CHP Feasibility Study

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Terms of reference

File: Terms of reference-par0-rev0.DOC - IBE Revizija: 0 Objekt: KOSOVO COMBINED HEAT AND POWER Datum: 21.3.2005

TERMS OF REFERENCE

B.

APPENDIX E—TERMS OF REFERENCE

Introduction

These Terms of Reference (ToR) outlines the requirements for preparation of a Feasibility Study for Supplying Heat from the lignite fired power plant Kosovo B (PPKB) primarily with the objective of supplying heat to the District Heating (DH) System in Prishtina.

Background

GENERAL BACKGROUND The provision of heating services for the population of Kosovo is essential to their survival and improvement in quality of life. At present, District Heating covers only 5% of heat demands in Kosovo, therefore electricity is the predominant source of energy for space heating and tap water heating in households is not connected to district heating. Even in buildings connected to district heating, tap water heating is usually done with electricity. The high demand for electricity in winter creates severe shortages, requiring Kosovo to import electricity and to regulate the supply. This not only leads to a fiscal burden but also disrupts economic activities.

Increased use of affordable District Heating would reduce the pressure on the power system.

The Kosovo Trust Agency (KTA) is, as part of the UN Mission in Kosovo (UNMIK), acting as custodian of assets of Publicly Owned Enterprises (POE), including the DH Companies and the Power Company. For the DH companies KTA is in charge of following functions:

� Oversight management of the DH Companies and chairing the Supervisory Boards, � Co-ordination of Donors funds, and � Strategic policies and developments of DH-sector

Recently, EU (EAR) has launched a Tender for support to undertake corporate restructuring, of selected POE’s, including the DH-Companies and the Power Company.

The key project deliverable will be incorporation of the organization. This means that the DHC’s will be reorganized into legal corporate entities with:

� Asset registers and opening balance sheet(s), � Statutes, charter/bylaws defining the responsibilities of management and the Board, � Registration of each corporate entity.

After incorporation, an ancillary deliverable will be the production of an information memorandum for lenders.

THE PRISHTINA DISTRICT HEATING SYSTEM

Termokos, the district heating company in Prishtina, is a local public utility company that operates the district heating system in Prishtina. The company has currently around 150 employees. The heating system serves about 12,000 apartments (614,000 m2), the hospital

(79,000 m2), official buildings (207,000 m2) and commercial premises (42,000 m2). The production is provided by two 58 MWth heavy fuel oil fired boilers and two new (1999-2000) 7 MWth light fuel oil fired boilers in the hospital area. The distribution system consists of 55 km of pipes and about 220 substations in the primary network. Last heating season, peak demand was some 70-80 MW. Clients are generally connected via substations equipped with heat exchangers. Domestic Hot Water (DHW) is not supplied from District Heating. The system is operated during the heating season (approximately 15 October –15 April), during the warmer part of the year it is shut down. Furthermore, the system is generally shut off during nighttime, in order to save fuel and water. During the recent heating seasons the intention has been to start continuous (24 h) operation, which has been possible for shorter periods of time, but has proved difficult to continuously achieve, due to scarce fuel supply, and heavy water leakages. The refurbishments so far carried out, including; i) relatively large scale pipe replacement program; ii) refurbishment of substations, and; iii) installation of a large substation hydraulically dividing the Sunny Hill (an area at a higher altitude than the rest of the city) network from the main system, have improved the leakage situation. During the heating season 2003/2004 leakage rate was reduced to around 400 m3/day compared with 800 m3/day in 2000/2001. Further refurbishment of the network will gradually be carried out, with an objective of reaching a leakage rate of 40-60 m3/day within the next three years. Client heating demands have during recent years not been fully met, partly due to the poor technical condition of the system, partly due to scarce fuel supply. Supply situation has however, drastically improved the last two heating seasons, due to the technical system refurbishment and improved fuel supply. The system has so far been operated in production-oriented way, and clients have been billed according to the heated area, not according to actual heat consumption. However, after installation of variable speed drives on the distribution pumps and control valves at the substations as well as appropriate controls for these, the system will be transferred into a demand driven operation. This will be accompanied by a gradual transfer towards a billing system based on actual consumption at the substation level. Low collection rates have been the major obstacle to financial reconstruction of the company. However, last heating season showed a drastic improvement, from ca 29% of billed amount in 2002/2003 to around 45% in 2003/2004.

POWER PLANT “KOSOVO B”

The Kosovo B power plant consists of two lignite-fired units, B1 and B2. The tables below shows some base design data for the units of Kosovo B and actual achieved technical parameters during years 2000 and 2001. Technical data for Kosovo B

Unit Year of

commissioning Designed

gross capacity

Available net capacity Minimum load –

net

Design net heat rate

MW MW MW kJ/kWh B1 1983 339 309 172 11724 B2 1984 339 309 172 11724

The thermal cycle includes re-superheating and a maximum steam temperature of 542 °C is foreseen. Maximum pressure is about 170 bar.

URBAN DEVELOPMENT IN PRISHTINA

The City of Prishtina has grown considerably during and after the conflict and has now a population of some 400,000 to 450,000 people, the municipality planners foresees a further increase in population to around 640,000 to 800,000 the year 2020. Currently about 80,000 of the inhabitants live in apartment buildings, constituting some 20% of the building stock. The main portion of the apartment buildings (ca 65,000 inhabitants) is currently connected to the Termokos DH system. The municipality has elaborated an ambitious development plan for the period to 2020. The plane includes a large housing program that eventually would switch the portion of apartment buildings from the current situation to a status where about 50% of the population would live in such accommodation. The municipality has declared an intention to promote DH as the preferred means of space heating and provision of DHW. Details of infrastructure planning are foreseen to be available at the Department of Urban Development and Construction of the Prishtina Municipality during the autumn 2004.

THE PROJECT

Project Outline

Current DH production system is not technically or financially sustainable. Even after the recent refurbishment the two base load boilers will probably continue to have a low efficiency and possibly unsatisfactory reliability. Furthermore, remaining lifetime, considering poor maintenance and operation, and the frequent starts and stops undertaken, is limited. Furthermore, base load production utilizing heavy fuel oil is hardly financially sustainable and a less optimal solution from environmental viewpoint. Therefore, new base load production is a necessity within a perspective of a few years. The nearby power stations have always been a natural option for supplying base load to Prishtina. A project was initiated in the 80’s to supply heat from an industrial CHP plant close to the older power plant “Kosovo A”. However the project was never brought to completion, parts of the pipeline were installed and construction of a heat exchanger building at the District Heating production plant was commenced. The building structure and parts of the pipeline still exist. The current project aims at extracting heat from PPKB and transfer through a transmission pipeline to the Prishtina District Heating system. Preliminary assessment indicates a suitable extraction and transmission capacity of some 90 MWth.

Investments and Financing

Preliminary assessments (ESTAP module H) indicate an investment for the complete heat transmission system of around US$ 18 million, under the assumption that part of the piping and the building from the abandoned project can be reused. The Kosovo Consolidated Budget (KCB) has allocated funding for the project, currently € 2.5 million. These funds will be utilised for project preparation, and for part funding of project implementations. It is highly unlikely that the KCB could fund the entire investment, which is why external finance will be sought. The law on Concessions, expected to be passed by the Assembly and promulgated by the Special Representative of the Secretary General (SRSG), may increase the likelihood of attracting foreign and private capital. Objective of the Consultancy

The overall objective of the Consultancy is to: • Prepare a Feasibility Study for the project with a sufficient quality to justify the

contribution from KCB and acquire financing from International Finance Institutions or Private sector

• Assist the client to take initial contacts with potential financiers and prepare a realistic proposal for project financing.

Consultancy Scope of Work

TASK 1; VERIFICATION OF CONDITIONS AND ASSUMPTIONS

The consultant shall taking into account i.a. Termokos and KEK production statistics and urban development plans in Prishtina, verify i) current total heat load in the Prishtina District Heating system, including losses; ii) current load duration curve (annual and daily variations); iii) prepare realistic forecasts for the development of the heat load and load duration, in three scenarios low, medium and high growth, taking into account the municipal development plans as well the development plans of the DHC, including the impact of increased end user efficiency; iv) verify current and future key design features of the Prishtina District Heating system with an impact on the heat supply systems performance, particularly the temperature regime the DH system is and will be operating at; and v) verify price levels and other financial data to be utilised in the study. Above shall be presented in the inception report, and agreed with the Client before proceeding with the following study tasks.

TASK 2; LEAST COST ANALYSIS

Taking into account the results of task 1 the conclusion that a transmission line from Kosovo B is the Least Cost Solution for the supply of District Heating to Prishtina, from the ESTAP Module H study shall be verified, and reported in the Analysis Report.

TASK 3; ASSESSMENT OF CURRENT STATUS OF INSTALLATIONS

The consultant shall make a thorough status analysis of the equipment already installed in connection with the abandoned transmission pipeline project in order to assess the feasibility of and associated costs in connection with reusing the equipment. The assessment shall be separately documented in an inventory report with the objective of defining the possibilities of reusing equipment already available, including but not necessarily limited to pipes, pipe supports and civil structures for heat exchanger building at Termokos main production plant.

TASK 4; TECHNO-ECONOMIC ANALYSIS

The Consultant shall analyze and optimize the system. The analysis shall include, but not necessarily be limited to:

• Pricing of heat at the delivery limits of the system. That is, from the turbines to the transmission system, and from the transmission line to the DH system.

• Sizing/optimization of the system. The size, in terms of heat extraction and transmission capacity shall be optimized to achieve a least cost solution (taking into account the possible re-use of equipment already in place). Alternative methodologies for sizing/optimization shall be presented and discussed in the inception report and a decision made together with the Client on what methodology to use. The planning horizon should be a realistic load development considering the development plans over the nearest future (ca 5-7 years) with a perspective of how to, if necessary, increase capacity to accommodate growth over a longer period (15 years)

• The inclusion of a thermal storage to level out load variations and improve the possibilities of optimizing heat and electricity production by shifting production in time shall be separately analyzed.

On the basis of the analysis a preferred solution in terms of general principles and sizes shall be worked out. The analysis and preferred solution shall be reported to and agreed with the Client in the Analysis Report. For the agreed preferred solution a preliminary design to a degree sufficient to verify technical feasibility and to assess investment cost with an accuracy of +/- 15% shall be prepared, including

• Heat extraction system. • Transmission pipeline and requisite heat exchanger and pumping arrangements.

The design and costs assessment shall take into account to the maximum degree possible, with consideration to technology and economy, reuse of equipment and installations already in place from the abandoned project.

TASK 5; INSTITUTIONAL ANALYSIS

The consultant shall analyze alternative institutional set-up for owning, operating and maintaining the system and present the findings for agreement with the Client in the Analysis Report. A set of principal agreements (heat purchase, transmission etc) matching the agreed institutional set-up shall be drafted.

TASK 6; FINANCIAL AND ECONOMIC ANALYSIS

A detailed financial analysis of the project to verify its financial feasibility under the agreed assumptions shall be performed. This shall be supplemented by a thorough sensitivity analysis taking into account i.e. the high and low growth scenarios, variations in the investment and in prices of fuel etc. An outline economic analysis shall be performed to highlight the impact of the project on the Society in Kosovo, the analysis including but not necessarily limited to:

• Employment • Social impact by access to more affordable heating • Macroeconomic impact by substitution of electric heating by DH

TASK 7: ENVIRONMENTAL IMPACT ASSESSMENT

The Consultant shall prepare an outline Environmental Impact Assessment in line with the requirements of the IFI’s to a level of detail ness sufficient to start initial financing discussions.

TASK 8; IDENTIFICATION OF SOURCES OF FINANCE

The Consultant shall survey and identify potential financiers (donors, IFI’s and private capital/operators) of the project including the conditions of such finance. On the basis of the survey a preferred finance package shall be elaborated, including recommendations to the stakeholders (primarily UNMIK, KTA and KCB) on required actions to facilitate the finance.

BACKGROUND MATERIAL AVAILABLE

In preparing their offer the Consultant shall take into account information provided in the following reports and background documents: • Energy Sector Technical Assistance Project (ESTAP) Kosovo, World Bank Grant No

TF-027791, Particularly Modules B “Least Cost Power Generation Investment Program”, and H “District Heating” Final Report, June 2002.

• Energy Strategy and Policy of Kosovo, The White Paper, Final version submitted for approval, September 2003

QUALIFICATIONS OF THE CONSULTANTS

The consultant is envisaged to be a company or consortium offering extensive experience in medium to large scale CHP and District Heating technology. A small team of consultants is preferred (2-3 persons) with experience in CHP technology, particularly turbine technology, district heating distribution, financial and economic analysis and acquisition of project finance. In addition to the core team a pool of expertise from the home office is anticipated. The inclusion of Kosovar experts into the team is encouraged, these may however not be employed by KTA, KEK or the District Heating Companies, or any of their affiliations. All foreign team members shall be fluent in English. Knowledge of local languages (Albanian and/or Serbian) is an advantage.

TIMING AND REPORTING

The assignment is expected to commence early October 2004. The consultant shall produce the following Reports to KTA:

1. An Inception Report, ref task 1 latest four weeks after commencement date, the Client is left two weeks for comments that the consultant shall incorporate into a final agreed version of the report latest seven weeks after commencement.

2. An inventory report, ref task 3 latest six weeks after commencement date. 3. An Analysis Report, ref task 2, 4 and 5, latest eight weeks after

commencement date, the Client is left two weeks for comments that the consultant shall incorporate into a final agreed version of the report latest ten weeks after commencement.

4. Draft Final Feasibility Report latest thirteen weeks after commencement date, the Client is left three weeks for comments that the consultant shall incorporate into a final agreed version of the report latest eighteen weeks after commencement

Implementation Arrangements

PRACTICAL ARRANGEMENTS

KTA will facilitate the issuance of all necessary visas and permits required for the Consultant to carry out his work. KTA will provide the following free of charge to the Consultants:

• Office facilities, 2 furnished rooms centrally in Prishtina (tentatively at the KEK-building)

• Access to international telephone and facsimile at their offices • Access to reliable internet connection at their offices

COUNTERPART ORGANIZATION

KTA will nominate a counterpart organization with representatives from KTA, KEK and Termokos, and with liaison persons from the Ministry of Economy and Finance, department of Budget (KCB) and the Department of Urban Planning and Construction of the Municipality of Prishtina. The counterpart organization will be responsible to:

• Assist the consultant in data collection (without reliving the consultants from their responsibilities in terms of quality of their final product)

• Provide the Consultants with comments/approvals of reports etc.

Executive summary

File: Summary-par0-rev0.DOC - IBE Revizija: 0 Objekt: KOSOVO COMBINED HEAT AND POWER Datum: 21.3.2005

EXECUTIVE SUMMARY

1.0 EXECUTIVE SUMMARY

Executive summary 1-0


CONTENTS

1. EXECUTIVE SUMMARY...................................................................................................... 1-1



1. EXECUTIVE SUMMARY The City of Prishtina has grown considerably in the last years and has now a population of approximately 400,000 residents. The municipality predicts an increase of up to 800,000 inhabitants in the year 2020. The main portion of the existing apartment buildings without domestic water heating is connected to the district heating system. The existing district heating system in Prishtina is supplied by two heavy fuel oil boilers installed in the boiler station. The heat supply is insufficient due to a bad condition of the existing district heating system. For economical and ecological reasons heavy fuel oil boilers represent an inappropriate source of base heat load supply. From economical and environmental point of view the base heat load supplied from the Thermal Power Plant Kosovo B gives an opportunity of a more appropriate heat supply. The existing boilers shall be used as peak load boilers. The TPP Kosovo B is located only 10.5 km away from the main boiler house in Prishtina. The following main new units should be installed in case the base heat load is supplied from the TPP Kosovo B:

• heating station in the TPP Kosovo B • main pipeline • heating station in Prishtina

The following issues were considered in the study:

Task Issue Task 1 • heat consumption in accordance to the predicted growth of the city

• temperature regime of the district heating system in Prishtina Task 2 • preliminary least cost analysis Task 3 • assessment of current status of installations Task 4 • optimization of the heat supply from the TPP Kosovo B

• consideration of the heat storage tank • selection of the other main parameters for the base heat load supply

from the TPP Kosovo B • investment cost and operating data • time schedule

Task 5 • institutional analysis Task 6 • financial analysis

• sensitivity analysis Task 7 • environmental impact assessment Task 8 • identification of sources of finance



Heat consumption and heat load have been considered due to the predicted high expansion of the city. In accordance with the EU regulation already in force and the one anticipated a significant reduction of the heat consumption in new buildings in comparison with the existing ones is foreseen. Moreover, a part of the existing buildings is supposed to be reconstructed. Domestic water heating in the new buildings will be connected to the district heating system. The economic performance of the district heating system depends on the number of factors. They range from heat generation and distribution to house substations and customer installations and they are interrelated. Over-dimensioning of the existing utilities and selection of a more reasonable design ambient temperature were taken into account by determining the temperature regime. The selected heat loads for low, medium and high scenario are as follows:

HEAT LOAD

0

50

100

150

200

250

300

350

400

450

2005 2010 2015 2020 2025 2030 2035

Year

Hea

t loa

d (M

W)

low

medium

high



There were many activities performed in the past concerning base load heat supply from the Thermal Power Plant Kosovo A and B. Technical documentation for the district heating of the city of Prishtina from the Kosovo A Thermal Power Plant was made in 1993. The installation started after the documentation was completed and stopped due to the crisis in the Kosovo region. The current status of the installed equipment is as follows:

unit current status of the installation current status of the equipment

heating station at the TPP Kosovo A

installation has not started

pipeline from the TPP Kosovo A to the heating station in Prishtina

most of foundations for supports are finished, most of the pipeline is temporary welded

some foundations are damaged pipes and elbows are highly corroded

heating station in Prishtina

main civil structures are erected

the building is in a quite good condition

If we would like to assure a reliable operation and an increased heat consumption the use of the existing pipeline is not recommended. The existing heating station in Prishtina is in a good condition and appropriate for the designed purpose. It is foreseen that the existing civil structure will be completed in accordance with the revised technical documentation. Several options were considered in the optimization of the base heat load supply from the TPP Kosovo B. The options were divided into two main groups:

• installation of the main pipeline in one phase • installation of the main pipeline in two phases

In both options, the supply and the return pipelines shall be installed at the beginning of the project. In case of the one-phase installation, the capacity of the pipeline is sufficient for maximal load. In case of the two-phase installation, an installation of the third pipeline is foreseen after the consumption rises up to the appropriate level. Several nominal diameters of the main pipeline (from DN350 up to DN700) were taken into consideration.



The results of the medium growth scenario are presented in the following figure. Key: DNyyy nominal diameter of the supply and return pipeline installed in one phase 2xDNyyy nominal diameter of the supply and return pipeline installed in the first phase,

third pipeline is installed in the second phase with a cross area 2 x DNyyy

Net present value

0.0

10.0

20.0

30.0

40.0

50.0

60.0

DN

450

DN

500

DN

600

DN

700

2xD

N35

0

2xD

N40

0

2xD

N45

0

2xD

N45

0-ex

istin

g

2xD

N50

0

2xD

N60

0

option

net p

rese

nt v

alue

(mio

EU

R)

fuel oilTPP Kosovo Bmaintenanceinvestment

The option of the two phase installation has been selected. The main 2 x DN450 pipeline is foreseen in the first phase and the DN700 pipeline is foreseen in the second phase. The main operating data for the selected option and the medium growth scenario are presented in the following figures. Key: t1DHK supply temperature from the TPP Kosovo B district heating station t2DHK return temperature to the TPP Kosovo B district heating station t1HS_DHP outlet temperature from the heating station in Prishtina t1DHP supply temperature from the boiler house in Prishtina t2DHP return temperature from the district heating system in Prishtina DHK heating station in the TPP Kosovo B TPP Kosovo B heating station in the TPP Kosovo B DHP heating station in Prishtina Peak load boiler peak load boiler and boiler house in Prishtina



20 10 0 10 2040

60

80

100

120

140

t1DHKt2DHKt1HS_DHPt1DHPt2DHP

Temperature regime in first year

ambient temperature °C

tem

pera

ture

regi

me

°C

20 10 0 10 2040

60

80

100

120

140


Temp. regime after second investment


tem

pera

ture

regi

me

°C

20 10 0 10 2040

60

80

100

120

140


Temperature regime in last year


tem

pera

ture

regi

me

°C



20 10 0 10 20150

200

250

300

350

400

DHKDHP

Flow diagram in first year


flow

kg/

sec

20 10 0 10 20300

400

500

600

700

800

DHKDHP

Flow diagram after second investment


flow

kg/

sec

20 10 0 10 20400

600

800

1000

1200

DHKDHP

Flow diagram in last year


flow

kg/

sec



0 6 12 18 24

year

200000

400000

600000

800000

heat

sup

ply

(MW

h)

TPP Kosovo Bfuel oil

0 6 12 18 240

1.67

3.33

5

6.67

8.33

10Heat supply from peak load boiler

year

heat

rate

%

Structure of the heat supply

0 6 12 18 24

year

1

2

3

4

5

6

cost

(mio

EU

R)


Operating costs of the heat supply without maintenance costs

15 9 3 3 9 150

15

30

45

60

75

90

TPP Kosovo BPeak load boiler

Heat load in first year


Hea

t loa

d M

W

15 9 3 3 9 150

70

140

210

280

350


Heat load in last year


Hea

t loa

d M

W



The foreseen heat supply from the TPP Kosovo B covers the range from 90% to 100 % of the total heat consumption regarding the required heat load. The reduction of the electricity production in the TPP Kosovo B is approximately 0,2 MWhe/MWht. The installation of a heat storage tank was also considered. The main advantage of the heat storage tank is higher electricity production. The heat is supplied to the tank during the night load reduction of the power plant and withdrawn at rush hours of the electric consumption. In spite of all that we do not recommend the installation of the heat storage tank due to the low absolute level of the net present value, inaccurate production costs and electricity sales prices. The heating station in the TPP Kosovo B will be installed in the new building. The selected location for the heating station is near the north-west side of the main turbine building. The main parts of the heating station are as follows:

• connection to the steam turbines (unit B1 and B2) • heat exchangers • main circulating pumps • system for maintaining of the static pressure • other equipment

The main pipeline will connect the heating station in the TPP Kosovo B with the heating station in Prishtina. The route of the pipeline runs along the Prishtina-Mitrovica main motorway. Two pre-insulated pipes, 2 x DN450 and DN700 are foreseen. The length of the pipeline is 10,500 m. The heating station in Prishtina will be installed in the existing building which was built several years ago near the boiler house. The building is located on the west side of the boiler house. The main parts of the heating station are as follows:

• heat exchangers • main circulating pumps • auxiliary circulating pumps • connection to the existing boiler house

The Kyoto Protocol objectives and, more recently, the constraints on energy sources enhanced the priority given to energy efficiency policies. The Combined Heat and Power (CHP Project) is a fuel efficient energy technology that, unlike conventional forms of power generation, puts to use the by-product heat that is normally wasted to the environment. From the environmental point of view the advantages of the Pristina CHP project are evident. Due to an increase of the overall fuel efficiency the specific emissions of carbon dioxide will be reduced. The reductions of the emissions calculated at the existing heat demand are as follows:

• 23.6% reduction of CO2 emissions • 91.1% reduction of SO2 emissions



Depending on different future heat demand projections the CO2 emissions will increase substantially according to the heat demand growth. On the other hand, the SO2 emission quantities will be lower than the reference value even in case of the high heat demand scenario. The estimated investment and financial sources are as follows (Prices as of January 2005): Price component Cost

Phase I Phase II Grand total

000 EUR 000 EUR 000 EUR

Heating station in the TPP Kosovo B 3,484 868 4,352 Main pipeline 13,119 13,032 26,151 Heating station in Prishtina 2,719 1,419 4,138

Financing costs 1,858 993 2,851

Grand total 21,180 16,312 37,492

DINAMICS OF CONSTRUCTION

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2005

2006

2006

2008

2009

2010

2011

2012

2013

Year

000

EU

R

Civil Works Equipment Other Financing Costs



There are many types of finances potentially available to energy projects and it is usually a mixture of different sources of finance which results in a financial package. The main financial sources available to the project are:

− The World Bank Group, − European Bank for Reconstruction and Development (EBRD), − The European Investment Bank (EIB), − Global Environment Facility (GEF) funds, − Government export financing agencies, − Domestic government, − International commercial banks, − Venture capital companies, companies that are interested in taking an equity stake in

the project and − contractors and suppliers debt financing.

As a general rule, the maximum debt equity split required by the international financial institutions is 70% debt and 30% of equity financing. If TERMOKOS and the local community can not assure at least 30% of their own financial sources, concession or BOT model of financing would be appropriate. Concession or BOT model was not selected due to the existing low collection rates. It is expected that the major part of the project will be financed by one of the international banks. Their share will be slightly over 60%. Furthermore, it is expected that Kosovo Government will, according to current legislation, grant a loan to finance a part of the first phase of the project. The governmental loan will represent 17% in total financing of the project. The rest of the financial sources will be provided by Termokos. Termokos funds will be primarily used to cover financing cost i.e. interest during construction and financial fees. The majority of Termokos funds are expected in the second phase of the project, when Termokos will already realize the financial benefits of the first phase of the project. The financial sources are presented in the following table. Financial sources Structure Total Phase I. Phase II: 000 EUR 000 EUR 000 EUR Investors Funds 22.3% 8,354 2,138 6,215 Kosovo Budget funds 0.0% 0 0 0 Grant 0.0% 0 0 0 Domestic loan 16.9% 6,318 6,318 0 Foreign loan 60.9% 22,820 12,728 10,092 Total 100.0% 37,492 21,184 16,308 VAT 13.9% 5,196 2,898 2,298 TOTAL 100.0% 42,688 24,082 18,606



The main financial results for the scenarios considered are as follows:

No growth Scenario

Low Scenario

Medium Scenario

High Scenario

Average energy production GWh 185 456 564 758 Investment costs (VAT excluded) million EUR 21.2 37.5 37.5 37.5

Financed by loans million EUR 19.0 29.1 29.1 29.1 Debt financing % 90% 78% 78% 78% COST PRICE

Average District Heating cost price (Without connection to TPP Kosovo B) EUR/MWh 50.0 46.0 45.3 44.5

Average District Heating cost price (With connection to TPP Kosovo B) EUR/MWh 25.6 19.6 19.2 20.4

ECONOMICS OF THE PROJECT Simple Pay-back (years) 9 10 10 9 NPV at 12% discount rate (million EUR) 6.4 25.9 34.8 47.7 IRR 16.3% 22.2% 24.3% 27.0%

For the medium growth scenario, the district heating price is presented in the following figure.

DISTRICT HEATING COST PRICEMedium Scenario

0

10

20

30

40

50

60

70

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

Leto

Co

st p

rice

EU

R/M

Wh

With connection to TPP Kosovo B Without connection to TPP Kosovo B



The figure above presents the cost price of the district heat without connection to the TPP Kosovo B and for the scenario with connection to the TPP Kosovo B. In case there is no connection to the Kosovo B, the cost price in 2005 will be 44.38 EUR/MWh. In the future years, the cost price will increase mainly because of the raise of financing costs. Due to a long receivables collection period the amount of the short term debt increases, which results in higher financing costs.

For the medium growth scenario, the cash flow is presented in the following figure.

CASH FLOW

-20

-10

0

10

20

30

40

50

60

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

Year

mill

ion

EU

R

Cash receipts from operations Receipts from financing & investment

Disbursements for operations & investment Financing disbursments

NET CASH FLOW

The period till 2014 can be defined as a construction period. In this period, Termokos will raise long term loans to finance the investment and short term loans to cover loss from operations. Therefore, the net cash flow in this period ranges around zero. From the year 2014 onward, the net cash flow begins to rise. The main reason of the net cash flow rise lies in the expected growth of the district heat consumption which at present district heating prices yields big profits.



The sensitivity analysis is presented in the following figure.

SENSITIVITY ANALYSIS

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

-60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60%Change of input data

NP

V m

ill E

UR

Investment costs Scope of production DH purchase costs

HFO prices DH sales prices

When interpreting the sensitivity analysis results one must bear in mind that the economics of the project were calculated as a difference between two scenarios, the one without connection to the TPP Kosovo B and the other with connection to the TPP Kosovo B. A major cost item in case of no connection to the TPP Kosovo B is fuel oil costs. Therefore the profitability of the project is very sensitive to fuel oil costs. The second most influential issue is change in the production scope, and in the scope of district heat sales, respectively. The third issue is the project sensitivity to investment costs. The project is least sensitive to change in the district heating purchase price and district heating sales price.

The existing low collection rates lead the project in a vicious circle. Because of low collection rates there are no funds to carry out the project. The increase of the collection rate is the key condition for implementation of the project.



Most European district heating projects have two types of institutional models. The first model is a single company responsible for heat generation, transmission and distribution. The second model includes two or more companies responsible for heat generation, transmission and distribution. The actual situation in Pristina is that there is an existing heating company TERMOKOS, which operates the district heating network. Another fact is that the Power Plant Kosovo B is also an independent business entity. Therefore we assume that in case of Pristina the most feasible solution is to adopt the model of two independent companies. The business relationship between TERMOKOS and the Power Plant Kosovo B would be regulated by a Thermal Energy Service Agreement. The study approved that from the economical and the environmental point of view the connection of the district heating system in Prishtina to the TPP Kosovo B is an appropriate solution.

