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2010 QUARTER 2 REPORT
(1 APRIL – 30 JUNE)
KORPORATA ENERGJETIKE E KOSOVES (KEK)
KEK NETWORK AND SUPPLY PROJECT
CONTRACT NUMBER EPP-I-04-03-00008-00
JULY 2010
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This quarterly report on the Korporata Energjetike e Kosoves (KEK) Network and Supply Project
covers the period 1 April through 30 June 2010. It was prepared by PA Government Services Inc.,
under Task Order 4 of Contract EPP-1-00-03-00008-00. The authors gratefully acknowledge the
support of the United States Agency for International Development’s Kosovo Mission
(USAID/Kosovo) for this project.
This report was made possible through the support of the American people through USAID/Kosovo.
Its contents are the sole responsibility of PA Government Services Inc. and do not necessarily reflect
the views of USAID or the United States Government.
USAID PA Government Services Inc.
Mr. Arben Nagavci
Contracting Officer’s Technical
Representative
USAID/Kosovo
Pristina, Kosovo
Masoud Keyan, Chief of Party
PA Government Services Inc.
c/o KEK
3 Bill Clinton Street
Pristina 10000 Kosovo
+381 38 249 193
4601 North Fairfax Drive, Suite 600
Arlington, VA 22203
Tel: +1 571 227-9000
www.paconsulting.com
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Executive Summary Major Milestones in Quarter 2
Kosova B Feasibility Study
The first draft of this study was circulated for comments amongst KEK, USAID and the KRPP
Transaction Advisory Team.
Security
PA began providing security assistance to KEK during this quarter. PA is assessing and making
recommendations on security matters that impact the staff working environment, asset management,
transportation, site access and the work of the security service provider. We conducted initial visits to
all KEK districts, the mine pits, key asset depots, warehouses, and workshops. PA observed the
functions, execution of duties, general production, and areas of responsibilities.
KEK Disciplinary Code
PA finalized the new KEK Disciplinary Code, which was submitted to the Board of Directors for
approval. The new Code introduces three important reforms to the existing disciplinary process: 1) the
right of managers to take action against the non-performing employees under their supervision (this
should be distinguished from misconduct), 2) the abolition of the current practice of establishing three
member commissions to adjudicate disciplinary cases, and 3) limitations on the discretion of the
adjudicator when determining the applicable disciplinary penalty. While the new Code has been
considered by the Board of Directors, it has chosen to defer its approval for the moment.
Connection Charging Methodology
PA developed a distribution network connection charging methodology and facilitated its review and
update by all interested parties in KEK. The methodology was submitted to ERO for comment and
approval. This methodology will formalize the manner in which KEK processes customers’ new
connections and connection reinforcement requests.
Other Notable Events and Accomplishments
Finance
PA assisted KEK in preparing its Performance to Plan report for the first quarter of 2010, supervised the
execution of KEK’s 2010 expenditure budget, monitored the implementation of KEK’s business plan
for 2010, and revised KEK’s funding needs from the Kosovo Central Budget for 2010-2011. We also
assisted KEK in filing an appeal with the Independent Appeals Board following the partially
unfavorable decision of the Kosovo Tax Administration (TAK) Appeals Division in connection with
the findings of the audit it performed of KEK’s financial statements for the period 2005 – 2008.
TAK’s Appeals Division did recognize the existence of “bad debt” (the tax auditors had previously
refused to recognize “bad debt”), but ruled that the amount of bad debt would be limited to the debt
of customers taken to court. It thus refused to include in KEK’s bad debt the amounts owed by
households that have been warned and disconnected for non-payment and uncollectible amounts
from minorities.
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Billing and Collections
Collections were higher (€6.2 million or 17%) in the second quarter of 2010 than in the same quarter
in 2009, due primarily to the increased amount of energy available for sale and to an increase in the
collection rate. The number of customer payment transactions increased by 38% (167,000 more
payments among 611,000 customers) compared to 2009. During Q2 2010, the billing rate was 85%
and the collection rate was 108%. Thus, overall performance (collection of delivered energy) was 92%.
For the same period in 2009, the billing rate was 88%, the collection rate 93%, and overall
performance was 82%. Unaccounted for energy (commercial losses) continues to be a major problem.
The principal impediment is management’s failure to comply with district regulations requiring
disciplinary action for employees who do not comply with their job requirements.
Internally Displaced Persons (IDPs)
IDP Collective Centers represent the final group of consumers south of the Iber River to be
regularized. PA has been working constantly since August 2009 with the applicable government
ministries and international community to raise awareness of the need to provide funds to cover the
cost of electricity provided. Significant progress was made on this issue during Q2. As discussed in the
Q1 report, at 16:00 hours on 31 March, Minister of Communities and Return, Sasa Rasic, sent an
email to KEK’s managing director stating that his Ministry would pay for the electricity consumed by
the IDP Centers during April. The Ministry made the April payment, the first ever received for
electricity consumed by the IDP Centers.
On 29 April 2010 a meeting was held with the Minister of Communities and Return, Minister of
Labor and Social Welfare, US Embassy, USAID, KEK, and PA advisors. Discussions focused on a
presentation PA prepared that KEK’s Managing Director sent to all participants entitled “KEK’s
Analysis and Views on Service to IDP Collective Centers.” Participants were informed that metering
individual residences in the Centers would be impractical and costly to the residents. A single meter
for each facility is the only workable solution and KEK and the Ministry would have to closely
monitor consumption since several of the facilities have extremely high consumption rates per family.
The Minister of Communities and Return also agreed to pay for May consumption and PA prepared a
Memorandum of Understanding (signed by KEK and the Ministry) to formalize the agreement.
On 07 June, a meeting was held with the same attendees plus the senior advisor to the Prime Minister.
Minister Sasa Rasic stated that the government, through his Ministry, would be willing to pay for up to
330 kWh per family per month (this was the amount the government paid for Social Cases in 2009)
through 01 October 2010 and possibly until 31 December 2010. He stressed that if the 330 kWh limit
is reached before the end of a calendar month, KEK should disconnect the facility for the remainder
of that month. PA prepared a notice to provide to each household in the Centers. The notices were
delivered along with an energy conservation brochure in mid-June. During the third week of June,
three of the centers in Strpce had exceeded the 330 kWh per family limit. In accordance with the
Minister’s instruction, those facilities were disconnected. The leaders of the Centers indicated that
residents would be willing to pay for their additional consumption. PA and KEK estimated the
additional consumption through the end of the month and the residents of those three facilities
immediately paid approximately €1,000 to have service restored.
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Upcoming Events and Activities
PA anticipates that the following important events will occur during Quarter 3:
Issuing of draft requests for particulars for the Kosova e Re Power Plant transaction, July 2010.
Development of a draft contract for Ferronikeli for service effective April 2011.
Submission to the Energy Regulatory Office (ERO) of a proposed regulated tariff for service at
220 kV (which would apply to Ferronikeli if it decides to become a regulated customer in April
2011).
The final version of the Kosova B Investment Requirement and Rehabilitation Feasibility Study
will be made available.
Responses to the request for expressions of interest for the distribution company privatization.
Commissioning of the newly refurbished Radavc small hydro plant.
Commissioning of two new low-pressure rotors and one generator rotor at the Kosova B thermal
power plant.
Award of contracts for the construction of the Vaganicë 110/35/20(10) SS and the reconstruction
of the Palaj 110/35 kV SS.
Receipt of ERO approval of the Network Development Plan and the Connection Charging
Methodology.
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Table of Contents
1. Introduction / 1
2. Progress Made during Quarter 2 / 2
3. Status of Results Achieved under the Performance-Based Management System / 25
4. Proposed Solutions to New or Existing Problems / 27
5. Documentation of Best Practices that can be Taken to Scale / 30
6. Coordination with Other USAID Implementing Partners and Other Donors / 31
7. Upcoming Events with Dates / 32
Appendix A. List of Activities and Deliverables / 33
Appendix B. Performance-Based Management System Results / 42
Appendix C. Supporting Documentation / 48
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1 Introduction
This report’s format meets the requirements of Section A.6 (Reports), Paragraph B (Quarterly Report)
of Task Order 4 under Contract EPP-1-00-03-00008-00. The objectives and tasks described in this
quarterly report are based on the KEK Network and Supply Project’s 2010 Work Plan. Appendix A
shows activities completed, benchmarks achieved, and other achievements under the Work Plan.
Appendix B describes the results of the project’s performance-based management system.
The updated project objectives are:
Objective 1: Support for technical preparation of the Distribution Company for privatization
Objective 2: Assistance with post-privatization implementation for the Distribution Company
Objective 3: Privatization support for the Thermal Power Plant Kosova B.
The PA team’s approach to achieving these objectives is based on two task areas and eight subtasks,
each of which is associated with one or more of the project’s objectives.
Subtask
Task Area 1
Objective
1 2 3
1 Support Management and Operation to
Maintain Asset Value
X X X
2 Prepare Technical and Contractual
Documentation for Investor Due Diligence
X
3 Provide Advisory Support in Privatization
Process
X
4 Strengthen Skills and Technical Capacity of
Counterparts
X X
5 Support Management Post-Privatization X
Subtask
Task Area 2
Objective
1 2 3
6 Prepare a Thermal Power Plant Kosova B
Investment Requirement and Rehabilitation
Feasibility Study
X
7 Prepare Technical and Contractual
Documentation for Investor Due Diligence
X
8 Strengthen Skills and Technical Capacity of
Counterparts
X
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2 Progress Made during Quarter 2
A number of important accomplishments were realized in Quarter 2 based on the recommendations,
assistance and support provided by PA’s resident advisor team embedded at KEK and other short-
term advisors.
Subtask 1: Support Management and Operation to Maintain
Asset Value
1.1 New Internal Policies and Procedures
During Q2, PA prepared several internal policies and procedures, including instructions
regarding zero and negative bills and the KEK disciplinary code. These are discussed in more
detail later in this report.
1.2 Business Planning and Budgeting
The PA team supervised the preparation of the Performance to Plan Report for Q1 2010. The
report contains detailed information on the performance of each of the four core divisions
(Mines, Generation, Network and Supply) against the approved key performance indicators
(coal production, overburden removal and coal stockpile for the Mines; availability, gross
generation, auxiliary consumption, net generation and capital investment for Generation;
commercial losses, meter reading, meter installation, meter inspection and calibration for
Network; and billing rate, bill delivery, and collection rate for Supply). PA also monitored the
implementation of the Division Action Plans for performance improvement based on the
findings of the Q1 2010 Performance to Plan Report.
PA supervised the execution of KEK’s 2010 expenditure budget, including the commitment
of funds based on budget commitment requests submitted by the divisions and reviewed and
approved by the Budget Department. We also reviewed procurement procedures and
contracting for goods, works and services; the invoicing upon delivery and completion; and
the payments of invoices by KEK’s Treasury. PA and the Budget Department also regularly
reviewed the ranking of all projects in the “priority” category of the budget to make sure that
the total amount in this category is consistent with the actual revenue as directed by the Board
of Directors. PA also reviewed the applications and justifications for budget adjustments
(mainly the transfer of funds between budget lines) and the use of the Budget Reserve Fund.
PA monitored the implementation of KEK’s detailed business plan for 2010 consistent with
the plan approved by KEK’s Board of Directors. We also tracked the implementation of all
division actions plans in support of the company’s business plan.
PA continued to supervise the execution of KEK’s long-term investment plan, including all
high-priority projects for Mines, Generation, and Network for the period 2010 to 2012. The
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team also monitored the procedures for the efficient utilization of the loans granted by the
Government of Kosovo to fund the major part of the plan.
At the request of Ministry of Economy and Finance (MEF), KEK, with PA’s assistance,
reviewed its cash flow forecasts related to the loans and electricity import subsidies from the
Kosovo Central Budget (KCB) to examine the possibility of deferring some of the payments
to 2011. The results were communicated to MEF and the final cash flow forecast was
subsequently confirmed and agreed by all stakeholders.
PA assisted KEK in requesting and obtaining an extension to one of the existing loan
agreements with the KCB to accommodate the revised payment schedules of some of the
contracts for the supply of goods and services to the Mines funded by the loan. Further, PA
helped KEK conclude two new loan agreements for capital investments needed for the
Kosova B thermal power plant (TPP), and in connection with opening the new Sibovc South
West Mine.
1.3 Billing and Collection
The table below summarizes KEK’s metering, billing and collections performance for all customers,
including those served at 110 and 220 kV. The values are from the monthly report to the Board of
Directors.
Year
2009
Q2
2009
Q2
2010
First 6 Months
2009 2010
Ratio of energy billed vs. energy available for sale 79.3 87.9 84.6 78.4 76.2
Percent of money collected vs. billed 81.4 93.1 108.5 80.1 91.3
Percent collected vs. energy available for sale 64.6 81.8 91.9 62.8 69.5
Collected revenue (millions of Euros) 160.3 37.2 43.4 78.9 91.9
Collections increased 17% in Q2 of 2010 and 16% in the first half of 2010 vs. the comparable periods
in 2009, primarily due to the increased amount of energy available for sale and the increased collection
rate. Unaccounted-for energy (commercial losses) continues to be a challenge for KEK.
Improving Performance in District Operations
The lack of proper daily management in districts still continues to be an issue. Because of this, PA
decided to directly hire its own local advisors to work with district managers. Interviews were held and
two candidates were selected, trained and appointed as advisors to Prizren and Mitrovica district
managers. The main purpose of this action is to have a daily presence in these districts and to help and
instruct district management teams on daily operation activities.
In the second quarter, PA continued to visit districts on a regular basis and to help district
management teams to implement regulations and policies, disconnect problematic customers, and
check the effectiveness of disconnections. PA was involved in the district performance evaluation
process, analyzing the weaknesses of different sub-districts, helping management teams and sub-
district coordinators to hold meetings with district staff, conducting training, participating in the
signing of community agreements, and proposing new ideas to decrease commercial losses. During
this period PA trained 10 people on how to fight commercial losses.
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PA continues to provide recommendations and encourage the taking of disciplinary actions against
employees pursuant to the terms of the District Regulations. In the majority of cases these
recommendations have not been implemented by KEK. However, during the second quarter KEK
did follow through on the following recommendations that were made by PA:
Termination of Contract – 17 feeder specialists, 1 coordinator
No extension of contract – 18 feeder specialists, 1 feeder team leader, 1 sub-district
coordinator
Final written warning – 66 feeder specialists, 5 feeder team leaders, 8 sub-district
coordinators
Deduction of 20% salary – 66 feeder specialists, 5 feeder team leaders, 8 sub-district
coordinators, 3 managers.
There were still many other recommendations that KEK did not implement, including:
Dismissal of the Peja district manager for poor performance. He simply was transferred to
a different position.
Final written warnings to Mitrovica and Gjakove district managers, who instead received a
20% pay deduction for 1 month.
Use of a new software program developed by PA to monitor and evaluate feeder teams.
Addressing the “zero bill” problem in an effective manner. Although this initiative was
recommended last year, measures have only recently been taken to reduce the problem.
Disciplining employees who do not perform the required number of disconnections as
called for in the District Regulations.
During the second quarter all feeder teams and sub-district coordinators, more then 700 employees,
were tested both in practical and theoretical skills. Most of the tests were prepared by PA and a team
member was present for both parts of the testing process.
