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Investments in the wind power potential in Macedonia

This brief overview is made by:

Chapters: 1 (Doing business in Macedonia) and 2 (Tax and Rates) made by Predrag Stojkovski Chapters: 3 (Investments in the wind power potential in Macedonia) made by Zlatko Chavdarovski Chapters: 4 (Barriers/Incentives for Wind Energy), 5 (Barriers/Incentives for Wind Energy) made by Aleksandar Atanasovski

Company: INTRO GROUP DOOEL department for energy efficiency ThreeTech http://www.introgroup.co.cc e-mail:introgroupmk@gmail.com Phone number:+389 77 681 579 Address: Anesti Panovski 29/7 7000 Bitola Republic of Macedonia

Investments in the wind power potential in Macedonia

Content:

Doing bussines in Macedonia ....................................................................................................... 1 1.1 Registration of Companies ...................................................................................................... 2 1.2 Right to Private Ownership and Establishment ...................................................................... 2 1.3 The Company Law ................................................................................................................... 2 1.4 Price controls ........................................................................................................................... 2 1.5 Competition ............................................................................................................................. 2 1.6 Monopolies and Antitrust ....................................................................................................... 2 1.7 Securities markets ................................................................................................................... 3 1.8 Energy Law .............................................................................................................................. 3 1.9 Law on ESM ............................................................................................................................. 3 1.10 Guideline for building and operating of wind power plants in Republic of Macedonia ........ 3 2. Taxes and Rates ............................................................................................................................ 3 2.1 Macroeconomic Stability......................................................................................................... 4 3. Investments in the wind power potential in Macedonia ............................................................. 4 3.1 Foreign investors ..................................................................................................................... 4 3.2 Domestic companies ............................................................................................................... 5 3.3 Successful stories .................................................................................................................... 5 4. Current Status of Wind Energy ..................................................................................................... 6 4.1 Wind Energy Resource Potential ............................................................................................. 6 4.2 Identification of Areas/Projects with High Potential for Wind Energy ................................... 6 5. Barriers/Incentives for Wind Energy. ........................................................................................... 6 5.1 The Privileged tariff of electric energy .................................................................................... 6 5.2 The privileged producer uses the privileged tariff for period of 20 years .............................. 6 5.3 The market operator has legal obligation to buy the total production of electric energy. .... 7 5.4 Supporting industry ................................................................................................................. 7 5.5 Qualified labour and experts................................................................................................... 7 5.6 Reliable wind studies............................................................................................................... 7 5.7 Supporting regulations ............................................................................................................ 7 5.8 Barriers for Wind Energy ......................................................................................................... 7 6. Overall Prospects .......................................................................................................................... 7 1.

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1.

Doing business in Macedonia

1.1 Registration of Companies

Macedonia has introduced a one-stop-shop system that enables investors to register their businesses within 4 hours. One can register a company in Macedonia by visiting one office, obtaining the information from a single place, and addressing one employee. This significantly reduces administrative barriers and start-up costs. The one-stop-shop system operates within the Central Register via 32 electronically integrated offices located throughout Macedonia. With the development of egovernment services, company registration will soon be available online.

1.2 Right to Private Ownership and Establishment

The Constitution of the Republic of Macedonia guarantees an investors right to property No person may be deprived of his/her property or the rights deriving from it, unless the use of that property affects the general welfare of the public. Foreign investors may acquire property rights for buildings and for other immovable assets to be used for their business activities, as well as full ownership rights over construction land through a locally registered company, If the property is expropriated or restricted, rightful compensation of its market value is guaranteed.

1.3 The Company Law

The Company Law is the primary law regulating business activity in Macedonia. It defines the types of companies, as well as the procedures and regulations for their establishment and operations. Foreign investors receive the same treatment as local companies and therefore need not any special approvals. Under the Company Law, trade companies are formed as separate legal entities that operate independently and are distinct from their founders, shareholders and managers. Depending on the type, trade companies have their own rights, liabilities, names and registered offices.

