Energy Support Package in action - The rehabilitation of six hydropower plants in North Macedonia

Financing agreements totaling €36.2 million were signed on 23 February 2023, for the rehabilitation of six hydropower plants in North Macedonia. The investment consists of €11.2 million in EU grants, €25 million loan from the KfW development bank, and €200,000 from the German Government - all funds channeled through the Western Balkans Investment Framework (WBIF).

The investment will be completed in the next two years and is the third phase of the rehabilitation of six large hydropower plants (HE Vrutok, HE Vrben, HE Raven, HE Tikvesh, HE Shpilje and HE Globocica) that provide between 20% and 30% of the total electricity production in the country.

The investments will extend the lifetime of the plants, increasing their generation capacity by 13.5 MW. Electricity production will increase by about 47.5 GWh per year and avoid the emission of 38,000 tonnes of CO₂ annually.

The project is in line with the commitment of the Green Agenda for the Western Balkans to transition to clean energy and will contribute to the Energy Development Strategy of North Macedonia. This aims to reduce greenhouse gas emissions by 61% compared to 2005 levels and increase the share of renewable energy sources to 45% by 2040.

The loan, grant and guarantee agreements were signed between KfW Head of the Division for Energy and Transport Southeast Europe and Turkey, Pablo Obrador Alvarez; Minister of Finance of North Macedonia Fatmir Besimi; and Director of the public company AD ESM - Skopje Vasko Kovachevski. The signature ceremony was attended by the European Ambassador David Geer and the acting ambassador of Germany in the country, Otto Graf.

The project, identified as Flagship 4 - Renewable energy in the EU Economic and Investment Plan, is part of the European Commission´s effort to improve energy security in the region, and follows the adoption of the €1 billion Energy Support Package for the Western Balkans. It is financed through the WBIF part of the package (€500m) that covers priority flagship investments to diversify energy supplies, boost renewable energy and improve energy efficiency.

H.E David Geer, EU Ambassador: "Rehabilitation of existing hydropower plants is part of this strategy as they should help boost the production of green energy. For this purpose, the EU provides an investment grant in the amount of €11.2 million (through the Western Balkans Investment Framework) as a supplement to the loan provided by the KfW and a grant from Germany. We will continue to cooperate with the national authorities, the private sector and our international partners to help North Macedonia advance in the implementation of the Green Agenda, which is a priority for all of us.”

Mr Pablo Obrador Alvarez of KfW stated: “The agreements signed are part of Germany's commitments within the Berlin process, as well as part of the EU energy package to support the green transition of the energy sector in the countries of the Western Balkans.”

Minister Fatmir Besimi said: "These agreements enable the realisation of an investment of €36.2 million, which the Republic of North Macedonia will implement with the support of our partners, and with which we take significant steps in ensuring energy independence through investments in renewable energy sources. Investments in the energy sector, as well as infrastructure, are one of our priorities in the programme. They mean investments in our development, investing in greater competitiveness of the economy, higher living standards, improving the quality of life, investing in the future. That's why in the budget for this year, €800 million are provided for capital investment projects, of which infrastructure and energy projects dominate.”

H.E. Otto Graf, acting Ambassador of Germany: "Germany and the EU support North Macedonia with the aim of increasing energy security, a goal we all strive for. The new KfW loan will enable the rehabilitation of hydropower plants and contribute to strengthening ESM's renewable energy capacity. This is an excellent example of how our two governments are working together to ensure the availability of energy at reasonable prices."

Mr Vasko Kovachevski, ESM director: “The third phase of the revitalisation of the six large hydroelectric power plants is of great importance, as replacing outdated and worn-out equipment will result in reduced downtime due to planned and unplanned maintenance. This means 100%availability of the facilities annually after the completion of the project.”