There were also personnel changes as a result of the punishment of district managers. In Peja and
Prishtina districts, managers were replaced and Mitrovica and Gjakova district managers had a 20%
salary reduction for poor performance.
Since the number of zero and negative bills continue to be an issue, PA helped to develop instructions
on how to conduct readings and is continually working on this issue by reviewing the procedures in
use and by verifying customers with zero and negative bills. While checking the situation and data in
the field, PA found many violations and proposed corrective actions to be taken by KEK
management.
To better illustrate KEK’s performance during the second quarter, PA conducted a comparative
analysis of the Q2 data of 2010 with data from the same period of 2009 as well as the six-month
comparison analysis.
Second Quarter 2010 vs. Second Quarter 2009. Excluding 110 kV customers, collections (€36.3 million)
were 11% higher in the second quarter of 2010 than in the same period of the prior year, while the
number of transactions increased by 16% and reached 610,970.
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Collections (000€) Number of Payments
29000
31000
33000
35000
37000
39000
Q2 2009 Q2 2010
Thou Euro
400000
450000
500000
550000
600000
650000
Q2 2009 Q2 2010
# of Trnsct
KEK’s progress compared to the second quarter of 2009 is due to an increase in the collection rate. In
the second quarter of 2009, the billing rate (amount of Energy Billed as a percent of Energy Available
for Sale) was 76% and the collections rate was 81%, producing an overall performance (collection of
delivered energy) of 62%.
For the comparable period in 2010, the billing rate was 76%, the collection rate 91%, and overall
performance 68%. The 6 percentage point improvement results from a higher collection rate (10%)
rather than any reduction in commercial losses. Commercial losses are one of the most problematic
issues for KEK. The principal causes are an old metering system and the failure to discipline
employees who do not perform their responsibilities.
Energy Available for Sale Energy Billed
450000
550000
650000
750000
850000
Q2 2009 Q2 2010
EAFS in KWh
000
500000
550000
600000
650000
700000
Q2 2009 Q2 2010
Billing in KWh
000
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First Half of 2010 vs. First Half of 2009. In the first half of 2010, at the district level, collections
were about €7.5 million (11%) higher than in the same period of 2009, while transactions increased by
241,976 or 26%.
Collections (000€) Number of Payments
50000
55000
60000
65000
70000
75000
80000
85000
6 Months
2009
6 Months
2010
Thou Euro
600000
700000
800000
900000
1000000
1100000
1200000
1300000
6 Months
2009
6 Months
2010
# of Trnsct
In the first six months of 2009, the billing rate for the districts was 72%, the collections rate was 75%,
and overall performance (collection of delivered energy) was 54%. For the same period in 2010, the
billing rate was 69%, the collection rate 83% and overall performance 58%. The 4 percentage point
improvement is the result of an increase in the collection rate (8%) rather than reduction in
commercial losses. As noted above, KEK is not making significant progress to reduce commercial
losses due to non-compliance with district regulations regarding disciplinary actions that must be taken
for non-performance.
Energy Available for Sale Energy Billed
1000000
1200000
1400000
1600000
1800000
2000000
6 Months
2009
6 Months
2010
EAFS in kWh
000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
1450000
6
Months
2009
6
Months
2010
Billing in kWh
000
Source of Collections
The table below displays the sources of collections for the First Half of 2010 in terms of both the
number of payments and Euros collected.
First Half 2010 # of Payments % Euro (000) %
Customer offices 1,022,851 86 53,897 59
KOS-Giro 49,311 4 12,510 14
Bank transfers 16,493 1 7,710 8
Payroll deductions 64,346 5 1,068 1
Direct debit 3,411 - 1,145 1
Social Cases 32,956 3 2,211 2
Total districts (CCP) 1,189,368 100 78,541 85
Direct (110 kV) customers 12 - 13,331 14
Total collections 1,189,380 100 91,872 100
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Notes:
1. Total Cash Collections (in Euros) balances to Energy Accounting Report to Board of Directors
2. Number of Payments from Payroll Deductions adjusted to eliminate double counting (related to old debt)
3. Payment for 2009 consumption was received for 32,956 Social Case customers in April 2010
The €4.5 million amount is allocated over 12 months
The information above is being compiled each month and can be used to measure the impact of the
newer payment mechanisms such as KOS-Giro and direct debit.
KOS-Giro Payment Mechanism
The payment volumes and amounts processed through KOS-Giro since this mechanism was
implemented are shown in the following table.
Use of the KOS-Giro Payment System
Quarter Number of Payments Amount (€ 000)
Q1 2008 3,490 1,822
Q2 2008 5,258 2,158
Q3 2008 5,339 2,286
Q4 2008 7,086 3,093
Q1 2009 7,929 4,320
Q2 2009 9,029 4,171
Q3 2009 11,298 3,868
Q4 2009 17,186 5,592
Q1 2010 22,563 7,175
Q2 2010 26,748 5,335
Source: KEK Supply Division
Household and small commercial customers’ participation continues to grow, in both the number of
payments and amount collected. The increase in the number of payments during Q2 reflects this fact.
The reduction in the amount of money received through KOS-Giro reflects the fact that some of the
larger commercial customers are migrating to the direct debit mechanism.
Late in 2009 following the Central Bank of Kosovo’s approval of Western Union to participate in the
KOS-Giro System, KEK decided to allow Western Union to be a KOS-Giro participant. The
payments are being processed through the Interbank Transaction System by a commercial bank and all
procedures are working properly. The addition of Western Union to the KOS-Giro System is one of
the factors contributing to the increased volume of payments given the significant usage of the
Western Union system by households in Kosovo.
Direct Debit System
Additional customers continue to be added to the direct debit payment mechanism since the
mechanism was made available to all customers in January 2010. More than 1% of the amount
collected in the first half came through direct debit. This is the result of KEK’s efforts to have several
commercial entities with multiple locations (IPKO, PTK, all commercial banks, Kujtesa) enroll all
their facilities in direct debit. In addition, all A+ customers are now part of direct debit.
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Minority Issues
PA continues to monitor the performance of customers subject to the 133 Community Agreements.
The following report summarizes the results from the inception date (second half of 2009) of the
various agreements through 30 June 2010.
MINORITY COMMUNITY AGREEMENTS
OVERVIEW OF PERFORMANCE RESULTS
As of 30 June 2010
1. Number of Customers 22,380
2. Debt Prior to Agreement €34.4 million
3. Number of Bills Issued Since Agreement 260,117
4. Number of Payments since Agreement 171,415
5. Payment Transaction Percentage 66%
[% of Line 4 divided by Line 3]
(KEK average = 50%)
6. Amounts Billed Since Agreement (000) €7,133
(€ value of Line 3)
7. Amounts Paid Since Agreement (000) €5,315
(€ value of Line 4)
8. Payment Percentage 75%
[% of Line 7 divided by Line 6]
(KEK average = 81%, households 73%)
9. Number of Customers that never paid 2,858
[% of Line 9 divided by Line 1] (13% of total)
As the results show, the newly regularized customers continue to pay quite well compared to the rest
of KEK’s customers.
In addition to the minority customers residing in areas with Minority Community Agreements, there
are others living in “mixed areas” that have no agreements. Given the fact that KEK has been more
aggressive in disconnecting customers based on their outstanding debt, minority consumers in mixed
areas have approached KEK to request that they be provided the same opportunity as other minority
customers to have their old debt “frozen.” Many of these families have been paying for electricity for
the past one to two years, but accumulated significant debts in prior years when KEK was not allowed
to disconnect them for non-payment.
PA developed an “individual consumer” agreement, which is a variation of the Community
Agreement. It requires the customer to pay all invoices since 01 July 2009 and to agree to pay the next
12 monthly bills by the due date (36 bills in the case of non-households). In return, KEK agrees not to
disconnect the customer based on debts incurred prior to 30 June 2009. This agreement is only
available to those consumers that the international community restrained KEK from disconnecting
since 1999. The customers in mixed areas that have taken advantage of this agreement reside in Fushe
Kosova, Vitia, and Prishtina.
Internally Displaced Persons (IDP) Collective Centers
Collective Centers represent the final group of consumers south of the Iber River to be regularized.
PA has been working constantly since August 2009 with the applicable government ministries and
international community to raise awareness of the need to provide funds to cover the cost of
electricity provided. Significant progress was made on this issue during Q2. As discussed in the Q1
report, at 16:00 hours on 31 March, Minister of Communities and Return Sasa Rasic sent an email to
9
the KEK managing director stating that his Ministry would pay for April consumption of the IDP
Centers. The Ministry made the April payment, the first ever received for the Centers’ electric
consumption.
On 29 April 2010 a meeting was held with the Minister of Communities and Return, Minister of
Labor and Social Welfare, US Embassy, USAID, KEK, and PA advisors. Discussions focused on a
presentation PA prepared that KEK’s Managing Director sent to all participants entitled “KEK’s
Analysis and Views on Service to IDP Collective Centers.” Participants were informed that metering
individual residences in the Centers would be impractical and costly to the residents. A single meter
for each facility is the only workable solution and KEK and the Ministry would have to closely
monitor consumption since several of the facilities have extremely high consumption per family. The
Minister of Communities and Return also agreed to pay for May consumption and PA prepared a
Memorandum of Understanding (signed by KEK and the Ministry) to formalize the agreement.
On 07 June a meeting was held with the same attendees plus the Senior Advisor to the Prime Minister.
Minister Sasa Rasic stated that the government, through his Ministry, would be willing to pay for up to
330 kWh per family per month (the government paid this amount for Social Cases in 2009) through
01 October 2010 and possibly until 31 December 2010. He stressed that if the 330 kWh limit is
reached prior to the end of a calendar month, KEK should disconnect the facility for the remainder of
that month. PA prepared a notice that was delivered to each household in the various Centers along
with an energy conservation brochure by mid June. During the third week of June, three of the
Centers in Strpce had exceeded the 330 kWh per family limit. In accordance with the Minister’s
instruction, those facilities were disconnected. The leaders of the Centers indicated that residents
would be willing to pay for additional consumption. PA and KEK estimated the additional
consumption through the end of the month and the residents of those three facilities immediately paid
approximately €1,000 to have service restored.
Initiatives Related to Regularizing the Consumers North of the Iber River
Discussions continued during Q2 with Serbian officials (State Secretary of Ministry of Energy and
Mines, Deputy Minister of Ministry for Kosovo and Metohjia, and EPS) concerning the draft energy
services company (ESCO) Agreement that was provided to them in September 2009. Observers from
the US Embassy Kosovo and ECLO Kosovo also attended. On 19 April, a meeting was held in North
Mitrovica to discuss the draft ESCO contract; however, the Serbian participants brought up two old
issues that KEK had previously told them were not open to discussion for legal, regulatory, and
commercial reasons. One issue related to having the ESCO arrangement pertain to communities south
of the Iber River that KEK regularized in 2009. PA explained to the Serbian representatives that this
would be a step backward since those consumers are paying quite well and there is no business reason
to do so. The other issue was the desire of the Serbian side to export energy from Serbia (and possibly
elsewhere) to Kosovo. They were told that KEK cannot justify the sole sourcing of imports. Although
both of these issues were previously brought up and responded to by KEK, the Serbian side continues
to press them.
On 28 May another meeting was held between the parties. The Serbian side again brought up the same
two issues of the territory to be covered by the ESCO arrangement and the import of power. They
still have not yet addressed the technical and commercial aspects of the draft ESCO contract. The two
major issues are roadblocks to moving forward with the ESCO arrangement.
It is apparent that Serbian Government will not be able to sign the ESCO agreement, given the
political environment in Serbia. Therefore, the Serb Government representatives that attend the
meetings have been instructed to continue raising the same issues that the Kosovo law does not allow,
10
hence stalling any progress. PA believes that the Serbian Government will not sign the ESCO
agreement unless it is forced to do so by the US and the EU governments. In order to prevent the
same hardship experienced by the electricity customers in the north last winter, this issue has to be
resolved by September 2010.
PA advisers traveled to the north to determine the validity of Serbian propaganda about the
construction of a new line from Serbia to Valaqe substation in Kosovo. No sign of line construction
activity was observed by the team. Also, PA continues to monitor the water level at Gazivode
reservoir/dam to ensure that proper water level is maintained in the reservoir.
1.4 Accounting and Financing
The PA team continued to advise KEK on finance and accounting issues, primarily regarding the
replacement of some of the modules of the Customer Accounting System (CAS), improving the
quality of financial reporting (including the preparation of unbundled financial statements for each of
the company’s core divisions), and preparing the company for privatization. PA undertook the
following activities during Q2:
Unbundling of Accounting
Monitored the preparation of KEK’s unbundled financial statements for FY 2009. PA helped
with the calculation of the allocation factors based on staff numbers especially in cases where
staff reports to one Division for administrative purposes and to a different Division for
functional purposes.
Introducing Improvements to CAS and Financial Accounting
PA assisted with the provision of more training on the new Fixed Asset Module and
supervised the data entry and generation of reports during training performed by KEK’s
Information Services (IS) Division.
We continued work on the calculation adjustments to the book values of all assets carried in
the General Ledger. These adjustments will be recorded as post-closing adjustments at the end
of 2009 [reflected in the opening balance for 2010] in order to eliminate the errors in the
accumulated depreciation accounts in the ledger identified by KEK’s auditors Deloitte &
Touche.
PA continued work on the source document database and the replacement of the Accounts
Payable and Inventory Modules.
Financial Reporting and External Audit
PA assisted KEK with finalizing the consolidated financial statements for FY 2009 and took
part in the initial review of the statements by the external auditors. Specifically, we advised the
Accounting Department on recording KEK’s environmental liabilities, estimating and
recording provisions for contingent liabilities related to the payment of pensions and recording
provisions related to payments for the supply of a transformer, which failed in the process of
commissioning.
PA participated in all meetings between KEK and the external auditors on the audit of FY
2009.
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Taxation
PA assisted KEK in filing a second appeal (with the Independent Appeal Board) against the findings
of the Kosovo Tax Administration (TAK) during the audit of KEK’s financial statements for the
period 2005-2008. TAK failed to recognize the “bad debt” recorded in the books of KEK and
confirmed by the auditors Grant Thornton and Deloitte & Touche. Thus, after the adjustments that
the auditors made to KEK’s financial results (for tax purposes), KEK appeared to owe TAK large
amounts of corporate profit tax. This tax was further increased with penalties and charges for KEK’s
failure to declare it in due time. PA assisted KEK in filing an appeal with TAK’s Appeals Division.
The Appeals Division issued a ruling in which they recognized the existence of “bad debt,” but
pronounced that the amount of bad debt would be limited to the debt of customers taken to court. It
thus refused to include in KEK’s bad debt the amounts owed by households that have been warned
and disconnected for non-payment and uncollectible amounts from minorities. The ruling of TAK’s
Appeals Division on the amount of “bad debt” (which is currently being disputed by KEK) is not
consistent with the current law and does not truly reflect the situation in Kosovo.
Financing
PA assisted KEK in requesting and obtaining an extension to one of the existing loan
agreements with the Kosovo Central Budget (KCB) to accommodate the revised payment
schedules of some of the contracts for the supply of goods and services to the Mines funded
by the loan. Further, PA assisted KEK with concluding two new loan agreements for capital
investments need for the Kosova B TPP, and in connection with opening the new Sibovc
South West Mine.