TASK 1

File: Task1-par0-rev0.DOC - IBE Revizija: 0 Objekt: KOSOVO COMBINED HEAT AND POWER Datum: 21.03.2005

TASK 1

VERIFICATION OF CONDITIONS AND ASSUMPTIONS 1.0 INTRODUCTION 2.0 HEAT CONSUMPTION 3.0 TEMPERATURE REGIME 4.0 OTHER DATA 5.0 REFERENCES

TASK 1 1-0


CONTENTS

1. INTRODUCTION................................................................................................................. 1-1

TASK 1 1-1


1. INTRODUCTION The City of Prishtina has grown considerably in the last years and has now a population of approximately 400,000 residents. The municipality predicts an increase of up to 800,000 inhabitants in the year 2020. The main portion of the existing apartment buildings without domestic water heating is connected to the district heating system. The existing district heating system in Prishtina is supplied by two heavy fuel oil boilers installed in the boiler station. For economical and ecological reasons heavy fuel oil boilers are not appropriate for base load heat production. The base load heat supply from the TPP Kosovo B is a better option. The existing district heating system in Prishtina is in a bad condition and lacks a contemporary control system. The supply temperature is limited and the operation stopped during the night due to bad condition of the network. These restrictions cause an insufficient heat supply to the apartments at low ambient temperatures. Heat consumption and heat load have been considered due to the predicted high expansion of the city. Studies concerning the existing heat consumption have not been made. Instead of measured data of the heat consumption in Prishtina relevant data from other cities were used. The allowed heat consumption in accordance with former regulation, the one still in force and the anticipated one was considered. In accordance with the EU regulation already in force and the one anticipated a significant reduction of heat consumption in new buildings in comparison with the existing ones is foreseen. One part of the existing buildings is foreseen for reconstruction as well. Domestic water heating in the new buildings will be connected to the district heating system. The economic performance of the district heating system depends on the number of factors. They range from heat generation and distribution to house substations and customer installations and they are interrelated. Low temperature regime gives an opportunity for a competitive cogeneration. Possibilities to lower the temperature regime in the district heating system Prishtina were considered. Over-dimensioning of the existing utilities and selection of a more reasonable design ambient temperature were taken into account by determining the lower temperature regime. Energy prices and other economical data were selected for a techno-economic analysis.

TASK 1 2-0


CONTENTS

2. HEAT CONSUMPTION ...................................................................................................... 2-1

2.1 REGULATION OVERVIEW................................................................................................. 2-1

2.2 INPUT DATA......................................................................................................................... 2-4

2.2.1 Introduction............................................................................................................................. 2-4 2.2.2 Climate conditions .................................................................................................................. 2-4 2.2.3 Building configuration factor.................................................................................................. 2-8 2.2.4 Construction year.................................................................................................................... 2-9 2.2.5 Apartments data for Prishtina............................................................................................... 2-10 2.2.6 Non-residential heat consumption ........................................................................................ 2-10 2.3 HEAT CONSUMPTION ANALYSIS.................................................................................. 2-11

2.3.1 Specific heat consumption for space heating:....................................................................... 2-11 2.3.2 Heat consumption for domestic water heating...................................................................... 2-16 2.3.3 Heat losses in the network..................................................................................................... 2-17 2.4 ENERGY CONSERVATION POTENTIALS ..................................................................... 2-18

2.5 PREDICTED HEAT CONSUMPTION IN PRISHTINA .................................................... 2-20

2.5.1 Predicted specific heat consumptions ................................................................................... 2-20 2.5.2 Heat consumption scenarios ................................................................................................. 2-20

TASK 1 2-1


2. HEAT CONSUMPTION 2.1 REGULATION OVERVIEW The first measures concerning heat conservation in the buildings in ex-Yugoslavia were issued in 1968. The »Proposal for maximal thermal transmittance« predicted three climate zones for the state. In accordance with the selected climate zone the maximal allowable thermal transmittance k (W/m2K) was limited. It was defined for the outside and indoor walls and outside ceiling. The city of Prishtina was classified in the third zone (III). The maximal allowable thermal transmittance was k = 1,37 W/m2K (Official Gazzette SFRJ 45/67). In the year 1970, the maximal allowable thermal transmittance coefficient was reduced down to k = 1,28 W/m2K (Official Gazzette SFRJ 35/70). A greater improvement concerning the heat conservation in buildings was achieved by the JUS.U.J5.600 code which was published in 1980. It was not only limited to the maximum allowable thermal transmittance but it took into consideration also other influences as minimal thermal stability of civil structures and vapor diffusion through the building outside walls. The maximal allowed thermal transmittance was significantly decreased. For the Prishtina (third climate zone (III)) it was limited to k = 0,83 W/m2K which represented a reduction of about one third with respect to the regulation of 1970. Calculation methods for thermal heat transfer coefficient, vapor diffusion and thermal stability of the civil structures were defined in the JUS.U.J5.510, 520 and 530 codes, also published in 1980. In 1984, a new regulation »Rules for rational use of energy (Official Gazzette SRS 31/84« was released in Slovenia due the reduction of the maximal allowable heat losses in Europe. The regulation was included in the JUS.U.J5.600 code which was released in Yugoslavia in 1987. In the same year, the JUS.U.J5.510 code was amended. Table 1: Review of regulations in Yugoslavia (YU) [1]

Year of publishing or amending of Regulation

Reduction of the heat losses (%)

Range of validity

� 1967 / YU 1970 - 1980 -7 YU

1980 – 1984 (1987) -25 -30

YU 1984 (1987) – 2002 -30 SLO (YU)

2002 - 2006 -30 SLO (EU) 2006 � -20 SLO (EU)

As a consequence of the process of accession to the EU and adoption of the acquis communautaire in the field of efficient use of energy, new »Rules on thermal protection and

TASK 1 2-2


efficient use of energy in buildings (Official Gazzette RS 42/02)« passed in 2002 adopting the EU legislation. The existing EU legislation concerning heat losses in buildings is as follows: [2]

• Directive on construction products (89/106/EEC) • Directive SAVE (93/76/EEC) • code EN 832

Table 2: Heat insulation thickness in accordance with regulation and good engineering

practice for the third climate zone [2] [11]

Regulation

(Year)

Thermal transmittance

(W/m2K)

Heat insulation thickness for

outside boundary

1984 (1987) U(k)= 0,70 W/m2K) 5 cm 2002 U(k)= 0,40 W/m2K) 9 – 10 cm

Massive compact buildings

2006 U(k)= 0,20 W/m2K) 20 cm The Directive on construction products (89/106/EEC) deals with requirements relating to construction elements in all life (vital) period (e. g. economical treatment of energy). The Directive SAVE (93/76/EEC) restricts heat losses, requires energy reviews and introduces energy identity cards for buildings. The calculation method in EN832 gives the opportunity to compare the energy consumption indexes of the buildings. The energy consumption index is also restricted. The energy consumption index is the output of the calculation method given in EN 832. It indicates the energy consumption of the building in one year (kWh/m2a or kWh/m3a). The EU legislation in force reduces the energy consumption for at least 30% regarding previous regulations in Yugoslavia. The new legislation concerning energy performance of the buildings (Directive on Energy Performance of Buildings (2002/91/EC)) [3] is in ratification in EU. It is expected that the new legislation will be accepted in all EU members up to 2006. The new directive introduces additional measurements for reduction of the energy consumption concerning space and water heating, air conditioning and lighting. A 20% reduction of the energy consumption is expected. The directive defines:

• calculation methodology for the overall energy consumption of the buildings • minimal requirements for the heat losses of the new buildings • minimal requirements for the heat losses of the existing reconstructed buildings

TASK 1 2-3


• energy identity card • regular inspection review of the boilers, air conditioning equipment and space heating

systems with boilers older than 15 years. Table 3: Review of regulation in Germany (D) [1]

Year of publishing or amending of Regulation

Reduction of the heat losses (%)

Range of validity

� 1977 / D 1977 - 1983 -30 D 1983 – 1994 -30 D 1994 – 2001 -30 D

2001 � -30 D (EU)

TASK 1 2-4


2.2 INPUT DATA 2.2.1 Introduction Heat consumption in buildings depends on the quality of civil construction, resident habits and measurement method. Quality of thermal insulation, room temperature and tariff system are the most important influences. The comparison of heat consumption in different buildings is made on the basis of the following:

• climate conditions • building configuration • purpose of the building • construction year

Specific heat load and heat consumption (W/m2, kWh/m2 etc.) are used as a main value for indication of the heat consumption in buildings. 2.2.2 Climate conditions

Prishtina and Ljubljana are comparable in the view of climate zones and design temperatures. The climate zone and the design temperature represent the main input data for heat consumption and required heat load determination. Table 3: Yugoslavian Code JUS.U.J5.600 (80/87)

Climate zone Outside design temperature

Minimum outside temperature

LJUBLJANA III. - 18°C - 25,2°C PRIŠTINA III. - 18°C - 25,2°C

Table 4: Duration of the heating season [4]

Heating season Z (day)

Average outside temperature

SD*

LJUBLJANA 198 3,9°C 2985 PRIŠTINA 195 4,1°C 2915

* Local climate conditions are defined with degree-days. They are calculated in form of a difference between room and outside temperature multiplied by the number of days. The value “degree-days” is calculated for the heating season. The foreseen room temperature is 20°C and the maximal outside temperature 12°C.

TASK 1 2-5


The above table shows that Prishtina and Ljubljana are comparable as regards climate conditions. Outside design temperature for Ljubljana was increased in the new SLO legislation in 2002 (adopted EU legislation) from -18°C to -13°C. In accordance with the design temperature in Ljubljana (-13°C) we anticipate that the design temperature of -13°C for Prishtina is an acceptable value.

Picture 1: Annual load duration curve

Distribution curve of the outsiede air temperature - Prishtina

-14-12-10

-8-6-4-202468

101214

0 20 40 60 80 100 120 140 160 180 200 220

days

outs

ide

tem

p. (°

C)

distributioncurve

Heating season for Prishtina is 195 days.

The Prishtina District Heating Company has not recorded heat load and heat consumption, yet. Only supply/return temperatures have been recorded manually. The operation of the district heating system is being interrupted during the night, supplying no heat for domestic water heating.

TASK 1 2-6


Picture 2: Heat load daily variation curve - Prishtina - Working day

Prishtina - working dayHeat load - daily variation

0%

20%

40%

60%

80%

100%

0 2 4 6 8 10 12 14 16 18 20 22 24

daily hours

load

relative load

Picture 3: Heat load daily variation curve - Prishtina - Weekend

Prishtina - weekendHeat load - daily variation

0%

20%

40%

60%

80%

100%

0 2 4 6 8 10 12 14 16 18 20 22 24

daily hours

load

relative load

TASK 1 2-7


Picture 4: Heat load daily variation curve - Ljubljana - winter

Ljubljana - winter (working day)Heat load - daily variation

0%

20%

40%

60%

80%

100%

0 2 4 6 8 10 12 14 16 18 20 22 24

daily hours

load

relative load

Picture 5: Heat load daily variation curve - Ljubljana - summer

Ljubljana - summer (working day)Heat load - daily variation

0%

20%

40%

60%

80%

100%

0 2 4 6 8 10 12 14 16 18 20 22 24

daily hours

load

relative load

TASK 1 2-8


The comparison of the daily variation heat load curve between Prishtina and Ljubljana shows that the range of variation is higher in Prishtina than in Ljubljana. A characteristic day with the highest variation is presented for Ljubljana. A higher variation in Prishtina may be caused by the interrupted operation and manual recording. A higher variation increases higher optimal capacity of the heat storage tank. In order to avoid any selection of a too big heat storage tank we presume that the daily variation heat load curve of Ljubljana is more accurate for optimization.

2.2.3 Building configuration factor There are no average values known as regards heat consumption in the buildings. The specific heat consumption depends on the category of the building and its configuration factor (e. g. block of flats, terraced houses, single house). Buildings with the same floor area and the same heat insulation quality of outside walls have different heat losses with regard to the building configuration factor. The building configuration factor (f0) is defined as a division between building volume and building outside boundary. The buildings with higher configuration factor have higher heat consumption due to the more inappropriate building configuration concerning heat losses.

The buildings can be classified in the main categories with an average configuration factor as follows [2]:

• Apartments building: block of flats (g+3 floors) Average configuration factor f0 = 0,33

• Row of houses: terraced houses Average configuration factor f0 = 0,65

• Detached house: single house Average configuration factor f0 = 0,92

TASK 1 2-9


Picture 4: Maximal allowed heat consumption for heating in relation to configuration factor f0

2.2.4 Construction year

The construction year represents an important data due to the regulation concerning maximum allowable heat losses in the past. It should be pointed out that every new regulation has reduced the allowable heat losses for approximately 30% with relation to the previous regulation. In accordance with the regulation development it is helpful to divide buildings into three categories as follows:

• buildings constructed up to 1984 (1987) • buildings constructed between1984 (1987) and 2002 • new buildings

The annual energy consumption in the new buildings in the EU members is limited in accordance with the EU legislation. The energy consumption of the building is indicated as specific energy consumption (kWh/m2a or kWh/m3a). [5] There are different indicators related to the type of energy consumption (space heating, domestic water heating, electricity, lighting etc.).

TASK 1 2-10


2.2.5 Apartments data for Prishtina Floor areas of the existing apartments in Prishtina already connected to the district heating system (TERMOKOS) are as follows:

Type of building Floor area

(m2) Apartments, Flats 634086

Stores, Offices 43056 Schoolhouses 128561

Public buildings 182610 Total 988313

Comment: construction year is not available. Heat consumption of the additional existing apartments foreseen for connection to the district heating system is 9,000 MWh/a [26]. Floor areas of the new apartments foreseen for connection to the district heating system are as follows:

Projection Total floor area

(m2)

Share of connected apartments to district

heating system

Total floor area heated by district heating

system (m2)

low 3750000 70% 2625000 medium 5250000 70% 3675000

high 8000000 70% 5600000 2.2.6 Non-residential heat consumption Detailed data concerning non-residential heat consumption are not available. The estimated heat consumption in public sector and industry is approximately 40% of the total heat consumption which includes residential and non-residential heat consumption.

TASK 1 2-11


2.3 HEAT CONSUMPTION ANALYSIS 2.3.1 Specific heat consumption for space heating:

1. YU (SLO) regulation:

a. Apartments building: block of flats (g+3 floors)

Regulation (Year) Configuration

factor (f0)

Annual heat consumption

(kWh/m2a) � 1984 150 - 130

1984 - 2002 85 2002 �*

0.30 – 0.35 55

* -valid only in SLO

b. Row of houses: terraced houses

Regulation (Year) Configuration

factor (f0)


(kWh/m2a) � 1984 180 - 150

1984 - 2002 100 2002 �*

0.65 70

* -valid only in SLO 2. German (D) regulation:

a. Apartments building: block of flats (g+3 floors)

Regulation (Year) Configuration factor

(f0) Specific heat loss

(W/m2) � 1984 180 - 130

1984 - 1994 90 1994 - 2001 60

2001 �

0.30 – 0.35

40 - 35

TASK 1 2-12


3. Values for Ljubljana in accordance with good engineering practice: [6]

Year Annual heat

consumption (kWh/m2a)

Specific heat loss (W/m2)

1966 - 1984 180 - 130 180 - 130 1984 - 2002 100 - 70 60 - 45

2002 � < 55 < 35

4. Project »Apartments 2000« in Germany (Competitive examination for the best solution of heat conservation): [7]

Year

Configuration factor (f0)

0.30 – 0.35 block of flats

Configuration factor (f0)) 0.65

terraced houses � 1984 160 (kWh/m2a) 190 (kWh/m2a)

1984 - 2000 90 (kWh/m2a) 110 (kWh/m2a) 2000 � < 60 (kWh/m2a) < 60 (kWh/m2a)

5. Heat consumption analysis of residential buildings connected to the district heating system in Ljubljana: [8]

Year Configuration

factor (f0)) block of flats


(kWh/m2a)

Specific heat loss

(W/m2) 1950 - 1968 168 150

1972 – 1997 * 0.30 – 0.35

136 151

121 135

* share of residential buildings constructed before 1984 is high, so the values are a little bit higher than those given as the average values in the regulation

The surveys in Ljubljana indicate that the annual heat consumption in the apartment buildings (block of flats) move in the range from -10% to +10% related to the regulation in force for the buildings construction year. Maximal inaccuracy was found for the period after 1984 (1987). A possible reason for such deviation lies in the fact that buildings in early 80’s were not designed in accordance with the new regulation.

TASK 1 2-13


6. Heat consumption analysis in public buildings: [5] [10]

Public buildings Annual heat


high value 240 (kWh/m2a) average value 205 (kWh/m2a)

low value 80 (kWh/m2a)

Schoolhouses * Annual heat


high value 200 (kWh/m2a) average value 170 (kWh/m2a)

low value 80 (kWh/m2a) * Some schoolhouses have already been renovated; average values for old schoolhouses amount to 200 (kWh/m2a)

7. Analysis of heat consumption regarding the actual heavy fuel oil consumption in the

Prishtina District Heating Company - TERMOKOS

a Heat production:

Annual values for 2003/2004

Heavy fuel oil consumption 12301000 (kg)

Boiler efficiency 90% Lower heat value (Hi) 41 (MJ/kg)

Heat production 126085 (MWh) Heat losses in the network* 15%

Supplied Heat 107172 (MWh/a) * Increased due to the bad condition of the network.

TASK 1 2-14


b Heat consumption in buildings:

Type of building

Annual consumption of heat for heating

(kWh/m2a)

Floor area (m2)


(MWh/a)

Apartments, Flats 150 634086 95113 Stores, Offices 150 43056 6458 Schoolhouses 170 128561 21855

Public buildings 200 182610 36522 Total 988313 159949

Reduction due to the interrupted supply (published value)

0,85

135956

Reduction due to the insufficient supply (calculated as per data recorded from

supply/return temperature)

10%

122361 The difference between the calculated and the measured heat consumption is 14%. The difference is acceptable regarding the quality of the input data.

8. District heating system in Ljubljana: [24]

Central heating supply system in Ljubljana consists of a district heating system and a gas network. In 1999, both systems together covered 57% of the heat consumption in the residential buildings.

Connected to main system

Local heating Year

Total number of

apartments number % number %

1999 120000 69000 57 51000 43 DH system 39 natural gas 18

2010 125000 90000 72 35000 28 DH system 41 natural gas 31

TASK 1 2-15


Non-residential buildings are covered from the same central heating supply system. The heat consumption share in the non-residential buildings was around 47% of total heat consumption.

Residential and non-residential heat consumption in Ljubljana

Non-residential buildings

47%

Residential buildings

53%

9. District heating system in the Velenje municipality: [25]

The Velenje municipality district heating system is the second largest district heating system in Slovenia. The base load heat is supplied from the Šoštanj Thermal Power Plant.

TASK 1 2-16


Residential and non-residential heat consumption in Velenje

Non-residential buildings

43%

Residential buildings

57%

2.3.2 Heat consumption for domestic water heating Daily domestic hot water consumption in housekeeping depends on the number of members of a family and theirs personal habits. The annual heat consumption for domestic water heating ranges between 2,500 and 3,200 kWh for an average four members’ family. [9]

Consumption Heating season

(200 days) kWh/per.

Summer season (145 days)

kWh/per.

Heat consumption for domestic water

heating per day KWh/per.

medium 400 250 1,2 do 2,4

Consumption Consumption of hot water

(l/per.) per day By 45°C

Consumption of hot water (l/per.) per day

By 60°C medium 30 - 60 20 - 40

A heat consumption survey of residential buildings connected to the district heating system in Ljubljana indicated that the share of annual heat consumption for water heating is between 25% and 30% of the overall annual heat consumption. The annual heat consumption share for water heating in the apartment buildings (block of flats) is around 30%. The share in the detached houses (single house) is around 15%.

TASK 1 2-17


In more than 1,000 apartments the heat load for domestic water heating amounts to 1,4kW/apartment. [15] 2.3.3 Heat losses in the network The level of the heat losses depends on the type of insulation and its thermal conductivity, thickness and application method of insulation. Distribution temperatures and extensive surface area of any heat distribution may justify efficient insulation. Quality and cost of materials are of importance which dictates their application. The existing network is in bad condition. Not only heat losses but also leakages are high. . Consequently, the present heat losses can not be used for a long term prediction. To exemplify: reasonably acceptable yardsticks tests under West European and British conditions indicate that for mean supply/return water at 80°C and 5°C soil temperature, an average heat loss figure of 40 W/m length of pipe, could be realistic as a guide. This figure refers to an average for a range of pipe sizes constituting a typical system and use of factory pre-fabricated insulated pipe work. For a competently installed system an overall winter heat loss of network may be estimated at 5-7% of total heat distributed. [12] Very relevant to overall thermal loss from mains is the network heat density of particular area. High concentration of heating loads with correspondingly short runs of underground piping would ensure a much lower loss of heat than a scattered, possibly badly planned estate. This is the European experience indicating 9% loss for distribution density of 250 W/m2 and 3% for a heat density of 1000 W/m2. [12] An overview of the annual reports of district heating companies in different European countries indicates that the overall heat loss is in the range from 6% to 14% with the average value of 10%. [13] The overall heat loss of 10% is selected as a conservative value for the Prishtina district heating network.

TASK 1 2-18


2.4 ENERGY CONSERVATION POTENTIALS Energy saving in the building sector is focused on improvements in the building envelope, heating systems, electrical appliances, and advice on efficient energy utilisation. A survey concerning energy conservation potential for the town of Prishtina has not been made. Due to the lack of data we present data valid for Slovenia [14]. They can be used as a case study. Total energy saving potential resulting from the building envelope and heating measures ranges from 30% to 65% in single family houses depending on the age of the building, and between 14% and 73% in the apartment blocks and commercial, public and industrial buildings, again depending upon their age. The potential is higher in buildings constructed before 1980 and more particularly before 1966. Assuming that only measures provoking a payback period of less than 10 years are attractive, the cost effective potential is reduced. The cost effective potential in single family houses is so reduced to 36%, in residential apartments to 27% and in commercial, public and industrial buildings to 34%. The most effective benefits are gained from the following areas:

• measures related to building insulation (loft and roof insulation and wall insulation) • measures related to the heating system (control systems and thermostatic radiator

valves) • reduction of air infiltration level (draught proofing) and improved double glazing

Institutional measures can also have a market effect on the energy conservation. For example the introduction of a formalised energy management system, according to Western European experience, gives cost effective savings of the order of 5-10%. In addition, institutional measures may be used to focus attention on:

• inefficient heating systems • inappropriate thermal performance of the building envelope • rational energy behaviour

The reduction level of the heat losses in the existing buildings with some measurements is presented in the following table: [6]

Measure

Heat loss reduction

– 20 cm roof insulation 11% – replacement of windows 20% – 12 cm insulation of outside

boundary 25%

– 6 cm insulation of basement ceiling

6%

TASK 1 2-19


In accordance with the survey [14] the cost effective potential ratio of 10% has been selected as a conservative value for the existing buildings in Prishtina for the next 10 years.

TASK 1 2-20


2.5 PREDICTED HEAT CONSUMPTION IN PRISHTINA 2.5.1 Predicted specific heat consumptions

1. Apartment building: block of flats (g+3 floors):

Year of construction Configuration

factor (f0)

Annual heat consumption for

space heating (kWh/m2a)

Annual heat consumption for domestic water

heating (kWh/m2a)

� 1984 (1987) 150 -135** 1984 (1987) � 90 - 81**

New buildings 2002 - 2006 55 New buildings 2006 �

0.30 – 0.35

50 - 45 *

45

* Directive on Energy Performance of Buildings (2002/91/EC) anticipated decreased / cut for 15 to 20%. ** It is predicted that the average heat consumption will be reduced for 10% in the next 10 years. The heat consumption in the first year is 150 (90) kWh, it decreases to 135 (81) in the tenth year and stays unchanged up to the last analysed year.

Year of construction Configuration

factor (f0)

Heat load for space heating

(W/m2)

Additional Heat load for domestic

water heating (W/m2)

� 1984 (1987) 135 1984 (1987) � 75

New buildings 2002 - 2006 45 New buildings 2006 �

0.30 – 0.35

40 - 35 *

23

2. Non-residential area: The floor area of the new public buildings and heat consumption in the industry area are not defined. Due to the lack of data the heat consumption of the non-residential area is defined in accordance with the heat consumption in the residential area. The selected share of the heat consumption in non-residential area is 40% of the total heat consumption. 2.5.2 Heat consumption scenarios The predicted heat consumption is presented in the following tables and diagrams.

TASK 1 2-21


Heat consumption without network heat losses:

Type


for space heating in 2005


for space heating in 2020

Annual heat consumption for hot water Floor area

Predicted share for

DH system


for space heating in

2008

Annual heat consumption for hot water

in 2008

Total heat consumption

in 2008


for space heating in

2020

Annual heat consumption for hot water

in 2020

Total heat consumption

in 2020(kWh/m2a) (kWh/m2a) (kWh/m2a) (m2) (%) (MWh/a) (MWh/a) (MWh/a) (MWh/a) (MWh/a) (MWh/a)

Existing buildings Apartments, Flats 150 135 634086 100% 95113 85602Stores, Offices 150 135 43056 100% 6458 5813Schoolhouses 170 153 128561 100% 21855 19670Public buildings 200 180 182610 100% 36522 32870New connections 100% 9000 8100Total 988313 168949 0 168949 152054 0 152054

Projection I residential 50 45 3750000 70% 131250 118125 249375non-residential 87500 78750 166250

Existing buildings+Projection I 370804 196875 567679

Projection II residential 50 45 5250000 70% 183750 165375 349125non-residential 122500 110250 232750

Existing buildings+Projection II 458304 275625 733929

Projection III residential 50 45 8000000 70% 280000 252000 532000non-residential 186667 168000 354667

Existing buildings+Projection III 618720 420000 1038720

TASK 1 2-22


Heat consumption and heat load with network heat losses:

2008 2020 2033 2008 2020 2033(MWh/a) (MWh/a) (MWh/a) (MW) (MW) (MW)

Existing buildings 185.844 83

Existing buildings+Projection I 624.447 624.447 235 235Existing buildings+Projection II 807.322 807.322 299 299Existing buildings+Projection III 1.142.593 1.142.593 416 416

Heat consumption Heat load

Heat consumption and heat load growth:

Heat consumption

growth(up to 2020)

Heat consumption

growth(2020 - 2033)

Heat load growth

(up to 2020)

Heat load growth

(2020 - 2033)

(%) (%) (%) (%)

Existing buildings+Projection I 11% 0% 9% 0%Existing buildings+Projection II 13% 0% 11% 0%Existing buildings+Projection III 16% 0% 14% 0%

TASK 1 2-23


PREDICTED HEAT CONSUMTION

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2005 2010 2015 2020 2025 2030 2035

Year

Hea

t con

sum

ptio

n (M

Wh/

a)

Projection IProjection II

Projection III

PREDICTED HEAT LOAD

0

50

100

150

200

250

300

350

400

450

2005 2010 2015 2020 2025 2030 2035

Year

Hea

t loa

d (M

W)

Projection I

Projection II

Projection III

TASK 1 3-0

File: Task1-par3-rev2.doc - IBE Revizija: 1 Objekt: KOSOVO COMBINED HEAT AND POWER Datum: 21.3.2005

CONTENTS

3. TEMPERATURE REGIME ................................................................................................ 3-1

3.1 EXISTING SYSTEM IN PRISHTINA................................................................................... 3-1

3.2 UTILISING EXISTING RESERVES..................................................................................... 3-3

3.3 SELECTED TEMPERATURE REGIME............................................................................... 3-6

TASK 1 3-1


3. TEMPERATURE REGIME 3.1 EXISTING SYSTEM IN PRISHTINA The existing district heating system in Prishtina covers the main portion of the existing apartment buildings in the city. It is supplied from the boiler house with two heavy fuel oil fired boilers. The domestic water heating is not connected to the district heating system. The design data for the apartment space heating and district heating system are as follows:

• ambient design temperature -18°C • room temperature 20°C • space heating (SH) 90/70°C • district heating system in Prishtina (DHP) 140/80°C

The heat load at the output from the boiler house has not been measured and recorded. Only the supply/return temperatures are manually recorded. Due to the bad condition of the network the supply temperature is limited to 100°C. The capacity of the district heating system is due to the limitation of the supply temperature insufficient at the low ambient temperatures. The calculated and measured temperatures are presented in the following diagram:

TASK 1 3-2


20 15 10 5 0 5 10 15

20

40

60

80

100

120

140

SH_supplySH_returnDHP_supplyDHP_returnDHP_supply_measuredDHP_return_measured

Temperature regime

ambient temperature (°C)

flow

/ret

urn

tepe

ratu

re (°

C)

5−

The comparison of the calculated values and the measured ones shows that in case of ambient temperature ranging down to 0°C the supply temperatures of the district heating system in Prishtina (DHP) are higher than required.. At lower outside temperatures they are lower than the calculated values. In case of ambient temperatures ranging down to -5°C the return temperatures of the district heating system are higher than the calculated values.. There is also a high deviation of the measured values due to manual recording. The limited supply temperature causes lower supply temperatures than calculated at the ambient temperatures below 0°C. The return temperatures of the district system are lower than calculated at the ambient temperatures below -5°C. The capacity of the district heating system is insufficient due to the limited supply temperature. The supply temperatures are lower and return temperatures are higher than calculated in the range of ambient temperatures from 0°C to -5°C. We can conclude that the existing utilities are over dimensioned.

TASK 1 3-3


3.2 UTILISING EXISTING RESERVES The economic operation of the district heating system depends on the number of factors. They range from heat generation and distribution to house substations and customer installations and they are interrelated. A low temperature regime gives an opportunity for a competitive cogeneration. The existing maximum supply temperatures in the district heating systems in Europe are in the range from 150°C to 90°C. The range between 120°C and 130°C is the most frequent one with tendency to even lower values through to low temperature systems. When converting the existing heating facilities, usually dimensioned for the 90/70°C temperature regime, to district heating service, it is important to consider which heating-unit reserves are available. There have not been made any analyses concerning dimensioning of the existing heating units in Prishtina. The studies from the other cities were used for estimation of the existing utilizing reserves. Several analyses of heating units dimensioning in the existing buildings have revealed mean over dimensioning factor of 1.3 to 1.6 in comparison to calculating the connected heat load [16]. It has been established that as a rule over 85% of the heating units have been over dimensioned. There are considerable reserves available in radiators. However, a survey of individual buildings has also demonstrated that heating units are in use on individual basis that have been under dimensioned up to 50%. In such cases, careful consideration and detailed reflection of needed measures (replacement of radiators and of parameters for house installations) is indispensable. Analysis of radiator dimensioning for 40 buildings with 1,883 heating units in Germany:

TASK 1 3-4


Another example of successful lowering the network temperature regime is Esag District Heating system in Dresden [17]. The system was originally designed for the temperature regime of 145/80°C and supplies the heat to 503 customers. They established a test program with lowering the supply temperature for 20°C. They only received complaints from customers which use heat for generating low pressure steam. Underheating due to too small dimensioned heating surfaces was not established. We have recalculated the temperature regime in Prishtina with a selected 10% over dimensioning of the existing utilities. The results are presented in the following diagram:

20 15 10 5 0 5 10 15

20

40

60

80

100

120

140

SH_supplySH_returnDHP_supplyDHP_returnDHP_supply_measuredDHP_return_measured

Temperature regime with overdimensioning

outside ambient temperature (°C)

flow

/ret

urn

tepe

ratu

re (°

C)

13−

It can be estimated from the above diagram that at ambient temperature below -10°C the existing system with limited supply temperature has insufficient capacity.

