnel development plan, which reduces the typical overstaffing of the
DH Companies without taking into account the investment program. These staff
reductions will be achieved by organizational measures. It is assumed that the
staff can be reduced gradually until 2015 in such way that productivity will be
doubled (in terms of GWh/cap).
- Second, the investment program which usually allows reducing the operating
staff. For each investment component the staff requirements have been
estimated (see the cater on the priority investment program).
The following table shows the average service lifetime of the investment
components, which are used to calculate depreciation charges.
Mazut
For the time being, available oil price and oil product prices forecasts are often
contradictory. Under the current economic and financial conditions, such forecasts
are actually extremely difficult to prepare. As long as the cost plus tariff regulation is
applied, fuel prices do not have a direct impact on the financial results of the DH
Companies provided that the tariffs are adjusted in due time. They have, however, a
substantial impact on the affordability for final consumers.
The price forecast for mazut is based on a study prepared by the German Ministry
for Economy 19, which was submitted in Dec. 2008. The study does not provide a
forecast for heavy oil, but only for crude oil. As heavy oil prices used to be very
closely related to crude oil, the price development was assumed to be similar for
both. For 2009, the actual prices (until 08/09) replaced the forecast for 2009 and the
growth rates for the following years were adapted in such way to correspond to the
initial forecast in 2013. The result is shown in the figure below.
To apply the numbers for the financial forecast, a delay of 12 months has been
assumed, as mazut has to be ordered some time before the heating season starts.
19
EEFA, Analyse des von der EU-Kommission am 23. Januar 2008 vorgelegten Energie und Klimapakets
im Hinblick auf die gesamtwirtschaftlichen und sektoralen Auswirkungen beim Produzierenden Gewerbe in
Deutschland, Untersuchung im Auftrag des Bundesministeriums für Wirtschaft und Technologie (BMWi),
Endbericht-Münster, Berlin, im Dezember 2008
Improvement of district Heating in Kosovo 91
2.50
2.00
1.50
1.00
0.50
-
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Electricity
Electricity prices constitute currently about 15% of total costs. The prices are
assumed to increase modestly in 2009 by 2.5%, 3% in 2010, and thereafter by 3.5%
Water
Water prices increase by the same rate as the consumer price index.
100.00%
80.00%
60.00% Series1
40.00%
20.00%
0.00%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
8.1.3 Benefits
The following benefits will be identified:
- direct and indirect fuel savings: direct fuel savings are due to boiler
replacement or upgrading, while indirect fuel savings are due to loss reduction
or reduction of final consumption
- electricity savings: mostly due to a reduction of electricity consumption of
pumps
- water reduction: mostly due to replacement and upgrading of pipes and
substations
- staff reduction; mostly due to automation and reduced maintenance.
In case of new connection the additional demand is calculated as a negative saving.
Item Corresponding
lifetime
Buildings 66.7
Boiler 20
Pipes 30
Pumps 8
Substations 20
8.1.7 Financing
The costs are calculated by assuming that the investment program will only be
financed by loans in Pristina and Gjakova. The rational for this approach is that it
allows to test whether the project would be viable under normal commercial
conditions. Two options for the terms have been determined (see Figure 67).
20
According to ERO, interest payments may not constitute a part of the allowed revenues.
21
The financial forecast is based on the assumption, that the investment programs will be financed by a loan. In this
case. In this case the interest payments will be compensated by higher profits as the new assets will increase the
Regulatory Asset Base.
Improvement of district Heating in Kosovo 94
Providing the financial contribution as a grant would help to overcome the still
prevailing financial problems.
8.2 Risks
8.3 Results
The following chapters show the results of the financial forecasts.
8.3.1 Pristina
The following figure shows the development of the costs. Numbers until 2008 are
actual (reported) numbers, while those starting from 2009 are forecasted. Due to the
presumed high average fuel price in 2009 costs will significantly go up and fall again
in the following years. Thereafter fuel costs will gradually increase despite energy
efficiency achievements in the whole DH system. This is caused on the one hand by
new connections and on the other hand by increasing fuel prices.
Improvement of district Heating in Kosovo 95
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Fuel costs
The development of tariffs is illustrated in the following figure, which shows the
specific annual production costs as accepted by ERO (i.e., the cost price). A
significant increase is followed by a sharp decrease and thereafter the costs
increase gradually.