We monitored the implementation of the loan agreements between KEK and the
Government of Kosovo for funding the top-priority capital projects in mining and generation.
PA also took part in a series of meetings with the Treasury Department at MEF to finalize the
terms of the agreements.
Other
PA attended meetings on issues related to the financial position and performance of KEK
between the CFO and the Privatization Transaction Advisor.
We helped KEK’s Accounting Methodology Department to develop accounting policies and
procedures for recording the reversal of impairment of fixed assets.
1.5 Legal and Regulatory
PA continued to provide legal advice and support to KEK’s management on a variety of issues, which
included:
Drafting, negotiating, and finalizing the contracts for the supply of spare parts and installation
services in connection with Alstom’s delivery of a new generator rotor, and repair of an
existing generator rotor for the Kosova B TPP
Continuing to advise KEK on its dispute with Turbocare in connection with the purchase of a
used transformer for the Kosova A TPP, to include drafting documents for a possible
determination of the dispute using an independent technical expert.
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Drafting and negotiating energy import agreements, using the EFET General Agreement and
customized election sheet.
Drafting new internal KEK procedures in connection with the issuance and monitoring of
performance and advance payment guarantees presented by contractors. These procedures
were subsequently approved by KEK Managing Director, and are being implemented.
Drafting new internal KEK procedures in connection with the sale of surplus electricity to
wholesale buyers. It is expected that these rules will be approved by the Board of Directors in
Quarter 3.
Finalizing the new KEK Disciplinary Code, which was submitted to the Board of Directors
for approval. The new Code introduces three important reforms to the existing disciplinary
process 1) the right of managers to take action against non-performing employees under their
supervision (this should be distinguished from a misconduct), 2) abolition of the current
practice of establishing three-member commissions to adjudicate upon disciplinary cases, and
3) limitations on the discretion of the adjudicator when determining the applicable disciplinary
penalty. While the new Code has been considered by the Board of Directors, it has chosen to
defer its approval for the moment.
Preparing the tender dossiers and draft contracts for the re-tendering of the new 110/35/20
kV substation in the vicinity of Vaganicë and for the tendering of the new 110/35kV Palaj
substation.
Providing legal advice to KEK in connection with its request to the Public Procurement
Agency for additional works to be performed by Siemens for refurbishing the water treatment
facility at the Kosova B TPP.
Continuing to provide legal advice to KEK project managers in connection with the
implementation of the contracts for refurbishing two bucket wheel excavators by the original
manufacturer, Thyssenkrupp, and also refurbishment of the conveyor belts by Eco Trade,
which will be deployed to the new Sibovc SW mine.
Continuing to provide legal assistance to KEK’s efforts to regularize electricity service to
minority communities in the northern part of Kosovo.
Continuing to closely monitor the implementation of the GoK’s May 2009 decision to proceed
with the expropriation of land near Hade village. As previously reported, PA has noted, with
concern, that the process is not progressing at the required pace. Quarter 2 saw little
improvement on this matter, with a second high-level meeting attended by responsible
ministers and municipal leaders yielding no tangible results. Owing to these continued delays,
PA drafted a letter for KEK to send to the GoK requesting it to expedite the expropriation
process.
Providing legal advice to KEK in connection with its post-contractual obligations for the
collection of RTK Fees, to include drafting a letter to RTK outlining KEK’s interpretation of
the Constitutional Court Decision of October 2009.
Advising KEK on the drafting of several contracts related to the refurbishment of coal system
one, specifically the coal conveyor system, which will be used in the new Sibovc South West
mine.
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PA provided support to the KEK regulatory staff during Q2 on the following matters:
Met with the ERO to discuss comments they had on the Network Development Plan. Based
on that meeting, PA advisors are working with the KEK Network personnel to address issues
raised and to revise the report accordingly.
A request was made to ERO for derogation of a number of requirements of the Distribution
Code.
Comments were provided to ERO on draft documents prepared by their consultant
concerning Certificates of Origin for renewable energy facilities.
Comments were provided to ERO on a document prepared by their consultant relating to
performance standards. In accordance with the Network and Supply licenses, the licensees are
to propose performance standards to ERO for review. The document discussed various
options for performance measures.
On 07 May, KEK submitted a request to ERO for derogation of Article 7 of the Rule on
Disconnection which relates to communal (group) disconnection. KEK previously provided
extensive justification to ERO and the Government of the need to disconnect 10/0.4
transformers (or the secondary feeds from those transformers) in those areas where payment
discipline is very poor (payments less than 30% of amount billed). At their meeting in June,
the ERO Board rejected KEK’s request for derogation. PA is working with KEK to determine
the way forward on the issue of group disconnections, which are needed to maintain
collections at a reasonable level.
KEK provided the 2009 unbundled financial statements (unaudited) to ERO. The various
licenses require KEK to submit audited financial statements to ERO in an unbundled manner
for each licensed activity by 31 March of the subsequent year. ERO routinely grants a
derogation of this requirement until 30 June. ERO was satisfied to receive the unbundled
statements at this time, with the understanding that audited results will be provided as soon as
the external auditor completes its work.
1.6 Internal Audit and Anti-corruption
In Q2 the Internal Audit Committee (IAC) engaged in a series of interventions in the day-to-day
operations of the Audit Office (IAO), which had and will continue to have a negative impact on the
functioning of the Office. Without good reason or justification, the IAC decided to demote the leader
of the network and supply operational audit – the Principal Operations Auditor. This decision violated
the Committee’s own Standard Operation Policies (approved at the beginning of the year), which
prohibited such interventions. The decision also sent the wrong signal to the remainder of KEK’s
IAO departments.
The Committee further interfered in the daily operations of the IAO by instructing the Internal Audit
Officer to reverse his decision to reduce the salaries of those auditors, whose performance was found
unsatisfactory during the Q1 performance evaluation. It must be noted that the method of
performance evaluation was previously approved by the Internal Audit Committee.
PA advised the Committee against both of these interventions, explaining in detail why such actions
are detrimental to the effectiveness of the IAO. However, the committee ignored the advice and the
decisions were enforced.
Despite these failures to provide leadership, the IAC achieved some progress in Q2, including:
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Reviewed the progress of the Annual Internal Audit Plan and concluded that the half-year
targets were met, with exception of a few financial audit-related tasks.
Reviewed and approved recommendations in relation to changes in chemical specifications for
water cleaning for power plants. This decision was further reviewed and supported by KEK’s
Board, and it will result in both significant quality and cost reduction.
Reviewed and approved recommendations related to procurement audits.
Among the large-scale audits performed in Q2 were the operational audits of Network and Supply and
the audits of Procurement, the results of which are summarized below.
IAO completed a comprehensive audit of the Gjilan District and continued selective audits in Pristina,
Gjakova and Mitrovica districts. It found the following weaknesses:
Low meter reading quality and high number of “zero bills – up to 17%.
Very low performance in meter reading, including inaccurate reading and data entry.
Misreporting/falsification and serious underperformance in disconnections.
Underperformance in commercial loss reduction.
Gross neglect of KEK’s approved policies and procedures
Districts continuously fail to enforce payment discipline. Even in the few cases when disconnections
are being performed, reconnection is done following the payment of a very low amount (sometimes
only 2-4% of the customer’s debt). As mentioned before, the debt restructuring procedure was found
to be very ineffective and a new approach is needed. Extensive data collection and analyses were
initiated for a better understanding of the magnitude and specifics of the problem. The design and
implementation of a new process to replace current debt restructuring is expected to be completed by
the end of the year. Other improprieties discovered during the audits included falsifying seals and
ratios of current transformers, illegal connections, and lines. All these illegal acts are causing a
significant loss to the company.
PA assisted the IAO in reviewing the progress in the implementation of Regulation 66 related to the
registration of all customers of KEK. Around 620 new customers were identified and registered, and
the registration of several hundred customers was accelerated. The implementation Regulation 66 has
a significant impact on the loss reduction efforts in Pristina, since 90% of the customers mentioned
above were found in this district.
The unsealed meters and measurement installations present another very significant problem resulting
in high commercial losses. Based on sample studies performed by the IAO, approximately 20% of the
customers’ meters are not sealed. IAO held a number of meetings with the Supply Division
representatives to address this issue. Their estimates of the percentage of unsealed meters was even
higher – approximately 25-30%. An action plan to resolve the issue is under development and will be
finalized in Q3. It will include diverse activities such as a media campaign, legal actions and technical
steps for putting the installations in order.
District regulations. The most important audit of Network and Supply operations was related to the
implementation of the District Regulations. IAO concluded that the performance evaluation of the
Network and Supply Division employees completely ignored the District Regulations.
Based on the requirements stipulated in the District Regulations:
1. 7 district managers should have been punished for not meeting their targets - none of these
punishments have been implemented.
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2. 44 sub-district coordinators should have been punished for not meeting their targets -
disciplinary measures have been implemented against 11.
3. 175 feeder teamleaders should have been subject to disciplinary punishments - only 2 were
punished.
4. 625 feeder team specialists should have been punished - only in 79 cases were some
disciplinary measures implemented.
This flagrant disregard of the District Regulations encourages underperforming employees and further
strengthens the perception of impunity. All IAO conclusions and recommendations have been
finalized and submitted to the IAC.
HR recruitment process audit. In Q2 IAO received a request from the Kosovo Police to audit the
employee recruitment process for the year 2009. The basis for this request was a complaint from
KEK’s Labor Union. The audit has discovered significant deficiencies and violations in the
abovementioned process:
Lack of procedures regulating the entire process, from vacancy announcement to evaluation
and selection of staff.
Deficiencies in the application filing and archiving process which create serious complications
and in most cases make it impossible to inspect the fairness of the selection.
Employment of staff who do not meet the announced qualifications and skills requirements.
In all abovementioned cases IAO prepared or is preparing appropriate recommendations and
submitting them to IAC and KEK management.
IAC reviewed and approved the recommendations of the IAO for the following procurement audits:
Procurement of gear boxes – the audit was completed in Q1.
Procurement of conveyer belt spare parts (better known as the ACDC investigation) – The IAC decided to
dismiss Procurement Officer Muhamed Selmani and to issue final written warnings to the rest of
participants in this procurement.
Summary of Audits and Measures Taken to Address the Findings
During Q2, the IAO completed 35 audits and investigations.
Investigations. 27 new audits were initiated and are expected to be completed in Q3-4.
Disciplinary Actions. As a result of the investigations performed by the IAO, 79 KEK employees
were proposed for different forms of disciplinary action.
Law Enforcement. With PA’s assistance, KEK was able to submit 12 cases to law enforcement
officials for follow-up action.
Customers Inspected. The Operations Audit Function inspected more than 2, 500 customers’
electric use and metering.
Field Enforcement. Under PA’s leadership, the Field Enforcement Office launched an extensive
campaign for resolving problems related to customers with large debts and high commercial losses.
233 “problematic” customers were disconnected (with police support in 10% of the cases).
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210 cases of electricity theft were discovered and submitted to the Legal and Supply
Departments for processing.
Field Enforcement Office is currently hiring additional staff, as the volume of work is expected to
increase in subsequent quarters.
1.7 Network, Human Resources, Information Services, Public Relations and
Communications
Network Division
Network Development Plan – PA updated the 2010 Network Development Plan in response to
comments from the ERO. The updates provided additional information on justification and
expected benefits related to the proposed projects. Upon receipt of the updated plan, ERO
requested more detailed information on specific projects that will include data on performance
improvements as computed by power flow analysis. PA is in the process of helping KEK to
develop a further update to the Plan that will satisfy the ERO’s requirements.
Network Division Management – PA actively managed and coordinated the implementation of the
2010 Network Division Management and Action Plan. This will be an ongoing and routine
activity that will gradually transition to KEK staff. PA developed a job description and assisted
in the selection of a Network Division Management Coordinator. During Q2, monthly
management meetings were held, draft project plans were developed, project status reporting
was formalized, operations performance reporting templates were developed, and operations
performance reporting was introduced. The current focus is to assist the Network Division’
management to become accustomed to concepts of accountability, delegation, and
performance measurement and reporting.
Metering Strategy – PA continued gathering information and analyzing options for an overall
metering strategy that balances KEK’s challenges, budget constraints, and strategic
considerations. The strategy is expected to be finalized in July 2010.
Operations Support – PA worked with KEK staff on several routine operational matters,
coaching and assisting in the management and resolution of problems, in order to ascertain
adherence to regulations, and ensure timely progress and proper closure. Examples of such
matters include:
o Reviewed energy consumption at IDP sites and developed recommendations for
future actions
o Supported wind PPA negotiations and prepared relevant documentation
o Supported KEK negotiations with Iber Lepenc to ensure reliable electricity supply to
customers in Besi
o Assisted the process of asset relocation as required by the new highway construction
project.
Expert Review and Comment – PA reviewed and provided comments on the following ERO
documents:
o Quality Standards for Electricity Licensees
o Rule for the Establishment of a System of Certificates of Origin
o Rule for the Support of Electricity for which a Certificate of Origin has been issued
and Procedures for Admission to the Support Scheme.
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Regularization Projects – PA identified and defined two projects focused on regularizing KEK
customers and continues to support KEK in the design, planning and execution of these
projects:
o Magura 10kV Feeder Regularization – This low performing 10 kV feeder was selected and
three joint network and supply teams were engaged to regularize the 1995 customers
served by the feeder. Now 1352 customers have been regularized. This project is
expected to be completed in Q3 2010. Upon completion and based on measured
sustainable performance improvement, similar projects may be planned for other low-
performing feeders.
o Regulation 66 Customer Regularization – The scope of this project is to regularize several
customers in new buildings that were constructed in the recent past without the proper
permits and approvals. The scope will include the regularization electricity consumed
by common areas and the detection and removal of illegal taps. This project is in the
design and planning phase, and execution is expected to begin in July 2010.
Tendering and Procurement – PA assisted KEK with the tendering and procurement processes
related to:
o Meter boxes
o SIM Cards
o Simple electronic meters and multi-functional remote read meters
o Remote read modems.
Connection Charging Methodology – PA developed a distribution network connection charging
methodology and facilitated its review and update by all interested parties in KEK. The
methodology was submitted to ERO for comment and approval. This methodology will
formalize the manner in which KEK processes customers’ new connections and connection
reinforcement requests.
Vaganicë 110/35/20(10) Substation – PA supported KEK in the development of a revised
technical specification and other tender documents for the construction of the Vaganicë
110/35/20(10) kV substation. This substation is required to provide stability of supply for
customers in the Mitrovica area and the western part of Kosovo, and also to properly
regularize customers who are currently served through the Trepca mining complex. The tender
was announced on 5 July 2010.
Palaj 110/35 kV Substation – Working in concert with the KEK engineering team, PA assisted
in developing draft technical specifications and other documents for the tender. This
substation is pivotal to both the mining and transport of coal to the Kosova A and Kosova B
generating plants. The final package of tender documents was sent to KEK’s procurement
office and the tender is expected to be announced in July 2010.