TASK 1 3-5


There is a statement in the conceptual design for the district heating system of Prishtina being supplied from the Kosovo A Thermal Power Plant [18] that the return temperature has never reached the temperature of 65°C. In accordance with the data recorded the temperature regime of 110°C/65°C was selected. Ljubljana and Prishtina are comparable in view of climate data. The design temperature in Ljubljana has been increased from -18°C to -13°C. If we assume the design temperature of -13°C for Prishtina and predict a 10% over-dimensioning of the existing heating units in buildings, the maximal return temperature in the district heating system is 65°C. The actual design temperature regime is then 117/65°C and it is comparable with the values selected in [18].

TASK 1 3-6


3.3 SELECTED TEMPERATURE REGIME The highest temperature regime in the Prishtina district heating system is defined in accordance with the lowest calculated ambient temperature and the required room temperature. The lowest temperature regime is defined by the requirements for domestic water heating. The domestic water heating is normally adjusted to 45°C. The domestic hot water in the storage tank should be heated to 60°C once per day to decrease legionella growth [19]. The temperature regime in the Prishtina district heating system is selected on the basis of the following conclusions:

• The existing design temperature -18°C is replaced with -13°C (comparison between Ljubljana and Prishtina)

• The existing utilities are over dimensioned for at least 10% (several investigations of the similar systems)

• Heating of domestic water is foreseen

The selected temperature regime is as follows:

• design temperature -13°C • temperature regime in the Prishtina district heating system 117/65°C • minimal supply temperature 70°C

The selected temperature difference between the supply and the return temperatures in the Prishtina district heating system is 52°C and a sliding operation is predicted. The supply line from the TPP Kosovo B to the heating station in Prishtina is specified as the district heating system of Kosovo (DHK). The foreseen optimal temperature difference in the Kosovo district heating system can be estimated in accordance with [20]. A sliding operation is foreseen. The approximate distance between the TPP Kosovo B and the heating station in Prishtina is 10 km and a maximal heat load in the range from 100 MW to 500 MW is estimated. The estimated optimal temperature difference in the Kosovo district heating system is 50°C. The selected temperature difference in the Prishtina district heating system is approximately the same as the estimated temperature difference in the Kosovo district heating system. The selected temperature difference in the Prishtina district heating system is appropriate for the optimal selection of the temperature difference in the Kosovo district heating system.

TASK 1 3-7


The selected temperature regime in the Prishtina district heating system is presented in the following diagram:

15 10 5 0 5 10 1520

40

60

80

100

120

140

SH_supplySH_returnDHP_supplyDHP_return

Selected temperature regime


tepe

ratu

re (°

C)

13−

TASK 1 4-0


CONTENTS

4. OTHER DATA ...................................................................................................................... 4-1

4.1 ENERGY PRICES .................................................................................................................. 4-1

4.1.1 Average prices in EU .............................................................................................................. 4-1 4.1.2 Selected prices......................................................................................................................... 4-4 4.2 EQUIPMENT COST............................................................................................................... 4-5

4.3 ECONOMICAL DATA .......................................................................................................... 4-6

TASK 1 4-1


4. OTHER DATA 4.1 ENERGY PRICES 4.1.1 Average prices in EU 4.1.1.1 Coal prices The price of hard coal used in power plants within the Community has been monitored and published since 1977. The data concerns hard coal (hard coal used for electrical production and for combined heat and power generation) imported by the EU from the third countries. [21]

Period Average Price

(EUR/tec*) Average Price

(EUR/MWh) 1st semester 2004 51,497 6,33 2nd semester 2003 40,751 5,01 1st semester 2003 38,783 4,77

* 1 tonne of coal equivalent = 29,3 GJ (net calorific value)

4.1.1.2 Electricity prices 4.1.1.2.1 Internal cost Electricity generated by coal fired plants will tend to be setting the market prices and determine the average prices. Coal prices have increased sharply in the last year, driven mainly by a sharp increase in demand from China. [21]

Time Coal price

(EUR/MWh) June 2004 7,5

These increases affect the electricity prices by increasing the cost of coal fired plant which often sets prices in wholesale markets. [21]

Time

Marginal generation

cost (EUR/MWh)

Total generation

cost (EUR/MWh)

June 2004 22 45

TASK 1 4-2


The CO2 tax is not included in the marginal cost. The average price for the CO2 tax (in accordance with the European Energy Exchange [22]) amounts to 8,67 EUR/EU (EU = 1tonCO2). The CO2 tax for Kosovo lignite is approximately 1.06 EUR/MWh (1ton CO2/1ton coal).

4.1.1.2.2 Market price

The electricity market price is defined in accordance with the European Energy Exchange Market [22]. The equilibrium price determined on this (European Energy Exchange) market is a market price which is defined by way of bilateral auction by suppliers as well as by consumers. Electricity prices on the European Energy Exchange are presented in a graph as an average price for a daily hour in the whole-year and in the winter period.

Average electricity price

0,00

10,00

20,00

30,00

40,00

50,00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

daily hours

elec

tric

ity p

rice

(Eur

/MW

h)

average electricitypriceaverage winterelectricity price

The base load price in November 2004 was 31,33 EUR/MWh. The electricity price in November in rush hours was 43,37 EUR/MWh. The selected rush hours are from 17.00h to 20.00h.

TASK 1 4-3


The predicted short term future prices are presented in the following table:

4.1.1.3 Fuel oil prices The average light fuel oil price on the EU market (25 Member States) was 529,07 EUR/1000l in November 2004, VAT included. The average VAT is around 20% for 25 Member States. [21] The light fuel oil price without VAT is as follows:

– 1000l of light fuel oil = 423,26 Euro (without VAT) = 43.21 Euro/MWh

The average heavy fuel price is as follows:

– 1ton of heavy fuel oil (sulphur<1) = 200,13 Euro (without VAT) = 17,56 Euro/MWh

TASK 1 4-4


4.1.2 Selected prices The selected prices are as follows:

• coal 1.05 EUR/GJ 3.78 EUR/MWh

• marginal electrical generation cost 18 EUR/MWh • total electrical generation cost 30 EUR/MWh • light fuel oil 343.2 EUR/1000 l without VAT and

customs duty 434.15 EUR/1000 l

44.33 EUR/MWh • heavy fuel oil (sulphur >1%) 220.47 EUR/tonne without VAT and

customs duty 278.89 EUR/tonne

24.49 EUR/MWh For ecological reasons (too high sulphur content) the use of heavy fuel oil is not acceptable in future. Heavy fuel oil with sulphur content less than 1% can be used in the existing large combustion units in accordance with the EU legislation. In the long term optimisation of the district heating system light fuel oil was selected as a peak load fuel. For the option “doing nothing” the existing heavy fuel oil was selected.

TASK 1 4-5


4.2 EQUIPMENT COST The prices are defined in accordance with the offers of potential suppliers participating in the project. The main equipment foreseen is as follows:

• shell tube heat exchanger in the TPP Kosovo B heating station • plate heat exchanger in the Prishtina heating station • pre-insulated pipes for connection of the TPP Kosovo B and Prishtina heating

stations (max. temperature 140°C) • large hot water reservoir for heat storage tank

Civil work costs are divided into:

Civil works (EUR/m3)

– excavation

3,9

- transport of excavated material (~10km)

12,5

– filling up with sand

29,2

– backfilling with excavated material

6,25

TASK 1 4-6


4.3 ECONOMICAL DATA Cost of heat supply from the TPP Kosovo B The cost of the heat supply from the TPP Kosovo B will be calculated as the total cost of the equivalent electrical production. Cost of electrical consumption for circulating pumps The total electrical production price will be used for the cost estimation of circulating pumps electrical consumption. Cost of heat produced by peak load boilers Light fuel oil price serves as a basis for cost estimation of the heat generated by peak load boilers. The reserve boilers are foreseen also as peak load units. Benefits from the heat storage tank A part of the daily heat production is moved from the daily hours to the nighttime. Most of the day the existing units operate at full load which is reached in accordance with the current condition of the unit. Operation with constant full load is required due to the lack of electricity in the country. The load is reduced for 7 hours only during the night. It is reduced for approximately 36 MWe. The benefit of the heat storage is increasing the electricity production during the day. The maximal heat load for heat supply to the heat storage tank is defined in accordance with the reduced load during the night. Reduction of the electricity production due to heating should not be greater than 100 MWe during the heat supply to the heat storage tank. Due to the lack of electricity it is not possible to define the electricity market price. Economic estimation of the heat storage tank is as follows:

• additional costs o investment of the heat storage tank o marginal generation cost for additional electricity production

• additional income o selling of the additionally produced electricity at the total generation cost

Interest rate

• interest rate 12% [23]

Considered life time • period of depreciation 25 years

TASK 1 5-0


CONTENTS

5. REFERENCES:..................................................................................................................... 5-1

TASK 1 5-1


5. REFERENCES: [1] Poraba toplotne energije v stanovanjskih objektih priklju�enih na plinovodni sistem v

Ljubljani; Heat consumption in residential building connected to gas pipelines in Ljubljana; Strokovno posvetovanje – energetika v našem okolju; (4; 2001; Portorož)

[2] Pravilnik o toplotni zaš�iti in u�inkoviti rabi energije v stavbah; Energy conservation and

efficient use of energy in buildings; Strokovna delavnica; (2002; Ljubljana) [3] Energija v stavbah - jutri; Energy in buildings - tomorrow; Seminar; (2004; Maribor) [4] Projektovanje postrojenja za centralno grejanje; Space heating design; Mašinski

fakultet; (1982; Beograd) [5] Kazalci rabe energije za ogrevanje in rabe elektrike; Indicators for the heat

consumption and electricity consumption; ZRMK; (2001; Ljubljana) [6] Prihranki energije pri posodobitvi ogrevanja in energetski obnovi ovoja stavbe; Energy

saving in improvements of heating systems and the building envelope; (2003; Ljubljana)

[7] Pregled inozemnih i doma�ih pilot programa energetske efikasnosti u zgradama;

Overview of the domestic and international energy programs; Energetski institute; (2001; Zagreb)

[8] Analiza porabe toplote in stroškov za potrebe ogrevanja v stanovanjskih objektih

priklju�enih na sistem daljinskega ogrevanja v Ljubljani; Analysis of heat consumption and heating costs of residential buildings connected to the district heating system in Ljubljana; Strokovno posvetovanje – energetika v našem okolju; (4; 2001; Portorož)

[9] Priprava tople sanitarne vode; Hot domestic water preparation; U�inkovita raba

energije; AURE; (1999; Ljubljana) [10] Primerjava kazalcev rabe energije v ob�inah; Comparison of the energy consumption

indicators in municipalities; ZRMK; (2001; Ljubljana) [11] Var�ne hiše; Economical (energy saving) buildings ; U�inkovita raba energije; EGES;

(2004; Ljubljana) [12]�District heating (1979, MacKenzie-Kennedy) [13]�Annual reports from district heating companies

TASK 1 5-2


[14]�Final Report to Ministry of Economic Affairs – Study on Energy Conservation Strategy in Slovenia, Task 1: Development of a National Energy Survey; (1996, ETSU)

[15]�Grejanje i klimatizacija; Heating and air conditioning; Interklima; (1995) [16] Utilization of Reserves to Achieve Lower Outflow and Return-Flow Temperatures in

District Heating Networks; F. Schmitt; (Jarbuch Fernwearme international 1992) [17] Possibilities and Marginal conditions for Lowering the Network Temperature shown by

the Esag District Heating System in Dresden; g. Berger; (Jarbuch Fernwearme international 1992)

[18] Sistem daljinskog grejanja Prištine; Idejni projekti; Sveska A.2.5. Idejni projekat

izmenjiva�ke stanice uz TO Priština; 5M 2112.5 Mašinski deo; Energoprojekt-ENTEL; (1993)

[19] Trinkwassererwaermungs und Leitungsanlagen; DVGW Technische Regel W 551 [20] Economic Outgoing Temperatures in DH Supply; H. Winkens, (Jarbuch Fernwearme

international 1988) [21] Energy sources and demand management; EUROPA - European Commission -

Energy; (November 2004) [22] European Energy Exchange – EEX Futures Market; (November 2004) [23] Feasibility studia za obnovu hidrocentrale Kozhner; (2002) [24] Strategija razvoja daljinske oskrbe s toploto in plinom v Ljubljani do leta 2010 z

na�rtom zmanjšanja onesnaževanja zraka za izpolnitev mednarodnih obveznosti; Strokovno posvetovanje – energetika v našem okolju; (4; 2001; Portorož)

[25] Novelacija energetske zasnove ob�ine Velenje; (2004; Portorož) [26] ESTAP KOSOVO; Module H »District Heating« Final Report; (2002; Pristhina)

TASK 2


TASK 2

LEAST COST ANALYSIS 1.0 INTRODUCTION 2.0 LEAST COST ANALYSIS 3.0 CONCLUSION 4.0 REFERENCES

TASK 2 1-0


CONTENTS

1. INTRODUCTION................................................................................................................. 1-1

TASK 2 1-1


1. INTRODUCTION The existing district heating system in Prishtina is supplied by two heavy fuel oil boilers. The alternative option is base load heat supply from the Kosovo B Thermal Power Plant. In this case the existing heavy fuel oil boilers would be used as peak and reserve boilers. The main purpose of this task is to confirm that the heat supply from the Kosovo B Thermal Power Plant could be a better option. Both options (without and with connection to the TPP Kosovo B) were evaluated. The existing floor area which is heated by the existing district heating system and the existing buildings which are foreseen for connection were taken as a conservative approach. The total heat consumption was defined in accordance with the specific heat consumption selected in TASK 1. The temperature regime selected in TASK 1 was used for district heating system in Prishtina. The temperature difference in the pipeline from the TPP Kosovo B to the Prishtina heating station was defined in accordance with the data published [1]. The selected temperature difference is 50°C. A new pipeline is foreseen for the district heating system from the TPP Kosovo B to the heating station in Prishtina. The pre-insulated pipes are foreseen due to the required underground installation by the Prishtina municipality. A new heating station is foreseen at the TPP Kosovo B. The heating station will consist of a shell tube heat exchanger, circulating pumps and a static pressure control system. The steam will be extracted from the exhaust of the intermediate pressure stem turbine. The estimated length of the pipeline from the TPP Kosovo B to the heating station in Prishtina is approximately 2 x 10500 m. The heating station in Prishtina shall be erected in the existing building which was intended for the same purpose in the previous project [2]. A plate heat exchanger and circulating pumps shall be installed.

TASK 2 2-0

File: Task2-par2-rev2.DOC - IBE Revizija: 2 Objekt: KOSOVO COMBINED HEAT AND POWER Datum: : 21.3.2005

CONTENTS

2. LEAST COST ANALYSIS................................................................................................... 2-1

2.1 EXISTING DISTRIC HEATING SYSTEM IN PRISHTINA ............................................... 2-1

2.2 BASE HEAT SUPPLY FROM TPP KOSOVO B.................................................................. 2-3

2.3 EVALUATION....................................................................................................................... 2-6

TASK 2 2-1


2. LEAST COST ANALYSIS 2.1 EXISTING DISTRIC HEATING SYSTEM IN PRISHTINA There is an existing district heating system already erected in Prishtina.. The main boiler plant in the southern end of the city is the main heat source in the network and includes all facilities for operation of the district heating system. Heat is produced by two heavy fuel oil boilers in the main boiler house. The heavy fuel oil is stored in four ground tanks with 1800 m3 of overall capacity. Total capacitiy of the boilers is 2 x 58 MW. An uninterrupted night time operation with sufficient heat supply is foreseen.

a Heat consumption in the buildings of Prishtina:

Type of building Annual heat

consumption for heating (kWh/m2a)

Floor area (m2)


(MWh/a) Apartments, Flats 150 634086 95113

Stores, Offices 150 43056 6458 Schoolhouses 170 128561 21855

Public buildings 200 182610 36522 New connections 9000

Total 988313 168949 Total heat consumption was defined in accordance with specific heat consumption selected in TASK 1 for the existing floor area in the city of Prishtina and the existing buildings foreseen for connection. The present maximal head load in the heating season is around 83MW.

TASK 2 2-2


Existing heat load and heat consumption

Ambient air temperature Days Heat load Fuel consumption

(°C) MW MWh

-13 2 83.34 4001 4445-12 1 80.82 1940 2155-11 1 78.29 1879 2088-10 1 75.77 1818 2020-9 1 73.24 1758 1953-8 1 70.72 1697 1886-7 2 68.19 3273 3637-6 3 65.67 4728 5253-5 2 63.14 3031 3367-4 3 60.61 4364 4849-3 4 58.09 5577 6196-2 4 55.56 5334 5927-1 6 53.04 7637 84860 6 50.51 7274 80821 10 47.99 11517 127962 9 45.46 9820 109113 19 42.94 19578 217544 18 40.41 17457 193975 16 37.88 14547 161646 16 35.36 13578 150867 13 32.83 10244 113828 14 30.31 10183 113159 10 27.78 6668 740810 10 25.26 6061 673511 12 22.73 6546 727412 11 20.20 5334 5927

Total 195 185844 206493

MWh

Heat consumption

TASK 2 2-3


2.2 BASE HEAT SUPPLY FROM TPP KOSOVO B The base load heating from the TPP Kosovo B is an alternative option. The estimated base heat load for district heating system in the city of Prishtina supplied from the Kosovo B Thermal Power Plant is 58 MW. This is approximately 70% of the maximal heat load in the heating season. In this case, the heavy fuel oil boilers shall be used as peak load and reserve boilers. The base heat load supply from the Kosovo B Thermal Power Plant will cover the entire heat consumption down to the ambient temperature of – 3°C. The main data of the alternative heat supply system are as follows: Max. heat load for alternateve heat supply system 58,09 MWTemperature regime 120/70 °C (at ambient temperature -3° C)

Ambient air temperature

DaysHeat

consumption

(°C) MWh

DH system in Prishtina

Base load from TPP Kosovo B

Peak load boiler



Peak load boiler

-13 2 83,34 58,09 25,26 4001 2788 1212-12 1 80,82 58,09 22,73 1940 1394 546-11 1 78,29 58,09 20,20 1879 1394 485-10 1 75,77 58,09 17,68 1818 1394 424-9 1 73,24 58,09 15,15 1758 1394 364-8 1 70,72 58,09 12,63 1697 1394 303-7 2 68,19 58,09 10,10 3273 2788 485-6 3 65,67 58,09 7,58 4728 4182 546-5 2 63,14 58,09 5,05 3031 2788 242-4 3 60,61 58,09 2,53 4364 4182 182-3 4 58,09 58,09 0,00 5577 5577 0-2 4 55,56 55,56 0,00 5334 5334 0-1 6 53,04 53,04 0,00 7637 7637 00 6 50,51 50,51 0,00 7274 7274 01 10 47,99 47,99 0,00 11517 11517 02 9 45,46 45,46 0,00 9820 9820 03 19 42,94 42,94 0,00 19578 19578 04 18 40,41 40,41 0,00 17457 17457 05 16 37,88 37,88 0,00 14547 14547 06 16 35,36 35,36 0,00 13578 13578 07 13 32,83 32,83 0,00 10244 10244 08 14 30,31 30,31 0,00 10183 10183 09 10 27,78 27,78 0,00 6668 6668 010 10 25,26 25,26 0,00 6061 6061 011 12 22,73 22,73 0,00 6546 6546 012 11 20,20 20,20 0,00 5334 5334 0

Total 195 185844 181055 4789

Heat load

MW

Heat production

MWh

TASK 2 2-4


The alternative heat supply system from the Kosovo B Thermal Power Plant will assure 97% off the complete heat consumption during the heating season. The equivalent electricity production (base heat load cost) in the TPP Kosovo B and fuel oil consumption in peak load boilers is presented in the Table below:

Ambient air temperature

DaysHeat

consumptionFuel

consumptionDays

(°C) MWh MWh MWh



Peak load boiler

Peak load boiler

Peak load boiler

-13 2 4001 2788 1212 474 1347 2-12 1 1940 1394 546 237 606 1-11 1 1879 1394 485 237 539 1-10 1 1818 1394 424 237 471 1-9 1 1758 1394 364 237 404 1-8 1 1697 1394 303 237 337 1-7 2 3273 2788 485 474 539 2-6 3 4728 4182 546 711 606 3-5 2 3031 2788 242 474 269 2-4 3 4364 4182 182 711 202 3-3 4 5577 5577 0 948 0 0-2 4 5334 5334 0 907 0 0-1 6 7637 7637 0 1298 0 00 6 7274 7274 0 1237 0 01 10 11517 11517 0 1958 0 02 9 9820 9820 0 1669 0 03 19 19578 19578 0 3328 0 04 18 17457 17457 0 2968 0 05 16 14547 14547 0 2473 0 06 16 13578 13578 0 2308 0 07 13 10244 10244 0 1741 0 08 14 10183 10183 0 1731 0 09 10 6668 6668 0 1133 0 010 10 6061 6061 0 1030 0 011 12 6546 6546 0 1113 0 012 11 5334 5334 0 907 0 0

Total 195 185844 181055 4789 30779 5321 17


Equivalent electricity

productionHeat production

MWh

The estimated distance from the TPP Kosovo B to the main heating station in Prishtina is approximately 2 x 10500 m. The pre-insulated pipes are foreseen for the underground installation. The main data of the new equipment for alternative heat supply are as follows:

TASK 2 2-5


• Pipeline

The temperature regime is defined in accordance with [1].

Temperature °C

Flow speed (m/s)

Pipeline outside

diameter (mm)

Wall thickness

(mm)

Estimated length of the pipeline (m)

supply 120 1,8 457 6,30 10500return 70 1,8 457 6,30 10500

• Heat exchangers

Location TypeEstimated heat load

(MW)

Main heating station in Pristhina

plate 58

Heating station in TPP Kosovo B

shell tube 58

• Pumps

Temperature °C (-3°C)

Max. flow (kg/s)

Estimated length of the pipeline (m)

Total pressure drop (bar)

120/70 277,94 21000 20

Location of the pumps:

– Heating station in the TPP Kosovo B – Mean heating station in Prishtina

TASK 2 2-6


2.3 EVALUATION For evaluation the net present value method was used.. Two main options were analyzed:

• Option A: option with the existing heating • Option B: option with base load heating from the TPP Kosovo B

The Option A represents the existing heating system with two heavy fuel oil boilers in Prishtina. For ecological reasons light fuel oil is also considered as an alternative fuel in the option A. The Option B represents base heat load supply from the TPP Kosovo B. In this option the existing heavy fuel oil boilers will be used as peak load and reserve boilers. Heavy fuel oil and light fuel oil are considered as fuels for peak load boilers. The main data for the analysis:

• total electrical generation cost 30 EUR/MWh • heavy fuel oil price 24,49 EUR/MWh • light fuel oil price 44,33 EUR/MWh • interest rate 12 % • duration of the heating season 195 days • period of depreciation 25 years

The costs are presented in the following diagram and table:

TASK 2 2-7


0,00

10,00

20,00

30,00

40,00

50,00

60,00

70,00

80,00

Cos

t (m

io E

UR

O)

A1 - base option(heavy fuel oil)

A2 - base option(light fuel oil)

B1- alternativeoption (peak -heavy fuel oil)

B2 - alternativeoption (peak -light fuel oil)

Option

Cost structure

maintenance

energy

investment

In the depreciation. period considered, the option with base load heat supply from the TPP Kosovo B demonstrates lower costs. The type of the fuel for peak load boilers has minor influence on the total costs.

TASK 2 2-8


NPV

Description Option

Investment cost

Fuel oil cost

Base heat load cost

Operation and

maintenance cost

mio EURO mio EURO mio EURO mio EURO mio EUROExisting system - heavy fuel oil

A10,00 5,06 0,00 0,15 40,85

Existing system - light fuel oil

A20,00 9,15 0,00 0,15 72,98

Base heat load supply from TPP Kosovo B - heavy fuel oil for peak load

B1

16,42 0,13 0,92 0,31 27,10Base heat load supply from TPP Kosovo B - light fuel oil for peak load

B2

16,42 0,24 0,92 0,31 27,96

Cost

TASK 2 3-0


CONTENTS

3. CONCLUSION...................................................................................................................... 3-1

TASK 2 3-1


3. CONCLUSION The option with the existing heat supply by two heavy fuel oil boilers and the option with base load heating from the TPP Kosovo B were evaluated. The existing heating system (base option) requires low investment even in case with replacement or extension of the existing boilers. The existing boilers are fired with heavy fuel oil. The option with fuel oil was also considered out of ecological reasons. The connection of the existing district heating system to the TPP Kosovo B (alternative option) requires high investment. In spite of high installation costs the operating costs are quite low in comparison with the base option. The net present value of the alternative option is significantly lower than in the base option. The option with base load heating from the TPP Kosovo B is more economical than the existing heating system. The result confirms that the connection to the TPP Kosovo B is an optimal solution. It is made in accordance with the European practice. There are a lot of installations with similar distances between consumers and heat production units. The predicted growth of the heat consumption will increase the benefits of the selected option.

TASK 2 4-0


CONTENTS

4. REFERENCES:..................................................................................................................... 4-1

TASK 2 4-1


4. REFERENCES: [1] Warmeauskopplung aus Heizkraftwerken; Fernwarme international - FWI; (1992) [2] Sistem daljinskog grejanja Prištine; Idejni projekti; Sveska A.2.5. Idejni projekat

izmenjiva�ke stanice uz TO Priština; 5M 2112.5 Mašinski deo; Energoprojekt - ENTEL; (1993)

TASK 3


TASK 3

ASSESSMENT OF CURRENT STATUS OF INSTALLATIONS 1.0 INTRODUCTION 2.0 CURRENT STATUS OF THE EQUIPMENT 3.0 CONCLUSION

TASK 3 1-0


CONTENTS

1. INTRODUCTION................................................................................................................. 1-1

TASK 3 1-1


1. INTRODUCTION Technical documentation for the district heating of the city of Prishtina from the Kosovo A Thermal Power Plant was made in 1993. The design data for the district heating system running from the Kosovo A Thermal Power Plant to the heating station in Prishtina were as follows:

• nominal heat load 85 MW • temperature regime 160°C/70°C

The anticipated main units for the district heating system were as follows:

• heating station at the TPP Kosovo A • pipeline from the TPP Kosovo A to the heating station in Prishtina • heating station in Prishtina

The installation started after the documentation was completed and stopped due to the crisis in the Kosovo region. The current status of the installed equipment is as follows:

unit current status of the equipment heating station at the TPP Kosovo A installation has not started pipeline from the TPP Kosovo A to the heating station in Prishtina

most of foundations for supports are finished, most of the pipeline is temporary welded

heating station in Prishtina main civil structures are erected The installed equipment hasn’t been protected against weather conditions after the project was stopped.

TASK 3 2-0


CONTENTS

2. CURRENT STATUS OF THE EQUIPMENT ................................................................... 2-1

2.1 PIPELINE FROM THE TPP KOSOVO A TO PRISHTINA................................................. 2-1

2.2 HEATING STATION IN PRISHTINA.................................................................................. 2-5

TASK 3 2-1


2. CURRENT STATUS OF THE EQUIPMENT 2.1 PIPELINE FROM THE TPP KOSOVO A TO PRISHTINA The main data of the pipeline are as follows:

• outside diameter 457.2 mm • wall thickness 6.3 mm • material St 37.0 (�.0361)

Total length of the pipeline is 2 x 7800 m. The majority of the required pipes and elbows are found on the site. Most of the pipes and elbows are temporary welded and layed on concrete foundations. Front pipes are not closed with caps for storage. Only straight pipes were corrosion protected. The inner surface of the pipes is corroded in spite of the elbows where the inner and the outer surfaces are corroded. The supports are not located on the site. Most of the concrete foundations and ducts without covers and drying systems are installed. The quality assurance documentation is not available. The current status of the pipeline is presented on the pictures as follows:

TASK 3 2-2


Prior to the continuation of the installation the following works shall be carried out: The above ground installation

• demolition of the existing pipes and elbows • manual internal cleaning of the pipes and elbows • cleaning of the pipes and elbows with shot blasting and corrosion protection • metallurgical examination of the pipes and elbows as a substitution for the missing

quality assurance documentation • repair of the damaged concrete foundations • leveling of the foundations which are not on the appropriate level • repair of the damaged concrete ducts • installation of the drying system in the ducts

The underground installation (pre-insulated pipes)

• demolition of the existing pipes and elbows • manual internal cleaning of the pipes and elbows • cleaning of the pipes and elbows with shot blasting and corrosion protection • metallurgical examination of the pipes and elbows as a substitution for the missing

quality assurance documentation • pre-insulated pipes covering with insulation in the factory

TASK 3 2-3


In the design phase a stress calculation was made in accordance with the JUS.M.E2.038 code. The main data for the calculation were as follows:

• design temperature 160°C • design pressure 22 bar g • material St 37.0 (�.0361) • type welded • safety factor 1.5 • welding factor 0.8 (without inspection certificate in accordance with

JUS.C.B5.026) • thickness tolerance -0.35 mm • additional thickness

due to corrosion 1 mm • wall thickness 6.3 mm

The maximal allowable pressure should be reduced down to 18 bar due to high corrosion. Regarding the original calculation an additional reduction of the wall thickness for 1 mm is foreseen It should be pointed out that the JUS.M.E2.038 code does not consider the influence of the inspection certificate on the safety factor. This influence affects only the welding factor. In accordance with the JUS.M.B5.026 code delivery with or without the inspection certificate depends on the agreement between the purchaser and the supplier. The DIN 2413 code increases the safety factor from 1.5 to 1.7 in case of a delivery without the inspection certificate. The welding factor is 0.85. If we assume the increased value of the safety factor, the maximal allowable pressure is reduced to 16 bar. The foreseen pressure drop in the pipeline from the TPP Kosovo B to the heating station in Prishtina is approximately 11 bar. The maximal pressure in the pipeline is as follows:

pressure drop 11 bar elevation difference 74 m 7.4 bar vapor pressure for 130°C 1.7 bar g safety range for pressure control 0.5 bar

required maximal pressure 20.6 bar The required maximal pressure is similar as the original design pressure. The pressure drop in the pipeline is increased due to the extension of the line and the increased roughness. On the other side, the maximal temperature is reduced in order to achieve a lower maximal pressure required. In spite of the temperature reduction the required pressure is still higher than the allowable pressure of the current pipeline. The operation with the existing pipes is possible only with a high risk. Due to the temperature reduction the line capacity is sufficient only for the existing heat consumption of the district heating system in Prishtina.