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2,006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Figure 73 shows the indices for various items. The heat costs develop with a much
lower rate than the consumer price index and salaries.
Figure 71 Indices
1.4
1.2
0.8
Salaries
Heating costs
0.6 CPI
0.4
0.2
0
1 1.00 1.01 1.02 1.04 1.06 1.08 1.10 1.13 1.15 1.17 1.20
Improvement of district Heating in Kosovo 96
The following figure shows the cash flow, which becomes positive under both term
options due to increased collection rates. As option B has a shorter grace period and
shorter maturity, the cash flow is less favorable than under option A.
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-1,000,000
-2,000,000
-3,000,000
-4,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-1,000,000
-2,000,000
-3,000,000
-4,000,000
8.3.2 Gjakova
The following figure shows the development of the costs. Numbers until 2008 are
actual (reported) numbers, while those starting from 2009 are forecast. Due to the
high average fuel price in 2009 costs will significantly go up and fall again in the
following years. Thereafter fuel costs will gradually increase despite energy
efficiency achievements in the whole DH system.
2,500,000
Other costs
Bad debts
2,000,000 Interest payments
Sales costs
Administrative costs
1,500,000
Depreciation
Other material costs
Other material costs
1,000,000
Chemicals
Water costs
500,000 electricity consumption
Personnel cost
Fuel costs
0
2,006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Improvement of district Heating in Kosovo 97
The development of tariffs is illustrated in the following figure, which shows the
specific annual production costs as accepted by ERO (i.e., the cost price). A
significant increase is followed by a sharp decrease and thereafter the costs
increase gradually. At the end of the reference period (in 2019), the heat production
costs will be lower than in Pristina. The main reason is that in Gjakova the DH
network will be doubled and then most parts of system are new and equipped with
modern technology will allow some cost reductions compare with the existing part.
100.00
80.00
60.00
40.00
20.00
0.00
2,006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Figure 73 shows the indices for various items. The heat costs develop with a much
lower rate than the consume price index and salaries.
Figure 75 Indices
1.4
1.2
0.8 Salaries
Heating costs
0.6 CPI
0.4
0.2
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
The following figure shows the cash flow. As option B has a shorter grace period and
shorter maturity, the cash flow is less favorable than under option A. As option B has
a shorter grace period and shorter maturity, the cash flow is less favorable than
under option A.
Improvement of district Heating in Kosovo 98
600,000
400,000
200,000
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-200,000
-400,000
800,000
600,000
400,000
200,000
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-200,000
-400,000
-600,000
8.3.5 Affordability
The assessment of the affordability of heat services is based on the perception that
expenses for heating should not exceed a certain fraction of the household income.
There are however, no standards for the definition of the limit, but it is typically
determined to be in the range of 10-20%.
The average income per family household during 2007 in Kosovo was 5.700 €. In
2007 urban households had higher income and consumption. For the purpose of the
affordability analysis it is assumed that the income remained the same in 2008 and
2009. For Pristina an average income of 6.100 and for Gjakova of € 5.700 is applied.
For the years thereafter, it is expected that the development of household incomes
will follow the development of salaries.
Improvement of district Heating in Kosovo 99
The following figures show the share of heating costs in total household income. For
the period 2006-2008 the heating bills are calculated based on the average revenue
of the company, while for later years it is assumed that consumers will pay full cost
covering tariffs. The limit of affordability is fixed at 15%,
The forecast shows that in average the burden is far below the threshold. There are
however big differences, when the income distribution is taken into account. For
pensioners, for example, the heating billing would likely require a big fraction of the
income. As no numbers about income distribution were available, another group has
been defined with 50% of the average income. Only in 2009 the group would
achieve the limit due to the high fuel price prevailing in 2009. However, in reality the
limit is not achieved as tariffs are still subsidized.
Anyway, the results do not show an extraordinary burden for final consumers.
Numbers are similar to other CEE countries and cannot serve as a reasonable
explanation or excuse for the low collection rates. The low collection rates are likely
rather the results of an inconsequent collection policy. It is also worthwhile to
compare these numbers with other expenses, such as communication (2-3) and
tobacco and alcohol (3-4%).