Prishtina 7 110/20(10) Substation – PA supported the KEK engineering team in developing
draft technical specifications and other tender documents for the Prishtina 7 distribution
substation. This substation will be located next to the 220/110 kV Prishtina 4 transmission
station. According to KEK’s analysis, the demand in this area of the city of Prishtina is
growing rapidly and hence the need for the distribution substation. The technical
specifications and other tender documents are expected to be finalized in Q3 2010.
Electric Service Redundancy to KEK HQ – The tender for the supply and installation of a standby
diesel generator with automatic transfer switch was announced. PA supported KEK in the
technical evaluation of bids. Three local bidders applied and none of them qualified based on
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tender requirements. PA will continue supporting KEK in the re-tendering process.
Least Cost Generation Plan:
A) The revised Long-Term Electricity Demand Forecast for the Kosovo power system
developed by PA is in the final stages of review.
B) PA supported KEK in preparing the job description, interviewing and testing candidates
for a new position of Data Analyst/Long-Term Planner in the Capacity Management
Department. As a part of professional capacity building, PA will provide extensive on-the-
job training on all aspects related to data analysis and long-term leas-cost generation
planning.
Loss Calculations – PA reviewed the existing Technical Loss Calculation Methodology used by
KEK. The approach, accuracy of input data and models, assumptions, and level of detail of
the existing methodology as well as the software (GREDOS) used for computations can be
improved. PA is in the process of developing a new and improved methodology for loss
calculations. This effort is expected to be completed in Q3 2010.
Master distribution plan development – Long-term operations, maintenance and capital projects of
distribution networks require a Distribution Network Master Development Plan (MDP). PA
prepared an initial draft work plan for the development of the MDP. This work plan is
expected to be finalized in early Q3 2010.
Information Services (IS)
PA recommended additional improvements to the Fixed Asset Module, including:
o Calculation of depreciation for tax and regulatory purposes.
o Recording internal transfers of assets.
o Filtering of journals and virtual posting of journals into the General Ledger Module.
o Recording suppliers.
o New reporting tools
PA finalized the work plan for the implementation of the new FA module.
PA participated in the interview process for candidates for the new positions in the IS
Department.
PA reviewed and discussed the new customer care database structure.
PA designed and developed a new performance checklist for the froup of feeders:
o By custom selection of feeders
o By selection of feeder specialists.
PA modified the Tools of Electrical Tree for Kosovo (TETKo) software, modified help and
presentation files to include the change, and prepared a new software version which was
installed. OPA trained a total of 33 persons in 3 districts on the software.
PA designed the following sub-modules of the new Network and Supply Integrated Database
(NASID):
o Customers and contracts
o Services and prices
o Double entry accounting
o Organized the relationships between the appropriate sub-modules
PA prepared a report with structure diagrams of NaSID for review and discussions with
stakeholders.
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Human Resources (HR) Division
As part of the ongoing development of this division, PA:
Provided supervision of and assistance to, the Human Resources Department on drafting job
announcements, job descriptions, interviewing, recruitment, implementing disciplinary
measures, and preparation of payroll and salary deductions.
Supervised and made recommendations to KEK management for job postings, interviews and
the recruitment process for various KEK positions.
Finalized and obtained approval for the new interim organization structure for the Corporate
Services Division for KEK and planned the organization structure for the Corporate Services
Division of the future distribution company Kosovo Electricity Distribution and Supply
Company (KEDS).This includes the structural units of Human Resources, Public Relations &
Corporate Communications, Transport, Facility, Security, IT, Record Management and
Corporate Environmental Services and Safety.
Reviewed employee lists from the Supply and Customer Care Division, identified those
employees who were unassigned and recommended where they should be assigned within the
division.
Initiated and held monthly meetings between HR and the Supply and Customer Care Division
to resolve HR-related issues.
Identified and received approval from the Board of Directors for the list of employees at KEK
to be made redundant.
Provided recommendations for staff optimization in Kosovo “A”.
Held meetings with Ministry of Education representatives on how to proceed with the KEK
Training Center accreditation issue; prepared and submitted all requested documents.
Implemented and supervised regular recruitment of reserve feeder specialists and initiated the
monthly training of newly recruited feeder specialists to create a reserve of potential
employees.
Reviewed and corrected a variety of inaccuracies in the district organization structure and
payroll listings.
Reviewed the reorganization of payroll, headcount and job descriptions within the Coal
Production Division that resulted from making 120 positions redundant.
Reviewed and analyzed all recommended disciplinary measures and bonuses to determine
compliance with the KEK District Regulations and oversaw the implementation of these
recommendations against non-performing employees.
Analyzed the records of persons on unpaid sick leave, identified who was on sick leave and
provided recommendations on how to manage the unpaid sick leave benefit and process.
Supervised all recruitment for district positions.
Supported the North Mitrovica manager in implementing the KEK District Regulations in
connection with the punishment of non-performing employees.
Security
PA began its assistance to KEK on security matters during this quarter. We are assessing and making
recommendations on security aspect that affect staff working environment, asset management,
transportation, site access and security service provider (BESA security company) deliverables. PA
conducted initial visits to all KEK districts, the mine pits, key asset depots, warehouses, and
workshops to observe the functions, execution of duties, the general production, and areas of
responsibility.
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During Quarter 2, PA:
Instituted and held five regular weekly meetings to address day-to-day activities.
Guided the development of job descriptions for two key security sector managerial posts.
Developed and introduced a functional database system for reporting purposes, monitoring
vehicle movement control, and analyzing monthly consumption returns and expenditure
outcomes in order to streamline existing processes.
Prepared a policy document and recommendations on building evacuation plans for further
discussion and development. This document will serve as foundation for district
implementation and specific actions.
Began verifying documentation for implementing the KEK security sector upgrading process,
involving the installation of monitoring devices in Kosovo A and B, and all critical asset
warehouses together with re-fencing premises where applicable to secure KEK assets. PA has
conducted regular visits to verify “needs versus plans” and made recommendations for
revising procurement and tender documentation.
Evaluated and discussed with the security service provider, BESA, the current crucial areas of
responsibility for safeguarding KEK properties, staff and installations with an emphasis on
performance efficiency, upgrading the company image, standardizing employee equipment,
and regulating duty rosters.
Began discussions with the KEK security officer and BESA in connection with creating a
database system to monitor, regulate and follow up on KEK employees involved in criminal
activities. This will be vital to the HR Division as part of its employment processes.
1.8 Management and Operational issues
KEK’s Board of Directors continues to perform well and support management’s actions to
improve KEK’s performance. Occasionally, the Board has a tendency to micro manage and
attempt to act as executives in KEK’s contractual issues. PA will continue to monitor the
Board’s actions to facilitate proper conduct.
KEK’s Managing Director is performing well and has been very cooperative since early 2009.
He is under a lot of pressure by both internal and external forces, including the Minister of
Energy, to hire individuals, not to disconnect customers, invest in villages tied to politicians,
not to terminate poor performing or corrupt employees, restate terminated employees, and to
influence tenders and their outcome. Fortunately, he understands that he has full support of
the advisers and has resisted all of these pressures to a great extent. He has also been told by
the Ministers of Economy/Finance and Energy not to listen to his advisers and make his own
decisions, consistent with their instructions, which he has refused to do. The Managing
Director has been informing PA about all major issues and asks for advice before taking any
action; hence, in general, there has been a good cooperation between him and PA advisers.
PA’s relationship with the KEK Chairman has been very positive. He recognizes the role and
the importance of PA’s advisers in improving KEK’s performance, and has continuously
encouraged cooperation of KEK’s Managing Director with the PA advisers and has
recognized him for doing so.
Lack of support from the GoK, including the Ministry of Energy and Mines (MEM) and
MEF, for implementing a comprehensive plan to ensure electricity supply for Kosovo may
result in the need to import a large amount of electricity at a cost of over €200 million per year.
Given ERO’s strategy to not allow any tariff increase, the need for a significant government
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subsidy until new generation capacity is constructed may adversely affect the privatization
efforts. PA assisted KEK with communicating this concern to all stakeholders during the
quarter in the form of a letter regarding the closure of the Kosova A TPP.
There is need to reorganize the mines operation and review the staffing level, given that by
2012 the old mines will be depleted and only the SSW mine will be operational. There is
significant pushback at all levels of management to making any organizational and staffing
changes in the mines. This was manifested during Quarter 2 when KEK’s Coal Production
Division sought to evade any redundancies in its Maintenance Department. PA will need to
provide significant assistance and guidance to KEK management if any reorganization or
rightsizing of the Coal Production Division is to occur.
As previously reported, the hydraulic ash transfer project for the A units suffered a setback
when the BoD refused to approve €4 million in additional funding to construct ash processing
equipment for units A3, A4, and A5. The Board’s refusal was predicated on the EU’s demand
that Kosovo should shut down the A units by 2015. Accordingly, the BoD sought guidance
from the GoK on whether to proceed with the project. The GoK has yet to provide a formal
response. In the same vein, the BoD has also sought guidance from the GoK on the planned
overhaul of Unit A3 of the Kosova A TPP, which will occur in the summer of 2011. Again,
the GoK has yet to provide a formal response. PA will need to press the GoK for an answer
during Quarter 3 on both questions.
Subtask 2: Prepare Technical and Contractual Document for Investor
Due Diligence
2.1 KEK Unbundling Documentation
PA has already developed and shared with the DistCo and KRPP Transaction Advisory teams the
pertinent agreements.
2.2 Draft Agreements
PA has already developed and shared with the DistCo and KRPP Transaction Advisory teams the
pertinent agreements.
2.3 Legal/Regulatory
PA has already developed a draft regulatory statement that should form an integral part of the
transaction documents for the sale of the DistCo and shared this with representatives from the IFC
and also the KRPP Transaction Advisory team.
During Quarter 2, PA continued to work with Deloitte, a USAID implementing partner, and the legal
advisors to the KRPP Transaction on amendments to the three energy laws. PA has been particularly
focused on those amendments that aim to provide legal certainty and clarity to KEK and KOSTT’s
property rights over the assets that comprise Kosovo’s energy system, and new provisions that will
explicitly make electricity theft a criminal offence.
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PA met with an EU-sponsored consultant to ERO concerning regulatory accounting and reporting,
focusing on the upcoming unbundled environment. The consultant was introduced to KEK
accounting personnel so he could see first hand the system and procedures KEK has in place at this
time.
2.4 Investor Due Diligence
PA has already compiled an index to the documents collected in the DistCo data room and provided a
copy to the IFC for their review and comment. PA stands ready to assist KEK with responding to any
future requests for documents submitted by IFC or investors.
Subtask 3: Provide Advisory Support in Privatization Process
3.1 Tender Process Responses
The tendering process for the sale of KEDS has not yet started. Accordingly, there are no actions to
report for the quarter. It is anticipated that the request for expressions of interest will be published in
Quarter 3, and the prequalification process will start at the end of Quarter 3/beginning of Quarter 4.
3.2 Bid Submission, Evaluation and Award
No actions to report for the quarter.
Subtask 4: Strengthen Skills and Technical Capacity of Counterparts
4.1 Distribution Company Staff Coaching
PA actively supported the Network Division’s management staff by assisting with the implementation
of the Management and Action Plan. PA also supported routine daily operations of the Network
Division by ensuring proper follow up and adequate quality in the resolution of issues. These activities
were carried out by PA with the objective of achieving “on-the-job” training.
PA team members provided advisory support to the districts on a daily base, in line with the District
Regulation. PA also continued to coach the managers and staff in how to hold meetings, meeting
deadlines, communicating expectations, employee motivation and reward, development of the 2010
Action Plan for Supply and Network, and monthly performance monitoring.
23
4.2 Coaching on Billing, Managing Customer Accounts and Collection
During the second quarter of 2010, PA conducted training sessions for 10 people how to combat
commercial losses.
4.3 Training on Management Principles, Customer Service
No actions to report for the quarter.
4.4 Privatization Process Workshops
PA worked with USAID, USAID implementing partners and the National Association of Regulatory
Utility Commissioners (NARUC) in holding a high-level forum in Pristina entitled “Public Forum on
KEK Electricity Distribution and Supply Privatization: Enhancing the Security of Supply in Kosovo
for Economic Growth.” PA delivered a presentation on “Sustainable Commercial Operations,” and
provided input and comments on the presentations made by the others. PA also participated in the
workshops that followed the high-level forum, which focused on market design and tariff reform in
the context of the DistCo privatization and the KRPP Transaction.
4.5 Training of Trainers
No actions to report for the quarter.
Subtask 5: Support Management Post-Privatization
As the tendering process has not yet been initiated for the sale of KEDS, there are no actions to
report for this subtask.
Subtask 6: Prepare a Thermal Power Plant Kosova B Investment
Requirement and Rehabilitation Feasibility Study
6.1 TPP Kosova B Investment Requirement and Rehabilitation Feasibility Study
The first draft of the Thermal Power Plant Kosova B Investment Requirement and Rehabilitation
Feasibility Study was circulated for comments amongst KEK, USAID and the KRPP Transaction
Advisory Team. Some comments were received in late June,are which will be included in the next
draft of the report. The analyses indicate that it is feasible, both technically and financially, to
rehabilitate the B units at less than half the cost of constructing a new unit.
Subtask 7: Prepare Technical and Contractual Documentation for
Investor Due Diligence
24
7.1 Documentation for Data Room
PA continued to provide support and advice to the KEK employee who are the main contact
points/coordinators for documentation requested by the KRPP project implementation unit, and the
KRPP transaction aAdvisors. Further, during Quarter 2 PA attended meetings with Price Waterhouse
Coopers (PwC) to discuss the production of corporate and financial data for the data room.
7.2 Asset Sale/Lease and Power Purchase Agreements
PA attended meetings with PwC, PB Power and KEK personnel at the Kosova B TPP to discuss the
proposed terms of the power purchase agreement that will be introduced after this plant is transferred
to the new investor.
7.3 Responses to Tender Process Issues
As previously reported, PA’s stated position is that all of KEK’s existing generation and mining assets,
to include the Kosova A TPP either under a lease/ownership or an operations and management
arrangement should be included in the KRPP transaction. During Quarter 2, PA developed a draft
operations and management agreement for the Kosova A TPP, which will be shared with USAID and
the KRPP transaction advisors during Quarter 3.
It is likely that there will be further issues to be addressed as and when shortlisted bidders provide
their feedback on the existing transaction structure during Quarter 3.
Subtask 8. Strengthen Skills and Technical Capacity of Counterparts
8.1 Training on Feasibility Study Methodology
A training session was held on the Kosovo B feasibility study methodology on 7 June, when the
methodology and draft results were presented to four KEK employees. Subsequently, PA requested
feedback on the content of the report from the participants. Given the planned maintenance schedule
for the B units in the third quarter, further training will most likely be conducted in Quarter 4.
8.2 TPP Kosova B privatization Round Table Discussions
No actions to report for the quarter.
25
3 Status of Results Achieved
under the Performance-based
Management System
Please see Appendix B for a discussion of the progress made this quarter against the planned results
under the Performance-based Management System. This section discusses the barriers that are
hampering the achievement of better project results.
3.1 KEK Board of Directors
In contrast to the previous Board of Directors, the existing Board has shown a willingness to
cooperate with PA and displays greater awareness of corporate governance issues and the scope of its
role and responsibilities. However, Board members remain vulnerable to manipulation by internal and
external parties as well as the other Board members.