TASK 3 2-4


In case with the existing pipes the operating costs increase as well due to a higher roughness. The increased pressure drop is calculated as follows:

• case with new pipes • length 21 km • roughness 0.2 mm

• case with the existing pipes � existing pipes

• length 15.6 km • roughness 1.5 mm

� new pipes • length 5.4 km • roughness 0.2 mm

The increased pressure drop in the case with the existing pipes is approximately 6 bar. The increased operating costs are calculated as follows:

• marginal electricity price 22 EUR/MWh • interest rate 12% • duration of the heating season 195 days • considered years 25

The increased operating costs are approximately 200,000 EUR. The estimated price of the new pipes and elbows for the same quantity as it is installed is approximately 2.5 mio EUR. The municipality of Prishtina has additional requirements concerning installation of the pipeline:

• The pipeline should be installed underground. • The route foreseen is predicted for the reconstruction of the motor way running from

Prishtina to Mitrovica In order to meet the requirement regarding the underground installation the pre-insulated pipes are foreseen. Generally, it is possible to send the existing pipes and elbows in the factory to be covered by insulation. We can make a conservative conclusion that due to the differences in dimensions between the supplied elbows and pre-insulated elbows.only pipes can be used The estimated price of the new pipes in the same quantity as supplied amounts to approximately 2.2 mio EUR. The estimated steel pipes share in the total price of the pre-insulated pipes is approximately 60%. On the other hand, the existing pipes use could cause a highly risky operation and the capacity of the existing pipeline would be sufficient only for the existing heat consumption. It is not a good engineering practice to design a district heating system with high risk operation. Consequently, the existing pipes are not foreseen for the district heating system treated in the feasibility study.

TASK 3 2-5


2.2 HEATING STATION IN PRISHTINA The heating station is made from pre-fabricated concrete elements. There are only foundations, external walls and roofing installed. The building is not protected against weather conditions. The openings for windows and doors are not covered and a temporary roof is not installed, either. The current status of the heating station is presented on the pictures as follows:

TASK 3 2-6


The design documentation covering the existing structure has foreseen a monolith reinforced concrete skeleton type of structure with a steel roof. Actually, the structure is of a pre-fabricated RC type composed of main columns, main roof supports, longitudinal façade connections and T-type roof beams. The foundations are of reinforced concrete, block type, interconnected by strip supports along the rim of the structure, supporting the façade pre-fabricated panels. Relevant technical documentation shall be obtained for the existing structure confirming that the structure serves for the anticipated purpose. This shall represent a starting point of the reconstruction. The construction should be completed in accordance with the revised technical documentation. In order to avoid any additional damage on the building temporary protection (at least roof) is suggested prior to final construction. Using of the existing building for a heating station is a preferred option.

TASK 3 3-0


CONTENTS

3. CONCLUSION...................................................................................................................... 3-1

TASK 3 3-1


3. CONCLUSION The supplied equipment consists of a pipeline with total length of approximately 15.6 km and the main civil structure for the heating station in Prishtina. The supplied pipeline was foreseen for an aboveground installation. There are no inspection certificates for the pipeline and it is corroded due to an inappropriate preservation. Prior to any continuation of the installation the existing pipeline should be dismantled, cleaned and sent to factory for covering with insulation. It should be installed underground. On the other hand, the existing pipeline use could cause operation with high risk and the dimension of the pipeline is sufficient only for the existing heat consumption. In order to assure a reliable operation and an increased heat consumption the use of the existing pipeline is not recommended in the feasibility study. The existing heating station in Prishtina is in a good condition and appropriate for the designed purpose. It is foreseen that the existing civil structure will be completed in accordance with the revised technical documentation. It is suggested to protect the existing civil structure against any future damage prior to final construction.

TASK 4


TASK 4

TECHNO-ECONOMIC ANALYSIS 1.0 INTRODUCTION 2.0 OPTIMIZATION 3.0 TECHNICAL DESCRIPTION 4.0 INVESTMENT COSTS AND OPERATING DATA 5.0 TIME SCHEDULE 6.0 ENCLOSURES 7.0 DRAWINGS

TASK 4 1-0


CONTENTS

1. INTRODUCTION................................................................................................................. 1-1

TASK 4 1-1


1. INTRODUCTION The main purpose of this task is selection of an optimal heat load from the TPP Kosovo B for the district heating system, and of a temperature regime in the supply line from the heating station in the TPP Kosovo B to the heating station in Prishtina. Heat consumption and temperature regime in the district heating system of the city of Prishtina are defined in the Task 1. The following scenarios are considered:

• low scenario Projection I • medium scenario Projection II • high scenario Projection III

HEAT CONSUMPTION

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2005 2010 2015 2020 2025 2030 2035

Year

Hea

t con

sum

ptio

n (M

Wh/

a)

lowmedium

high

HEAT LOAD

0

50

100

150

200

250

300

350

400

450

2005 2010 2015 2020 2025 2030 2035

Year

Hea

t loa

d (M

W)

low

medium

high

TASK 4 1-2


15 10 5 0 5 10 1520

40

60

80

100

120

140

SH_supplySH_returnDHP_supplyDHP_return

Selected temperature regime


tepe

ratu

re (

°C)

13−

Technical description, investment price and operating costs are included in the second part of this task.

TASK 4 2-0


CONTENTS

2. OPTIMIZATION.................................................................................................................. 2-1

2.1 INTRODUCTION................................................................................................................... 2-1

2.2 OPTIMAL HEAT SUPPLY FROM THE TPP KOSOVO B ................................................. 2-3

2.2.1 Optimal velocity in the main pipeline ..................................................................................... 2-3 2.2.2 Connection to the steam turbine.............................................................................................. 2-4 2.2.3 Optimal heat supply from the TPP Kosovo B.......................................................................... 2-7 2.3 HEAT STORAGE TANK..................................................................................................... 2-29

2.4 STATIC PRESSURE SYSTEM ........................................................................................... 2-35

2.5 THERMAL COMPENSATION ........................................................................................... 2-38

2.6 INSULATION THICKNESS................................................................................................ 2-42

TASK 4 2-1


2. OPTIMIZATION 2.1 INTRODUCTION The optimization of the heat supply from the TPP Kosovo B was divided into three phases. An optimal heat supply was selected in the first phase and a thermal heat storage tank was considered in the second phase. In the third phase the rest of optimizations were done. The optimal heat supply from the TPP Kosovo B was defined in five main steps:

• selection of optimal velocity in the pipeline • selection of connection to the steam turbine • calculation of heat supply for different scenarios and options • calculation of net present values for different scenarios and options • selection of optimal design

Additional electrical production in the TPP Kosovo B was considered by heat storage installation. The following optimizations were performed in the third phase:

• static pressure system • compensation of the main pipeline • thermal insulation thickness

TASK 4 2-2


The optimization process is presented in the following flow diagram.

Optimal connection to the steam turbine

Calculation of net present values for different options

Selection of optimal velocity in the main pipeline

Selection of optimal heat supply from the TPP Kosovo B and of temperature regime for all scenarios.

low scenario

Calculation of heat supply from the TPP Kosovo B and from the peak load boiler for different options


medium scenario



high scenario


Considering of the heat storage tank

Selection of optimal location for maintaining static pressure

Selection of thermal compensation

Selection of thermal insulation thickness

TASK 4 2-3


2.2 OPTIMAL HEAT SUPPLY FROM THE TPP KOSOVO B 2.2.1 Optimal velocity in the main pipeline The investment costs and the operating costs were included in the main pipeline optimal velocity calculation. The option with minimal net present value was selected as an optimal option. The input data are as follows:

• length of the pipeline 10.5 km • estimated investment cost of the pipeline with standard wall thickness

and without civil works o DN300 3.6 mio EUR o DN500 7.2 mio EUR o DN700 10.9 mio EUR o DN1000 20.0 mio EUR o installation cost 30%

• estimated investment cost of the pumping station 810 EUR/kW • custom duty 10% • electricity price 30 EUR/MWh • interest rate 12% • period of depreciation 25 years

The results are presented in the following diagrams:

Net present value Pressure drop

1 1.5 2 2.5 30

5

10

15

investmentoperatingNPV

velocity (m/s)

cost

(mio

EU

R)

1 1.5 2 2.5 30

20

40

velocity (m/s)

pres

sure

dro

p (b

ar)

TASK 4 2-4


In accordance with the above diagrams the optimal velocity is around 2 m/s. The maximal pressure in the pipeline depends on the pressure drop. Higher pressure drop requires higher maximal pressure in the pipeline. A standard wall thickness was included in the calculation. The wall thickness of the pipeline and the nominal pressure of the equipment should be increased in case of the high pressure drop. The optimal velocity of 1.8 m/s is selected in accordance with the above diagrams in order to reduce the maximal pressure in the pipeline. 2.2.2 Connection to the steam turbine There are two coal fired units with 2 x 339 MW nominal power. The existing steam turbines are not designed for the connection to the district heating system. There exist two appropriate locations for extraction of the steam required for the heating station:

• inlet of the superheated steam into IP steam turbine • exhaust from the IP steam turbine

Regarding the appropriate locations for extraction of the steam there are two main possible designs of the heating station:

• design with one stage heater • design with two stage heaters

The design with one stage heater requires installation of a throttle valve on the existing steam pipeline between the IP and the LP steam turbine. The steam for the heating station is extracted upstream of the throttle valve. The required steam pressure in the heater is achieved by throttling of the valve. In the design with two stage heaters the installation of the throttle valve on the steam pipeline between the IP and the LP steam turbine is not required. The first stage heater is connected to the non-regulating exhaust from the IP turbine and the second stage heater is supplied by the superheated steam via a temperature control valve. Both designs are presented in the following flow diagrams:

TASK 4 2-5


��

��

TASK 4 2-6


The difference between both designs is presented with a value which indicates the reduction of the electricity production with relation to the heat load and outlet temperature from the heating station. The reduction of the electricity production is calculated for different heat loads and outlet temperatures from the heating station. The nominal load of the coal fired unit is 90% of the design load. The reduced electricity production for both options is shown in the following diagram:

0.10

0.15

0.20

0.25

0.30

0.35

0.40

100 110 120 130 140

outlet temperaturefrom heating station (°C)

redu

ctio

n of

the

elec

tric

al p

rodu

ctio

n (M

we/

MW

t)

50 MW with 1 steageheater




50 MW with 2 stageheater




In accordance with the above diagram we can conclude that there is no significant difference between both options except by the highest heating load. The option with a two stage heater is not appropriate for the highest load. The option with a one stage heater is selected owing to its simplified design.

TASK 4 2-7


2.2.3 Optimal heat supply from the TPP Kosovo B 2.2.3.1 Overview Several options for each scenario were considered by selection of the optimal heat supply from the TPP Kosovo B. The options could be divided into three main groups:

• Options with installation of the main pipeline only at the beginning of the operation • Options with installation of the main pipeline in two phases:

� Installation of the supply and return line at the beginning of the operation

� Installation of the third line after the heat consumption increases up to the appropriate level. The cross area of the third line is equivalent to the cross area of both existing lines and the existing supply line becomes a return line.

• Option with the existing pipes. The existing pipes shall be demolished, cleaned and pre-insulated before installation. After the heat consumption increases up to the appropriate level, the third line will be installed.

The options which were considered are as follows: option description DN450 Supply and return pipeline with nominal diameter DN 450 are installed

at the beginning of the operation DN500 Similar as by option DN450 DN600 Similar as by option DN450 DN700 Similar as by option DN450 2 x DN350 Supply and return pipeline with nominal diameter DN350 are installed at

the beginning of the operation. The third line will be installed in the second phase

2 x DN400 Similar as by option 2 x DN350 2 x DN450 Similar as by option 2 x DN350 2 x DN450-exisitng The existing pipes DN450 are demolished, cleaned, pre-insulated and

installed at the beginning of the operation. The third pipeline will be installed in the second phase.

2 x DN500 Similar as by option 2 x DN350 2 x DN600 Similar as by option 2 x DN350 In options where the installation of the main pipeline is foreseen in two phases, the installation of the heating stations is foreseen in two phases as well.

TASK 4 2-8


The main difference between using the new pipes and the existing ones is in the maximal allowable temperature. Static pressure is defined in accordance with the maximal temperature. Maximal pressure in the pipeline depends on the static pressure and the pressure drop in the pipeline. The maximal allowable pressure in the existing pipes is reduced due to a high corrosion. The maximal allowable temperature in the new pipes is limited up to 140°C and in the existing pipes up to 120°C due to the reduction of the maximal allowable pressure. The main input data for the optimization are as follows: Variable investment costs

• main pipeline � DN300 3.6 mio EUR � DN500 7.2 mio EUR � DN700 10.9 mio EUR � DN1000 10.0 mio EUR � saving by using the existing pipes 1 mio EUR � installation cost 30%

• heating station at the TPP Kosovo B 7.1 EUR/kW • heaters in the heating station in Prishtina 120 EUR/kW °C • pumping station 810 EUR/kW • customs duty 10%

Operating costs • reduction of the electricity production in the TPP Kosovo B electricity price • electricity consumption for circulating pumps electricity price • light fuel oil consumption for peak load boiler 44.33 EUR/MWh • maintenance costs

� pipeline 1% � equipment 2%

• electricity price 30 EUR/MWh Other data

• interest rate 12% • period of depreciation 25 years

The optimization is presented in the following flowchart:

TASK 4 2-9


Pipe flow calculation for all considered pipe diameters

Nominal temperature regime selection in the first year of operation at ambient temperature of -3°C for all considered pipe diameters

Temperature regimes calculation for all outside temperatures and years if all heat

is supplied from the TPP Kosovo B

Investment costs calculation

Net present value calculation

Optimal option selection

Correction of the temperature regime and heat supply from the TPP Kosovo B for all cases where maximal temperature in the supply line is higher than allowable

Operating costs calculation

TASK 4 2-10


The results are presented in the following diagrams. 2.2.3.2 Scenario: Low The results of the optimization are shown in the following diagram.

Net present value

0.05.0

10.015.020.025.030.035.040.045.050.0

DN

450

DN

500

DN

600

DN

700

2xD

N35

0

2xD

N40

0

2xD

N45

0

2xD

N45

0-ex

istin

g

2xD

N50

0

2xD

N60

0

option

net p

rese

nt v

alue

(mio

EU

R)


The optimal option is the DN400 one. The net present value of the DN450option is quite close to the net present value of the DN400option. The main operating data for DN400 and DN450 options are shown below. Key: t1DHK supply temperature from the TPP Kosovo B district heating station t2DHK return temperature to the TPP Kosovo B district heating station t1HS_DHP outlet temperature from the heating station in Prishtina t1DHP supply temperature from the boiler house in Prishtina t2DHP return temperature from the district heating system in Prishtina DHK heating station in the TPP Kosovo B TPP Kosovo B heating station in the TPP Kosovo B DHP heating station in Prishtina Peak load boiler peak load boiler and boiler house in Prishtina

TASK 4 2-11


Operating data for the DN400option

0 6 12 18 24

year

200000

300000

400000

500000

600000

heat

sup

ply

(MW

h)


0 6 12 18 240

1.67

3.33

5

6.67

8.33


year

heat

rate

%


0 6 12 18 24

year

1

2

3

4

5

cost

(m

io E

UR

)



15 9 3 3 9 150

15

30

45

60

75

90




Hea

t loa

d M

W

15 9 3 3 9 150

70

140

210

280

350




Hea

t loa

d M

W

TASK 4 2-12


20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

TASK 4 2-13


20 10 0 10 20150

200

250

300

350

400

DHKDHP



flow

kg/

sec

20 10 0 10 20300

400

500

600

700

800

DHKDHP



flow

kg/

sec

20 10 0 10 20400

600

800

1000

1200

DHKDHP



flow

kg/

sec

TASK 4 2-14



0 6 12 18 24

year

200000

300000

400000

500000

600000

heat

sup

ply

(MW

h)


0 6 12 18 240

1.67

3.33

5

6.67

8.33


year

heat

rate

%


0 6 12 18 24

year

1

2

3

4

cost

(mio

EU

R)



15 9 3 3 9 150

15

30

45

60

75

90




Hea

t loa

d M

W

15 9 3 3 9 150

70

140

210

280

350




Hea

t loa

d M

W

TASK 4 2-15


20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

TASK 4 2-16


20 10 0 10 20150

200

250

300

350

400

DHKDHP



flow

kg/

sec

20 10 0 10 20300

400

500

600

700

800

DHKDHP



flow

kg/

sec

20 10 0 10 20500

600

700

800

900

1000

1100

DHKDHP



flow

kg/

sec

TASK 4 2-17


2.2.3.3 Scenario: Medium The results of the optimization are shown in the following diagram.

Net present value

0.0

10.0

20.0

30.0

40.0

50.0

60.0

DN

450

DN

500

DN

600

DN

700

2xD

N35

0

2xD

N40

0

2xD

N45

0

2xD

N45

0-ex

istin

g

2xD

N50

0

2xD

N60

0

option

net p

rese

nt v

alue

(mio

EU

R)


The optimal option is the DN450 one. The main operating data for the DN450 option are shown below.

TASK 4 2-18



0 6 12 18 24

year

200000

400000

600000

800000

heat

sup

ply

(MW

h)


0 6 12 18 240

1.67

3.33

5

6.67

8.33


year

heat

rate

%


0 6 12 18 24

year

1

2

3

4

5

6

cost

(mio

EU

R)



15 9 3 3 9 150

15

30

45

60

75

90




Hea

t loa

d M

W

15 9 3 3 9 150

70

140

210

280

350




Hea

t loa

d M

W

TASK 4 2-19


20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

TASK 4 2-20


20 10 0 10 20150

200

250

300

350

400

DHKDHP


ambient temperature grd.C

flow

kg/

sec

20 10 0 10 20400

500

600

700

800

900

DHKDHP



flow

kg/

sec

20 10 0 10 20400

600

800

1000

1200

1400

DHKDHP



flow

kg/

sec

TASK 4 2-21


2.2.3.4 Scenario: High The results of the optimization are shown in the following diagram.

Net present value

0.010.020.030.040.050.060.070.080.090.0

100.0

DN

450

DN

500

DN

600

DN

700

2xD

N35

0

2xD

N40

0

2xD

N45

0

2xD

N45

0-ex

istin

g

2xD

N50

0

2xD

N60

0

option

net p

rese

nt v

alue

(mio

EU

R)


TASK 4 2-22



0 6 12 18 24year

200000

400000

600000

800000

1000000

1200000

heat

sup

ply

MW

h

TPP Kosovo Bpeak load boiler


0 6 12 18 240

1.67

3.33

5

6.67

8.33


year

heat

rate

%

0 6 12 18 24

year

0

2

4

6

8

10

cost

mio

EU

R



15 9 3 3 9 150

15

30

45

60

75

90




Hea

t loa

d M

W

15 9 3 3 9 150

90

180

270

360

450




Hea

t loa

d M

W

TASK 4 2-23


20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

grd.

C

20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

TASK 4 2-24


20 10 0 10 20150

200

250

300

350

400

DHKDHP



flow

kg/

sec

20 10 0 10 20400

500

600

700

800

900

DHKDHP



flow

kg/

sec

20 10 0 10 20600

800

1000

1200

1400

1600

1800

2000

DHKDHP



flow

kg/

sec

TASK 4 2-25



0 6 12 18 24year

200000

400000

600000

800000

1000000

1200000

heat

sup

ply

MW

h

TPP Kosovo Bpeak load boiler


0 6 12 18 240

1.67

3.33

5

6.67

8.33


year

heat

rate

%

0 6 12 18 24

year

0

4

8

12

cost

mio

EU

R



15 9 3 3 9 150

15

30

45

60

75

90




Hea

t loa

d M

W

15 9 3 3 9 150

90

180

270

360

450




Hea

t loa

d M

W

TASK 4 2-26


20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

grd.

C

20 10 0 10 2040

60

80

100

120

140




tem

pera

ture

regi

me

°C

TASK 4 2-27


20 10 0 10 20150

200

250

300

350

400

DHKDHP



flow

kg/

sec

20 10 0 10 20400

500

600

700

800

900

DHKDHP



flow

kg/

sec

20 10 0 10 20500

1000

1500

2000

DHKDHP



flow

kg/

sec

TASK 4 2-28


2.2.3.5 Conclusion The optimal diameters of the main line from the TPP Kosovo B to the heating station in Prishtina are as follows: scenario optimal option low 2 x DN400 medium 2xDN450 high 2xDN500 The 2xDN450option is selected as a solution which is the most suitable for all scenarios. The investment is foreseen in two phases. Two main pipelines (supply and return) are foreseen in the first phase. The third line will be installed in the second phase. The third line will have the function of the supply line and the pipelines installed in the first phase will have the function of the return lines. The selected nominal diameters are as follows: installation phase function nominal diameter 1 supply line DN450 return line DN450 2 supply line DN700 return line 2 x DN450 installed in the 1st

phase

TASK 4 2-29


2.3 HEAT STORAGE TANK The average load of both coal fired units B1 and B2 during heating season is approximately 90%. The reduction of the load is only about 7 hours during the night. The base load heat supply from the TPP Kosovo B will reduce the electricity production due to the high average load of the power plant during heating season. The heat storage tank installation gives the opportunity to move a part of the daily heat production in the night and to increase the electricity production. Possible locations for the heat storage tank are in the TPP Kosovo B heating station or in the heating station in Prishtina. The location of the heat storage tank in the heating station in Prishtina would require a higher capacity of the transmission line and of both heating stations. A higher capacity of the transmission line can be achieved to some extent by a higher temperature difference. The location of the heat storage in the TPP Kosovo B requires only a higher capacity of the heating station in the TPP Kosovo B. The location in the TPP Kosovo B is not appropriate for direct connection of the tank to the main pipeline due to a high static pressure. An additional heater is foreseen to supply heat to the thermal storage tank. In the district heating system of the city of Prishtina the static pressure is lower and the tank could be directly connected to the grid. The existing main circulating pumps in the boiler house should be moved from the cold side to the hot side and an additional peak load heater is required due to the maximal temperature limitation to 98°C. in the heat storage tank. The capacity of the heat storage tank also depends on the inlet temperature. The temperature difference between the return temperature in the district heating system of Prishtina and in the return line from the heating station of Prishtina to the TPP Kosovo B is quite low. We can conclude that the return temperature does not have a bigger influence on the optimal location of the tank. Two companies are foreseen from the organization point of view. These are the TPP Kosovo B as a base heat load supplier and the Distribution Company as a heat supplier to the customers. The heat storage tank will serve the needs of the TPP Kosovo B. There is no steam source for sealing on the top of the storage tank in Prishtina. The location in the TPP Kosovo B is selected because it is closer to the heat source and the storage tank will serve the needs of the TPP Kosovo B.

TASK 4 2-30


The maximal allowable temperature in the heat storage tank is 98°C and the maximal supplied heat load to the heat storage tank is the same as the maximal heat load of the heating station (210 MW). At the highest load one coal fired power plant can supply heat to the district heating system and another one to the heat storage tank. The main data for the optimization of the heat storage tank are as follows:

• main pipeline 2xDN450 + DN700 • maximum temperature in the heat storage tank 98°C • total electricity price 30 EUR/MWh • marginal electricity price 18 EUR/MWh • specific investment price of the heat storage tank 163 EUR/MWh • specific investment for additional heating station 7.1 EUR/kW • customs duty 10% • interest rate 12% • period of depreciation 25 years

The results of the optimization are presented in the tables and diagrams below.

TASK 4 2-31


Scenario: Low Net present value

volume of the tank

maximal filling capacity

investment cost maintenance

income from selling additional electricity total

m3 MW mio EUR mio EUR mio EUR mio EUR 5000 41 1.22 0.10 1.54 0.22

10000 82 2.43 0.19 3.01 0.39 15000 123 3.65 0.29 4.19 0.25 20000 164 4.86 0.38 4.91 -0.33 25000 205 6.08 0.48 5.36 -1.20

Option with heat storage tank 10000 m3

15 9 3 3 9 150

200

400

600

800Storage capacity in first year


stor

age

capa

city

MW

h

15 9 3 3 9 15200

350

500

650

800Storage capacity in last year


stor

age

capa

city

MW

h

0 4 8 12 16 20 2450

75

100

125

150Storage capacity

year

capa

city

GW

h

TASK 4 2-32


Scenario: Medium Net present value

volume of the tank





10000 83 2.44 0.19 3.04 0.41 15000 124 3.66 0.29 4.26 0.32 20000 165 4.88 0.38 5.06 -0.19 25000 206 6.09 0.48 5.61 -0.97


15 9 3 3 9 150

200

400

600



stor

age

capa

city

MW

h

15 9 3 3 9 15200

350

500

650



stor

age

capa

city

MW

h

0 4 8 12 16 20 2450

100

150

200Storage capacity

year

capa

city

GW

h

TASK 4 2-33


Scenario: High Net present value

volume of the tank





10000 83 2.44 0.19 3.05 0.42 15000 124 3.66 0.29 4.33 0.38 20000 165 4.88 0.38 5.22 -0.04 25000 206 6.09 0.48 5.88 -0.69


15 9 3 3 9 150

200

400

600



stor

age

capa

city

MW

h

15 9 3 3 9 15200

350

500

650



stor

age

capa

city

MW

h

0 4 8 12 16 20 2450

100

150

200Storage capacity

year

capa

city

GW

h

TASK 4 2-34


The optimal volume of the heat storage tank is 10,000m3. The net present value is positive in all scenarios but the absolute value is quite low. The net present value is approximately 14% of the income from additional electricity sales. It should be noticed that there are also some additional fixed investment costs which were not included in the calculation and they reduce the net present value. The existing electricity supply in the Kosovo region is insufficient at the moment. On the other hand, the foreseen load of the coal fired power plant is 90% due to some technological problems. With increasing of the power plant quality and including of the heat thermal storage tank in the process the electricity production could be increased to a higher level. The electricity market in the Kosovo region is not an open one. The real production costs and selling price are inaccurate due to the present economic situation in Kosovo. We do not recommend the installation of the heat storage tank due to the low absolute level of the net present value, inaccurate production costs and electricity sales prices. The connection of the heat storage tank to the heating station is presented in the drawing DHSP-2X0021. The installation of the heat storage tank can be made any time after the heating station is put in operation.

TASK 4 2-35


2.4 STATIC PRESSURE SYSTEM The heating station in the TPP Kosovo B is selected for installation of the system maintaining static pressure in the main pipeline. This location is selected due to a sufficient existing capacity of the water treatment plant and large demineralised water tanks. Minimum pressure in the system is defined as follows:

• maximum temperature 150°C • additional margin for pressure control system 0.4 bar

The selected minimum pressure in the system is 5.2 bar abs. The heating station in the TPP Kosovo B lies on the lowest elevation. Between the TPP Kosovo B and Prishtina there is a hill with the highest elevation. Possible locations for static pressure maintenance are as follows: location maximal pressure

in the system bar abs

comments

suction side of the circulating pumps

20 the highest maximal pressure but lower operating costs of the static pressure system

outlet from the heaters 18.7 lower maximal pressure but higher operating costs of the static pressure system

Between the circulating pumps

18.7 lower maximal pressure and operating costs of the static pressure system but main pumps and booster pumps are required

The location between the circulating pumps is rejected due to a high number of the circulating pumps. Low increase of the maximal pressure by maintaining of the static pressure on the suction side may not increase investment costs. This location is selected for maintaining static pressure. The pressure distribution for all options is presented in the following diagrams.

TASK 4 2-36


Maintaining of the static pressure on the supply line

� ��

��

��

� ��

��

� ��

� ��

� ��

��

!�"��

�!!

#��$��%

!�"��

��

��

!&��

Maintaining of the static pressure on the return line (selected option)

!�"��

��

��

��

�!!

#��$��%

��

��

��

��

!&��

!�"��

� ��

��

� ��

� ��

Maintaining of the static pressure between the booster and the main circulating pump

��

� ��

��

��

� ��

� ��

��

� ��

� ��

��

�!!