1.4 Price controls

Price liberalization in Macedonia has been essentially completed. Price controls exist for only very few products. Prices in the energy sector (oil derivatives, electricity) are controlled by independent regulatory bodies.

1.5 Competition
The Macedonian Law on Competition ensures that the task of the right of competition is to prevent certain practices and business activities on the market, which certain undertakings will use to achieve an unjustified advantage compared to other undertakings and to jeopardize the free competition among undertakings.

1.6 Monopolies and Antitrust

The Law Against Limiting Competition (LALC), drafted on the basis of The German Act against Restraints on Competition, came into force on 1 April 2000, thus establishing the Monopoly Authority (MA) as a body within the Ministry of Economy. This law guarantees the protection of competition, in cases where competition is distorted by collusive agreements, abuse of a dominant position in the market, or merger agreements among companies that lead to the creation of a dominant position or the strengthening of existing dominant positions.

Investments in the wind power potential in Macedonia

1.7 Securities markets

The Central Securities Depository (CSD) records the existence of an ownership of shares and associated transactions. The CSD has greatly improved the efficiency of the capital markets and the rights of minority shareholders in companies. All joint stock companies have transferred their shareholding books to the CSD.

1.8 Energy Law

This law shall govern: the objectives of the energy policy and the manner of its realization, energy activities and the manner of regulating the energy activities, construction of energy facilities, functioning of the Energy Regulatory Commission, introduction of market for electricity, market for natural gas, market for oil and oil derivatives, as well as market for thermal or geothermal energy, requirements for realization of energy efficiency and promotion of the utilization of renewable resources and other important issues from the energy field.

1.9 Law on ESM

This Law regulates the transformation of the Joint Stock Company Electric Power Company of Macedonia for Production, Transmission and Distribution of Electricity in State Ownership (hereinafter referred to as JSC Elektrostopanstvo na Makedonija or JSC ESM).

1.10 Guideline for building and operating of wind power plants in Republic of Macedonia
Ministry of Economy in cooperation with the authorizes institutions prepared guideline for building and operating of Wind Power Plants in Republic of Macedonia, in this guideline in details is written all the necessary documents for building and operating of the Wind Power Plants, as well as the way and procedure for providing the same.

2. Taxes and Rates

With the recent economic reforms, Macedonia has created the most attractive tax package in Europe.

Tax Corporate Income Tax Personal Income Tax Value Added Tax Property Taxes Property Tax Inheritance and Gift Tax Sales Tax on Real Estate and Rights

Tax Rate 10% 10% 18% general tax rate 5% preferential tax rate* 0.1%-0.2% 2-3% or 4-5%** 2-4%

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* Includes computer software and hardware ** 2-3% for the taxpayer in the 2nd order of succession and 4-5% for the taxpayer in the 3rd order of succession or not related to the testator

2.1 Macroeconomic Stability The economic performance of the Macedonian economy is expressed through stable GDP growth of around 4%, low inflation rate of 2-3% on average, fiscal discipline confirmed by the international financial institutions and a well-functioning coordination between fiscal and monetary policy.
2003 Real GDP growth (%) Annual inflation (%) Central budget balance as % of GDP Trade balance (USD m) FDI (USD m) Unemployment Rate (%) 2.8 1.2 -1.1 -939 117.8 36.7 2004 4.1 -0.4 0.0 -1,255 323.0 37.2 2005 4.1 0.5 0.2 -1,186 97.0 37.3 2006 4.0 3.2 -0.5 -1,362 424.2 36.0 2007 5.1 2.3 0.6 -1,817 319.7