3.2 Procurement
Kosovo’s procurement regulations remain a significant problem. In these circumstances, PA maintains
its previously stated recommendation that the EU Procurement Regime for Utilities (2004/17/EC) be
applied in Kosovo. This issue will become more pressing with KEK’s privatization, since the private
investors for both KRPP and KEK DistCo will be subject to Kosovo’s current Public Procurement
Law.
The difficulties posed by the existing Public Procurement Law, and those who implement it, were
again evident during Quarter 2. In light of the unscheduled departure of the Head of the Public
Procurement Agency (PPA), all requests for approval submitted by KEK to PPA were left
unanswered. This inaction and resulting delay were particularly problematic for KEK’s request for
additional work in connection with the rehabilitation of the water treatment plant for the Kosova B
TPP. PA assisted KEK with drafting a letter to the GoK asking that it immediately appoint an acting
Head of the PPA so that KEK’s outstanding requests could be addressed.
3.3 Employee Issues
The approach of Kosovo’s courts continues to be a problem, specifically with respect to legal
challenges on employment matters. Employees who are dismissed by KEK on disciplinary grounds
frequently challenge KEK’s decision, request re-instatement, and are granted re-instatement by the
courts. This aspect will become increasingly problematic as employees dismissed under the new
District Regulations for non-performance contest their termination through the courts.
26
As reported in previous quarters, the new Regulations for Operations in KEK Districts provide clear
benchmarks for assessing poor or unsatisfactory performance by employees and introduce a zero-
tolerance approach to serious disciplinary offences. However, as outlined earlier in this report, KEK
management has shown itself reluctant to fully enforce the terms of the District Regulations.
3.4 Stakeholder Interference
This was one of the barriers to KEK’s progress identified in PA’s earlier analyses. Stakeholder
interference in KEK’s operations, coal production strategy, loan for the SSW mine opening,
procurement of the new excavators, and many other areas have made the team’s task much more
difficult. Most recently, the GoK proclaimed its opposition to KEK’s practice of collectively
disconnecting customers for non-payment on feeders that have less than 30% payment, and
proceeded to instruct the Ministry of Energy & Mines to intervene in KEK’s operational policies on
this issue. Continued USAID support and leadership are appreciated and needed to ensure that
stakeholder involvement and interest in KEK can be managed properly.
27
4 Proposed Solutions to New
or Existing Problems
4.1 Dispute Regarding KEK’s Corporate Tax Liability
Problem: The Kosovo Tax Administration (TAK) is forcing KEK to recognize and pay taxes on non-
existing revenues from the sales of electricity to minority customers, insolvent companies, and warned
and disconnected customers who have not been paying their debt, despite all measures taken by KEK.
TAK failed to recognize the “bad debt” recorded in the books of KEK and confirmed by the external
auditors Grant Thornton and Deloitte & Touche during the audits of KEK financial statements for
2005, 2006, 2007 and 2008.
As a result, after adjustments that the tax auditors made to KEK financial results, KEK appeared to
owe TAK large amounts of corporate profit tax. This tax was further increased with penalties and
charges for KEK’s failure to declare it in due time. KEK filed an appeal of this matter with the TAK
Appeals Division on 12 January 2010. On 30 April the Appeals Division issued a ruling that
recognized the existence of “bad debt,” but limited the amount only to the debt of customers taken to
court and refused to include amounts owed by households that have been warned and disconnected
for non-payment and uncollectible amounts from minorities. PA has concluded that this ruling of
TAK Appeals Division is not consistent with the current law and does not accurately reflect the
situation in Kosovo. KEK filed a second appeal on 7 June with the Independent Appeals Board
against the findings for 2005 and 2006.
Due to the fact that there is as yet no written ruling interpreting the requirements of the law on
corporate tax, it is subject to misinterpretation. At the same time the procedure for recognizing bad
debt for the purposes of value added tax (VAT) was clearly defined in a ruling by the Minister of
Economy and Finance, which was approved by the Government of Kosovo on 8 April 2009
(Decision No. 02/60) and KEK has been using it for more than a year.
Proposed solution: PA is pressing for the Minister of Economy and Finance to issue a ruling to
stipulate that bad debt for corporate tax purposes shall be calculated and recognized in the same way it
is calculated and recognized for VAT purposes.
4.2 Hydraulic Transfer of Ash from the Kosova A TPP
Problem: In late March 2010 KEK management submitted a request to the Board of Directors (BoD)
for additional funding for the installation of a hydraulic handling system for wet ash from the Kosova
A TPP. Specifically, the KEK BoD was asked to approve an increase in funding for the project of
approximately €4 million in 2010 and up to another €4 million in 2011, with theses costs to be borne
28
entirely by KEK from its own funds. The World Bank is also co-funding this project and the benefits
of the project have been outlined clearly in a letter from World Bank dated 15 April 2010.
The project will not only bring operational benefits to KEK, but will also produce tangible benefits to
the inhabitants of Kastriot, Fushë Kosova, and Pristina by reducing air pollution. However, the KEK
BoD is concerned as to whether this investment is advisable given on-going Government of Kosovo
discussions relating to the date for the closure of Kosovo A.
Proposed solution: PA drafted a letter for KEK to send to the POE Unit of the Ministry of Economy
and Finance asking the shareholder to confirm that KEK should proceed with this project. It is
anticipated that this issue will require further attention in Q3 – to ensure that the Minister of
Economy and Finance issues a written response confirming that KEK should proceed with the
project.
4.3 Overhaul of Unit A3 of the Kosova A TPP
Problem: KEK is planning to perform a major overhaul of Unit 3 of the Kosova A TPP during the
summer of 2011. The cost of the overhaul will be borne entirely by KEK from its own funds. On 17
June 2010, KEK management presented to the BoD the relevant justification for the proposed
overhaul and BoD agreed that the overhaul is fully consistent with KEK’s duty as the public supplier
of electricity to ensure 24-hour supply of electricity to all of its paying customers. In particular, the
Board considered the following key points:
Applicable operation and maintenance parameters state that the unit must undergo a
major overhaul every five years and the last major overhaul was in 2006; thus, this
overhaul is critical if the unit is to be operated until 2015, or beyond
Failure to perform the overhaul will lead to increased forced outages and repeated failures
will in time render the unit inoperable
If Unit A3 becomes inoperable, Kosovo will lose approximately 115 MW of current
capacity which, based on the unit’s current performance, would cost from €40-70 million
per year to import a replacement. Neither KEK nor the Government can afford this
The planned overhaul is consistent with the new Kosovo Energy Strategy for the period
2009-2018.
While the KEK BoD agrees with the request from KEK management for the planned overhaul, they
remain concerned as to whether the shareholder views this investment as advisable, given on-going
Government of Kosovo discussions relating to the date for closing Kosova A. As there are very
significant lead times for the manufacture and delivery of certain parts needed for the overhaul, it is
imperative that the procurement process begin immediately in order to ensure the overhaul can be
conducted during the planned outage in the summer of 2011.
Proposed solution: PA drafted a letter for KEK’s Chairman of the Board to send to the Minister of
Economy and Finance asking the shareholder to confirm that KEK should proceed with this project.
It is anticipated that this issue will require further attention in Q3 – to ensure that the Minister of
Economy an Finance issues a written response confirming that KEK should proceed with the project.
29
4.4 Delays in Expropriation – Hade Village
Problem: Government Decision No. 08/66 of 29 May 2009 approved KEK’s request for
expropriation of land in the vicinity of Hade Village, as part of the ongoing development of the new
Sibovc South West mine. Subsequently, the Ministry of Environment and Spatial Planning (MESP), in
conjunction with other stakeholders - notably KEK, the Municipality of Obiliq, and the Ministry of
Economy & Finance (MEF) - formed a Working Group/Committee to implement the terms of the
Decision.
Given that it has been over one year since the Decision, PA is increasingly concerned at the slow
progress of the expropriation proceedings. Indeed, only 22 properties within the Shala neighborhood
of Hade Village have been registered and valued; that leaves more than 70 buildings within the
affected area that have not been registered or valued. Over the past five months, the Working
Group/Committee has been spent significant time considering a variety of demands submitted by
Hade residents, which have included the right to be employed by KEK. The vast majority of these
demands was not foreseen by the provisions of the Law on Expropriation (No. 03/L-139) and should
not be allowed to delay the expropriation process.
The land subject to expropriation must be available to KEK’s mining operations in the coming
months. Failure to comply with this timetable will seriously endanger the development of the new
Sibovc South West mine and continuity of coal supply to the Kosova A and B power plants. KEK
cannot afford any further delays in this process.
Proposed solution: PA is pressing the Minister of Economy and Finance to impress upon all relevant
Ministries the urgency of this matter and the need to proceed expeditiously with the expropriation
process in accordance with the applicable law.
4.5 Trepca – Unpaid Electricity Debts
Problem: Over the past seven years, Trepca mining complex has accrued significant debts to KEK
arising from non-payment of electricity bills. KEK has been effectively barred from issuing a claim
against Trepca for debts accrued prior to 9 March 2006, owing to the Moratorium Decision No. SCR-
05001 of the same date, which was issued by the Special Chamber of the Supreme Court of Kosovo
and which placed Trepca in protective bankruptcy. However, KEK can issue a claim against Trepca
for debts accrued after 9 March 2006.
Proposed solution: PA is assisting KEK with preparing a claim that will be filed with the Special
Chamber of the Supreme Court in Q3 for the outstanding debt, which is approximately €6 million.
30
5 Documentation of Best Practices
that Can be Taken to Scale
The following procedures were produced under the project in quarter 2 and are best practices that can
be used on other similar projects.
Procedures for network maintenance, which contain guidelines related to KEK network
operations and maintenance, and outline distribution system operator standard practices with
respect to the review and evaluation of maintenance practices. These procedures are expected to
improve network performance and overall safety.
The Distribution Network Connection Charging Methodology will formalize the manner in which
KEK processes customer connection requests.
New internal KEK procedures in connection with the issuance and monitoring of performance
and advance payment guarantees presented by the contractors.
New internal KEK procedures in connection with the sale of surplus electricity to wholesale
buyers.
31
6 Coordination with Other
USAID Implementing Partners
and Other Donors
The PA team engaged in considerable coordination-related activities with other USAID partners,
especially Bearing Point (now Deloitte) and other donors. The following activities were
undertaken during Q2:
PA continued to coordinate with Deloitte advisors on issues regarding the privatization of
DistCo and the KRPP Project. Draft documents were shared with Deloitte for comment
before their submission as final.
PA cooperated and shared information with the IFC, as the transaction advisor for the
DistCo privatization, and also with the KRPP transaction Advisory team.
PA continued to maintain regular contact with the USAID Justice Reform Team (NSCS) to
discuss efforts to improve judicial processes for the execution of debt cases.
PA continued to maintain regular contact with AEAI advisors on a variety of regulatory
issues.
PA held meetings with USAID contractor Chechi Consulting, which is working on the
enforcement of judgments in Kosovo.
PA continued to liaise with Deloitte advisors at the Tax Administration on various issues,
including KEK’s corporate tax and VAT liability.
PA cooperated with Deloitte advisors at the MEF on the securing of new credit facility
agreements for KEK, and assessing KEK’s input for the Mid-Term Expenditure Framework
(2010-2013).
PA maintained its communications with OSCE, EULEX, UNMIK, Swedish KFOR, and US
KFOR on the issue of minority area policies, including internally displaced persons.
PA continued to maintain regular contact with the WB, IMF, KfW, EU, UNMIK, EULEX,
OSCE and other stakeholders, and has been responsive to their requests.
32
7 Upcoming Events with Dates
Issuing of draft Requests for Particulars for the Kosova e Re Power Plant transaction: July
2010.
Development of a draft contract for Ferronikeli for service: effective April 2011.
Submission to ERO of a proposed regulated tariff for service at 220 kV (which would apply
to Ferronikeli if it decides to become a regulated customer): April 2011.
The final version of the Kosova B Investment Requirement and Rehabilitation Feasibility
Study will be made available in July 2010.
Responses to the request for expressions of interest for the DistCo privatization: August
2010.
Commissioning of the newly refurbished Radavc small hydro plant: September 2010.
Commissioning of two new low-pressure rotors and one generator rotor at the Kosova B
TPP: July-August 2010.
33
Appendix A. List of Activities and Deliverables
Nr. Subtask 1: Support Management and Operation to
Maintain Asset Value
Specific Objectives / Accomplishments
Completion Date
(End-of-month)
Major Activities Completed/ Status of Deliverables
1.1 Assist with the development and implementation of new
internal policies and procedures. Ongoing Developed draft evacuation policy for KEK.
1.2 Support business planning and budgeting.
Ongoing PA assisted KEK with the preparation of the Performance to Plan
report for the first quarter of 2010, supervised the execution of
KEK’s 2010 expenditure budget, monitored the implementation of
KEK’s business plan for 2010, and revised KEK’s funding needs
from the Kosovo Central Budget for 2010-2011.
1.3 Recommend improvements to billing and collection and
monitor their implementation in the field on a daily basis. Ongoing
Readings, bill delivery, and disconnections are continuously being
monitored by PA. Evaluation of the performance of districts is
done each month.
1.4 Provide support to accounting and financing.
Ongoing PA also assisted KEK in filing an appeal with the Independent
Appeals Board following the decision of Kosovo Tax
Administration (TAK) Appeals Division addressing KEK’s first
appeal against TAK’s findings of the audit of KEK’s financial
statements for the period 2005 – 2008.
34
Nr. Subtask 1: Support Management and Operation to
Maintain Asset Value
Specific Objectives / Accomplishments
Completion Date
(End-of-month)
Major Activities Completed/ Status of Deliverables
1.5 Provide assistance in legal and regulatory affairs.
Ongoing PA continued to provide legal advice to KEK senior management
and various project managers on a number of discrete issues during
Q2.
Assistance in regulatory affairs during Q2 included 1) Network Development Plan, 2) Connection Charging Methodology, 3) Request to ERO for derogation of a number of requirements of the Distribution Code, 4) comments to ERO on draft documents concerning Certificates of Origin for renewable energy facilities, 5) comments provided to ERO on a document relating to Performance Standards, 6) request to ERO for derogation of the communal disconnection provisions of the Rule on Disconnection, and 7) provision of the 2009 unbundled financial statements (unaudited) to ERO.
1.6 Provide active support to Internal Audit and Anti-corruption. Ongoing PA assisted the Internal Audit Office in completing 35 audits and
investigations.
35
Nr. Subtask 1: Support Management and Operation to
Maintain Asset Value
Specific Objectives / Accomplishments
Completion Date
(End-of-month)
Major Activities Completed/ Status of Deliverables
1.7
Provide support to other functions in KEK on an as-needed
basis, e.g., Network, Human Resources, Information
Services, Public Relations and Communications.
Ongoing PA developed a distribution network connection charging
methodology and facilitated review and update by all interested
parties in KEK. The Connection Charging Methodology was
submitted to ERO for comment and approval.
PA recommended additional improvement to the Fixed Asset
Module and finalized a work plan for its implementation. PA
trained 17 persons on the Tools of Electrical Tree for Kosovo
(TETKo).