14%
12%
10%
Threshold
8% Households with average income
Households with 50% of average income
6%
4%
2%
0%
2,006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Improvement of district Heating in Kosovo 100
14%
12%
10%
Threshold
8% Households with average income
Households with 50% of average income
6%
4%
2%
0%
2,006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
*) The reduced electricity consumption is due to electricity savings of pumps, boiler processes,
substations, etc.
Improvement of district Heating in Kosovo 101
Improvement of district Heating in Kosovo 102
9.2 Regulation
- The prevailing rules for tariff calculation constitute a sound basis for the
development of consumption based billing. However, the current cost-plus
regulation should be replaced by an incentive regulation to foster technical
energy and financial performance improvements. In practice, however, it would
be reasonable, when general subsidies will be eliminated, as the Government
will unlikely be ready to finance profits. The recommended incentive price
regulation would be price cap regulation. Under this approach, a base line tariff
is fixed which is valid for the whole regulatory period of usually 3-5 years. The
actual tariff, however, is subject to the application of a price indexation formula
that allows adjusting the tariff in accordance to input prices (such a fuel costs).
Improvement of district Heating in Kosovo 103
11 Annexes
Item Unit 2010 2011 2012 2013 2014 2015 2020 2025 2030
Investment Component:
I DH substation rehabilitation
Benefits
Heat
Substation related losses
With the Project GWh/yr 5.6 3.1 1.0 0.0 0.0 0.0 0.0 0.0 0.0
Without Project GWh/yr 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6
Savings in heat GWh/yr 0.0 2.5 4.6 5.6 5.6 5.6 5.6 5.6 5.6
Savings in fuel GWh/yr 0.0 2.9 5.4 6.5 6.5 6.5 6.5 6.5 6.5
Price of fuel €/MWh 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0
Fuel savings 000 €/yr 0.0 89.6 166.0 200.2 200.2 200.2 200.2 200.2 200.2
Water
With the Project 000 m³ 71.5 71.5 71.5 71.5 71.5 71.5 71.5 71.5 71.5
Without Project 000 m³ 71.5 71.5 71.5 71.5 71.5 71.5 71.5 71.5 71.5
Savings 000 m³ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Unit costs €/m³ 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Cost savings 000 €/yr 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Electricity
With the Project MWh 4,500 4,433 4,365 4,298 4,230 4,163 4,050 4,050 4,050
Without Project MWh 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500
Savings MWh 0 68 135 203 270 338 450 450 450
Unit costs €/MWh 80 80 80 80 80 80 80 80 80
Cost savings 000 €/yr 0.0 5.4 10.8 16.2 21.6 27.0 36.0 36.0 36.0
Capacity
With the Project MW 102.5 101.6 100.8 99.9 99.1 98.3 96.8 96.8 96.8
Without Project MW 102.5 102.5 102.5 102.5 102.5 102.5 102.5 102.5 102.5
Savings MW 0.0 0.8 1.7 2.5 3.4 4.2 5.6 5.6 5.6
Unit costs €/kW 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost savings 000 €/yr 0.0 0.1 0.2 0.3 0.3 0.4 0.6 0.6 0.6
Staff
With the Project # 176 175 174 172 171 170 168 168 168
Without Project # 176 176 176 176 176 176 176 176 176
Savings # 0.0 1.2 2.4 3.6 4.8 6.0 8.0 8.0 8.0
Unit costs €/yr, cap 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000
Cost savings 000 €/yr 0.0 7.2 14.4 21.6 28.8 36.0 48.0 48.0 48.0
Maintenance
Cost savings 000 €/yr
Total savings 000 €/yr 0.0 102.2 191.3 238.3 250.9 263.6 284.8 284.8 284.8
Investment costs 000 €/yr 850.0 725.0 325.0 0.0 0.0 0.0
Net cash flow of Component 000 €/yr -850.0 -622.8 -133.7 238.3 250.9 263.6 284.8 284.8 284.8
IRR of Component 12.9%
Improvement of district Heating in Kosovo 108
Investment Component:
II DH network rehabilitation
Benefits
Heat
Network losses
With the Project GWh/yr 14.3 11.9 9.7 8.6 8.6 8.6 8.6 8.6 8.6
Without Project GWh/yr 14.3 19.8 19.8 19.8 19.8 19.8 19.8 19.8 19.8
Savings in heat GWh/yr 0.0 7.9 10.1 11.3 11.3 11.3 11.3 11.3 11.3