#��$��%

!�"�� !�"��

��

��

!&��

TASK 4 2-37


A detailed pressure distribution for the selected option is presented in the following diagram. Supply line from the TPP Kosovo B to Prishtina

PROFILKOSOVO B - PRISTHINA

520

530

540

550

560

570

580

590

600

610

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000length (m)

elev

atio

n (+

m)

-2.00

2.00

6.00

10.00

14.00

18.00

22.00

pres

sure

(bar

)

elevation

pressure

Return line from Prishtina to the TPP Kosovo B

PROFIL PRISTHINA - KOSOVO B

520

530

540

550

560

570

580

590

600

610

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000length (m)

elev

atio

n (+

m)

-2.00

2.00

6.00

10.00

14.00

18.00

pres

sure

(bar

)

elevation

pressure

TASK 4 2-38


2.5 THERMAL COMPENSATION The bonded pipe system can be installed according to different installation methods as follows:

• heat pre-stressing • expansion bends • E-muffs • high axial stress installation

The heat pre-stressing technique ensures that the pipe section is stress-free at a mean temperature, and that the temperature variations in the system are converted to stresses instead to movement. Pre-stressing can be performed by water or electricity. The installation method with expansion bends is a traditional method. The E-system is a simplified installation technique where temperature variations are absorbed as stresses in the steal pipe instead of being converted into expansion movements. The only expansion absorbing device is the E-muff which replaces expansion bends and anchors. The E-muff is a compensator which operates only once, after which it is fixed to absorb a movement corresponding to the pipe being stressless at mean temperature. The result is that the pipes are fixed in the ground without expansion movements. High axial stress installation is a very simple installation method by which very long pipe sections are installed without pre-stressing and without U, Z and L bends for expansion absorption. The main characteristics of the different installation techniques are as follows: technique advantages disadvantages heat pre-stressing

• fewer components • no movements in the pipes • even stress level

• the trench is open until heat pre-stressing has been made

expansion bends • low stress • the pipes can be backfilled

before heating

• additional U, Z and L bends with foam pads are required

E-muffs • fewer components • no movements in the pipes

even stress level the pipes can be backfilled before heating

• additional E-muffs are required

TASK 4 2-39


technique advantages disadvantages high axial stress • fewer components

• the pipes can be backfilled before heating

• no movements except at the end

• high stress levels • reinforcement at all branches • more stringent requirements

for pipes excavation • very large movements at the

bends • it is not possible to use

anchors • it is not possible to use

beveling or bends between 0 – 80°

The maximal allowable stress depends on the material. The following allowable stress is in the range from 150 N/mm2 up to 300 N/mm2. Higher allowable stresses cause additional restrictions by design and installation of the pipes. The maximal allowable stress up to 250 N/mm2 is selected. The covering of the pipe must be sufficient to obtain the necessary stability so that the pipes are not pushed up. Furthermore, the necessary covering ensures that no damages occur to the pipes due to the traffic loads. The traffic load of 16.7 kN/m2 and the wheel load of 50 kN are defined for town streets and roads with normal traffic (bridge class SLW 30). On the locations with higher traffic loads additional measurements are foreseen. The selected covering is as follows:

• DN450 600 mm • DN700 750 mm

The maximal calculated temperature is 140°C and the minimum soil temperature is 0°C. The geometry of the pipeline is simplified with the straight run pipeline. The main data concerning thermal compensation are as follows:

TASK 4 2-40


DN450 pipe

type of installation

type of compensation

distance between

compensation units

m

axial stress

N/mm2

comments

U elbow with foam pads

120 77 The maximal distance between U elbows is limited by allowable deformation of the foam pads. The maximal deformation of the foam pads is 90 mm.

cold installation

start up compensator

128 250 The maximal distance between start up compensators is limited by allowable stress

without compensation

360 not applicable

heat pre-stressed


± 180 Heat pre-stressing in sections with electric preheating is foreseen

DN700 pipe type of installation

type of compensation

distance between compensation units

axial stress N/mm2

comments

U bend with foam pads

120 m 81 The maximal distance between U elbows is limited by allowable deformation of the foam pads. The maximal deformation of the foam pads is 90 mm.

cold installation

start up compensator

120 ± 250 N/mm2 The maximal distance between start up compensators is limited by allowable stress


360 N/mm2 not applicable

heat pre-stressed


± 180 N/mm2 Heat pre-stressing in sections with electric preheating is foreseen

TASK 4 2-41


The heat pre-stressed installation is selected with regard to acceptable maximal stresses and competitive investment solution. Heat pre-stressing in sections and electric preheating method is foreseen.

TASK 4 2-42


2.6 INSULATION THICKNESS The pre-insulated pipes can be supplied with three different insulation thicknesses as follows: nominal diameter category of the

thickness insulation jacket pipe diameter

mm DN 450 series 1 630 series 2 710 series 3 800 DN 700 series 1 900 series 2 1000 series 3 1100 The optimal insulation thickness was calculated in accordance with the following input data:

• average temperature in the supply line 108°C • average temperature in the return line 51°C • average soil temperature 5°C • heat price (equivalent electricity price) 6 EUR/MWh • interest rate 12% • period of depreciation 25 years

The cost of heat losses and investment price are included in the calculation of the optimal insulation thickness. The results are presented in the following table:

nominal diameter

average temperature

insulation thickness category

heat loss

heat losses cost

additional investment

net present value of all costs

°C W/m EUR/m EUR/m EUR/m DN450 108 series 1 48 1.35 0 11 series 2 36 1.01 52 60 series 3 29 0.81 122 128 51 series 1 22 0.62 0 5 series 2 16 0.45 52 56 series 3 13 0.37 122 125 DN700 108 series 1 65 1.83 0 14 series 2 46 1.29 98 108 series 3 38 1.07 197 205

The insulation thickness category “series 1” is selected due to minimal expenses.

TASK 4 3-0


CONTENTS

3. TECHNICAL DESCRIPTION............................................................................................. 3-1

3.1 INTRODUCTION................................................................................................................... 3-1

3.2 HEATING STATION IN THE TPP KOSOVO B.................................................................. 3-2

3.2.1 Mechanical part ...................................................................................................................... 3-2 3.2.2 Electrical part ......................................................................................................................... 3-6 3.2.3 Civil part ................................................................................................................................. 3-7 3.3 MAIN PIPELINE.................................................................................................................... 3-8

3.3.1 Mechanical part ...................................................................................................................... 3-8 3.3.2 Electrical part ......................................................................................................................... 3-9 3.3.3 Civil part ................................................................................................................................. 3-9 3.4 HEATING STATION IN PRISHTINA................................................................................ 3-10

3.4.1 Mechanical part .................................................................................................................... 3-10 3.4.2 Electrical part ....................................................................................................................... 3-13 3.4.3 Civil part ............................................................................................................................... 3-14 3.5 EXTENSION OF THE BOILER HOUSE............................................................................ 3-15

3.6 SCOPE OF SUPPLY ............................................................................................................ 3-16

3.6.1 Phase I................................................................................................................................... 3-16 3.6.2 Phase II ................................................................................................................................. 3-25

TASK 4 3-1


3. TECHNICAL DESCRIPTION 3.1 INTRODUCTION Two heat sources are anticipated for heat supply to the district heating system in Prishtina. TPP Kosovo B is foreseen as a base load unit and fuel oil boilers in Prishtina are foreseen as peak load boilers. Three new units are foreseen:

• heating station in the TPP Kosovo B • main pipeline • heating station in Prishtina

The extension of the existing boiler house and network in Pristina is also anticipated but it is not included in the feasibility study. The project will be completed in two phases. Installation of the main 2 x DN450 pipeline and one heat exchanger in each heating station is foreseen in the first phase. The third DN700 pipe and the second heat exchanger in each heating station will be installed in the second phase. The capacity of the equipment does not depend on the scenario. The difference in heat loads between scenarios is covered by higher heat load and heat supply from the peak load boilers.

TASK 4 3-2


3.2 HEATING STATION IN THE TPP KOSOVO B 3.2.1 Mechanical part The heating station will be installed in the new building. The selected location for the heating station is near the north-west side of the main turbine building. The main parts of the heating station are as follows:

• connection to the steam turbines (unit B1 and B2) • hybrid heat exchangers • main circulating pumps • system for maintaining of the static pressure • other equipment

There are two identical units in the TPP Kosovo B with nominal load of 2 x 339 MW. The extraction of the steam for the heating station is anticipated from the IP steam turbine exhaust. For that purpose the installation of a throttle butterfly valve is foreseen on the connecting steam pipeline between the IP and LP steam turbines. There are two connecting pipelines (2 x DN1200) on each unit. The following equipment is foreseen at the connection for protection of the steam turbine:

• safety valve • check butterfly valve • check butterfly valve with pneumatic actuator

One DN 1000 steam pipeline from each unit is foreseen for supplying the steam to the heating station. The condensate is returned back into the feed water heating system. Two hybrid heat exchangers will be installed in the heating station. They will operate with only one unit or with both units (B1 and B2). In case when the steam is supplied from both units, each heat exchanger will be separately supplied from one unit. Three main circulating pumps are foreseen. Two of them will be equipped with a speed control. The required flow depends on the ambient temperature and return temperature. The return temperature from the heating station in Prishtina and the main circulating pumps located in Prishtina are also included in the control system. The static pressure maintenance system consists of:

• two expansion tanks • three pumps • two pressure control valves

The selected level of the static pressure is 12.6 bar abs. The selected volume of the expansion tanks is sufficient for normal operation. The existing demineralized tanks and a

TASK 4 3-3


water treatment plant will be used during start up or shut down of the heating system. One pump (the smallest one) is connected to the electric emergency supply system. The heating station will be equipped also with other necessary equipment as follows:

• pipes and headers • supporting structures • valves • instrumentation • drain and venting system • heating and air conditioning system

The heating station will be completed in two phases. In phase I the following equipment will be installed:

• complete connection to the units B1 and B2 • one heat exchanger • two main circulating pumps with speed control • one expansion tank • complete pumps for static pressure maintenance • both pressure control valves for static pressure maintenance

The following equipment will be installed in phase II:

• another heat exchanger • third main circulating pump without speed control • second expansion tank

Design data for the equipment are as follows: Heat exchangers:

• number of heat exchangers 2 • heat load 107.1 MW • steam

o pressure 4 bar abs o temperature 260°C o flow 41.4 kg/s o return condensate temperature 90°C

• cold water o temperature regime 139/49.7 °C o flow 287.17 kg/s

TASK 4 3-4


Condensate system: • condensate tank

o number 2 o volume 50 m3

• condensate pump o number 4 o flow 41.4 kg/s o head 13 bar

Main circulating pumps:

• number of circulating pumps o with speed control 2 o without speed control 1

• flow 287.17 kg/s • head 9 bar • suction pressure 12.6 bar abs • temperature 140 °C

Static pressure maintenance:

• design supply temperature o maximal 140°C o minimal 73°C

• design return temperature o maximal 73°C o minimal 50°C

• volume of the whole system o supply pipeline DN700, 11 km o return pipeline 2 x DN450, 11 km

• maximal increase/reduction of the ambient temperature 10 °C/h

• expansion tank o number of the tanks 2 o volume 150 m3

• pumps o main pumps

• number 2 • flow 40 kg/s • head 13 bar

o emergency pump • number 1 • flow 0.5 kg/s • head 13 bar

TASK 4 3-5


• pressure control valve o number 2 o flow 80 kg/s

TASK 4 3-6


3.2.2 Electrical part The existing 6,3kV general auxiliary switchgear will be used for electrical supply of the 6,3kV main circulating pumps. It shall be supplied from the 0BT - 48/28/28MVA power transformer. The switchgear consists of two equal sections (0BL and 0BM) and enables 100% redundancy of power supply for auxiliary consumers of the power plant. It is placed in R12 switch room on the platform +-0,00m. The main consumers will be three 500kW heating pumps. The same mode of supply will be used for the new consumers of the heating station. The existing two free-reserve cubicles located in sections 0BL (Nr.: 08) and 0BM (Nr.: 08) will be used for connection to the new switchgear. The connection between both switchgears will be realized with middle voltage cables (XHP-48 3x (1x150mm2)). New 6kV switchgear will be composed of 5 cubicles:

• cubicle for metering, • cubicle for power supply of the first pump with frequency converter, • cubicle for power supply of the second pump with frequency converter (reserve), • cubicle for power supply of the third pump without frequency converter and • cubicle for connection with 0BL and 0BM switchgears.

The new switchgear will be placed in the existing room R8 on the platform +6,00m. The type of connection between both switchgears will be the same as by the existing power supply for the existing pumps. This means that the switchgear will be connected with a single cable from two cubicles, 0BL (number: 08) and 0BM (number: 08). For that reason an additional cable connection between 0BL and OBM sections (between both cubicles 0BL-08 and 0BM-08) will be performed. One or two circulating pumps will be in operation. The third pump is a reserve pump. The number of the pumps in operation depends on the required heat load. In the scope of new consumers there will be also two pumps for static pressure (2x90kW), condensate pumps (4x90kW), other small consumers and an emergency 2,8kW static pump. The static pressure pumps and the condensate pumps will be supplied from the new low voltage switchgear. This switchgear will be supplied from the existing 0EU low voltage switchgear. The 2,8kW emergency pump will be supplied from the existing low voltage 0EU switchgear. This switchgear has two sources of supply. One is from the existing 1000kVA transformers

TASK 4 3-7


0CT09 and 0CT10 and the other is from the existing 0EY emergency diesel generator. This 0EY is automatically switched on when it is necessary. In such manner a safe shutdown of the heating system will be assured. 3.2.3 Civil part The heating station will be installed in a new building. The ground dimensions are 24,0 x 42,0 m, and the maximal height is 9,0 m. The main structure involves reinforced concrete foundations and columns with a steel roof construction. The façade walls and the roof covering are made of double corrugated trapezoidal sheet with intermediate isolation. The ground floor, where the most technological equipment is installed, is made of a reinforced concrete slab. The main pumps are based on their own block foundations.

TASK 4 3-8


3.3 MAIN PIPELINE 3.3.1 Mechanical part The main pipeline will connect the heating station in the TPP Kosovo B with the heating station in Prishtina. The route of the pipeline runs along the Prishtina-Mitrovica main motorway. Two pre-insulated pipes, 2 x DN450 and DN700 are foreseen. The length of the pipeline is 10,500 m. The pipeline will be completed in two phases. The 2 x DN450 pipeline will be installed in the phase I. The installation of the third DN700pipeline is foreseen in the phase II. The third pipe will be a supply line and the 2 x DN450 pipelines will be the return lines after the completion of the phase II during the heating season. During summer, when the heat is needed only for domestic water heating, the DN700 pipeline will not be in operation. Only 2 x DN450 pipelines will be in operation in the summer period. Butterfly valves with an actuator are foreseen for switching the lines in operation with relation to the season. A surveillance system for identifying locations of any moisture in the pipe insulation is foreseen. The pipeline will be equipped also with a drain and a venting system. The design data for the pipeline are as follows:

• maximal temperature 140°C • maximal pressure 22 bar • allowable traffic load

without additional measurements 16.7 kN/m2 • nominal diameter DN450

o material P235GH o outside diameter 457.2 mm o wall thickness 6.3 o diameter of the jacket pipe 610 mm o covering 600 mm o length 2 x 10500 m

• nominal diameter DN700

o material P235GH o outside diameter 711.2 mm o wall thickness 8 mm o diameter of the jacket pipe 900 mm o covering 750 mm o length 10500 m

TASK 4 3-9


A heat pre-stressed installation is foreseen. The section of the pipeline installed shall be electrically preheated to the mean temperature (70°C). After the mean temperature is reached, the pipeline will be backfilled. This technique allows installation on different sections at the same time. The intermediate sections can be installed later according to an appropriate method.

The foam pads will be installed at the elbows to allow an appropriate movement. 3.3.2 Electrical part A cathode protection is foreseen on the sections of the pipeline which are close to the railway or a high voltage grid. All the necessary I/O modules for binary and analog signals are included in the project. They will be connected to the existing serial bus link based on an ETHERNET (IEEE 802.3). A new fiber cable for connection of both heating stations is foreseen. 3.3.3 Civil part The main 2 x DN450 pipeline of 10,500 m total length shall be buried into soil and shall be constructed in two phases. Civil construction works shall encompass excavation, transport of excess material and backfilling with sand and the excavated material. All the other civil construction works including crossings with traffic and municipal infrastructure are considered as well.

TASK 4 3-10


3.4 HEATING STATION IN PRISHTINA 3.4.1 Mechanical part The heating station will be installed in the existing building which was built several years ago near the boiler house. The building is located on the west side of the boiler house. The main parts of the heating station are as follows:

• heat exchangers • main circulating pumps • auxiliary circulating pumps • connection to the existing boiler house

Two hybrid heat exchangers will be installed in the heating station. The heat will be supplied from the TPP Kosovo B heating station via main pipeline. The heating station will be connected to the district heating system on the intermediate header. It is located on the discharge side of the main circulating pumps in the boiler house. The auxiliary pumps are foreseen to cover the pressure drop through the heating station on the secondary side. The main circulating pumps will operate in cooperation with the main circulating pumps located in the TPP Kosovo B heating station.. The heating station will be equipped also with other necessary equipment as follows:


The heating station will be completed in two phases. In the phase I, the following equipment will be installed:

• one heat exchanger • two main circulating pumps with speed control • complete auxiliary pumps • connection to the existing boiler house

TASK 4 3-11


The following equipment will be installed in the phase II:

• another heat exchanger • third main circulating pump without speed control • connection to the extension of the boiler house

Design data for the equipment are as follows: Heat exchanger

• number of heat exchangers 2 • mode of operation maximal load in first year at

ambient temperature -13°C o capacity 79.8 MW o hot side

� temperature regime 140/73.5 °C � flow 287.17 kg/s

o cold side � temperature regime 114.6/64.7 °C � flow 382.7 kg/s

• mode of operation maximal heat load in last year at ambient temperature +3°C

o capacity 107.1 MW o hot side



Main circulating pumps


• flow 287.17 kg/s • head 9 bar • suction pressure 7 bar • temperature 140 °C

TASK 4 3-12


Auxiliary circulating pumps


• flow 232 kg/s • head 1.5 bar • suction pressure 14 bar abs • temperature 80 °C

TASK 4 3-13


3.4.2 Electrical part The existing 10kV switchgear, which is supplied from the remote PRIII-35/10kV switchyard, will be used for electrical supply of 10kV main circulating pumps in the heating station. The 10kV switchgear consists of only one section and it is placed in the main switch room of Termokos on the platform +-0,00m. Frequency converters for the existing pumps, complete main low voltage 0,4kV switchgear and cubicles with compensation batteries are located there as well.. There is not enough place for the new switchgear in the room with the existing middle voltage. It will be used for power supply of the three 500kW new main circulating pumps. Therefore it is more practical and from the operational aspect more reliable and safe to place the new part of the middle voltage switchgear in the separate auxiliary room near the main switch room. There are now 10kV and 0,4kV switchgears which are out of operation. This room is foreseen for installation of the new electrical equipment for the heating station and extension of the boiler house (not included in the scope of the feasibility study). The middle voltage cables (XHP-48 3x (1x150mm2)) will be used for connection of both switchgears. The new 10kV switchgear will consist of 5 cubicles:

• cubicle for metering, • cubicle for power supply of the first pump with frequency converter, • cubicle for power supply of the second pump with frequency converter (reserve), • cubicle for power supply of the third pump without frequency converter and • cubicle for connection to the existing switchgear.

One or two circulating pumps, or neither of them, will be in operation. The third pump is a reserve pump. The number of the pumps in operation depends on the heat consumption. There are also four low voltage 55kW auxiliary pumps in the scope of the new heating station. The pumps will be supplied from the new low voltage switchgear. This switchgear will be supplied from the existing low voltage switchgear and the existing 1600kVA reserve transformer T3. This switchgear will be placed in the same room as the existing one. Three auxiliary pumps will be equipped with frequency converters and only one will be connected directly to the switchgear and will operate with constant power.

TASK 4 3-14


The auxiliary pumps will operate simultaneously with the existing main circulating pumps in the boiler house. Three pumps will be in operation at the maximum heat consumption and one pump will be a reserve pump. 3.4.3 Civil part The heating station shall be located in the already existing but uncompleted structure. The top view dimensions of the structure are approximately 17.0 x 22.0 m, the height is 8.0 m above the terrain. The design documentation covering the existing structure has foreseen a monolith reinforced concrete skeleton type of structure with a steel roof. Actually the structure is of RC pre-fabricated type composed of main columns, main roof supports, longitudinal façade connections and T-type roof beams. The roof covering was not accomplished. The foundations are of reinforced concrete, block type, interconnected by strip supports along the rim of the structure, supporting the façade pre-fabricated panels. Relevant technical documentation shall be obtained for the existing structure confirming that the structure serves for the anticipated purpose. This shall represent a starting point of the reconstruction. Civil construction works shall encompass refurbishment of the structure and façade. The roof covering is made of double corrugated trapezoidal sheet with intermediate isolation. The ground floor, where the most technological equipment is installed, is made of a reinforced concrete slab. The main pumps are based on their own block foundations. Additional steel structures are foreseen for supporting of the main equipment and pipelines. New windows, doors and other finishing works are foreseen as well.

TASK 4 3-15


3.5 EXTENSION OF THE BOILER HOUSE The extension of the boiler house is not included in the feasibility study and it is not necessary at the beginning of the project. The extension range will be adjusted in accordance with the actual increase of the heat consumption. The capacities of the existing boiler house are as follows:

• main circulating pumps o number of the pumps in operation 3 o total capacity 695 kg/s

• peak load boiler

o number of the boiler in operation 2 o total capacity 116 MW

The required maximal capacities are as follows: scenario capacity of the main

circulating pumps capacity of the peak load

boiler kg/s MW

low 1078 71 medium 1372 133

high 1909 250 The additional capacities which should be installed in the extension of the boiler house are as follows: scenario additional capacity of the

main circulating pumps additional capacity of the

peak load boiler kg/s MW

low 383 0 medium 677 17

high 1214 134

TASK 4 3-16


3.6 SCOPE OF SUPPLY 3.6.1 Phase I 3.6.1.1 Heating station in the TPP Kosovo B 3.6.1.1.1 Mechanical part 3.6.1.1.1.1 Heat exchanger




3.6.1.1.1.2 Condensate system

• condensate tank o number 1 o volume 50 m3


3.6.1.1.1.3 Main circulating pumps

• number of circulating pumps 2 • speed control yes • flow 287.17 kg/s • head 9 bar • suction pressure 12.6 bar abs • temperature 140 °C

TASK 4 3-17


3.6.1.1.1.4 Maintaining of the static pressure

• expansion tank o number of the tanks 2 o volume 150 m3

• pumps o main pumps

• number 2 • flow 40 kg/s • head 13 bar

o emergency pump • number 1 • flow 0.5 kg/s • head 13 bar

• pressure control valve o number 2 o flow 80 kg/s

3.6.1.1.1.5 Other equipment


TASK 4 3-18


3.6.1.1.2 Electrical part 3.6.1.1.2.1 New 6kV switchgear with 5 cubicles:


3.6.1.1.2.2 Frequency converter for 650kVA power

2 pcs.

3.6.1.1.2.3 Low voltage switchgear for static pressure pumps ( 90kW ) 3.6.1.1.2.4 New part of a low voltage switchgear for connection with a new LV switchgear 3.6.1.1.2.5 Middle voltage 1x150mm2-Cu cables:

3 x 3 x 20 m = 180 m 3.6.1.1.2.6 Low voltage cables

approx. 150 m 3.6.1.1.2.7 I/O modules for binary and analog signals 3.6.1.1.2.8 Other electrical equipment and parts

TASK 4 3-19


3.6.1.1.3 Civil part 3.6.1.1.3.1 New building

o main dimensions � floor area 24 m x 42 m � maximal height 9 m

o structure � reinforced concrete foundations � columns with steel roof construction

o façade walls � double corrugated trapezoidal sheet with intermediate isolation

o roof covering � double corrugated trapezoidal sheet with intermediate isolation

o ground floor � reinforced concrete slab

o equipment foundations � block foundations

o finishing works

TASK 4 3-20


3.6.1.2 Main pipeline 3.6.1.2.1 Mechanical part 3.6.1.2.1.1 Pre-insulated pipe

• nominal diameter DN450 • maximal operating temperature 140°C • maximal short term temperature 150 °C • maximal pressure 22 bar • allowable traffic load

without additional measurements 16.7 kN/m2

o material P235GH o outside diameter 457.2 mm o wall thickness 6.3 o diameter of the jacket pipe 610 mm o covering 600 mm o length 2 x 10500 m o including in the scope of supply

• elbows and other fittings • insulation shells • shrink film • shrink sleeve • surveillance system for identifying locations of any moisture in the pipe

insulation


• drain and venting system

TASK 4 3-21


3.6.1.2.2 Electrical part 3.6.1.2.2.1 Cathode protection 3.6.1.2.2.2 Fiber cable

length 10.500m 3.6.1.2.3 Civil part 3.6.1.2.3.1 Civil works for installation of the pre-insulated pipeline

• length 10500 m • excavation 4.7 m3/m • off-loading of excavated material 2.5 m3/m • backfilling with sand delivered to location 1.6 m3/m • backfilling with excavated material 2.2 m3/m • other works • finishing works

TASK 4 3-22


3.6.1.3 Heating station in Prishtina 3.6.1.3.1 Mechanical part 3.6.1.3.1.1 Heat exchanger

• number of heat exchangers 1 • mode of operation maximal load in the first year at




• mode of operation maximal heat load in the last year at ambient temperature +3°C





• number of circulating pumps 2 • speed control yes • flow 287.17 kg/s • head 9 bar • suction pressure 7 bar • temperature 140 °C

3.6.1.3.1.3 Auxiliary circulating pumps


• flow 232 kg/s • head 1.5 bar • suction pressure 14 bar abs • temperature 80 °C

TASK 4 3-23




3.6.1.3.2 Electrical part 3.6.1.3.2.1 New 10kV switchgear with 5 cubicles:


3.6.1.3.2.2 Frequency converter for 650kVA power

2 pcs. 3.6.1.3.2.3 Low voltage switchgear for auxiliary pumps ( 55kW ) 3.6.1.3.2.4 Frequency converter for 70kVA power 3 pcs. 3.6.1.3.2.5 Middle voltage 1x150mm2-Cu cables:

3 x 3 x 80m + 30m = 750m 3.6.1.3.2.6 Low voltage cables

approx. 90m 3.6.1.3.2.7 Other electrical equipment and parts

TASK 4 3-24


3.6.1.3.3 Civil part 3.6.1.3.3.1 Completion of the existing building

o main dimensions � floor area 17 m x 22 m � maximal height 8 m

o structure � refurbishment

o façade walls � refurbishment � installation of the windows and doors

o roof covering � double corrugated trapezoidal sheet with intermediate isolation

o ground floor � reinforced concrete slab

o equipment foundations � block foundations

o steel structures � supports for the main equipment � secondary steel structures for piping

o connection to the existing boiler house o finishing works

TASK 4 3-25


3.6.2 Phase II 3.6.2.1 Heating station in the TPP Kosovo B 3.6.2.1.1 Mechanical part 3.6.2.1.1.1 Heat exchanger




3.6.2.1.1.2 Condensate system

• condensate tank o number 1 o volume 50 m3



• number of circulating pumps 1 • speed control no • flow 287.17 kg/s • head 9 bar • suction pressure 12.6 bar abs • temperature 140 °C

TASK 4 3-26



• pipes • supporting structures • valves • instrumentation • drain and venting system

3.6.2.1.2 Electrical part 3.6.2.1.2.1 I/O modules for binary and analog signals 3.6.2.1.3 Civil part 3.6.2.1.3.1 New building

• minor civil works caused by installation of the new equipment

TASK 4 3-27


3.6.2.2 Main pipeline 3.6.2.2.1 Mechanical part 3.6.2.2.1.1 Pre-insulated pipe

• nominal diameter DN 700 • maximal operating temperature 140°C • maximal short term temperature 150 °C • maximal pressure 22 bar • allowable traffic load

without additional measurements 16.7 kN/m2

• material P235GH • outside diameter 711.2 mm • wall thickness 8 mm • diameter of the jacket pipe 900 mm • covering 750 mm • length 10500 m • including in the scope of supply

o elbows and other fittings o insulation shells o shrink film o shrink sleeve o surveillance system for identifying locations of any moisture in the pipe

insulation 3.6.2.2.1.2 Other equipment

• drain and venting system

TASK 4 3-28


3.6.2.2.2 Electrical part 3.6.2.2.2.1 I/O modules for binary and analog signals 3.6.2.2.3 Civil part 3.6.2.2.3.1 Civil works for installation of the pre-insulated pipeline

• length 10500 m • excavation 4.5 m3/m • off-loading of excavated material 2.6 m3/m • backfilling with sand delivered to location 1.8 m3/m • backfilling with excavated material 1.9 m3/m • other works • finishing works

TASK 4 3-29


3.6.2.3 Heating station in Prishtina 3.6.2.3.1 Mechanical part 3.6.2.3.1.1 Heat exchanger

• number of heat exchangers 1 • mode of operation maximal load in the first year at




• mode of operation maximal heat load in the last year at ambient temperature +3°C





• number of circulating pumps 1 • speed control no • flow 287.17 kg/s • head 9 bar • suction pressure 7 bar • temperature 140 °C


• pipes • supporting structures • valves • instrumentation • drain and venting system

TASK 4 3-30


3.6.2.3.2 Electrical part 3.6.2.3.2.1 I/O modules for binary and analog signals 3.6.2.3.3 Civil part 3.6.2.3.3.1 Existing building

• minor civil works caused by installation of the new equipment • connection to the extension of the boiler house

TASK 4 4-0


CONTENTS

4. INVESTMENT COSTS AND OPERATING DATA.......................................................... 4-1

4.1 INVESTMENT COSTS.......................................................................................................... 4-1

4.1.1 Phase I..................................................................................................................................... 4-1 4.1.2 Phase II ................................................................................................................................... 4-3 4.1.3 Overview of all investment costs ............................................................................................. 4-4 4.2 OPERATING DATA .............................................................................................................. 4-5

4.2.1 Low scenario ........................................................................................................................... 4-5 4.2.2 Medium scenario ..................................................................................................................... 4-6 4.2.3 High scenario .......................................................................................................................... 4-7