PA finalized and obtained approval for the new interim
organization structure for the Corporate Services Division for
KEK and planned the organization structure for the Corporate
Services Division of the future distribution company Kosovo
Electricity Distribution and Supply Company (KEDS).
1.8 Advise KEK top management on other management and
operational issues.
Ongoing PA provided advice on management and operational issues. Regular meetings were held with MD and with Supply, Network, CFO, and Corporate Services executives. Meetings were also held on an as-needed basis with mine, generation and procurement executives.
36
Nr. Subtask 2: Prepare Technical and Contractual
Document for Investor Due Diligence in KEK DistCo
Specific Objectives / Accomplishments
Completion Date
(End-of-month) Major Activities Completed/ Status of Deliverables
2.1 Prepare KEK unbundling documents and related transfer
papers. Per TA’s Request
First drafts completed, save for populating the schedules.
2.2 Prepare draft agreements between the electricity market
participants. April 2010
First drafts completed.
2.3 Prepare Legal/Regulatory documentation related to the
privatization transaction. Per TA’s Request
Completed the following deliverables:
1) Draft Regulatory Statement.
2) Draft Collection Agreement.
3) Draft DistCo Privatization Law
4) New wording for the draft Energy Law, to address property
rights of DistCo/KEK.
2.4 Assist KEK to prepare data for the Investor Due Diligence. Per TA’s Request
PA has compiled an index to the documents collected in the
DistCo data room and provided a copy to the IFC for their review
and comment, and facilitated the provision of various documents
requested by IFC and the DistCo privatization project
implementation unit.
37
Nr. Subtask 3: Provide Advisory Support In Privatization
Process
Specific Objectives / Accomplishments
Completion Date
(End-of-month) Major Activities Completed/ Status of Deliverables
3.1
Assist KEK with the timely preparation of responses to all
technical, legal and financial issues raised during the tender
process.
Per TA’s Request No action required at this time.
3.2 Provide active support to the Transaction Advisor during the
process of bid submission, evaluation and award. Per TA’s Request No action required at this time.
Nr. Subtask 4: Strengthen Skills And Technical
Capacity Of Counterparts
Specific Objectives / Accomplishments
Completion Date
(End-of-month) Major Activities Completed/ Status of Deliverables
4.1
Provide assistance and coaching to the DistCo staff
on a daily basis in developing
leadership skills, including communicating
expectations, motivating employees, time
management, meeting management, presentation
skills, and planning and organization.
December 2010
PA actively supported the Network Division’s management staff
by assisting with the implementation of the Management and
Action Plan.
38
Nr. Subtask 4: Strengthen Skills And Technical
Capacity Of Counterparts
Specific Objectives / Accomplishments
Completion Date
(End-of-month) Major Activities Completed/ Status of Deliverables
4.2 Provide day-to-day coaching on billing, managing
customer accounts, and collection.
December 2010 PA team members provided advisory support to the districts on a
daily base, in line with the District Regulation. PA also continued
to coach the managers and staff on how to hold meetings, meeting
deadlines, communicating expectations, employee motivation and
reward, development of the 2010 Action Plan for Supply and
Network, and monthly performance monitoring.
4.3
Conduct training on management principles,
customer service and other areas as deemed
necessary.
December 2010 No action at this stage.
4.4
Convene round table discussions and workshops on
important topics to support the privatization
process.
December 2010 No action at this stage.
4.5
Identify potential trainers and train them to deliver
all training courses developed and offered by the PA
team.
December 2010 No action at this stage.
Nr. Subtask 5: Support Management Post-
Privatization
Specific Objectives / Accomplishments
Completion Date
(End-of-month) Major Activities Completed/ Status of Deliverables
5.1
Develop and assist with the implementation of a
transition plan for the Finance
and Accounting Function.
One month after
closing the privatization
transaction.
Completed
39
Nr. Subtask 5: Support Management Post-
Privatization
Specific Objectives / Accomplishments
Completion Date
(End-of-month) Major Activities Completed/ Status of Deliverables
5.2
Develop and assist with the implementation of a
transition plan for the Legal
Function.
One month after closing the
privatization transaction.
Will be defined once a specific Work Plan is
developed by DistCo and the incoming private
sector investor
5.3
Develop and assist with the implementation of a
transition plan for the Regulatory
Affairs Function.
One month after closing the
privatization transaction.
Will be defined once a specific Work Plan is
developed by DistCo and the incoming private
sector investor
5.4
Develop and assist with the implementation of a
transition plan for the Human
Resources Function.
One month after closing the privatization transaction.
Will be defined once a specific Work Plan is
developed by DistCo and the incoming private
sector investor
5.5
Development and assist with the implementation of
a transition plan for the Billing
and Collection Activities.
One month after closing the
privatization transaction.
Will be defined once a specific Work Plan is
developed by DistCo and the incoming private
sector investor
Nr. Subtask 6: Prepare A Thermal Power Plant Kosova B Investment Requirement
And Rehabilitation Feasibility Study
Specific Objectives / Accomplishments
Completion Date
(End-of-month) Major Activities Completed/ Status of Deliverables
6.1
Prepare TPP Kosova B Investment Requirement
and Rehabilitation Feasibility
Study.
Four months after
obtaining COTR
agreed upon directions
from Transaction
Advisor and BEO approved
Scoping statement
The first draft of the study was circulated for comments among
KEK, USAID and the KRPP Transaction Advisory Team.
40
Nr. Subtask 7: Prepare Technical And Contractual
Documentation For Investor
Due Diligence
Specific Objectives / Accomplishments
Completion Date
(End-of-month) Major Activities Completed/ Status of Deliverables
7.1
Assist KEK and Transaction Advisors with collating
documentation for the data
room.
Upon request
PA provided support to the designated KEK employee who acts as
the main contact point/coordinator for documentation requested
by the KRPP Project.
PA attended meetings with Price Waterhouse Coopers to discuss
the production of corporate and financial data.
7.2
Provide assistance and input to the Transaction
Advisors in connection with asset
sale or lease agreement(s), and power purchase
agreement.”
Upon request
PA has developed two draft power purchase agreements for the
sale of Kosova B TPP’s output and shared these with the KRPP
transaction advisors.
During Q2 PA attended meetings with the KRPP transaction
advisors and KEK to discuss the terms of the PPA that will be
used for Kosova B TPP’s output.
7.3
Timely preparation of responses to all technical, legal
and financial issues raised
during the tender process.
Upon request
PA continued to provide its input to the KRPP Transaction
Advisory Team and the World Bank representatives on what assets
it believes should be included in the KRPP transaction.
41
.
Nr. Subtask 8: Strengthen Skills And Technical
Capacity Of Counterparts
Specific Objectives / Accomplishments
Completion Date
(End-of-month) Major Activities Completed/ Status of Deliverables
8.1
Conduct training on the methodology to
evaluate performance, characteristics of
the new technology and the methodology for
economic and financial analysis used in the
Feasibility Study.
Three months following
the completion of the
Feasibility Study
No action at this stage.
8.2
Convene round table discussions on important
issues raised during investor Due
Diligence (see Subtask 7) to support the TPP
Kosova B privatization process.
Three months following
the completion of the
Feasibility Study
No action at this stage.
42
Appendix B. Performance-Based Management System Results
1. Key Indicators (KI) (Reported Quarterly)
No. Objectives
Supported
by These
Results
Task
Reference
Supported
by These
KI
Definition of Indicator
and Unit of Measure
2006
Actual/
Calculation
2007
Actual
2008
Target
2008
Actual
2009
Target
2009
Actual
2010
Target
Q2
2010
Actual
First
Half
2010
Actual
1
1, 2, 3
1
Reduce commercial losses as
compared with previous year
(ratio of commercial losses vs.
energy available for sale)
31% 30% 25% 20% 10% 21% 15% 15.4% 23.8%
2
1, 2, 3
1
Reduce technical losses (ratio of
technical losses vs. energy
delivered to distribution)
18.2% 17.4% 17% 16.6% 16.5% 17.7% 16.4% 15.4% 16.6%
3
1, 2, 3
1
Ratio of energy billed vs. energy
available for sale
69.1% 69.9% 75% 79.8% 90.0% 79.3% 85% 84.6% 76.2%
4 1, 2, 3 1 Ratio of revenue collected versus
billed
74.2% 76.6% 80.0% 75.6% 89.0% 81.4% 86% 108.5% 91.3%
5
1, 2, 3
1
Revenue collected as a percentage
of value of energy available for
sale [ratio of revenue collected vs.
billed] x [ratio of energy billed vs.
energy available for sale]
51.3% 53.5% 60% 60.3% 80.0% 64.5% 73% 91.8% 69.5%
6 1, 2, 3 1 Collected revenue in Euros €96 M €110.8 M €116 M €135 M €140 M €160.3 M €155 M €43.4 M €91.9 M
43
2. Milestone Indicators
Subtask Description Milestones Reporting
Frequency Status
1
Support Management and Operation to Maintain Asset Value
2010 Business Plan approved by the BOD
2010 Budget approved by the BOD
Tariff filing for 2010
Performance against the budget
Draft audited financial statements
Billing and collection reports to the BoD
Unbundled financial statements
Credit facility agreements
Internal audit summary report
Quarterly Completed.
Completed.
Completed, but no tariff increase ordered by ERO.
Report completed and submitted to the BOD.
Completed.
Provided.
Completed.
Completed.
Completed.
44
Subtask Description Milestones Reporting
Frequency Status
2
Prepare Technical and Contractual Documentation for Investor Due Diligence
Draft legal unbundling agreement
Draft KEK/DistCo (KEDS regulated power
sales agreement
Draft KEK/DistCo, deed transferring assets
& liabilities from KEK to DistCo
Briefing paper - transfer of 110 kV system to
DistCo/KEK
Draft full requirements electricity service
agreement between DistCo and
New Mine/Generation Co.
Draft regulatory statement
Draft collection agreement between DistCo
and GoK/MEF
Draft DistCo Privatization Law
Draft share purchase agreement between
GoK/investor
Draft index of data room documentation.
Create DistCo asset registers and compile
asset ownership documentation
Quarterly Completed
Completed.
Completed.
Completed.
Completed.
Completed.
Completed.
Completed.
Ongoing.
Completed.
Ongoing.
3 Provide Advisory Support in Privatization Process
Timely preparation of responses to all
technical, legal and financial issues raised
during the tender process.
Quarterly Ongoing.
4 Strengthen Skills and Technical Capacity of Counterparts
Per training indicators Quarterly See training indicators
45
Subtask Description Milestones Reporting
Frequency Status
5
Support Management Post-Privatization
Producing transition plan for the Finance and
Accounting Function.
Producing transition plan for the Legal
Function.
Producing transition plan for the Regulatory
Affairs Function.
Producing transition plan for the Human
Resources Function.
Producing transition plan for the Billing and
Collection Activities.
Quarterly No action at this stage.
6
Prepare a Thermal Power Plant Kosova B Investment Requirement and Rehabilitation Feasibility Study
Feasibility study report, including technical
and financial feasibility for rehabilitation and
potential efficiency improvement of Power
Plant B, investment requirements,
recommendation, and implementation
schedule
Quarterly The first draft of the study was circulated for
comments among KEK, USAID and the KRPP
Transaction Advisory Team.
7
Prepare Technical and Contractual Documentation for Investor Due Diligence
Timely preparation of responses to all
technical, legal and financial issues raised
during the tender process.
Quarterly Ongoing.
8 Strengthen Skills and Technical Capacity of Counterparts
Per training indicators Quarterly See training indicators
46
3. Training Indicators - Performance (Reported Quarterly)
No. Task Order Objective Reference
Definition of Indicator & Unit of Measure
2006 Actual/ Calculation
2007 Actual
2008 Target Actual
2009 Target Actual
2010 Target Actual
Q2 2010 Actual
1. 1, 2 &3 Number of
people who
received
training in
technical
energy field
0 231
Target 60
(M=42 and
W=18)
Actual 54
(M=54 and
W=0)
Target 60
(M=48 and
W=12)
Actual 36
(M=32and
W=4)
Target 40
(M=35 and
W=12)
Total 99; M= 92, W = 11
Men Women Total
Q1 2010 131 13 144
Q2 2010 92 11 103
Q3 2010
Q4 2010
Total Year 2010
No. Task Order Objective Reference
Definition of Indicator & Unit of Measure
2006 Actual/ Calculation
2007 Actual
2008 Target Actual
2009 Target Actual
2010 Target Actual
Q2 2010 Actual
2. 1, 2 &3 Number of
people who
received
training in
energy-related
business
management
field
0 149 Target 100
(M= 70 and
W=30)
Actual 69
(M=61 and
W=8)
Target 60
(M=30 and
W=30)
Actual 261
(M = 196
and
W =65)
Target 40
(M=150 and
W=50)
Actual 36
Total 18; M= 17, W = 1
Men Women Total
Q1 2010 61 24 85
Q2 2010 17 1 18
Q3 2010
Q4 2010
Total Year 2010
47
4. Contextual Indicators - Impact (Reported Quarterly)
No Task Order
Objective
Reference
Definition of Indicator &
Unit of Measure
FY 2006
Actual
FY 2007
Actual
FY 2008
Actual
FY 2009
Actual
FY 2010
Target
Q2 2010
Actual
1. 1&2
Percentage (%) of served
demand (ratio of “un-
served energy” to “supplied
energy plus unserved
energy”) based upon data
provided by the KEK
Capacity Management
Department.
12.92 % 10.24 % 14.70 % 6.86 % 10.72 %
4.54%
Q1+Q2
4.29%
Note: The Fiscal Year (FY) runs from 1 October of one year to 30 September of the following year; Q2 is the second quarter (April through June) of the calendar
year.
48
Appendix C. Supporting Documentation
49
Energy Accounting Report – Quarter 2
ENERGY FLOWS - THROUGH TRANSMISSION
YTD - June 2010
(All flows in MWH)
Flows Into KOSTT: Flows Out Of KOSTT:
A&B Generation PP Kosova A 354,816 S
Gross 2,847,525 R Gross 889,646 354,816
Aux (on-site only) 241,690 R Aux (on-site only) 83,580
Net 2,605,835 Aux at PP Kos. A in excess of Net 32,267
PP Kosova B
70,252 R Gross 1,957,879 139,296 N
Aux (on-site only) 158,110 Total 139,296
Aux at PP Kos. B in excess of Net 52,654
Kosova Coal 0 R
Coal production 3,855,134
Overburden production 4,090,457
52 mtrs @ 22 s/s 2,338,213 N
Interconnections In Net Import 220,264
1,722,552 R (In-Out) Interconnections Out
1,502,288 R
Losses 64,026
Total In: 4,398,639 1.46% Total Out: 4,334,613(% of Flow In)
KOSTT Delivery to 7 Districts
KOSTT delivery to Direct
Customers (3)
Ujmani HPP Connect Trans. KOSTT delivery to LOMAG
50
ENERGY FLOWS - DSO including 220 and 110 kVYTD - June 2010
(All flows in MWH)
Flows In To KEK (Gross) Flows Out Of KEK Distribution
Customer Billing (by CCP)
Delivery From KOSTT Flow Through non 110 kV Residential 941,758 S
KOSTT delivery to Direct Customers (3) 354,816 *S Delivery to 7 Districts and LOMAG 2,477,509 Commercial 249,961 S
KOSTT delivery to LOMAG 139,296 N Small Hydro Inflow 23,955 Industrial (35&10KV) 130,978 S
Total 2,501,464 Public Lighting 4,804 S
Total 1,327,501
KOSTT Delivery to 7 Districts 2,338,213 N
Total 2,832,325
Allocation of Losses N
Small HPP Connected in Distribution MWH Euro (000)
Lumbardh 21,926 N Technical Losses
Radavc 2,029 N 110 kV Xfrmer to 10 kV 189,020 6,069 354,816 *S
Total 23,955 0.4 kV from ESTAP 226,012 7,292
Total 415,032 13,361 KEK Internal Use:
% of Total Technical Losses 16.59% KEK Mines 44,059 N
% of Technical Losses at 7 Districts 17.52% Aux for Gen in excess of Net 84,921
Unaccounted for Energy Losses 526,168 28,424 Distribution (Self Consumption) 3,493 S(Energy component of commercial losses) 21.03% Total 132,473
Total 941,199 41,785 Minorities
(% Flow Thru Non 110 kV) 37.63% N. Mitrovice (Unbillable) 100,291 N
S
Average Wtd Trf (Euro / MWH) 54.0 N
Total 100,291
Total In to KEK (Gross) 2,856,280 Losses Total 941,199 Total Out: 1,915,081
Note:
1) Cost of purcheased losses is 33.7 (Euro / MWH) from April 10 as per ERO tariffs order.