Savings in fuel GWh/yr 0.0 9.2 11.7 13.1 13.1 13.1 13.1 13.1 13.1
Price of fuel €/MWh 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0
Fuel savings 000 € 0.0 285.0 363.5 405.8 405.8 405.8 405.8 405.8 405.8
Water
With the Project 000 km3 71.5 65.0 58.6 52.2 45.7 39.3 28.6 28.6 28.6
Without Project 000 km3 71.5 71.5 71.5 71.5 71.5 71.5 71.5 71.5 71.5
Savings 000 km3 0.0 6.4 12.9 19.3 25.7 32.2 42.9 42.9 42.9
Unit costs €/m3 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Cost savings 000 € 0.0 6.4 12.9 19.3 25.7 32.2 42.9 42.9 42.9
Electricity
With the Project MWh 4,500.0 4,486.5 4,473.0 4,459.5 4,446.0 4,432.5 4,410.0 4,410.0 4,410.0
Without Project MWh 4,500.0 4,500.0 4,500.0 4,500.0 4,500.0 4,500.0 4,500.0 4,500.0 4,500.0
Savings MWh 0.0 13.5 27.0 40.5 54.0 67.5 90.0 90.0 90.0
Unit costs €/MWh 80.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0
Cost savings 000 € 0.0 1.1 2.2 3.2 4.3 5.4 7.2 7.2 7.2
Staff
With the Project # 176.0 175.4 174.8 174.2 173.6 173.0 172.0 172.0 172.0
Without Project # 176.0 176.0 176.0 176.0 176.0 176.0 176.0 176.0 176.0
Savings # 0.0 0.6 1.2 1.8 2.4 3.0 4.0 4.0 4.0
Unit costs €/yr, cap 6,000.0 6,000.0 6,000.0 6,000.0 6,000.0 6,000.0 6,000.0 6,000.0 6,000.0
Cost savings 000 € 0.0 3.6 7.2 10.8 14.4 18.0 24.0 24.0 24.0
Maintenance
Maintenance 000 € 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0
Total savings 000 € 90.0 386.1 475.7 529.1 540.2 551.3 569.8 569.8 569.8
Investment costs 000 € 1,741.4 1,611.3 868.8 0.0 0.0 0.0 0.0 0.0
Net cash flow of Component 000 € -1,651.4 -1,225.2 -393.1 529.1 540.2 551.3 569.8 569.8 569.8
IRR of Component 13.1%
Improvement of district Heating in Kosovo 109
The following table shows the IRR from the prospective of final consumers, which will
replace electric heating by district heating and who will benefit from the differences in
electricity and district heating tariffs. Investment costs are larger than above as they
include investment costs for the indoor heating system.
Item Unit 2010 2011 2012 2013 2014 2015 2020 2030
Investment Component:
I DH substation rehabilitation
Benefits
Heat
Substation related losses
With the Project GWh 2.6 0.7 0.0 0.0 0.0 0.0 0.0 0.0
Without Project GWh 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6
Savings in heat GWh 0.0 2.0 2.6 2.6 2.6 2.6 2.6 2.6
Savings in fuel GWh 0.0 2.3 3.0 3.0 3.0 3.0 3.0 3.0
Price of fuel €/MWh 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0
Fuel savings 000 €/yr 0 71 93 95 95 95 95 95
Water
With the Project 000 m3 7.8 7.5 7.1 6.8 6.5 6.1 5.6 5.6
Without Project 000 m3 7.8 7.8 7.8 7.8 7.8 7.8 7.8 7.8
Savings 000 m3 0.0 0.3 0.7 1.0 1.4 1.7 2.3 2.3
Unit costs €/m3 1 1 1 1 1 1 1 1
Cost savings 000 €/yr 0 0 1 1 1 2 2 2
Electricity
With the Project MWh 500 492.5 485 477.5 470 462.5 450 450
Without Project MWh 500 500 500 500 500 500 500 500
Savings MWh 0 7.5 15 22.5 30 37.5 50 50
Unit costs €/MWh 80 80 80 80 80 80 80 80
Cost savings 000 €/yr 0 1 1 2 2 3 4 4
Capacity
With the Project MW 50 50 50 50 49 49 49 49
Without Project MW 50 50 50 50 50 50 50 50
Savings MW 0 0 0 0 1 1 1 1
Unit costs €/kW 100 100 100 100 100 100 100 100
Cost savings 000 €/yr 0 0 0 0 0 0 0 0
Staff
With the Project # 31 31 30 30 29 28 25 25
Without Project # 31 31 31 31 31 31 31 31
Savings # 0 0 0 1 1 1 1 1
Unit costs €/cap,yr 6000 6000 6000 6000 6000 6000 6000 6000
Cost savings 000 €/yr 0 1 2 4 5 6 8 8
Maintenance
Cost savings 000 €/yr
Total savings 000 €/yr 0 73 97 101 103 105 109 109
Investment costs 000 €/yr 685 212 15
Net cash flow of Component 000 €/yr -685 -139 82 101 103 105 109 109
IRR of Component 10.2%
Improvement of district Heating in Kosovo 112
The following table shows the IRR from the prospective of final consumers, which
will replace electric heating by district heating and who will benefit from the
differences in electricity and district heating tariffs.