TASK 4 4-1


4. INVESTMENT COSTS AND OPERATING DATA 4.1 INVESTMENT COSTS 4.1.1 Phase I 4.1.1.1 Heating station in the TPP Kosovo B price component equipment cost EUR

mechanical part heat exchanger 141,700 main circulating pumps 174,000 pressure static system 42,000 condensate system 27,000

valves 613,000 supply steam pipeline 300,000 other equipment 249,820

subtotal 1,547,520 electrical part 110,000 civil part 641,000

installation 331,504

subtotal 2,630,024

investor's costs 184,102 transport and insurance 49,726 customs duty 165,752

subtotal 3,029,603

contingencies 454,440

grand total 3,484,044

TASK 4 4-2


4.1.1.2 Main pipeline price component cost EUR

mechanical part 7,243,700 electrical part 15,000 civil part 1,386,000

installation 1,814,675

subtotal 10,459,375


subtotal 11,925,975

contingencies 1,192,597


4.1.1.3 Heating station in Prishtina price component equipment cost EUR

mechanical part heat exchanger 278,000 main circulating pumps 174,000 auxiliary circulating pumps 69,360 valves 361,000

connection to the boiler house 211,600 other equipment 244,988 subtotal 1,338,948

electrical part 150,000 civil part 242,000 installation 297,790

subtotal 2,028,738


subtotal 2,364,312



TASK 4 4-3


4.1.2 Phase II 4.1.2.1 Heating station in the TPP Kosovo B price component equipment cost EUR

mechanical part heat exchanger 141,700 main circulating pumps 87,000 pressure static system 21,000

condensate system 27,000 valves 81,000 supply steam pipeline 0

other equipment 107,780 subtotal 465,480 electrical part 20,000

civil part 64,000 installation 97,096

subtotal 646,576

investor's costs 45,260 transport and insurance 14,564

customs duty 48,548

subtotal 754,949


grand total 868,191

4.1.2.2 Main pipeline price component cost EUR

mechanical part 7,158,500 electrical part 0 civil part 1,449,000

installation 1,789,625

subtotal 10,397,125


subtotal 11,847,586

contingencies 1,184,759


TASK 4 4-4


4.1.2.3 Heating station in Prishtina price component equipment cost EUR

mechanical part heat exchanger 278,000 main circulating pumps 87,000 auxiliary circulating pumps 0

valves 114,000 connection to the boiler house 211,600 other equipment 107,852

subtotal 798,452 electrical part 20,000 civil part 72,000

installation 163,690

subtotal 1,054,142


subtotal 1,234,331



4.1.3 Overview of all investment costs Price component Cost Phase I Phase II Grand total EUR EUR EUR

Heating station in the TPP Kosovo B 3,484,044 868,191 4,352,235 Main pipeline 13,118,572 13,032,345 26,150,917 Heating station in Prishtina 2,718,959 1,419,481 4,138,440

Grand total 19,321,575 15,320,017 34,641,592

TASK 4 4-5


4.2 OPERATING DATA 4.2.1 Low scenario

Year Total heat consumption

Supplied heat from the TPP Kosovo B

Supplied heat from the peak load boiler

Equivalent electricity production in the TPP Kosovo B

Electric consumption for circulating pumps

Peak heat load

Required boiler peak load

MWh MWh MWh MWh MWh MW MW 0 185844 185673 171 37966 3428 83 4 1 205594 204915 679 41349 3507 91 10 2 227444 225958 1485 45065 3583 99 18 3 251615 248934 2681 49261 3639 108 26 4 278355 273994 4361 54094 3678 118 36 5 307936 300873 7063 59441 3701 128 46 6 340661 329972 10689 65738 3767 140 57 7 376864 376864 0 79817 6683 153 0 8 416915 416594 321 87052 6851 166 7 9 461222 459896 1326 94809 6992 181 20

10 510237 507326 2911 103347 7155 198 35 11 564462 559188 5273 112573 7271 215 52 12 624449 615849 8600 122924 7349 235 70 13 624449 615849 8600 122924 7349 235 70 14 624449 615849 8600 122924 7349 235 70 15 624449 615849 8600 122924 7349 235 70 16 624449 615849 8600 122924 7349 235 70 17 624449 615849 8600 122924 7349 235 70 18 624449 615849 8600 122924 7349 235 70 19 624449 615849 8600 122924 7349 235 70 20 624449 615849 8600 122924 7349 235 70 21 624449 615849 8600 122924 7349 235 70 22 624449 615849 8600 122924 7349 235 70 23 624449 615849 8600 122924 7349 235 70 24 624449 615849 8600 122924 7349 235 70

TASK 4 4-6


4.2.2 Medium scenario






Peak heat load



10 632023 621818 10205 123286 7396 241 77 11 714317 696653 17664 137387 7463 269 103 12 807327 778445 28882 153984 7541 299 133 13 807327 778445 28882 153984 7541 299 133 14 807327 778445 28882 153984 7541 299 133 15 807327 778445 28882 153984 7541 299 133 16 807327 778445 28882 153984 7541 299 133 17 807327 778445 28882 153984 7541 299 133 18 807327 778445 28882 153984 7541 299 133 19 807327 778445 28882 153984 7541 299 133 20 807327 778445 28882 153984 7541 299 133 21 807327 778445 28882 153984 7541 299 133 22 807327 778445 28882 153984 7541 299 133 23 807327 778445 28882 153984 7541 299 133 24 807327 778445 28882 153984 7541 299 133

TASK 4 4-7


4.2.3 High scenario






Peak heat load



10 844189 806339 37850 160281 7582 318 152 11 982129 916971 65159 187364 7618 364 197 12 1142609 1033503 109106 219146 7663 416 250 13 1142609 1033503 109106 219146 7663 416 250 14 1142609 1033503 109106 219146 7663 416 250 15 1142609 1033503 109106 219146 7663 416 250 16 1142609 1033503 109106 219146 7663 416 250 17 1142609 1033503 109106 219146 7663 416 250 18 1142609 1033503 109106 219146 7663 416 250 19 1142609 1033503 109106 219146 7663 416 250 20 1142609 1033503 109106 219146 7663 416 250 21 1142609 1033503 109106 219146 7663 416 250 22 1142609 1033503 109106 219146 7663 416 250 23 1142609 1033503 109106 219146 7663 416 250 24 1142609 1033503 109106 219146 7663 416 250

TASK 4 5-0


CONTENTS

5. TIME SCHEDULE ............................................................................................................... 5-1

TASK 4 5-1


5. TIME SCHEDULE General time schedule task year

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25decision for investmentphase Iphase IIoperation Phase I task month

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37decision for investmentpreparing tender documentationinvitation for tenderstenders evaluationsigning of the contractpreparing documentation for building permitbuilding permitpreparing design documentationconstructionstart of operation

TASK 4 5-2


Phase II task month

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30decision for investmentpreparing tender documentationinvitation for tenderstenders evaluationsigning of the contractpreparing documentation for building permitbuilding permitpreparing design documentationconstructionstart of operation

TASK 4 6-0


CONTENTS

6. ENCLOSURES...................................................................................................................... 6-1

TASK 4 6-1


6. ENCLOSURES enclosure description 6-1 TPP Kosovo B

90% nominal load 6-2 TPP Kosovo B

Existing operation – without HP feedwater heaters 6-3 TPP Kosovo B with heating station

90% nominal load of the power plant Maximal load of the heating station in the first year of operation – 79.8 MW

6-4 TPP Kosovo B with heating station 90% nominal load of the power plant Maximal load of the heating station in the last year of operation – 214 MW

6-5 TPP Kosovo B with heating station Existing operation – without HP feedwater heaters Maximal load of the heating station in the last year of operation – 214 MW

RH1

RH2

1

2

3456

7

8 123456

7

8

TPP Kosovo B

Gross power 310720 [kW]Net power 278499 [kW]Net electric efficiency(LHV) 35.98 [%]Net heat rate(LHV) 10007 [kJ/kWh]Net fuel input(LHV) 774134 [kW]

90% nominal load

Enclosure 6-1

1° 2°3° 4° 5° 6°

7

8

9

10°

11 12 13 14 15 16

32

17° 18° 19° 20° 21° 22° 23°

24°

31°

25°

26°

27°28

29

30

111.4181900

2

11.891.8770

3

246247900 4

39.722465.7

5

250214900 6

21.6197101

7

11.4158770 8

6.2216040.5

9

11.6128770 10

3.0097.683.4

111.0125.0131

121.0115.01080

13

3.0023142.8

14

39.732065.7

1539.7320834

16

21.646335.0

1721.6463799

18

10.236429.1

1910.2364770

20

6.2230540.5

216.22305730

22

3.0023142.8

233.00231687

24

0.8712562.9

250.87125624

4311.4158770

2639.7320900

2721.6463834

2810.2364799

296.22305770

303.00231730

310.87125687

320.06136.3624

331.011741186

34177540900

351993650

3636.1540834

423.00231687

37254189900

38

12.034.6624

390.06134.3624

40

1.0134.0

3.1E+4

411.0123.03.1E+4

THERMOFLEX Version 12.0 Iztok JENKO IBE173 File = C:\Projekti\Kosovo\optimizacija parametrov\sheme\TPPosnova.tfx 02-11-2005 14:25:03

��

RH1

RH2

1

2

3456

7

8 123456

7

8

TPP Kosovo B

Gross power 274670 [kW]Net power 244502 [kW]Net electric efficiency(LHV) 33.94 [%]Net heat rate(LHV) 10606 [kJ/kWh]Net fuel input(LHV) 720309 [kW]

Exisitng operation - without HP feedwater heaters

Enclosure 6-2

1° 2°3° 4° 5° 6°

7

8

9

32

10°

11 12 13 14 15 1617° 18° 19° 20° 21° 22° 23°

24°

31°

25°

26°

27°28

29

30

19.50172774

2

9.8791.0753

3

219182774 4

10.72980

5

224182774 6

10.72980

7

9.50156753 8

6.0015939.6

9

9.68127753 10

2.9196.681.5

111.0125.0122

121.0115.01005

439.50156753

13

2.9122142.0

14

36.53270

1536.5327774

16

20.64420

1720.6442774

18

9.8334621.1

199.83346753

20

6.0028939.6

216.00289713

22

2.9122142.0

232.91221671

24

0.8512361.7

250.85123610

2636.5327774

2720.6442774

289.83346774

296.00289753

302.91221713

310.85123671

320.06036.2610

331.011661104

34158532774

351773560

3633.4513774

422.91221671

37228182774

38

10.133.5610

390.06033.2610

40

1.0133.8

3.1E+4

411.0123.03.1E+4

THERMOFLEX Version 12.0 Iztok JENKO IBE173 File = C:\Projekti\Kosovo\optimizacija parametrov\sheme\TPPobstojece.tfx 02-11-2005 14:26:37

��

A B C D E

RH1

RH2

1

2

3

4

56

7

8

9

10

123456

7

8

9

10

TPP Kosovo B with heating station

Gross power 289290 [kW]

90% nominal load of the power plant

Maximal load of the heating station inthe first year of operation - 79.8 MW

Enclosure 6-3TPP Kosovo B with heating station


1° 2°3° 4° 5° 6°

33°

7

8

9

32

35

10°

34

11 12 13 14 15 1617° 18° 19° 20° 21° 22° 23°

24°

31°

25°

26°36

27°28

29

30

111.2180900

2

11.688.3772

3

246247900 4

39.722465.6

5

250214900 6

21.7197102

7

11.2159772 8

6.5016243.2

9

11.4128772 10

3.0195.388.8

44

20.01401027

453.7090.5111

111.0125.0139

121.0115.01143

4311.843.0634

4810.536725.3

13

3.7025245.6

46

20.173.51027

14

39.732165.6

4939.73210

1539.7321834

16

21.746336.7

1721.7463798

18

10.536725.3

1910.5367772

20

6.6131243.2

216.61312729

22

3.7025245.6

233.70252573

473.70252111

24

0.7514149.2

250.75141523

2639.7321900

2721.7463834

2810.5367798

296.61312772

303.70252729

310.75141573

320.05534.5523

331.012901255

34177540900

351993650

3636.1540834

422.56250573

37254188900

38

11.832.952350

11.890.7111

390.05532.5523

40

1.0132.4

3.1E+4

411.0123.03.1E+4

THERMOFLEX Version 12.0 Iztok JENKO IBE173 File = C:\Projekti\Kosovo\optimizacija parametrov\sheme\Ogrevanje_max_prvo_leto.tfx 03-21-2005 13:40:03

��

A B C D E

RH1

RH2

1

2

3

4

56

7

8

9

10

123456

7

8

9

10




Maximal load of the heating station inthe last year of operation - 214 MW

Enclosure 6-4

1° 2°3° 4° 5° 6°

33

7

8

9

32

35

10°

34

11 12 13 14 15 1617° 18° 19° 20° 21° 22° 23°

24°

31°

25°

26°36

27°28

29

30

111.2180900

2

11.680.0772

3

246247900 4

39.822465.5

5

250214900 6

21.7197102

7

11.2159772 8

6.5016244.2

9

11.4127772 10

3.0189.897.8

44

20.01392068

453.8290.0298

111.0125.0139

121.0115.01143

4311.857.5651

4810.636825.3

13

4.0026053.6

46

20.449.72068

14

39.832165.5

4939.83210

1539.8321835

16

21.746336.9

1721.7463798

18

10.636825.3

1910.6368772

20

6.7931544.2

216.79315728

22

4.0026053.6

234.00260376

474.00260298

24

0.5114923.4

250.51149353

2639.8321900

2721.7463835

2810.6368798

296.79315772

304.00260728

310.51149376

320.04531.1353

331.012901255

34177540900

351993650

3636.2540835

421.70257376

37254188900

38

11.829.735350

11.890.2298

390.04529.1353

40

1.0129.4

3.1E+4

411.0123.03.1E+4

THERMOFLEX Version 12.0 Iztok JENKO IBE173 File = C:\Projekti\Kosovo\optimizacija parametrov\sheme\Ogrevanje_max_zadnje_leto.tfx 03-21-2005 13:41:23

��

A B C D E

RH1

RH2

1

2

3

4

56

7

8

9

10

123456

7

8

9

10



Existing operation -without HP feedwater heaters

Maximum load of the heating station inthe last year of operation - 214 MW

Enclosure 6-5

1° 2°3° 4° 5° 6°

33

7

8

9

32

35

10°

34

11 12 13 14 15 1617° 18° 19° 20° 21° 22° 23°

24°

31

25°

26°36

27°28

29

30

19.51172774

2

9.8979.0757

3

219183774 4

11.22980

5

224182774 6

11.22980

7

9.51159757 8

6.5016243.9

9

9.69127757 10

3.0189.297.9

44

20.01392068

453.8290.0300

111.0125.0129

121.0115.01064

4310.158.1638

4810.335117.2

13

4.0025253.9

46

20.449.72068

14

36.93270

4936.93270

1536.9327774

16

20.94430

1720.9443774

18

10.335117.2

1910.3351757

20

6.6430043.9

216.64300713

22

4.0025253.9

234.00252359

474.00252300

24

0.4914721.1

250.49147338

2636.9327774

2720.9443774

2810.3351774

296.64300757

304.00252713

310.49147359

320.04530.8338

331.012821169

34158532774

351773560

3633.6513774

421.61248359

37228182774

38

10.129.533850

10.190.1300

390.04528.8338

40

1.0129.2

3.1E+4

411.0123.03.1E+4

THERMOFLEX Version 12.0 Iztok JENKO IBE173 File = C:\Projekti\Kosovo\optimizacija parametrov\sheme\Ogrevanje_brez HP_grelnikov_max_zadnje_leto.tfx 03-21-2005 13:42:18

��

TASK 4 7-0


CONTENTS

7. DRAWINGS .......................................................................................................................... 7-1

TASK 4 7-1


7. DRAWINGS Identification No. Title DHSP -2X0001 General flow diagram DHSP -2X0002 Flow diagram of connection to the TPP Kosovo B DHSP -2X0003 Flow diagram of the heating station in the TPP Kosovo B DHSP -2X0004 Flow diagram of the heating station in Prishtina DHSP -2X0005 Flow diagram of connection to the boiler house DHSP -2X0006 Flow diagram of the heat storage tank DHSP -2X0010 Electrical single line diagram of the TPP Kosovo B DHSP -2X0011 Electrical single line diagram of the h.s. in Prishtina DHSP -2X0020 Layout of the main pipeline DHSP -2X0021 Layout of the TPP Kosovo B DHSP -2X0022 Layout of the units in Prishtina DHSP -2X0023 Layout of the heating station in the TPP Kosovo B DHSP -2X0024 Layout of the heating station in Prishtina

TASK 5


TASK 5

INSTITUTIONAL ANALYSIS 1.0 INSTITUTIONAL ANALYSIS 2.0 FINDINGS AND SUGGESTIONS 3.0 DRAFT AGREEMENTS

TASK 5 1-0

File: Task5-par1-rev1.doc -JK Revizija: 1 Objekt: KOSOVO COMBINED HEAT AND POWER Datum: 21.3.2005

CONTENTS

1. INSTITUTIONAL ANALYSIS ........................................................................................... 1-1

1.1 DISTRICT HEATING IN EU AND CEE .............................................................................. 1-1

1.1.1 LEGAL AND REGULATORY FRAMEWORK ........................................................................ 1-1 1.1.2 OWNERSHIP .......................................................................................................................... 1-2 1.1.3 COMPETITIVE ASPECTS...................................................................................................... 1-3 1.1.4 PRICES AND TAXES.............................................................................................................. 1-3 1.2 DISTRICT HEATING IN PRISHTINA ................................................................................. 1-5

1.2.1 LEGAL AND REGULATORY FRAMEWORK ........................................................................ 1-5 1.2.2 OWNERSHIP .......................................................................................................................... 1-5 1.2.3 PRICES AND TAXES.............................................................................................................. 1-7

TASK 5 1-1


1. INSTITUTIONAL ANALYSIS Under UNMIK’s administration Kosovo has started the process of approaching to the EU standards. Therefore, in the beginning of this section, we are presenting an overview of the district heating systems in the EU and in the CEE countries. 1.1 DISTRICT HEATING IN EU AND CEE 1.1.1 LEGAL AND REGULATORY FRAMEWORK

In most of the EU countries, there is no specific law for DH. District heating is considered as a business function, driven mainly by market forces. However, CHP/DHC fulfils tasks of general economic interest, mainly in relation to environmental policies.

Countries like the Netherlands and Sweden rely on fiscal/taxation incentives in order to promote CHP/DHC, while Germany, Austria and Denmark provide support to efficient CHP schemes through legislation (bonus systems). Renewables are also promoted through both, policy and regulatory/legislative measures.

As a part of the accession process to the EU, all selected CEE countries have passed energy laws/acts to create a general framework for the energy sector and to support market liberalization and the introduction of competition in line with the EU Directives.

Some of the CEE countries have developed specific DH/heat legislation. For example, Hungary issued a district heat law and Estonia is preparing one. In Croatia and Lithuania, DH aspects are addressed in heat laws. In the Czech Republic and Romania, DHC/CHP is seen as a part of the energy conservation policy and a cost-effective tool for implementing energy efficiency measures. In Bulgaria, Hungary, Romania, Latvia and Slovakia, the DH sector is considered a public service and is regulated as such.

Most CEE countries are strongly encouraging the development of electricity produced in CHP units and from renewable energy sources. CHP support measures include, among others: a guaranteed price level for CHP electricity (Estonia and Latvia for certain capacities), and a purchasing obligation for the electricity supplied by CHP plants (Bulgaria, Czech Republic, Hungary, Slovakia). The development of renewables is supported by targets, purchasing obligations, feed-in tariffs, and incentive mechanisms. Estonia uses a combination of three measures while Lithuania has an ambitious target for renewable energy production (12% by 2010). Hungary and Czech Republic have also established targets and Latvia, Bulgaria and Slovakia foresee purchasing obligations.

TASK 5 1-2


1.1.2 OWNERSHIP

In most EU Member States, the DH companies are either municipal or privately owned (Sweden, Finland, UK). As DH is a local business, municipalities play an important role. Conversely, the DH companies in these countries are acting in a market-driven environment, and with the energy market liberalization new trends such as mergers and take-overs create new structures.

Recent developments in the ownership structure of the DH companies in the CEE countries are mostly related to the restructuring process. Leasing, privatization and public-private partnerships are used in several Accession countries as a method of attracting financial sources for reforming and refurbishing the DH schemes.

In most CEE countries, the DH companies are owned by municipalities. In Bulgaria, Croatia, Slovakia and Latvia the DH systems are partially owned by the state. The Czech Republic, Estonia, Hungary, Latvia, Slovakia and Romania are in the process of privatizing the DH companies. Lithuania uses leasing extensively in order to attract investment funds.

A rough indication of the ownership structure in the CEE countries is provided in Figure 5.

�

Figure 5. Ownership structure of DH systems in CEE countries

�

TASK 5 1-3


�

1.1.3 COMPETITIVE ASPECTS The main competitor for the DH schemes in both EU Member States and the surveyed CEE countries is individual gas heating.

The competitive advantage of CHP/DHC mainly emerges from energy savings and the reduction of carbon dioxide emissions. District heating, and especially CHP generation, also reduces sulphur dioxide (SO2), dust and oxides of nitrogen (NOx) emissions, and therefore plays a major role in reducing the environmental impact of energy supply as well as in meeting the greenhouse gas emission reduction targets. The country examples below illustrate this.

• In Austria in 1998, a reduction of 1.1 million tons of carbon dioxide was achieved by means of district heating and CHP.

• In Hungary, energy savings related to CHP (90% coupled to the DH schemes) represented 20 PJ/year in 1998, which was 2% of the total primary energy consumption. This resulted in the reduction of approximately 1 million tons of carbon dioxide emissions.

• In Italy in 2000, the DH schemes saved approximately 27% of energy which would have been used by conventional systems. Carbon dioxide emissions were reduced by 1.1 million tons, SO2 emissions by 13,000 tons and NOx by nearly 5000 tons.

• In the Netherlands, fuel savings achieved by using different CHP technologies ranged between 15% and 24% in 1999.

1.1.4 PRICES AND TAXES The DH prices in the EU Member States surveyed vary in the range of €27-69/MWh (US$31-79/MWh). Some countries apply a favorable value-added tax (VAT) for the DH sector (UK and Iceland). However, in France the VAT level is higher for DH (19.6%) than for electricity and gas (5.5%). In Sweden and Finland the trend is to substitute income taxes by indirect taxes, including energy taxes.

In the CEE countries, DH prices are situated in the range of €13-41/MWh ($15-47/MWh). In some cases there is a single residential heat price (independent of whether the heat is supplied from DH or individual gas boilers). Those Accession countries where the VAT rate is lower for households connected to the DH schemes (Czech Republic, Estonia, Lithuania) will have to develop measures to enhance the DH sector and counterbalance the negative effects induced by a possible future equalization of VAT taxes in the energy sector.

TASK 5 1-4


Various mechanisms are used for financing DH rehabilitation and modernization in the CEE countries. They range from direct governmental support to the use of third-party financing and leasing of capacity. However, private sector investments (mainly foreign) have an increasing importance - often being associated with the privatization process. In some cases, international financial institutions have played a catalytic role as well.

TASK 5 1-5


1.2 DISTRICT HEATING IN PRISHTINA 1.2.1 LEGAL AND REGULATORY FRAMEWORK Legal and regulatory framework concerning district heating made a substantial progress in 2004. Functioning of the energy sector in Kosovo and establishment of an energy market was regulated by Law on Energy (Law NO. 2004/08). One of the purposes of the Law is to promote the efficient and economical use of energy resources. Article 9 of the Law states:

− The purpose of the energy efficiency policy shall be to encourage the efficient use of energy and energy resources and to promote renewable energy sources and co-generation.

− The economic regulation of activities in the energy sector shall be implemented in compliance with the Law on the Energy Regulator.

Based on the Law on Energy the Law on the Energy Regulator was passed and the Energy Regulatory Office was established. The Energy Regulatory Office has already issued two temporary instructions concerning district heating:

− Temporary Instruction No. 01/2004 On the Principles of Calculation of Prices and Tariffs in the District Heating Sector in Kosovo for the Heating Season 2004/2005

− Temporary Instruction No. 01/2004 On the Terms and Procedure for New Connections to the District Heating Distribution Network

1.2.2 OWNERSHIP

The United Nations Interim Administration Mission in Kosovo entrusted the Kosovo Trust Agency (KTA) to administer the publicly owned enterprises (POEs). One of them is the District Heating Enterprise in Pristina.

In regulation no. 2002/12 on the establishment of the Kosovo Trust Agency the Administrative Powers of the Agency over Enterprises was set.

TASK 5 1-6


The Agency has power of:

− Appointing and replacing the chairman, directors and managers of an Enterprise; − Creating, confirming or recomposing the supervisory board, managing board, workers’

council or other managing or supervisory body of an Enterprise; − Modifying the authority of any of the aforementioned bodies; − Issuing instructions regarding an Enterprise operations, in particular policies for sound

financial management; − Assuming direct control over an Enterprise, including its accounts and assets, and

administering such accounts and assets, separately from the Agency’s accounts; − Carrying out external audits of an Enterprise either directly or through designated

agents; − Requiring any employee or contractor or other business contact of an Enterprise to

provide information in his possession regarding such Enterprise; − Requiring any person with control over documents regarding an Enterprise to provide

access to such documents for their review, reproduction and safekeeping; − Entering and inspecting the premises of Enterprises; − Approving business plans and investment plans of Enterprises; − Issuing or modifying charters, by-laws and other relevant documents of Enterprises; − Effecting the registration in Kosovo of Enterprises not properly registered; − Entering into arrangements for the management, reconstruction or reorganization of

Enterprises; − Granting concessions or leases with respect to Enterprises; − Establishing one or more corporate subsidiaries of Enterprises, owned by those

Enterprises but administered by the Agency, and transferring part or all of the assets of such Enterprises to such subsidiaries;

− Transforming Enterprises into Corporations; − Restructuring an Enterprise into several Enterprises and/or Corporations; − Contracting out part of the activities of Enterprises; and − Initiating bankruptcy proceedings with respect to Enterprises and/or representing such

Enterprises in bankruptcy proceedings. At present the European Agency for Reconstruction (EAR) is funding the project of incorporation for District Heating. When the incorporation process is finished, it will enable District Heating company business contacts with lenders such as the World Bank, the EBRD and other international financial institutions. The incorporation is also a necessary pre-requisite for any privatization or Joint Venture.

TASK 5 1-7


1.2.3 PRICES AND TAXES According to the Law on Energy Regulator the Energy Regulatory Office (ERO) is responsible for setting methodology and approving the district heating tariffs in Kosovo. The district heating tariff rates for heating season 2004/2005 set by ERO are:

Consumer Class

DH Company "Termokos"

Prishtina DH Company

"Gjakova"

Residential 0.85 EUR/m2 per

month 0.82 EUR/m2 per

month

Commercial 1.10 EUR/m2 per

month 1.25 EUR/m2 per

month Taking into consideration the average size of flats and of the commercial area as well as the average heat consumption, the district heating prices in Prishtina amount to 37,5 EUR/MWh. Compared to the EU member states, the district heating prices in Prishtina are below the EU average. In comparison with the CEE countries, the district heating prices in Prishtina are on the upper side of the district heating price span. The district heating prices in Kosovo are subject to VAT.

TASK 5 2-0


CONTENTS

2. FINDINGS AND SUGGESTIONS ...................................................................................... 2-1

TASK 5 2-1


2. FINDINGS AND SUGGESTIONS Most European district heating projects have two types of models. The first model is a single company responsible for heat generation, transmission and distribution. Model 1:

Single company

The second model includes two or more companies responsible for heat generation, transmission and distribution. Model 2:

Company A

Company B

The actual situation in Pristina is that there is an existing heating company TERMOKOS, which operates the district heating network. Another fact is that the Power Plant Kosovo B is also an independent business entity. The organizational model with two companies, one taking care of heat distribution and peak heat production and the other producing electricity and heat is quite common in the EU. Therefore we suggest that in case of Pristina the most feasible solution is to adopt the model of two independent companies. The business relationship between TERMOKOS and the Power Plant Kosovo B would be regulated by a Thermal Energy Service Agreement. The draft of the Thermal Energy Service Agreement is presented in the next chapter.

� Production � Transmission � Distribution

� Production � (Transmission)

� Distribution � (Transmission)

TASK 5 2-2


Another major issue is the company ownership.. After the incorporation process of TERMOKOS is finished, the company will be legally capable to raise loans. But beside legal capability the company should have enough financial strength to raise such loans. For financial reasons or any other reasons the municipality can grant a concession for heat supply and running the existing district heating system. The concession is an operating contract between the owner (the municipality) and the operator. The owner gives the right to the company to build and to operate the assets for a certain period of time against a concession fee. The advantages for the municipality are:

− The municipality keeps control over operations (property, rules, prices..); − The company operates and guarantees efficiency and service; − The local community can allocate funds to other priorities.

In case the concession proves to be, for financial or other reasons, a right solution, the municipality usually announces a public tendering for the concession. A draft of such concession tender is presented in chapter 3 of this task.

TASK 5 3-0


CONTENTS

3. DRAFT AGREEMENTS...................................................................................................... 3-1

3.1 THERMAL ENERGY SERVICE AGREEMENT ................................................................. 3-1

3.2 CONCESSION TENDER..................................................................................................... 3-17

TASK 5 3-1


3. DRAFT AGREEMENTS 3.1 THERMAL ENERGY SERVICE AGREEMENT THERMAL ENERGY SERVICE AGREEMENT THIS THERMAL ENERGY SERVICE AGREEMENT ("Agreement") is entered into as of (date), by and between ("Seller"), and ("Buyer"). WITNESSETH: WHEREAS, Seller is engaged in the business of producing and selling heating energy; and WHEREAS, Buyer operates district heating system in Prishtina (Buyer's Facilities) ;and NOW, THEREFORE, in consideration of the premises and mutual covenants, conditions hereinabove and hereinafter set forth and such other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller, each intending to be legally bound, do hereby agree as follows: 1. DEFINITIONS Except as otherwise expressly provided herein, all capitalized terms used in this Agreement shall have the respective meanings as set forth below: (a) "Billing Month" shall mean any calendar month, or any portion thereof, during which Buyer receives and Seller delivers Thermal Energy to Buyer's Facilities in accordance with the terms and conditions of this Agreement. (b) "Contractual Obligation" shall mean, as to either party to this Agreement, any contract, agreement, indenture, instrument or undertaking to which such party is a party or by which any of its properties is bound or affected. (c) "Governmental Authority" shall mean the government and other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any other governmental entity with authority over any aspect of this Agreement or the performance of any of the obligations hereunder. (d) "Metering Equipment" shall have the meaning set forth in Section 8.1 of this Agreement. (e) "Point of Delivery" shall mean the physical point where Thermal Energy is delivered to Buyer, as more specifically described on Schedule 1(e) attached hereto and made a part hereof.