KOSTT delivery to Direct Customers (Billed but
not in CCP)
Cost of purcheased losses 33.7 (Euro / MWH)
from 01 April 10 as per ERO tariffs order.
51
RESULTS BY DISTRICT
YTD - June 2010(Energy flows in MWH, Monetary amounts in 000 €)
Input to
KEK
Technical
Losses
KEK
Internal
Use:
Minorities
Unbillable &
Uncollectable
Energy Available
For Sale (EAFS) MWH € (000)
Collections €
(000)
Billed as % of
EAFS
Collection As
% of Billed
% Collected
Versus
EAFS
% Energy
Accoun. Versus
Input to DSO.
Responsible Area N N S N/S Calculated S S S Calculated Calculated Calculated Calculated
732,882 112,889 1,826 0 618,166 427,250 28,670 27,768 69.12% 88.12% 60.91% 73.95%
328,089 75,650 135 0 252,304 203,959 13,026 12,104 80.84% 85.57% 69.18% 85.26%
269,496 52,422 343 0 216,730 148,352 9,856 9,155 68.45% 85.38% 58.44% 74.63%
295,048 53,836 132 0 241,081 176,010 11,401 9,565 73.01% 78.17% 57.07% 77.95%
198,613 29,711 387 0 168,515 143,338 8,859 7,688 85.06% 80.25% 68.26% 87.32%
326,375 50,340 296 100,291 175,448 105,464 6,768 4,992 60.11% 68.53% 41.19% 78.56%
214,203 39,444 373 0 174,386 123,128 7,803 7,271 70.61% 85.33% 60.25% 76.07%
2,364,706 414,293 3,492 100,291 1,846,630 1,327,501 86,383 78,542 71.89% 83.56% 60.07% 78.05%
17.52%
136,761 739 128,980 0 7,042 0 0 0 0.00% 0.00% 0.00% 94.85%
2,501,466 415,032 132,471 100,291 1,853,672 1,327,501 86,383 78,542 71.61% 83.47% 59.78% 78.97%
16.59%
354,816 354,816 354,816 14,247 13,331 100.00% 94.54% 94.54% 100.00%
2,856,282 2,208,488 1,682,317 100,630 91,873 76.18% 84.91% 64.68%
MWH % EURO % EURO January 380,804 July 384,758
941,758 56% 52,541 52% 44,443 February 384,508 August 384,758
249,961 15% 23,580 23% 26,004 March 388,157 September 384,758
135,782 8% 10,265 10% 8,096 April 384,826 October 384,758
354,816 21% 14,247 14% 13,331 May 384,686 November 384,758
1,682,317 100% 100,632 100% 91,874 June 384,758 December 384,758
Note: 1) The energy billed to tariff customers located at LOMAG is included in Prishtina District.
2) Customer debt accumulated in a given month is equal to the difference between billing and collection for this month.
Industrial & Others 9%
Customer Debt per month € (000')
YTD - June 2010
Customer Billing Energy Billed Collection
%
Gjilan
Mitrovicë
Total 100%
Household 48%
Commercial 28%
(3) Direct Customers 15%
Energy Billed Key Performance indicators
Prishtinë
Prizren
Pejë
Ferizaj
Sub TOTAL
Direct Customers billed but
not in CCP
TOTAL
Gjakovë
Sub TOTAL
% of Technical Losses at 7 Districts
Land of Mines & Generation (Energy
delivered and billed to tariff
customers is included in PR Dis.)
% of Total Technical Losses
Notice: 1) Column P 'Collections €(000)' might be subject to changes because of later adjustments due to payments done through bank accounts (including Kos Giro).;
52
53
Unserved Demand Report – Quarter 2 TABLE 1. Actual FY 2008 (October 2007 - September 2008)
[MWh] 10 11 12 1 2 3 4 5 6 7 8 9
Served demand
(Gross Consumption) 388,862 467,904 522,047 523,803 459,772 452,343 395,009 353,191 294,128 318,943 321,106 379,584 SubTot. 4,876,692
Un-served denad
(Load shedding) 59,015 74,761 126,784 134,529 93,087 58,668 49,117 45,878 64,010 33,903 70,233 30,421 SubTot. 840,406
1,378,813 1,435,918 1,042,328 1,019,633 Calendar Year PUD
260,560 286,284 159,005 134,557
Q1+Q2+Q3+Q4
2008
Quartrely PUD 15.89% 16.62% 13.24% 11.66% 4,922,366
724,855
PUD = UD / (UD + SD) * 100% 14.70% 12.84%
TABLE 2. Actual FY 2009 (October 2008 - September 2009)
[MWh] 10 11 12 1 2 3 4 5 6 7 8 9
Served demand
(Gross Consumption) 424,452 461,502 538,533 575,293 522,811 526,077 386,131 351,686 321,742 352,011 369,665 352,296 SubTot. 5,182,199
Un-served denad
(Load shedding) 43,814 45,297 55,898 74,681 35,229 46,737 34,202 24,363 23,923 35,292 40,192 24,410 SubTot. 484,038
1,424,487 1,624,181 1,059,559 1,073,972 Calendar Year PUD
145,009 156,647 82,488 99,894
Q1+Q2+Q3+Q4
2009
Quartrely PUD 9.24% 8.80% 7.22% 8.51% 5,280,788
389,202
PUD = UD / (UD + SD) * 100% 8.54% 6.86%
TABLE 3. Actual FY 2010 (October 2009 - September 2010)
[MWh] 10 11 12 1 2 3 4 5 6 7 8 9
Served demand
(Gross Consumption) 447,956 506,950 568,170 599,918 524,740 529,168 428,294 388,455 351,084 SubTot. 4,344,735
Un-served denad
(Load shedding) 22,184 22,184 5,805 19,372 32,979 18,508 25,645 18,542 11,385 SubTot. 176,604
Q1+Q2
2010
1,523,076 1,653,826 1,167,833 2,821,659
50,173 70,859 55,572 126,431
Quartrely PUD 3.19% 4.11% 4.54% 4.29%
PUD = UD / (UD + SD) * 100% 3.91%
Table notes:
1) The data for above table are provided by the KEK Capacity Management Department.
2) Consumption is defined to be "Input to Distribution + Trepca + Newco FeronikeliProduction + Sharri + Kosova Thengjilli + TS Palaj&Bardhi Drenas + Self Consumption + Kosova A PP SS, note that these numbers will be different from the numbers for the
"Input to Distriution TOTAL" from the Energy Accoutning Reports to the KEK Baord of Directors.
3) Consumpiton in the future is based on the energy forecast that KEK has already prepared as part of the KEK business plan process.
4) Data not available is indicated as "n/a" in the cell.
5) The data are arranged based on USAID Fiscal Year (that is FY 2009 starts on 1 October 2008 and ends on 30 September 2009)
6) The Consumed Energy includes the transmission losses of KOSTT (which are a little over 2%).
USAID Fiscal Year PUD
USAID Fiscal Year PUD
USAID Fiscal Year PUD2009 2010
2007 2008
2008 2009
Unserved Demand is 4.54% in Q2 2010 compared to 7.22% in Q2 2009.
54
Training Information – Quarter 2
The following are the details of the 103 persons who received training in the technical energy field during Quarter 2 of 2010. Training Topic: Disconnection instructions Training Date: April 2010 Trainer: Gela Kereselidze Trainees: No Name Gender
1 Esat Hoxha M
2 Besart Shabani M
3 Agron Rudi M
4 Avdi Mustafa M
5 Vebi Jonuzi M
6 Ismet Hajdini M
7 Remzi Murseli M
8 Nexhat Uka M
9 Xhevdet Haliti M
10 Naim Sejdiu M
11 Musa Nimani M
12 Asllan Ferizi M
13 Hajdin Geci M
14 Xhavit Geci M
15 Mehe Zymberi M
16 Nezir Ahmeti M
17 Nuhi Dibrani M
18 Edmond Osmani M
19 Gazmed Gashi M
20 Hamdi Kerolli M
21 Bajram Gashi M
22 Albert Thaqi M
23 Asim Gashi M
24 Daut Zejnullahu M
25 Elbasan Rama M
26 Behexhet Hetemi M
27 Kujtim Abdullahu M
28 Refik Hoxha M
29 Nazif Kajtazi M
30 Faton Uka M
31 Xhevdet Shala M
32 Gazmend Jakupi M
No Name Gender
33 Ramiz Mehmeti M
34 Valon Ibishi M
35 Besim Voca M
36 Musa Ismajli M
37 Ruzhdi Sadiku M
38 Shaban Ibishi M
39 Isa Shosholli M
40 Gezim Ferati M
41 Kenan Xhekovic M
42 Fazli Ibishi M
43 Osman Abrahi M
44 Izet Kurti M
45 Enver Muharremi M
46 Nexhat Uka M
47 Skender Shabani M
48 Nexhat Ademi M
49 Jakup Jakupi M
50 Burhan Nici M
51 Nazif Mehmeti M
52 Gazmed Peci M
53 Mustafa Rexhepi M
54 Armend Xhaka M
55 Fatmir Feka M
56 Fadil Tahiri M
55
Training Topic: Commercial losses Training Date: 09 & 11 June 2010 Trainer: Gela Kereselidze Trainees: No Name Gender
1 Safet M
2 Izet Kurti M
3 Ramadan Rexhepi M
4 Gazmed Jakupi M
5 Lulzim Raka M
6 Islam Mehmeti M
7 Naim Bislimi M
8 Salih Haliti M
9 Hajriz Shabani M
10 Xhavit Zariqi M
Training Topic: Using TETKo software for management purposes Training Date: April, May, June 2010 Trainer: Davit Gharagedyan Trainees: No Name Gender
1 Ramadan Ahmeti M
2 Armend Ymeri M
3 Sherif Maliqi M
4 Sevdije Mu F
5 Ragip Hoda M
6 Hakif Matoshi M
7 Ismet Latifi M
8 Ibadete Tahiraj F
9 Mejreme Ismajli F
10 Xhevahire Dushullovi F
Training Topic: Kosovo B Feasibility Study Methodology Training Date: June 2010 Trainer: Masoud Keyan Trainees: No Name Gender
1 Remzi Shahini M
2 Luigj Ymeri – M
3 Shefqet Avdiu M
4 Besnik Haziri M
11 Luljete Nuhi F
12 Selvete Hasani F
13 Blerina Meholli F
15 Rrahman Ismajli M
15 Aferdita Syla F
16 Emina Bejiq F
17 Drita Zeneli F
18 Lendita Azemi F
19 Idriz Ibraj M
20 Jetmir Morina M
21 Hasan Muhaxheri M
22 Jakup Smajli M
23 Namik Bajraktari M
56
The following are the details of the 18 persons who received training in energy-related business management field during Quarter 2 of 2010.
Training Topic: General principles of distribution company management and importance of control implementation Training Date: 22 April 2010 Trainer: Givi Jgarkava Trainees:
No Name Gender
1 Flamur Bllacaku M
2 Hyrmete Mydyti F
Training Topic: Methods of auditing energy distribution performance Training Date: 26 April 2010 Trainer: Shalva Rukhadze Trainees:
No Name Gender
1 Agron Uka M
2 Mentor Krasniqi M
3 Alban Ceku M
Training Topic: General principles of electric distribution companies and importance and problematic issues of KEK Training Date: 05 & 21 May 2010 Trainer: Givi Jgarkava Trainees: No Name Gender
1 Arber Mulaku M
2 Isa Hajra M
3 Bujar Jupaj M
4 Flamur Bllacaku M
5 Fehmi Vojvoda M
6 Artan Shkreli M
7 Fatos Ceku M
Training Topic: Key points of sample study – performance audit in the field Training Date: 26 May 2010 Trainer: Shalva Rukhadze Trainees: No Name Gender
1 Mentor Hyseni M
2 Agron Uka M
3 Isa Malsiu M
4 Ilir Zeqiri M
5 Ibrahim Ibrahimi M
6 Halit Bekteshi M
57
Energy Accounting Report – Quarter 1
ENERGY FLOWS - THROUGH TRANSMISSION
YTD - March 2010
(All flows in MWH)
Flows Into KOSTT: Flows Out Of KOSTT:
A&B Generation PP Kosova A 170,492 S
Gross 1,478,926 R Gross 465,147 170,492
Aux (on-site only) 118,095 R Aux (on-site only) 45,773
Net 1,360,831 Aux at PP Kos. A in excess of Net 15,546
PP Kosova B
47,247 R Gross 1,013,779 78,953 N
Aux (on-site only) 72,322 Total 78,953
Aux at PP Kos. B in excess of Net 36,773
Kosova Coal 0 R
Coal production 1,847,763
Overburden production 1,517,140
52 mtrs @ 22 s/s 1,410,949 N
Interconnections In Net Import 291,553
1,052,712 R (In-Out) Interconnections Out
761,159 R
Losses 39,237
Total In: 2,460,790 1.59% Total Out: 2,421,553
KOSTT delivery to Direct
Customers (3)
Ujmani HPP Connect Trans. KOSTT delivery to LOMAG
(% of Flow In)
KOSTT Delivery to 7 Districts
58
ENERGY FLOWS - DSO including 220 and 110 kVYTD - March 2010
(All flows in MWH)
Flows In To KEK (Gross) Flows Out Of KEK Distribution
Customer Billing (by CCP)
Delivery From KOSTT Flow Through non 110 kV Residential 512,447 S
KOSTT delivery to Direct Customers (3) 170,492 *S Delivery to 7 Districts and LOMAG 1,489,902 Commercial 129,867 S
KOSTT delivery to LOMAG 78,953 N Small Hydro Inflow 7,558 Industrial (35&10KV) 67,560 S
Total 1,497,460 Public Lighting 2,801 S
Total 712,676
KOSTT Delivery to 7 Districts 1,410,949 N
Total 1,660,394
Allocation of Losses N
Small HPP Connected in Distribution MWH Euro (000)
Lumbardh 7,558 N Technical Losses
Radavc 0 N 110 kV Xfrmer to 10 kV 125,306 3,922 170,492 *S
Total 7,558 0.4 kV from ESTAP 135,161 4,231
Total 260,466 8,153 KEK Internal Use:
% of Total Technical Losses 17.39% KEK Mines 22,423 N
% of Technical Losses at 7 Districts 18.33% Aux for Gen in excess of Net 52,319
Unaccounted for Energy Losses 380,893 20,576 Distribution (Self Consumption) 2,328 S(Energy component of commercial losses) 25.44% Total 77,071
Total 641,359 28,728 Minorities
(% Flow Thru Non 110 kV) 42.83% N. Mitrovice (Unbillable) 66,355 N
S
Average Wtd Trf (Euro / MWH) 54.0 N
Cost of purcheased losses (Euro / MWH) 31.3 Total 66,355
Total In to KEK (Gross) 1,667,952 Losses Total 641,359 Total Out: 1,026,593
KOSTT delivery to Direct Customers (Billed but
not in CCP)
59
RESULTS BY DISTRICT
YTD - March 2010(Energy flows in MWH, Monetary amounts in 000 €)
Input to
KEK
Technical
Losses
KEK
Internal
Use:
Minorities
Unbillable &
Uncollectable
Energy Available
For Sale (EAFS) MWH € (000)
Collections €
(000)
Billed as % of
EAFS
Collection As
% of Billed
% Collected
Versus
EAFS
% Energy
Accoun. Versus
Input to DSO.