3. Investments in the wind power potential in Macedonia

There have been many announcements about investments in the energy sector in Macedonia, especially from renewable sources. Most of the companies are foreign, but there are also some domestic investors that realize the importance and profitability of such an investment. 3.1 Foreign investors One of the first companies that showed interest in the wind potential in Macedonia was the Norwegian NTE, which in collaboration with the Joint Stock Company Macedonian Power Plants (AD ELEM) conducted a field study to assess the viability of windmill power stations in Macedonia. In the first faze of the study four locations were chosen Sasavarlija near Stip, Bogoslovec (Sveti Nikole), Ravnec (Bogdanci) and Flora on Mt. Kozuf, where measuring stations are 50 meter high were installed. Besides these four micro locations, appreciable potential was visible on 11 more locations throughout the country. They are to be studied in the next faze, for which four new wind mill wills be supplied by the government, as part of the 30 million donation from the World Bank. In March 2007 the Austrian Neue Energie Technik GmbH and the Municipality of Gevgelija singed an agreement for installing 30 wind mills in the area of Gevgelija and along the flow of river Vardar. The Israeli EIG Renewable Energy Company announced large investment of 350 million in building a wind farm of 90 wind mills with total installed power of 180 MW, in the area of Sveti Nikole and Ovce pole. The investment plan was delivered to the Macedonian government by the president of the company David Brown, in cooperation with the Israel Electric Company. Mr. Brown also announced that EIG plans to build a solar plant in Macedonia, investment worth twice as much as the wind mill farm. Besides Macedonia, EIG also planes to build renewable sources power plants in Kosovo, Bulgaria and Albania. The still constructions and other equipment would be produced by Metalec Prilep, a Macedonian company specialized in designing, manufacturing and assembling of

Investments in the wind power potential in Macedonia

a vast range of steel structures, in which EIG will invest another ca. 10 million for building new production hall in the factory. Another foreign company that is interested in Macedonias wind potential is the Spanish Invall with its intention to invest 200 million for construction of 50 wind mills with maximum power of 150 MW in the vicinity of Stip. The measurements of the strength and the constancy of the wind that were carried out for one year were positive. The first step is that in Macedonia, unlike in other countries where we have been, there is better infrastructure. The second thing that attracted us is that there are positive packages by your government for investing in the alternative energy, said Jordy Moliner from Invall. The construction of wind mill farm will commence as of January 1 2009, as soon as the rulebooks and the legal provisions are adopted, and the Spanish company has already started the procedure for obtaining the licenses. SeeBA Energy Farming is a German company that also operates on the international market particularly in Belgium, Poland, Hungary, Canada, the USA and South Eastern Europe. Companys representatives visited Stip and announced installation of the largest so far installed wind mills in Macedonia, high up to 160 meters with installed power of 2.5 MW. 3.2 Domestic companies Macedonian companies are also active in the field of studying and using renewable energy sources. One of the largest projects is run by Mosen Krusevo. Their plan is to build wind mill park in the vicinity of the mountain town of Krusevo. The park would encompass 53 wind mills, type Vestas V90-3 MW, ranging in installed power from 0.8 to 3 MW. In optimal weather conditions with winds of 12 m/s the average produced power should be 2 MW. Mosen already conducted their own field study and are ready to start installing the wind mills. Metalec Prilep, already mentioned above, is one of the companies that are specialized in production of still constructions and energy efficiency equipment, such as solar collectors, and with the new investment from EIG, the companys field of activity will encompass manufacturing towers for wind mills of any size and capacity. The company already got a project in cooperation with the greek company Rokas Renewables for manufacturing wind mill towers that are to be installed in Greece. The two partners are also negotiating with Macedonian authorities for a location near Sveti Nikole, where the meteorological conditions are best and wind potential is highest. 3.3 Successful stories The usage of wind energy in Macedonia is not just something planed for the near or distant future. Its already here, although not in the scale we want it to be, but the realized projects in this area give promising results. Here are some of them: In the village of Kadino, near Skopje, Sieto Ltd Skopje used a house to run their pilot project Ecohouse: The use of renewable sources in energy supplying of individual households. Up to 70% of the electricity demand is satisfied from water heating solar panels, photovoltaic panels, battery and of course, a 400W wind mill.