TASK 5 3-2


(f) "Point of Return" shall mean the physical point where Seller is anticipated to receive the cold water return, as more specifically described on Schedule 1 (f) attached hereto and made a part hereof. (g) "New Service Commencement Date" shall have the meaning set forth in Section 2.2 of this Agreement. (h) "Thermal Energy" shall mean, as the context requires, quantities of heating energy as measured in MWh, respectively, extracted from the circulating flow of the hot water provided to Buyer at Buyer's Facilities in accordance with the delivery specifications set forth on Schedule 1 (h) of this Agreement. (i) "Thermal Energy Capacity Charges" shall mean the capacity charges for Thermal Energy for each Billing Month determined in accordance with the capacity charges set forth on Schedule 6.1 of this Agreement. (j) "Thermal Energy Production Facilities" shall mean the coal fired power plant, heating station, and all appurtenant equipment thereto, together with any and all parts, supplies and equipment installed or added thereto, and all improvements, additions or replacements made thereto (on the primary side) which constitute the hot water production facilities located at Seller's Facilities, and shall include Seller Owned Thermal Energy Production Facilities, all as more specifically identified on Schedule 1(j) attached hereto and made a part hereof. (k) "Thermal Energy Consumption Facilities" shall mean the supply and return pipeline from Point of delivery to Point of return, heating station, and all appurtenant equipment thereto, together with any and all parts, supplies and equipment installed or added thereto, and all improvements, additions or replacements made thereto (on the primary side) which constitute the hot water consumption facilities located at Buyer's Facilities, and shall include Buyer Owned Thermal Energy Consumption Facilities, all as more specifically identified on Schedule 1(k) attached hereto and made a part hereof. (l) "Thermal Energy Usage Charges" shall mean the usage charges for Thermal Energy for each Billing Month determined in accordance with the usage charges set forth on Schedule 6.1 of this Agreement. 2. TERM 2.1 Term. This Agreement shall be in full force and effect and be legally binding upon the parties and their permitted successors and assigns as of the date hereof and shall remain in effect for a term of twenty (20) years following the New Service Commencement Date, unless otherwise terminated as provided herein (the "Term"). 2.2 New Service Commencement Date. Buyer and Seller shall mutually agree upon a New Service Commencement Date upon which Seller shall first make available and deliver to Buyer's Facilities Thermal Energy but in no event shall the New Service Commencement Date occur any later than (date), unless otherwise agreed to in writing by the parties. 3. EASEMENTS 3.1 Easements and Rights-Of-Way; Access. Buyer shall grant, or cause to be granted, to Seller all rights-of-way, access rights, easements, licenses and other rights with respect to Buyer's Facilities as may

TASK 5 3-3


be reasonably necessary for Seller to perform its obligations and exercise its rights hereunder and Seller shall grant, or cause to be granted, to Buyer all rights-of-way, access rights, easements, licenses and other rights with respect to Seller's Facilities as may be reasonably necessary for Buyer to perform its obligations and exercise its rights hereunder.

4. THERMAL ENERGY PRODUCTION AND CONSUMPTION FACILITIES AND RELATED REQUIREMENTS

4.1 Thermal Energy Production Facilities. Seller will engineer, permit, construct, finance, operate and maintain the Thermal Energy Production Facilities so as to produce and deliver Thermal Energy to Buyer at the agreed upon Point of Delivery. 4.2 Thermal Energy Consumption Facilities. Buyer will engineer, permit, construct, finance, operate and maintain the Thermal Energy Consumption Facilities so as to take Thermal Energy from Seller at the agreed upon Point of Delivery.

4.3 Facility Operation. Seller will use, operate and maintain the Thermal Energy Production Facilities in a manner which meets or exceeds good industry practice, and Seller shall secure and maintain, at its sole cost and expense, all permits necessary for the use, operation and maintenance of Thermal Energy Production Facilities. Buyer will use, operate and maintain the Thermal Energy Consumption Facilities in a manner which meets or exceeds good industry practice, and Buyer shall secure and maintain, at its sole cost and expense, all permits necessary for the use, operation and maintenance of Thermal Energy Consumption Facilities. As soon as practicable, but in no event later than (date), Buyer and Seller shall enter into a definitive operating agreement on terms mutually acceptable to each of them setting forth their respective responsibilities for the use, operation and maintenance of the Thermal Energy Production Facilities and Thermal Energy Consumption Facilities.

5.0 PURCHASE AND SALE OF THERMAL ENERGY

5.1 Purchase and Sale of Thermal Energy. Commencing on the New Service Commencement Date and continuing thereafter throughout the Term of this Agreement, Seller will produce and deliver for sale to Buyer, and Buyer will purchase and receive from Seller, agreed Buyer's Thermal Energy requirements for Buyer's Facilities. Such Thermal Energy requirements will be produced by Seller from the Thermal Energy Production Facilities; provided, however, that Seller, at its sole reasonable discretion, may provide such Thermal Energy requirements from a centralized thermal energy plant to be owned and operated by Seller or an affiliate thereof, in which event Seller will maintain the Thermal Energy Production Facilities in a moth-ball condition which meets or exceeds good industry practice and in which event appropriate changes will be made to the Point of Delivery and Point of Return. Provided Buyer's Thermal Energy requirements do not exceed the levels of contract capacity specified in Schedule 6.1 attached hereto on more than two (2) occasions within any two (2) consecutive billing periods or in any two (2) Billing Months within consecutive calendar years, the costs thereof shall be as set forth in Schedule 6.1.

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If Buyer's Thermal Energy requirements exceed the levels of contract capacity specified in Schedule 6.1 on more than two (2) occasions within any two (2) consecutive billing periods, the contract capacity specified in Schedule 6.1 shall be increased to the maximum quantity of capacity delivered to Buyer and the cost thereof shall be as set forth in Schedule 6.1. 5.2 Point of Delivery and Return. Buyer will obtain its Thermal Energy

by extracting heat from the circulating flow of hot water that Seller will make available to Buyer at the agreed upon Point of Delivery. Buyer agrees to take and accept the flow of hot water at such Point of Delivery and return the cooled water to Seller at the agreed upon Point of Return. 5.3 Point of Transfer, Risk of Loss. The sale of Thermal Energy shall be deemed to occur at the Point of Delivery and the risk of loss of the circulating medium shall transfer to Buyer at such point and shall transfer back to Seller at the Point of Return. 5.4 Delivery Specifications. The Thermal Energy delivered by Seller at the Point of Delivery shall satisfy the conditions of temperature and pressure specified in Schedule 1 (h) attached hereto and made a part hereof. 5.5 Treatment of Water. Buyer shall not interfere with, or restrict (other than to extract its Thermal Energy requirements), or contaminate in any way the flow of water supplied to or collected from Buyer hereunder. Buyer agrees to compensate Seller for the reasonable costs of treating or replacing any water that is either contaminated or not returned, after making allowance for reasonable losses occurring within normal operating conditions by Buyer, as reasonably demonstrated by Seller to Buyer. Further, it is agreed that Seller may suspend service if Buyer fails to cure any contamination of water caused by Buyer, as reasonably demonstrated by Seller to Buyer, within thirty (30) days after being advised in writing by Seller of such contaminating, provided, however, that if the nature of such contamination is such that the same cannot reasonably be cured within such thirty (30) day period, Buyer shall not be deemed to be in default if it shall have commenced such cure within such thirty (30) day period and thereafter diligently and continuously prosecutes such cure to completion, and Seller may not suspend service to Buyer during such period of cure. 5.6 Scheduled Outages. Whenever it shall become necessary for Seller to schedule an outage so that Seller may make repairs, replacements or changes in the Thermal Energy Production Facilities, both parties shall exercise reasonable efforts to coordinate the timing of the scheduled outage, and, in any event, Seller shall give Buyer not less than ten (10) days prior written notice of such outage. Seller shall use reasonable means to limit the duration of the outage and shall attempt to schedule outages during summer months. Both parties agree to act reasonably and in good faith, recognizing that such outages will, from time to time, be required. Notwithstanding anything herein contained to the contrary, Seller agrees that outages shall not and may not result in the reduction of Thermal Energy services required to continue to maintain and meet Buyer's Thermal Energy requirements within reasonable levels hereunder.

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5.7 Buyer's Rights During Interruption in Service. If at any time during this Agreement, Seller shall fail to deliver Buyer's Thermal Energy requirements and such failure is, in Buyer's reasonable judgment, attributable to Seller's failure to diligently pursue and implement appropriate corrective actions consistent with the facts and circumstances of the interruption, Buyer may at its option elect to cure Seller's non performance, without being in default of Buyer's obligations under this Agreement, by producing its own Thermal Energy or purchasing and accepting deliveries of Thermal Energy from any other source. In such event, Seller shall reimburse Buyer for the excess of any costs if incurred by Buyer to cover over and above Seller's rates and charges hereunder. 6. CHARGES AND PAYMENTS 6.1 Charges for Heating Service. For each Billing Month in which Buyer receives Thermal Energy from Seller, Buyer shall pay Seller

(i) the applicable Thermal Energy Capacity Charges for Thermal Energy set forth in Schedule 6.1 attached hereto and made a part hereof;

(ii) the applicable Thermal Energy Usage Charges for Thermal Energy set forth in Schedule 6.1 attached hereto and made a part hereof.

6.2 Adjustment in Thermal Energy Capacity Charges. In the event the Thermal Energy required by Buyer increases at any time within ten (10) years of the New Service Commencement Date as the result of any expansion to Buyer's Facilities, Seller shall, at Buyer's option exercisable within twelve (12) months of Buyer's commencement of any expansion, provide such additional Thermal Energy requirements to Buyer under the same rates, terms and conditions then applicable under this Agreement. 6.3 Capacity Charge Payments; No Set-Off. Unless excused by reason of Force Majeure, payment of the Thermal Energy Capacity Charges and Thermal Energy Usage Charges are conditioned on Seller's ability to deliver to Buyer at the Points of Delivery the full Thermal Energy requirements of Buyer under this Agreement, and subject to the provisions of this Agreement, shall not otherwise be subject to any set-off, counterclaim, abatement, or diminution. If Seller is unable to deliver to Buyer when required any quantity of Thermal Energy up to the levels of Contract Capacity specified in Schedule 6.1 the applicable Thermal Energy Capacity Charges shall be adjusted to on a pro rated basis to account for such deficiency. 6.4 Invoice and Payments. Within fifteen (15) days following the close of each Billing Month, Seller shall send Buyer a detailed invoice setting forth all charges for Thermal Energy delivered to Buyer by Seller during such calendar month. Payment, less any credits or rebates due to Buyer pursuant to this Agreement, will be due and payable within thirty (30) days of receipt by Buyer of the invoice from Seller, or the first business day following such day if such day is not a business day. Buyer shall have the right at reasonable hours to examine the testing records and meter reading charts of Seller to the extent reasonably necessary to verify the accuracy of any invoice. If any such examination reveals any error or inaccuracy in Seller's invoice, than proper adjustment and correction thereof shall be made as promptly as practicable thereafter.

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6.5 Delinquent Payments. Any invoice tendered for service rendered hereunder shall be deemed delinquent if not paid within thirty (30) days after becoming due and payable. The outstanding balance of any delinquent invoice shall accrue interest from the date due until paid, at the prime rate then in effect at (source) or comparable publication, plus one percent (1%) per annum. 7. METERING 7.1 Metering Equipment. Seller will furnish, install, and maintain for the Term of this Agreement without charge to Buyer all required meters, instruments, recording devices, and other related data logging equipment required to measure and record all charges payable by Buyer under this Agreement (collectively, the "Metering Equipment"). 7.2 Testing. All Metering Equipment will be tested and calibrated by Seller periodically in accordance with the manufacturer's instructions and good industry practice. Test and calibration records will be issued to the Buyer upon request. Further, Buyer may request additional meter tests at any time; provided, however, if a meter is subsequently found to have a variance for accuracy of less than three (3%) percent, Buyer will bear the reasonable cost of such testing. 7.3 Adjustment to Prior Invoices. If any test establishes that a meter is not accurately performing (i.e., in accordance with the manufacturer's variance specifications), Seller shall make an adjustment in Buyer's invoices, measured from the date it is determined by Seller or Buyer, in good faith, that the inaccuracy began. 8. SALE OF THERMAL ENERGY TO THIRD PARTIES 8.1 Resale of Thermal Energy by Buyer. Thermal Energy may be resold by Buyer to its tenants, provided such tenants occupy Buyer's Facilities and provided that such resale does not subject Seller to any new or additional governmental rules, regulations or laws, including but not limited to, tax laws or regulations by any regulatory authority. In case of any such resale, Buyer shall remain primarily liable to Seller for all costs and charges of Thermal Energy delivered to Buyer pursuant to this Agreement. 9. REPRESENTATIONS AND WARRANTIES 9.1 Seller Representations. Seller hereby represents and warrants that: (a) It is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby; (b) Seller has or will obtain all necessary corporate approvals for the execution and delivery of this Agreement and the performance of its obligations hereunder; (c) This Agreement is a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms, subject to the qualification, however, that the enforcement of the rights and remedies herein is subject to

(i) bankruptcy and other similar laws of general application affecting rights and remedies of creditors and

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(ii) the application of general principals of equity (regardless of whether considered in a proceeding in equity or at law);

(d) To the best knowledge of Seller, as of the date of execution hereof, no Governmental Approval (other than any Governmental Approvals which have been previously obtained or disclosed, in writing, to Buyer), is required to authorize, or is required in connection with the execution, delivery and performance of this Agreement or the performance of Seller's obligations hereunder which Seller has reason to believe that it will be unable to obtain in due course; and (e) Neither the execution nor delivery of this Agreement by Seller nor compliance by Seller with any of the terms and provisions hereof (i) conflicts with, breaches or contravenes the provisions of the corporate charter or bylaws

of Seller or any Contractual Obligation of Seller or (ii) results in a condition or event that constitutes (or that, upon notice or lapse of time or both,

would constitute) an event or default under any Contractual Obligation of the Seller. 9.2 Buyer Representations. Buyer hereby represents and warrants that: (a) It is a general partnership duly formed, validly and existing and in good standing under the laws of the state of its formation and has all requisite power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. (b) The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary partnership action; (c) This Agreement is a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, subject to the qualification, however, that the enforcement of the rights and remedies herein is subject to

(i)bankruptcy and other similar laws of general application affecting rights and remedies of creditors and

(ii) application of general principals of equity (regardless of whether considered in a

proceeding in equity or at law); (d) To the best knowledge of Buyer, as of the date of execution hereof, no Governmental Approval (other than any Governmental Approvals which have been previously obtained or disclosed, in writing, to Seller) is required to authorize, or is required in connection with the execution, delivery and performance of this Agreement or the performance of Buyer's obligations hereunder which Buyer has reason to believe that it will be unable to obtain in due course. (e) Neither the execution and delivery of this Agreement by Buyer nor compliance by Buyer with any of the terms and provisions hereof

(i) conflicts with, breaches or contravenes the provisions of the Partnership Agreement of Buyer or any Contractual Obligation of Buyer or

(ii) results in a condition or event that constitutes (or that, upon notice or lapse of time or

both, would constitute) an event of default under any Contractual Obligation of the Buyer.

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10. INDEMNIFICATION/INSURANCE 10.1 Seller's Indemnity. Seller hereby agrees to defend, indemnify and hold harmless Buyer, its employees, officers, owners, directors and agents from and against any and all claims, demands, suits, actions, recoveries, judgments, and costs and expenses in connection therewith (including, without limitation, reasonable attorneys' fees and expenses), made, brought or obtained on account of the loss of life, property, or injury or damage to the person or property of any person or persons whomsoever, which loss of life or property, or injury or damage to persons or property, shall arise out of or in connection with Seller's or its employees' use, operation and maintenance of the Thermal Energy Production Facilities, or any act required of or omission by Seller, or any agent or employee of Seller under this Agreement or in connection therewith. 10.2 Buyer's Indemnity. Buyer hereby agrees to defend, indemnify and hold harmless Seller, its employees, officers, owners, directors and agents from and against any and all claims, demands, suits, actions, recoveries, judgments, and costs and expenses in connection therewith (including, without limitation, reasonable attorneys' fees and expenses), made, brought or obtained on account of the loss of life, property, or injury or damage to the person or property of any person or persons whomsoever, which loss of life or property, or injury or damage to persons or property, shall arise out of or in connection with Sellers or its employees' operation of Thermal Energy Consumption Facilities, or any act required of or omission by Buyer, or any agent or employee of Buyer, under this Agreement or in connection therewith. 10.3 Seller's Insurance. Commencing on the date of this Agreement and at all times thereafter throughout the Term of this Agreement, Seller shall maintain, at is sole cost and expense, comprehensive general public liability (including contractual) insurance, in an amount not less than (value Euro), with respect to any liability, losses, damages, expenses, claims, actions, judgments and settlement for any personal injury, death or property or economic loss occurring in Seller's Facilities or surrounding premises and arising out of or incident to the operation, maintenance, repair, construction, replacement or modification of Seller's Facilities. 10.4 Buyer's Insurance. Commencing on the date of this Agreement and at all times thereafter throughout the Term of this Agreement, Buyer shall maintain, at is sole cost and expense, comprehensive general public liability (including contractual) insurance, in an amount not less than (value Euro), with respect to any liability, losses, damages, expenses, claims, actions, judgments and settlement for any personal injury, death or property or economic loss occurring in Buyer's Facilities or surrounding premises and arising out of or incident to the operation, maintenance, repair, construction, replacement or modification of Buyer's Facilities. 10.5 Evidence of Insurance. Prior to commencing any construction or delivering any Thermal Energy under this Agreement, Seller and Buyer shall each furnish to the other one or more certificates of insurance evidencing the existence of the coverages set forth in Sections 10.3 and 10.4, respectively. Each certificate shall state that the insurance carrier will give Seller and Buyer at least thirty (30) days written notice of any cancellation or material change in the terms and conditions of such policy during the periods of coverage. 11. DEFAULT 11.1 Seller Default. Anyone of the following events shall constitute an "Event of Default" hereunder with respect to Seller: (a) In connection with itself or its assets, Seller shall

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(i) apply for or consent to the appointment of or taking of possession by a receiver or liquidator,

(ii) make a general assignment for the benefit of creditors, (iii) file a petition for relief under the Federal Bankruptcy Code or similar statelaw, or (iv) take similar action to commence a proceeding for relief under any other law relating

to the bankruptcy, insolvency, reorganization, or winding up of itself or the composition or adjustment of its debts;

(b) An action or proceeding shall be commenced, without the application or consent of Seller, in any court of competent jurisdiction for

(i) the liquidation, reorganization, dissolution, or winding up of Seller of the composition or adjustment of its debts,

(ii) the appointment of a trustee, receiver, liquidator or custodian of Seller or substantially of all its assets, or

(iii)any similar relief under any law relating to Seller's bankruptcy or insolvency, provided such proceeding shall continue undismissed, or an order, judgment or decree approving or ordering anyof the foregoing shall be entered and continues unstayed for ninety (90) days;

(c) Any representation or warranty made by Seller and contained in this Agreement shall prove to have been incorrect in any material respect when made; or (d) Seller shall fail to

(i) timely make any payment required hereunder, or (ii) comply with any non-payment obligation under this Agreement and shall fail to cure or remedy

such default within thirty (30) days following notice and written demand by Buyer to cure the same; provided, however, that Seller's failure to provide and deliver to Buyer the Thermal Energy required pursuant to this Agreement for any period of three (3) consecutive days, unless excused due to Force Majeure or actions or inactions of Buyer its agents representatives or employees, shall constitute an immediate Event of Default.

11.2 Buyer Default. Any one of the following events shall constitute an "Event of Default" hereunder with respect to Buyer. (a) In connection with itself or its assets, Buyer shall

(i) apply for or consent to the appointment of or taking of possession by a receiver or liquidator, (ii) make a general assignment for the benefit of creditors,

(iii) file a petition of relief under the Federal Bankruptcy Code or similar state law, or (iv) take similar action to commence a proceeding for relief under any other law relating to the

bankruptcy, insolvency, reorganization, or winding up of itself or the composition or adjustment of its debts;

(b) An action or proceeding shall be commenced, without the application or consent of Buyer, in any court of competent jurisdiction for

(i) the liquidation, reorganization, dissolution, or winding up of the buyer or the composition or adjustment of its debts,

(ii) the appointment of a trustee, receiver, liquidator or custodian of Buyer or substantially all of its assets, or

(iii) any similar relief under any law relating to Buyer's bankruptcy or insolvency, provided such proceeding shall continue undismissed or order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed for ninety (90) days;

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(c) Any representation or warranty made by Buyer and contained in this Agreement shall prove to have been incorrect in any material respect when made by Buyer; or (d) Buyer shall fail to comply with any provision of this Agreement and shall fail to cure or remedy such default within thirty (30) days following notice and written demand by Seller to cure the same. 12. REMEDIES 12.1 Seller's Remedies. Upon an Event of Default by Buyer, Seller may declare the Buyer to be in material breach of this Agreement and (i) suspend service until Buyer either cures the default or, in the case of nonpayment, provides

Seller with such assurances and security as Seller may reasonably request, (ii) terminate this Agreement by written notice to Buyer, or (iii) seek such other relief to which Seller may be entitled at law or equity. 12.2 Buyer's Remedies. Upon an Event of Default by Seller, Buyer may

(i) to the extent commercially practicable, cure the default by Seller and obtain reimbursement (through direct cash payment, credit, offset or otherwise as Buyer may elect) from Seller for all costs and expenses incurred by Buyer in connection with such cure,

(ii) terminate this Agreement by written notice to Seller, or (iii) seek whatever relief to which Buyer may be entitled at law or equity.

13. FORCE MAJEURE 13.1 Suspension of Performance. Neither Buyer nor Seller shall be in default in respect of any obligation under this Agreement if the party is unable to perform its obligation by reason of an event of Force Majeure, provided

(i) that the suspension of performance shall be commensurate with the nature and duration of the event of Force Majeure and the non-performing party is using its best efforts to restore its ability to perform,

(ii) that for so long as an event of Force Majeure relieves Seller of its obligation to deliver Thermal Energy to Buyer as required under this Agreement, Buyer may elect, without being in default of its obligations hereunder, to produce its own Thermal Energy or to purchase and accept deliveries of Thermal Energy from any other source.

13.2 Termination by Reason of Force Majeure. Notwithstanding anything in this Agreement contained to the contrary, if a party's performance is suspended for more than one (1) year, the other party may terminate this Agreement upon thirty (30) days written notice to the other, provided (with respect to an event of Force Majeure by Seller) that upon such termination Buyer is able to generate its own Thermal Energy or to obtain Thermal Energy from a third party. 13.3 Force Majeure Defined. Force Majeure shall mean any event that prevents or delays a party from performing in whole or in part any obligation arising under this Agreement and neither was within the reasonable control of the non-performing party nor could have been prevented by reasonable actions taken by the non-performing party, including, without limitation, an act of God, explosion, fire, lightening, earthquake, storm, civil disturbance, strike, lock-out, unavailability of fuel or power, changes in law, orders of governmental authorities, and equipment failures that are not due to the negligence of the non-performing party.

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14. TERMINATION This Agreement shall terminate at the end of the Term and may otherwise be sooner terminated only: (i) by Buyer upon the occurrence of an Event of Default by Seller, (ii) by Seller upon the occurrence of an Event of Default by Buyer, (iii) by either party in accordance with the provisions of Section 13.2 of this Agreement, or (iv)by Buyer in the event of any increase in the cost of Thermal Energy hereunder by more than ten

(10%) percent and actually paid or to be paid by Buyer resulting solely from the assertion of rate jurisdiction and imposition of any law or regulation respecting rates, whether now existing or hereafter enacted, or directly resulting form the administration or interpretation of any such law or regulation respecting rate regulation by any Governmental Authority.

15. MISCELLANEOUS 15.1 Assignment. Neither Party shall assign this Agreement without first having obtained the written consent of the other party, provided, however, that either party may assign its rights and delegate its duties hereunder without first obtaining the other party's consent to any subsidiary or affiliated entity controlled by the assigning party, on the condition that the assignee agrees in writing to assume all of the obligations of the assigning party hereunder, further provided, however, that either party may assign, pledge or mortgage this Agreement as security for the obligations or indebtedness of such party, including Seller's or Buyer’s financing of the District Thermal Energy Facilities, without the approval of the other party. 15.2 Notice. All notices hereunder shall be sufficient if sent by registered or certified mail postage prepaid, addressed, if to Seller: (address) Attention: President; and if to Buyer: (address), Attention: President and Chief Operating Officer, provided that either Seller or Buyer may by like notice designate any further or different address or addresses or person to which notices shall be sent. 15.3 Limitation of Liability. Except in the case of willful misconduct or gross negligence, neither Seller nor Buyer, nor their respective officers, officials, partners, agents, employees, subsidiaries, parents or affiliates shall be liable to the other party, or their respective officers, officials, directors, partners, agents, employees, subsidiaries, parents or affiliates for claims for incidental, special, direct or consequential damages of any nature, including lost profits and opportunity costs in connection with or resulting from performance or non-performance of their respective obligations under or in connection with this Agreement. Nothing in this Section 15.3, however, shall limit either party's rights or remedies to recover any direct damages for a breach of this Agreement. 15.4 Confidentiality. Each of the parties agrees to hold in confidence any information supplied to it by the other and designated in writing as confidential unless the recipient is required to disclose the information as a matter of law, in which case, the recipient shall give the other party prior written notice. 15.5 Counterparts. This Agreement may be executed in separate and several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. 15.6 Severability. Any provision hereof that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction and to the fullest extent permitted by applicable law, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and without affecting the validity or enforceability of any provision in any other jurisdiction.

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15.7 Governing Law. This Agreement shall be construed in accordance with and shall be enforceable under the laws of the (destination). 15.8 Entire Agreement. The Agreement constitutes the entire agreement between the Parties with respect to the matters contained herein and all prior agreements with respect thereto are superseded hereby. No amendment or modification hereof shall be binding unless duly executed by both Parties.

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered as of the date and day first above written. (Seller) By: /s/ ---------------------------------- Name: Title: (Buyer) By: /s/ ---------------------------------- Name: Title:

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SCHEDULE 1(e) POINT OF DELIVERY Point of delivery is defined as the point of exit from the heating station located in Seller's Facilities. Metering of thermal energy usage will occur within the heating station in Seller's Facilities. SCHEDULE 1(f) POINT OF RETURN Point of return is defined as the point of entry into the heating station located in Seller's Facilities. SCHEDULE 1(h) CONTRACT CAPACITIES AND THERMAL ENERGY SPECIFICATIONS (To Be Completed) SCHEDULE 1(j) THERMAL ENERGY PRODUCTION FACILITIES The "Thermal Energy Production Facilities" are defined on the following Piping Schematic. Thermal Energy Production Facilities are located within Seller's Facilities. All associated electrical and controls equipment required for the operation of the above-mentioned equipment is also included. (To Be Completed) SCHEDULE 1(k) THERMAL ENERGY CONSUMPTION FACILITIES The "Thermal Energy Consumption Facilities" are defined on the following Piping Schematic. Thermal Energy Consumption Facilities are located within Buyer’s Facilities except the part of the connecting pipelines. All associated electrical and controls equipment required for the operation of the above-mentioned equipment is also included. (To Be Completed)

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SCHEDULE 6.1 Thermal Energy Capacity Charges, Thermal Energy Usage Charges I. CHARGES FOR HEATING SERVICE The charges for heating service in any billing month shall equal the sum of the Monthly Capacity Charges and Monthly Usage Charges. A. MONTHLY CAPACITY CHARGES The Monthly Heat Capacity Charge shall equal the product of the Heat Contract Capacity times the sum of the Heat Capital Capacity Rate and the Heat O&M Capacity Rate, i.e., MSCC = SCC x (SCCR + SOMCR) where, MSCC = Monthly Heat Capacity Charge (Euro) SCC = Heat Contract Capacity (MW), and SCCR = Heat Capital Capacity Rate (Euro per MW) SOMCR = Heat O&M Capacity Rate (Euro per MW) The initial Heat Capital Capacity Rate shall equal (value Euro) per MW and the initial Steam O&M Capacity Rate shall equal (value Euro) per MW. These rates shall be adjusted annually commencing on (date). The new rates shall be determined by multiplying the old rates times the fraction whose numerator shall equal the latest available "Consumer Price Index" as published by (source) and whose denominator shall equal the same index as of twelve months immediately preceding, provided that with respect to the Heat Capital Capacity Rate, such fraction shall be no less than (value for example 1.03) nor more than (value for example 1.04). ---------- Refer to Schedule 1(h) for the Heat Contract Capacities.

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B. MONTHLY USAGE CHARGE The Monthly Heat Usage Charge shall equal the product of the Monthly Heat Energy Deliveries times the quantity determined by adding the Monthly Heat Base Usage Rate and the Monthly Heat Energy Usage Rate, i.e., MSUC = MSED x ( MSBUR + MSEUR ) where, MSUC = Monthly Heat Usage Charge (Euro) MSED = Monthly Heat Energy Deliveries (MWh) MSBUR = Monthly Heat Base Usage Rate (Euro/MWh), and MSEUR = Monthly Heat Energy Usage Rate (Euro/MWh) The initial Monthly Base Usage Charge shall equal (value) per MWh. This rate shall be adjusted annually commencing on (value). The new rates shall be determined by multiplying the old rate times the fraction whose numerator shall equal the latest available "Consumer Price Index," as published by (source) and whose denominator shall equal the same index as of twelve months immediately preceding. The initial Monthly Energy Usage Charge shall equal (value) per MWh. This charge shall be adjusted quarterly commencing on (date). The new rate shall be determined by multiplying the old rate times the fraction whose numerator shall equal the latest available Coal Price Index, as published by (source), and whose denominator shall equal the same index as of the immediately preceding quarter.