Improvement of district Heating in Kosovo 114
22
The lifetime of the existing old pipes increases gardually, as it can be assumed that the water quatlity improves..
Improvement of district Heating in Kosovo 122
Accelerated investment
Pipe replacement m/yr
12,000 - - - - -
All pipes m
12,000 12,000 12,000 12,000 12,000 12,000
New pipes m 12000
12,000 12,000 12,000 12,000 12,000
old pipes m
- - - - - -
Lifetime of old pipes yrs 12
30 30 30 30 30
Investment costs (accumulated) €
4,842,000 4,842,000 4,842,000 4,842,000 4,842,000 4,842,000
Investment costs
4,842,000 - - - - -
Loan €
4,842,000 4,842,000 3,389,400 968,400 - -
Repayment
484,200 484,200
O&M €/yr
48,420 48,420 48,420 48,420 48,420 48,420
O&M new €/yr
48,420 48,420 48,420 48,420 48,420 48,420
O&M old €/yr
- - - - - -
Heat losses MWh/yr
2,280 2,280 2,280 2,280 2,280 2,280
Heat losses new MWh/yr
2,280 2,280 2,280 2,280 2,280 2,280
Heat losses old MWh/yr
- - - - - -
Water losses m³/yr
- - - 6 26 46
New pipes m³/yr
- - - 3 13 23
Old pipes m³/yr
- - - 3 13 23
Total costs €/yr
3,254,444 419,422 419,422 332,266 187,012 128,928 128,948
Fuel costs €/yr
1,107,828 80,482 80,482 80,482 80,482 80,482 80,482
Water costs €/yr
156 - - - 6 26 46
Interest payments €/yr
1,479,968 290,520 290,520 203,364 58,104 - -
O&M €/yr
666,493 48,420 48,420 48,420 48,420 48,420 48,420
Total costs excluding interest €/yr
128,902 128,902 128,902 128,908 128,928 128,948
NPV €
3,254,444
Average annual costs excluding interest
Business as usual €/yr
108,481 210,691
Accelerated investment €/yr
36,928 128,921
Average savings €/yr
71,554 81,770
2,008 2,007
56
í
ASSETS l
A. Permanent PROPERTY (002 +0034-0044-005 +009) 15,532 13,661
I Unpaid subscribed capital
II GOODWILL
III. Intangible INVESTMENT
IV. REAL ESTATE, plant, EQUIPMENT l BIOLOGICAL ASSETS (006 +007 +008) 15,532 13,661
1. Property, plant and equipment 15,532 13,661
2. Investment Property
3. Biological resources
V. Long-term FINANSUSKI PLASMAN (010 +011)
1 participation in capital
2. Other long-term financial placements
B. Current assets (013 +014 +015) 25,636 21,164
I. Cash 615 882
II. Fixed assets intended for sale l BUSINESS ASSETS that stops
III. SHORT-TERM demand, placement and CASH (016 +017 +018 +019 +020) 25,021 20,282
1. Claims 8,752 8,807
2. Claims for more tax paid on the profit
3. Short-term financial placements 13,396 7,350
4. Cash and cash equivalents 2,803 4,125
5. Value added tax and the time between 70
V. Deferred tax assets
G. BUSINESS PROPERTY (001 +012 +021) 41,168 34,825
D. Loss above capital level
Dj. TOTAL ASSETS (022 +023) 41,168 34,825
E. VANBILANSNA ASSETS 2,293 2,474
LIABILITIES
A. CAPITAL 1 02 +1 03 +1 04 +1 05 +1 06-1 07 +1 08-1 09-1 1 0) 27,826 15,445
I. Share capital 6,084 6,084
II Unpaid subscribed capital
III. Reserves