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In June 2008 the Municipality of Gazi Baba installed the first wind mill on its territory, in the village of Vinice, that is used for supplying the church St. Ilija with electricity. The mill has a capacity of producing 40 kWh monthly and was manufactured by a local company. The local authorities plan to install another, larger tower, this time in the hill parts of the Municipality territory.

4. Current Status of Wind Energy

Macedonia is a country with great wind potentials. Potentials that are based on a serious researches conducted by foreign and domestic experts. 4.1 Wind Energy Resource Potential Macedonia's potential for wind energy is very good. The analyses that have been going on for the last few years are a reliable source of information for every serious investor. The long term analyses, the modern equipment used, the experts involved are a reliable source of information. The measurements are going on currently. 4.2 Identification of Areas/Projects with High Potential for Wind Energy A number of micro locations has been identified as suitable for wind parks. A Measuring campaign of the Norwegian government in collaboration with the joint stock company Macedonian Power Plants (AD ELEM) conducted a field study to assess the viability of windmill power stations in Macedonia. The results were presented to the public: - Number of potential locations 20 - Average wind speed 6,7 8,4 m/s. - Installed capacity per location 25 33 MW. - Number of units per location 10 15. - Generation per location 100 GWh.

5. Barriers/Incentives for Wind Energy.

5.1 The Privileged tariff of electric energy produced and delivered from the wind power plants is 8, 9 cents/kWh The privileged tariff for sale of electric energy produced and delivered from the wind power plants is determined to be 8,9 cents/kWh (article 1 of the decision for determining the privileged tariff for sale and purchase of electric energy produced and delivered from wind power plants, Official Gazette of RM no. 61/07) 5.2 The privileged producer uses the privileged tariff for period of 20 years
The privileged producer is obliged for period of 20 years to use privileged tariff approved by the Energy Regulatory Commission. (paragraph 2, article 3 from the Rulebook for the way and procedure for determining and approving the usage of privileged tariff for sale and purchase of electric energy produced from wind power plants, Official Gazette of RM, no.61/07)

Investments in the wind power potential in Macedonia

5.3 The market operator has legal obligation to buy the total production of electric energy from wind power plants. The operator of the market of electric energy is obliged to buy the total electric energy produced from the privileged producers of electric energy and from the production of electric energy from highly efficient combined facilities. The cost of that kind of purchasing will be invoiced by the operator of the electric energy market to the participants on the electric energy market in accordance with the tariff determined by ERC (paragraph 2, article 141 from the Energy Law, Official Gazette of RM no. 63/06 and 36/07) The operator of the electric energy market is obliged to purchase the total quantity of electric energy delivered by the privileged producer, by privileged tariff which with decision of the Energy Regulatory Commission is approved to the privileged producer for usage (paragraph 2, article 3 from the Rulebook for the way and procedure for determining and approving the usage of privileged tariff for sale and purchase of electric energy produced in wind power plants, Official Gazette of RM no. 61/07) 5.4 Supporting industry Metalec Prilep, is one of the companies that are specialized in production of still constructions and energy efficiency equipment, such as solar collectors, and with the new investment from EIG, the companys field of activity will encompass manufacturing towers for wind mills of any size and capacity. 5.5 Qualified labour and experts Qualified and highly educated experts are one of the assets of the streaming economy. 5.6 Reliable wind studies Number of studies have been done and are going on currently for specific micro locations. 5.7 Supporting regulations The best supporting regulations in the region confirmed in practice by the investors that have already targeted the country. 5.8 Barriers for Wind Energy Some of the locations that are on the mountains are relatively far from the transmission network and there are no roads leading to that location or if there are any they are not in good condition.

6. Overall Prospects
The Privileged tariff of electric energy produced and delivered from the wind power plants, raising economy, reliable wind studies, supporting industry, supporting regulations and human resources would put Macedonia at the very top of the list of countries for wind energy development in the region.

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Sources: Ministry of Economy Ministry of Economy / Department of energy ELEM - Macedonian power plants State statistical office Local community