Responsible Area N N S N/S Calculated S S S Calculated Calculated Calculated Calculated
448,071 72,575 1,155 0 374,341 237,090 18,292 14,816 63.34% 80.41% 50.93% 69.37%
198,807 49,245 85 0 149,477 110,459 8,125 6,658 73.90% 81.20% 60.00% 80.37%
160,973 32,166 236 0 128,571 80,489 6,158 4,984 62.60% 78.75% 49.30% 70.13%
171,111 32,030 82 0 138,998 90,560 6,803 5,180 65.15% 75.68% 49.31% 71.69%
111,425 17,070 271 0 94,084 74,584 5,328 4,032 79.27% 74.41% 58.99% 82.50%
202,365 32,516 218 66,355 103,277 54,735 4,024 2,651 53.00% 64.61% 34.24% 76.01%
127,061 24,606 281 0 102,173 64,760 4,758 3,941 63.38% 80.99% 51.33% 70.56%
1,419,812 260,209 2,327 66,355 1,090,921 712,676 53,488 42,261 65.33% 78.00% 50.95% 73.36%
18.33%
77,650 257 74,742 0 2,651 0 0 0 0.00% 0.00% 0.00% 96.59%
1,497,462 260,467 77,069 66,355 1,093,572 712,676 53,488 42,261 65.17% 77.85% 50.74% 74.56%
17.39%
170,492 170,492 170,492 7,135 6,204 100.00% 93.15% 93.15% 100.00%
1,667,954 1,264,063 883,167 60,622 48,465 69.87% 79.53% 55.56%
MWH % EURO % EURO January 380,804 July 388,157
512,447 58% 32,690 54% 23,874 February 384,508 August 388,157
129,867 15% 14,399 24% 13,760 March 388,157 September 388,157
70,361 8% 6,401 11% 4,628 April 388,157 October 388,157
170,492 19% 7,135 12% 6,204 May 388,157 November 388,157
883,167 100% 60,624 100% 48,466 June 388,157 December 388,157
Note: 1) The energy billed to tariff customers located at LOMAG is included in Prishtina District.
Sub TOTAL
Direct Customers billed but
not in CCP
TOTAL
Gjakovë
Sub TOTAL
% of Technical Losses at 7 Districts
Land of Mines & Generation (Energy
delivered and billed to tariff
customers is included in PR Dis.)
% of Total Technical Losses
Pejë
Ferizaj
Gjilan
Mitrovicë
Energy Billed Key Performance indicators
Prishtinë
Prizren
Total 100%
Household 49%
Commercial 28%
(3) Direct Customers 13%
Industrial & Others 10%
Customer Debt per month € (000')
YTD - March 2010
Customer Billing Energy Billed Collection
%
Notice: 1) Column P 'Collections €(000)' might be subject to changes because of later adjustments due to payments done through bank accounts (including Kos Giro).;
60
61
Unserved Demand Report – Quarter 1 TABLE 1. Actual FY 2008 (October 2007 - September 2008)
[MWh] 10 11 12 1 2 3 4 5 6 7 8 9
Served demand
(Gross Consumption) 388,862 467,904 522,047 523,803 459,772 452,343 395,009 353,191 294,128 318,943 321,106 379,584 SubTot. 4,876,692
Un-served denad
(Load shedding) 59,015 74,761 126,784 134,529 93,087 58,668 49,117 45,878 64,010 33,903 70,233 30,421 SubTot. 840,406
1,378,813 1,435,918 1,042,328 1,019,633 Calendar Year PUD
260,560 286,284 159,005 134,557
Q1+Q2+Q3+Q4
2008
Quartrely PUD 15.89% 16.62% 13.24% 11.66% 4,922,366
724,855
PUD = UD / (UD + SD) * 100% 14.70% 12.84%
TABLE 2. Actual FY 2009 (October 2008 - September 2009)
[MWh] 10 11 12 1 2 3 4 5 6 7 8 9
Served demand
(Gross Consumption) 424,452 461,502 538,533 575,293 522,811 526,077 386,131 351,686 321,742 352,011 369,665 352,296 SubTot. 5,182,199
Un-served denad
(Load shedding) 43,814 45,297 55,898 74,681 35,229 46,737 34,202 24,363 23,923 35,292 40,192 24,410 SubTot. 484,038
1,424,487 1,624,181 1,059,559 1,073,972 Calendar Year PUD
145,009 156,647 82,488 99,894
Q1+Q2+Q3+Q4
2009
Quartrely PUD 9.24% 8.80% 7.22% 8.51% 5,280,788
389,202
PUD = UD / (UD + SD) * 100% 8.54% 6.86%
TABLE 3. Actual FY 2010 (October 2009 - September 2010)
[MWh] 10 11 12 1 2 3 4 5 6 7 8 9
Served demand
(Gross Consumption) 447,956 506,950 568,170 599,918 524,740 529,168 SubTot. 3,176,902
Un-served denad
(Load shedding) 22,184 22,184 5,805 19,372 32,979 18,508 SubTot. 121,032
Q1
2010
1,523,076 1,653,826 1,653,826
50,173 70,859 70,859
Quartrely PUD 3.19% 4.11% 4.11%
PUD = UD / (UD + SD) * 100% 3.67%
Table notes:
1) The data for above table are provided by the KEK Capacity Management Department.
2) Consumption is defined to be "Input to Distribution + Trepca + Newco FeronikeliProduction + Sharri + Kosova Thengjilli + TS Palaj&Bardhi Drenas + Self Consumption + Kosova A PP SS, note that these numbers will be different from the numbers for the
"Input to Distriution TOTAL" from the Energy Accoutning Reports to the KEK Baord of Directors.
3) Consumpiton in the future is based on the energy forecast that KEK has already prepared as part of the KEK business plan process.
4) Data not available is indicated as "n/a" in the cell.
5) The data are arranged based on USAID Fiscal Year (that is FY 2009 starts on 1 October 2008 and ends on 30 September 2009)
6) The Consumed Energy includes the transmission losses of KOSTT (which are a little over 2%).
USAID Fiscal Year PUD
USAID Fiscal Year PUD
USAID Fiscal Year PUD2009 2010
2007 2008
2008 2009
Unserved Demand is 4.11% in Q1 2010 compared to 8.80% in Q1 2009.
62
Training Information – Quarter 1
The following are the details of the 144 persons who received training in the technical energy field during Quarter 1 of 2010. Training Topic: Disconnection instructions Training Date: 23 January 2010 Trainer: Gela Kereselidze Trainees: No Name Gender
1 Armend Ymeri M
2 Ragmi Hoda M
3 Nexhat Xheliu M
4 Bajram Sadiku M
5 Adnan Bajrami M
6 Ibrahim Kadriu M
7 Sherif Fejzullahu M
Training Topic: Disconnection instructions Training Date: 5 February 2010 Trainer: Gela Kereselidze Trainees: No Name Gender
1 Gani Mehmeti M
2 Adem Ademi M
3 Shukri Musa M
4 Hysen Hyseni M
5 Adnan Hajziri M
6 Fatmir Neziri M
7 Fazli Isa M
8 Musa Hajrizi M
9 Safet Shala M
10 Sabri Zeneli M
No Name Gender
1 Rahman Basha M
2 Idriz Asllani M
3 Abdullahu M
4 Murat Ternava M
5 Adem Zhegrova M
6 Agim Gashi M
7 Nazim M
9 Bekim Dallku M
10 Xheme Xhema M
11 Nexhat Sinani M
12 Ali Gerxhaliu M
13 Xherasim Berisha M
14 Jashar Abdullahu M
15 Abullah M
63
Training Topic: Using TETKo software for management purposes Training Date: March 2010 Trainer: Davit Gharagedyan Trainees:
No Name Gender
1 Nazim Feka M
2 Isuf Topalli M
3 Faredin Vitaku M
4 Shaqir Feka M
5 Ramadan Rexhepi M
6 Izet Kurti M
7 Safet Sadiku M
8 Gazmend Jakupi M
9 Halit Hoxha M
10 Fatmir Gibrani M
11 Menduh Leka M
12 Izet Reuhbi M
13 Xhavit Zanifi M
14 Muharrem Sejdue M
15 Hajrije Bytyqi F
16 Myrvete Shabami F
17 Imer Mebimi M
18 Hajriz Shabami M
19 Aferdita Lama F
20 Agim Qela M
21 Dritan Ferati M
22 Kadrush Syla M
23 Agron Deva M
24 Genc Pylla M
25 Genc Kerleshi M
26 Muhamet Saraqini M
27 Burim Gerqina M
28 Vehbi Sopiu M
29 Hyrmete Mydyti F
30 Arieta Kryeziu F
31 Arbresha Dupaj F
32 Sinan Morina M
33 Bekim Sylberi M
Training Topic: Disconnection and reading instructions Training Date: 9 March 2010 Trainer: Gela Kereselidze Trainees:
No Name Gender
1 Shpend Sylejmani M
2 Salih Habti M
3 Ymer Ymeri M
4 Naim M
5 Lulzim Raka M
6 Lutfi Salihaj M
64
No Name Gender
7 Naser M
8 Islam Makolli M
9 Xhavit Zeriqi M
The following are the details of the 85 persons who received training in energy-related business management field during Quarter 1 of 2010.
Training Topic: Tariff determination and dealing with the regulator Training Date: 15 January – 24 March 2010 Trainer: Thomas Smith Trainees:
No Name Gender
1 Petrit Pepaj M
2 Kujtim Hoxha M
3 Ymer Rudari M
Training Topic: Internal customer service and communications Training Date: 21 January 2010 & 22 January 2010 Trainer: Tatyana Marshall Trainees: No Name Gender
1 Samir Mejzini M
2 Fitore Keqmezi F
3 Nerzane Balidemaj F
4 Naxhije Arifaj F
5 Dashurie Shala F
6 Syrmije Kika F
7 Emine Mahmutaj F
8 Mirvete Gerguri F
9 Mihrije Ejupi F
10 Ardiana Sadiku F
No Name Gender
1 Muharrem Xhaka M
2 Arben Salihu M
3 Nazmije Maxhuni-Klinaku F
4 Xhafer Sopi M
5 Verdi Boshnjaku M
6 Sadije Tahiri F
7 Luan Hoxha M
8 Teuta Pruthi F
9 Hajrije Dedinca F
10 Flora Bakalli F
11 Hazbie Kelmendi F
65
Training Topic: Leadership and management Training Date: 28 January 2010 Trainer: Tatyana Marshall Trainees:
Training Topic: Internal services and communications Training Date: 10 March 2010 Trainer: Tatyana Marshall Trainees: No Name Gender
1 Shefqet Baca M
2 Xhemail Gerguri M
3 Zeqir Simnia M
4 Skender Isufi M
5 Ferdi Ademaj M
6 Qerim Nishevci M
7 Bardhyl Bektashi M
8 Selim Cacaj M
9 Xhavit Dermaku M
10 Teuta Bucinca F
11 Bujar Arifi M
12 Zenel Dinaj M
13 Faruk Gjukaj M
14 Gezim Ternava M
15 Arsim Sogojeva M
16 Avdi Zeqiraj M
No Name Gender
1 Luigj Ymeri
2 Isa Xhemajli
3 Mentor Hoxha
4 Valbona Kadrijaj
5 Skender Asaj
6 Besnik Haziri
7 Valentina Thaqi
8 EglantinaHoxha
9 Ramadan Xhemnica
10 Lulzim Islami
11 Gezim Ternava
12 Skender Berisha
66
Training Topic: Leadership and management Training Date: 11 March 2010 Trainer: Tatyana Marshall Trainees:
No Name Gender
1 Hilmi Hashani M
2 Nazmi Derguti M
3 Faruk Gjukaj M
4 Zenel Dinaj M
5 Bujar Arifi M
6 Teuta Bucina F
7 Xhavit Dermaku M
8 Qerim Nishevci M
9 Skender Isufi M
10 Zeqir Simnia M
11 Xhemail Gerguri M
Training Topic: Customer service and communications Training Date: 13 & 15 March 2010 Trainer: Tatyana Marshall Trainees:
No Name Gender
1 Lulzim Krasniqi M
2 Agim Aliu M
3 Muharrem Surdulli M
4 Shaip Demiri M
5 Njazi Juniku M
6 Fehmi Macastena M
7 Genc Jerliu M
8 Mirlinda Visoka F
9 Nizafete Dulami F
10 Bajram Avdyli M
11 Radojevic Dejan M
12 Milosavljevic Ivana F
13 Dzogovic Aleksandar M
14 Stojkovic Dragan M
15 Savic Marko M
16 Miletic Nemanja F
No Name Gender
1 Nikola Milicevic M
2 Goran Gacic M
3 Bojana Stoletovic F
4 Dejan Dimic M
5 Milosavljevic Goran M
6 Jankovic Sasa M
7 Samardzic Danijel M
8 Stanojevic Branislav M
9 Subaric Dobri M
10 Marko Jovanovic M
11 Marinkovic Biljana F
12 Bogosavljevic Branko M
13 Slavisa Laxetic M
14 Groti Ivan M
15 Miladinovic Vladimir M
67
Training Topic: Critical thinking and effective communication Training Date: 18 March 2010 Trainer: Tatyana Marshall Trainees:
No Name Gender
1 Zenel Dinaj M
2 Bujar Arifi M
3 Arta Qorolli F
4 Teuta Bucina F
5 Arsim Sogojeva M
6 Xhemail Gerguri M
7 Jonuz Saraci M
8 Xhavit Dermaku M
9 Skender Gashi M
10 Bajram Hasani M
11 Zeqir Simnia M
12 Agim Kupinci M