V. Revaluation reserve 497 497
V. NEREALIZOVANI Gains on the basis of value MARTY
VI. NEREALIZOVANI LOSSES by MARTY of value
VII. Undistributed PROFIT 22,023 9,642
VIII. LOSS 778 778
IX. Redeemed shareholder ACTION
B. Long-term provisons and liabilities (112 +113 +116) 13,342 19,380
I Long-term provisions
II. Long-term LIABILITIES (114 +115)
1. Long-term loans
2. Other long-term liabilities
III. OBLIGATION OF SHORT-TERM (117 +118 +119 +120 +121 +122) 13,342 19,380
1. Short-term financial obligations
2. Obligations on the basis of the funds for sales and business assets that stops
3. Obligations from the business 651 8,401
4. Other short-term obligations 9,463 10,977
5. Obligations on the basis of the value added tax and other public revenues, and the time between the
3,228
passive
6. Obligations under the tax
V. Deferred tax burden
G. TOTAL LIABILITIES (101 +111 +123) 41,168 34,825
D. VANBILANSNA LIABILITIES 2,293 2,474
Improvement of district Heating in Kosovo 128
2008 2007
5 6
Operating loss
Financial income 1,749
Financial expenses
Other income 7,993 581
Customer base
Customer group 2008 actual 2009 2009 2010 2010 Percentage Perce
actual planne actual planned change ntage
dl chang
e
No No No MWh/yr MWh/yr
A B C D E F =B/A G=D/
C
Residential consumers 0.0% 0.0%
Commercial consumers 0.0% 0.0%
Budgetary consumers 0.0% 0.0%
Industrial consumers (excl.. Steam) 0.0% 0.0%
Steam consumers 0.0% 0.0%
Improvement of district Heating in Kosovo 132
I
Improvement of district Heating in Kosovo 133
Figure 104 Cash Flow Gjakova DH Company (grace period 3 years, maturity 9 years)
2009 2010 2011 2012 2013 2014 2015 2019
Cash flow -349,063 -26,621 148,083 361,429 335,900 407,952 424,689 526,296
Incoming cash flow €/yr 954,857 2,201,505 2,092,515 2,187,452 2,222,537 2,404,152 2,428,792 2,537,928
Income from DH €/yr 954,857 1,104,505 1,488,515 1,892,452 2,222,537 2,404,152 2,428,792 2,537,904
Collection rate €/yr 55.00% 65.00% 75.00% 85.00% 95.00% 97.00% 97.00% 97.00%
Billed sales €/yr 1,736,103 1,699,238 1,984,687 2,226,414 2,339,512 2,478,507 2,503,910 2,616,396
Loans €/yr 0 1097000 604000 295000 0 0 0 0
Grants €/yr
Other income €/yr 0 0 0 0 0 0 0 12
Financial income €/yr 0 0 0 0 0 0 0 12
Outgoing cash flow €/yr 1,303,920 2,228,126 1,944,432 1,826,023 1,886,637 1,996,200 2,004,103 2,011,632
expenditures paid €/yr 1,303,920 1,073,761 1,267,967 1,451,183 1,593,890 1,712,324 1,729,099 1,789,854
Accounts payable €/yr 0.1 10.00% 10.00% 10.00% 5.00% 3.00% 3.00% 3.00%
expenditure minus depreciation €/yr 1,448,800 1,193,068 1,408,852 1,612,425 1,677,779 1,765,282 1,782,576 1,845,210
Loan repayment €/yr 0 0 0 0 221,778 221,778 221,778 221,778
Interest payments and others €/yr 0 57,365 72,465 79,840 70,969 62,098 53,227 0
Capital expenditures €/yr 1,097,000 604,000 295,000