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3.2 CONCESSION TENDER

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PRISTINA town

LOCAL GOVERNMENT

announces:

OPEN TENDER ON SUPPLY OF THERMAL ENERGY IN PRISTINA AND

THE ONE FOR RUNNING OF THE PRESENT HEATING SYSTEM

Pristina, (Date)

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In accordance with Status of Pristina town, and on the base of (other relevant legislation) by mutual consent and on behalf of the individual owners of energetic systems, which are situated on territory of Pristina town (if aplicable), of the local government of Pristina, hereby announces the following

OPEN TENDER

CONCERNING TO THE CONCESSION AWARDING FOR SUPPLYING OF HEATING POWER (PRODUCING AND SUPPLYING OF STEAM

AND HOT WATER) ON TERRITORY OF PRISTINA AND CONCERNING TO THE CONCESSION AWARDING FOR THE

PRESENT HEATING SYSTEM

PRESENT CONDITIONS IN HEATING SYSTEM IN PRISTINA

Introduction. Within territory of Pristina there are a few local separated and partial heating mini-systems, energetic systems in municipal, business and other objects. These separated local systems are not connected together organically. These systems are the following heating and energetic ones:

í Existing district heating system, í Individual boiler houses, í Future expansion of district heating system

The above-mentioned current heating (energetic) systems present existing distric heating system with boiler house and theand some inividual boiler houses. Detailed qualification and description of these systems there are found in the General and Particular Conditions of the present Competition Documentation, and we shall call them by common name “Heating System” (hereafter referred to as Heating System). All parts of heating system are separately listed in the tender documentation in the event that there is need for it, or there is necessary to emphasise, when we mention them as a “Separate Thermal System” or when – as a “Separate Energetic System”. So Pristina town (hereafter referred to as Town, or as announces a Pristina town, or as Grantor of Concession) – by means of the present invitation to tender – hereby calls for open tender (hereafter referred to as Tender) for concession on supply of heating energy in territory of Pristina town. At the same time and by means of the present tender, Pristina town chooses for itself a qualitative and capable Operator, who – by means of a concession agreement (hereafter referred to as Concession Agreement) – could take the responsibility for supply with heating energy (hereafter referred to as Concessionaire), and

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namely, with responsibility for Heating System of Pristina town as a whole, which is a subject of the Concession awarding. Concessionaire undertakes to run and correspondingly to develop heating system in a good way and for a long time, to provide qualitative and economically acceptable heating services

Classification and description of the present heating system. Subject of the concession awarding By means of the present tender the Grantor of Concession initiates the process of awarding of the Heating Supply Concession (hot water producing and supplying), as well as initiates the process of awarding of the Concession for running of the current Heating System. Pristina town is awarding the town concession along the whole territory of the town on the condition that Pristina asks from all participants of the tender to grant concrete detailed offer on acceptance of Heating System, which should contain the followings: (a) in the urban residential sector of the town:

The subject of the Concession are ( Description)

(b) Municipal and county public and other objects in heating sector:

The subject of the Concession are the trunk pipelines as well as the heating substations.

In accordance with the acquired concession, concessionaire has exclusive right and possibility to extend the Operator’s activity to other heating systems in Pristina in the future, which are not mentioned in the present tender documentation and which are independent from Heating System described and defined here. �

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Part 2. DESCRIPTION OF THE HEATING SYSTEM. DEFINITION OF THE SUBJECT OF THE CONCESSION. FIELD OF RESPONSIBILITY OF THE CONCESSIONAIRE. In process of competition procedure, every Tenderer on his own responsibility makes on the spot his decision in accordance with qualification of the whole Heating System and data at his disposal as well as in accordance with examination of the all parts of the separate heating- or energetic systems. On the basis of this, every Tenderer may forecast his own investments, which have the purpose to improve the energetic efficiency, accessibility and reliability of the given heating system, which are defined by the Concessionaire within the present field of responsibility so, how it is exactly described in what follows in the present Particular Conditions for every part of the System. However every Tenderer is obliged to carry out the investments in heat transmission pipeline TPP Kosovo B – Pristina, which will enable the use of heat produced in Power Plant Kosovo B. Tenderer is also obliged to use heat produced in Power Plant Kosovo B as primary source of heat used in district heating system in Pristina. It is follows from the conditions of the tender, that the Concessionaire’s responsibilities concerned of his field of responsibilities and defined by the present Particular Conditions will be passed by Concession Agreement concluded between the Granter of the Concession and the selected Concessionaire

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PART 3. CONTENT OF APPLICATION AND METHOD OF OFFER In the course of the tender procedure, each Tenderer – on the basis of the available data and documents and in accordance with on-the-spot investigation of the present condition of this part of Heating system and on his own responsibility – should perform his own judgement of state of the heating system and its quality, characteristics, features, energetic efficiency, reliability and other indicators, and on account of all the above, tenderer should take a stand on connection with the present state of the system. Tenderer is obliged to offer his unit price for a services for all parts of the Heating System, broken down into figures for the heating bought at PP Kosovo B, his own heat production and for heating energy sales, for domestic hot-water and so on, in dependence of specific kind of services demanded by the tender. For the purpose of we would have opportunity for evaluating and comparing of the offers of all tenderers, it is necessary to indicate the above prices for services in the “binomial” form of price for each separate part of thermal system, it means that the above price should be consist of two parts: the first part – the part of the variable costs that descends from the system control procedure but are variable depending on quantity of power, and the second part – the part of the permanent costs of the Concessionaire that as well descends from the system control procedure, but this part of the costs is permanent for every year and are independent on quantity of expended energy Fundamentally it means that the price for the energetic service should be shown as follows: R1 – Variable part of the service’s price (Power S1):

This service has a variable price depending on the used quantity of the power basic material during the billing period of time, and which consists of, first of all, the costs of fuel, electric power, basic material used for chemical pre-treatment of water, municipal water or other material used for heating production, which were used for an accounting period. In the case if the Concessionaire uses the heating power descending from other producer of heating power, as it is valid in case of the providing of heating power from the company TPP Kosovo B, then the costs of provided heating power of such kind must be accounted just as in the case of purchase of other power basic materials.

Within duration of the agreement the Concessionaire is obliged to provide the best power conditions. The Operator is obliged to modernise the present system with the purpose of providing of the more economic production, reorganisation and energy consumption, which should be mutually advantageous both for end- customers and for Concessionaire. Within the framework of the offer each Concessionaire should describe and plan in detail, how he is going to organise this service. The Operator as a future Concessionaire is expected to describe unequivocally and exactly, how, in what way, and in accordance with which guiding principle he wants to measure the quantity of expended fuel, electric power or other energy sources or applications, municipal water, as well as produced heating energy, quantity of domestic hot-water, and therewith, in what manner he used to bill the end-customers

Tenderer is obliged in his offer to give a very detailed explanation of how and in what way he intends to organise the billing for the produced quantities of heating power during the initial stage of action of the agreement in conditions of absence of the measuring equipment. For the mentioned period of time, when the tenderer intends billing for provided quantities of heating power in accordance with reading of the measuring instrument, the tenderer is obliged to give a very detailed explanation on his measuring plan according to each part of the heating system and according to every single energy source.

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R2 – Permanent part of the service’s price Simultaneously with the variable part R1, it is necessary to present this permanent part R2 of the service, which will be billed towards the end-customers monthly (EUR/month), in ratio 1/12 of debt of current year, or to simplify the above, for unit of measurement (EUR/unit/month), however there is not any connection with quantity of the provided energy sources towards the end-customer Those services belongs here that are independent on quantity of the delivered power during an agreed period, and namely:

- service – «S2 Heating system maintenance and control» - service – «S3 Total warranty for functioning of system of thermal production” - service – «S4 Investments in the heating system»

Within the framework of the service, the Operator is obliged to:

− provide – in a workmanlike manner – control, operation and supplying with materials necessary for jobbing and current maintenance of the whole heating system trusted to him, and to pay work of the operating staff

− provide economical and effective managing in the heating system, at the same time to accomplish all necessary prevent and operating maintenance with providing of the necessary materials and the spare parts in interests of the best satisfaction of needs of the end-customer.

− make investments in the heating system

The above kinds of work are billed towards the end-customers in the settled period monthly, and the ones consist of followings in detail:

SERVICE S2 – HEATING SYSTEM MAINTENANCE AND CONTROL: This service includes all control service of the heating system, as well as all jobbing and current maintenance of the heating system, which a subjects of the present tender. Tenderer is obliged to present an exact description of this service, and namely, a separate description of made work and another separate description with listing the materials needed for jobbing and current maintenance. Payment due for these services is organised and controlled only by the Concessionaire. These kinds of servicing work are billed monthly in the settled period towards the end-customers, in form of flat-rate debt during the billing period. These services concerns the whole heating system, and namely: the primary equipment for producing and distributing, the secondary equipment for liquid distributing, the secondary heating equipment, the ventilation, the conditioning, the secondary electric equipment, lighting equipment, electric cable configuration and equipment for domestic hot-water, which were determined in the present tender documentation. Tenderer offers all this, as well the Granter of concession and the end-customers altogether approve, and hereby it is becomes constituent parts of the concession agreement Tenderer is obliged to offer the best possible calculation for this part of permanent costs, his principles for accounting and for billing, which should be shown in adequate units of measure, in understandable, acceptable and clearly arranged way.

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SERVICE S3 – TOTAL WARRANTY FOR FUNCTIONING OF SYSTEM OF THERMAL PRODUCTION This service includes the total maintenance and the total warranty of proper operating and maintenance for functioning of system of thermal production system in accordance with modernisation program for the energetic system. These services concerns the production system described in above parts, and the Tenderer is obliged to describe them precisely in his own offer. The tender is obliged to separate precisely the production network under force of the total warranty from other parts of the distributing system that are not covered by this total warranty. In like manner, in his offer, within the total warranty’s frameworks, the Tenderer is obliged to present a preliminary description of his modernisation investments planned for producing system in accordance with content of the concession agreement. The concessionaire will be responsible for organisation and control of the investments and for financing. These kinds of work are billed towards the end-customers in the settled period monthly, in form of flat-rate debt during the billing period. Tenderer is obliged to offer the best mode for calculation, accounting and billing these costs. The total warranty does not concern to the liquid distributing equipment, to the secondary equipment for heating and conditioning, lighting equipment, electric cable configuration and secondary equipment for domestic hot-water, in accordance with the present Particular conditions. The total warranty does not concern to extension kinds of work, or to the new equipment that falls out of the objective frameworks. These kinds of work serve for provision of possible new needs (extension of the Heating System) or for provision of new business areas (new services). These applications remains in frameworks of responsibility of the Grantor of the concession and/or end-users, however they are entitled to ask help or consult with the concessionaire as well with a outside executor about their offers in connection with these executions. In the case if the Grantor of concession will enter into the agreement with the Concessionaire in connection with these executions, then those ones will become subjects of a new agreement that will be concluded according to conditions offered by the Tenderer and accepted by the Grantor of the concession

SERVICE S4 – INVESTMENTS IN THE HEATING SYSTEM General investments This service covers the financing and the paying by instalments for acquisition of new equipment for the purpose of optimisation and development of the networks and the equipment with the object of development of energetic efficiency, reliability and accessibility of the present heating system, in concerning to the kinds of work that are not covered by the total warranty. These services concern the Heating system as a whole, so the producing system too as a distributing part of the system. This service means development of the whole system or only modernisation of a part of the system, for the purpose of the most effective satisfaction of the true needs of the end-customers, from the point of view of optimisation of energetic costs and optimisation of development of obsolete parts of the system. These kinds of work will be accomplished on the account of the Concessionaire.

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Tenderer is obliged to offer an investment program in the field of responsibility within providing area with the object of modernisation of the system or/and of development of the energetic- and application efficiency. This program should contain a description of the investments. The Concessionaire finances and accomplishes these basic kinds of work connected to these investment, and so this service must be paid back completely till expiration of the concession agreement. The Concessionaire enjoys absolute freedom in his choice of technical solutions and in election of kinds of investments during duration of the concession agreement. The Concessionaire may plan and project new investments in the energetic system with the object of steady raising of the budgeting and energetic efficiency as well as accessibility of the Heating System. The Concessionaire organises, finances and accomplishes all these investments , and so this service must be paid back completely at the latest till expiration of the concession agreement. All investment accomplished within duration of the concession agreement in the frameworks of the part S4 will transfer to the Grantor of the concession (or if so was stipulated in the agreement – then in the property of the end-customers) after expiration of the concession agreement (in the end of the duration of the concession agreement); the payment for any possible unpaid book keeping values may be in prospect for those investments, which were accomplished in the last year of the concession agreement, and so their amortisation does not finished totally yet and if this fact may be proved by relevant book-keeping. All those kinds of work that must be made in the future after signing of the present concession agreement, as a result of possible modifying of the legal rules within duration of the agreement, in connection with flue-gas emanation, safety, energetic fluids, selection or insertion of materials, replacement of fuel, change of parameters (pressure, tension, heating value, air-, soil-, or water-pollution and so on) will remain in field of responsibility and charge of the end-customers or the Grantor of concession. The concessionaire is obliged to comply all prescription, will inform the Grantor of concession or the end-customers on possible modifications in the prescriptions and will offer necessary solutions for doing. With the purpose of adaptation to such modifications in the prescriptions, in necessary cases the Grantor of concession and the end-customers may ask additional offers from any third persons, and then will compare these conditions to the offer of the concessionaire

Investment in heat transmission pipeline TPP Kosovo B- Pristina

Tenderer is obliged to offer an investment program in the investment in heat transmission pipeline TPP Kosovo B – Pristina and connecting via new heating station to the district heating system.. This program should contain a description of the investments and financing of the project.

Method of offer

Summing up a required method of offer described in this chapter, it is clear, that the concessionaire gets right in offering of the prices for all the power services provided by him, with a habitual method of accounting for such services, on the basis of his own knowledge and experience as Operator, according to accepted international professional standards and rules, and namely the prices for following services:

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í hot water for heating

í customer (domestic) hot water

í other (possible)

Tenderer offers the prices, where the offering principle is well arranged and comprehensible, so, that the represented prices should show all structural elements contained the permanent and variable part of the price, the billing and the succession too. Each Tenderer is obliged to describe in details his own offering principle, to recast it for every energetic service, and to make it well arranged, comprehensible and acceptable both for the Grantor of concession and for end-customer. Each tenderer is obliged in his offer to prepare and to enclose the submission in table form for the prices R1 and R2 for each medium (and for each service), and the submissions for every element of the system separately that is a part of the subject of the concession, as well as to offer his comprehensible equation (formula) for modification in prices during the contracted period. Content and description of the power producing (transforming) system and equipment as well as of the power distributing system, which are subjects of the tender and the concession awarding, are in the above chapter of the Particular Conditions. Tenderer is obliged, on the basis of his experience in work of such kind, on the one part, to group the producing equipment and the primary distributing equipment in the best way, as well as, on the other part, to group the secondary distributing and applying equipment, and to offer the corresponding services’ prices for these both groups of networks, for Grantor of concession and for end-customer, in well arranged and comprehensible way. As well the offerer is obliged to make certain about completeness and state of the individual parts of the Heating System with the help of examination in the spot and by revision of technical documentation, he should suggest in his offer the appropriate communal-technical decisions inside frameworks of the above determined Heating System.

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PART 4. PLAN OF MEASUREMENT AND PRINCIPAL OF BILLING All transferred fuel and transformed energy that is a subject of the agreement in correspondent part of the Heating system will be measured with appropriate means, certified, sealed and accepted from the part of the a establishment concerned and acknowledged by Grantor of Concession or by the end-customers, but at the expense of Concessionaire The monthly reading values from all measuring tools should be handing over the end-customers once a month, except for the cases of flat-rate billing, that is defined in the plan of variable measurement and that is fixed in the offers of all tenderers and in the Concession agreement. On the basis of his own experience and Operator’s knowledge, Concessionaire should submit his own plan of measurements which makes possible measurements, readings and billings for all power fluids within the framework of services provided by the concessionaire (Plan of delivery and measurement). As well Concessionaire should suggest separately a such plan of measurement that makes possible to share the consumption between the concessionaire and an other eventual consumer, if the one exists in the area of responsibility of the concessionaire. (Plan of share measurement). The Plan of delivery and measurement should show in unequivocal and express way the division into application levels and application groups of the energetic networks (pipelines). The mentioned plans of measurement are obligatory parts of the offer, and necessarily must contain the schemes of all appropriate energetic systems, with indication of exact location of all supply measuring tools and with indication of exact place of share of energetic source materials’ applications (Scheme of points of measurement). These plans of measurements may be variable (develop) within the duration of the concession agreement depending on the offered investment project, the eventual modifications should be accepted by Grantor of the concession and then after the acceptance they should be enclosed to the agreement. The concessionaire have at his disposal four (4) months after the signing of the concession agreement for completion of installation of all measuring equipment in accordance with his own plan of delivery and measurement and in accordance with his plan of share measurement. Each Tenderer in his offer is obliged to develop in details and the to suggest to Grantor of concession his plan of billing concerning to the above 4 months’ period from the signing of the concession agreement till the completion of installation of all measuring tools. In his offer the offerer should describe in details the desired principles and modes of billing within this period. Each Tenderer is obliged to describe with full particulars in his offer the unit prices for all energy sources that are subjects of supply for the end-customers, and namely for each category of all end-customers separately, in accordance with principles of measured and used quantities and that are billed in flat-rate prices for the first 4 months of content of the concession agreement. It goes without saying that the unit prices, offered to various groups of the end-customers, will differ from each other, and the ones should not be identical, as the technical performance and the input parameters of used power systems for the different groups of end-customers are not identical, this implies an opportunity of various accounting of unit prices for the various end-customers also. In this situation it should elaborate and offer the price of the service that is a subject of the offer, in well arranged and comprehensible way, and first of all before application in the real world in the present situation.

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Depending on what part of thermal system is the case in point, and what energetic services were offered for this part of the Heating System , the Tenderer presents unit prices expressed in the appropriate units of measurement. It is responsibility of the Tenderer, on the basis of regulations of the present Particular conditions and on account of his own experience in providing services of this kind in accordance with his own capacity, to make his decision on subject of selection of the most useful and effective mode for exposition of the billed quantities and unit prices.

PART 5. SERVICE PRICE-CURRENT Immediately after the concession agreement concluding, the Concessionaire takes over the whole Heating System, in the present state, in accordance with the currant accounting principles in the current services. It means that in the parts of the Heating system, where already any billing for energetic services was in existence, there the Concessionaire will proceed the energetic services towards the end-customers according to the former billing principles, but with the prices in the “binomial” form offered by him and accepted by Grantor of concession. Tenderer offers particular prices relating to the billing services connected to particular conditions in the case of absence of measuring tools, as well as quotes a price for billing services connected to particular conditions in the case of presence of measuring tools, but under the stipulation that these measuring tools were stipulated in accordance with the installed measuring and billing plan presented in the Part 4. Object heating

During billing in accordance with the services’ price it is necessary explicitly to separate two following cases:

1. The case, if it takes place the acceptance of that part of the Heating system, which was in

possession of billing of any definite kind towards the end-customers in the moment of the acceptance. The following belongs to this particular case:

- existing district heating system

2. The case, if it takes place the acceptance of that part of the Heating system, which possessed with “rental” connection towards the end-customers in the moment of the acceptance, so there do not exist any billing before the acceptance by Concession agreement. The following belongs to this particular case:

- individual boiler houses

We would like particularly to note, that the Concessionaire should arrange mutual relations with the company Power Plant Kosovo B. The prices, the shifts of prices and all elements of terms of supply of thermal energy from the company Power Plant Kosovo B to the Tenderer are indicated in Appendix --- to the Common Conditions, and the tenderer is obliged take these conditions into his consideration in his price offer calculated for end-customers.

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The concessionaire may freely find any other solution for providing of these consumers with heating energy, however it should be a profitable, economic and safe solution, or in the case if the concessionaire does not come to an arrangement with the present providers.

Consumer domestic hot water (SHW) (Optional) The concessionaire makes his suggestion for the selling unit price of the domestic hot-water to the end-customers consuming the domestic hot-water (SHW), to each end-customer separately, in accordance with the Plan of delivery and measurement, on the basis of real consumption provided to the end-customers and measured separately with one or more measuring tools installed under control of the concessionaire, and the price should be expressed in units of EUR per cubic meter. In the course of year all these prices may be corrected many times, depending on the arisen costs and according to the correcting equation, which as well should be offered in the offer of the tenderer. The equation should be indicated, and each basic principle or the one for alterations should be explained. The provided domestic hot-water should be billed once a month.

Concessionaires’ services in excess of their obligations

Any other interference in the work, which makes necessary of attraction of an additional staff, and which falls out of frameworks of the concessionaire responsibility (i.e. does not correspond to the above described services) is a subject of additional billing. The Tenderer in his offer should process all cases of such kind that could happen in this sector in the future, and he should develop an appropriate mode of billing for the case as well as a mode of the price changing. However, for the purpose of the Grantor of concession must be ready to provide the opportunity to cover the costs, which do not concern to sphere of the responsibility of the concessionaire, with the object to ensure reimbursement for the following accounting period, at the end of the current period the concessionaire as the service provider should present his report and estimations about that work quality that should be executed in the following accounting period.

Services billing and paying-off Concessionaire’s services billing and paying-off

The billing of the concessionaire’s services towards the end-customers should take place once a month, in an exactly determined and contracted day, the billed costs are concerned the previous month. The bill should be issued in accordance with the Concession agreement, settlement of the bill occurs within 30 days. An eventual price correction will be accounted and billed separately, for each month separately.

End- customers’ lateness in fulfilment of their responsibilities

If an end-customer does not settle his obligation in the time to contracted payment date, then the Concessionaire is entitled to count up the interest for delay foreseen by law for a day of delinquency. If the end-customer does not settle his obligation in the future too, then the Concessionaire is entitled to attempt to enforce this claim in other legal way.

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Otherwise, if the concessionaire regards it necessary and if such kind of delay in payment lasts so long, that threatens to the financial state of the concessionaire because of impossibility of fulfilment of his own obligations in relation to his own suppliers, and in particular in relation to the state, then the concessionaire has the right to suspend performance of contractual services in relation to that end-customer that does not execute his payment obligations, without acceptance of the responsibility for possible consequences of the step. This decision is accepted by the concessionaire on his own.

PART 6. FORMULATED COMFORT CONDITIONS The concessionaire in accordance with his offer is obliged to reach and keep prescribed conditions (temperature and micro-climate in the premises, where it is necessary in, quality of the domestic hot-water and so on), according to preliminarily provided and contracted values, as follows in below, or according to Kosovo regulations. In the following there are the quality standards (i.e. comfort conditions) for energy provided by the concessionaire. The concessionaire is obliged to run and to control the system entrusted to him, that the system should meet the requirements of standards, or indicated technological values, in relation to quality of the heating of the premises or prescriptions for the providing domestic hot water.. POWER ��

− Maximum initial temperature 76°C − Minimum temperature depend on ambient temperature − Operating system of heating 75/55°C Availability with 24 h of 24 h and 7 days of 7 days from September 01 till April 31, or in the case, when on three (3) consecutive days at 6.00 a.m. was registered the temperature less than +13°C

��− Production minimum temperature 45°C − Contracted minimum temperature 50°C − Production maximum temperature 55°C − Once per day in the tank to decrease legionella growth 60 °C

Availability with 24 h of 24 h and 7 days of 7 days all the year round, except for standby attended time for technical maintenance provided for whole year

��

Guaranteed values connected to operation of the heating and conditioning systems are set depending on the specified values of internal climatic conditions given on the part of the end user. These conditions are the followings: WINTER-TIME design ambient temperature: -13° C

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Room-temperatures: Flats: On the stipulation that the capacity is sufficient the secondary equipment, that are out of the field of responsibility of the concessionaire, meets the prescribed requirements, and if other regulations do not prescribe anything else, the concessionaire should guarantee the following parameters in the flats:

Day’s normal mode of operation í Living room +20°C with tolerance ±2°C í Bedrooms – children +20°C with tolerance ±2°C í Bathroom +22°C with tolerance ±2°C Night’s reduced mode of operation: í Living room: +16°C with tolerance ±2°C í Bedrooms – children +16°C with tolerance ±2°C í Bathroom +16°C with tolerance ±2°C

Hospital premises: ( To be defined)

Business premises and others: ( To be defined)

PART 7. THE ORDER OF USE OF THE PREMISES Dwelling sector

− f lats 24/24 h 7/7 days

Availability from September 01 till April 31, or in the case, when on three (3) consecutive days at 6.00 a.m. was registered the external temperature less than + 3°C. In this season you should to differ the normal day's mode of operation and night's mode of operation, which were described in the above.

Other premises (schools, hospitals etc.)

Availability from September 01 till April 31, or in the case, when on three (3) consecutive days at 6.00 a.m. was registered the external temperature less than + 13°C.

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PART 8. THE PARTICIPANTS OBLIGATIONS AND GENERAL ORDERS Allowances and modes of payment Concession refunding towards the Grantor of concession

As refunding for use of the Heating System as well as for the exclusive right of management of Heating System places on the territory of town Pristina, the concessionaire pays allowance for the benefit of the Grantor of concession. The concessionaire pays the concession allowance in accordance with the Concession agreement, the amount of the allowance is indicated in the offer of the Tenderer and is a constituent part of the concession agreement. This concession allowance should be paid by the concessionaire once in quarter year for 3 months, in the beginning of the quarter. The amount of allowance is determined by reckoning, and namely - in accordance with the equation suggested in the offer of the concessionaire. The size of the concession allowance may be corrected once a year, in accordance with general temporary requirements, with growth of the cost-of-living index and other basic changes, according to the correction equation suggested in the offer of the concessionaire. The equation should be indicated and all basic or variable governing principles should be explained.

Concession allowance towards the Concessionaire as a result of a new connection

Concessionaire is authorised on flat-rate allowance after each new heating supply connection created within the area of his responsibility in town. The amount of this allowance is suggested by the tenderer in his offer and comes into effect after signing of the concession agreement, and the payment of the concession allowance becomes obligatory after each new connection. Concessionaire may spend the paid-in amount on modernisation of the energetic capacities for the purpose of perspective development of the town. The amount of allowance within duration of the agreement is determined by reckoning, in accordance with the equation suggested in the offer of the concessionaire. The size of the connection allowance may be corrected once a year, in accordance with general temporary requirements and other changes, according to the correction equation suggested in the offer of the concessionaire. The equation should be indicated and all basic or variable governing principles should be explained In accordance with the signed concession agreement, every new end-customer pays the connection allowance at the rate determined in the agreement, in the moment, when he makes his application for connection of his facilities to the Heating system of the concessionaire, in accordance with the procedure that should be described in the offer of each offerer and that is a constituent part of the concession agreement

Additional obligations of concessionaires Concessionaire as a provider of the service provides the services according to the obligation stated in the present tender documentation contained the General and Particular Conditions adjusted with regulations of the Concession agreement. It is natural, that concessionaire should be acquainted exceedingly with all networks that subjects of the Concession agreement. In accordance with the above, Concessionaire should set straight all eventual problems, especially in pursuance of the proper quality of materials or services. Concessionaire as a provider of the service faces and makes arrangements against the problems and the situations in case of potential dangers in connection of the good operation of the system trusted to him, as

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well as he provides managing and maintenance, repair and control, i.e. he should respect his responsibilities relating the public service. In any case and irrespective of what there is the question, Grantor of the Concession and end-customer should be informed quickly and in good time on the forthcoming or compelled measures and work in the system. Concessionaire as a provider of the service should be connected to external communication network that provides possibility of external communication in connection with services provided by him. Reports on the present situation in the heating system Concessionaire is obliged to make a report on the present state of the Heating system trusted to him once a year at stated report time. The report should contain the following:

- enumeration of the problems which have eventually arisen in the trusted part of the heating system or in other parts of the system for the past period

- enumeration of the problems that were solved or not solved in the past period, with commentary

- energetic consumption of the Heating system during the reported period Staff Concessionaire as a provider of the service arranges work and pays the staff for proper providing the taken responsibilities. Concessionaire on his own exclusive responsibility applies the staff and provides the staff’s appropriate working discipline and satisfaction, just as he guaranteed the above in his own offer concerning both to organisational level and to formation of the staff. At time of duration of the Concession agreement, the whole staff of the Concessionaire should be subordinated to the Kosovo legislation and Kosovo professional rules, as well as the labour prescriptions, and especially those regulations that concerning to behaviour, bearing own responsibility and professional ethic of the staff as a whole. The staff of the Concessionaire in the site of work carries a well conspicuous identification sign (for example: the corporate name) that assigns and identifies the person and appropriate place of work. In case of serious infringement of the working morale or the professional approach, the Grantor of the concession reserve the right to draw the Concessionaire attention to the fact, in the case if the breach of discipline goes on, then the Grantor of the concession will ask the Concessionaire to expel or to transfer the person committed the contravention, depending on degree of the contravention. From point of view of public health, Concessionaire is obliged put each his employee through all necessary health controls and vaccinations stipulated in the general health prescriptions. Concessionaire assumes the obligation to train the staff according to the special professional program. The training program of the professional training is concerning to the handling of the contracted system, the maintenance and the repair, but includes the farther continuous training too, which is necessary in case of modification or change of the equipment, covers the development of the planned maintenance and so on. This process goes in conference with the Concession agreement, which is in harmony with the further development of the Heating system during the period of validity of the Concession agreement. Receipt of store of fuel, lubricants and spare parts

TASK 5 3-33


In the moment of acceptance of the Heating system, Concessionaire is obliged to buy all stored accessory material (chemical agents for the water treating and preparing, oils, lubricants and so on) from Grantor of Concession or from the end-customers, in accordance with the commercial prices valid for the date of acceptance of the system, after verification and on the assumption of the normal quality. As well, Concessionaire is obliged to buy all stored fuel (if any) from Grantor of Concession (or from the end-customers) in accordance with the commercial prices valid for the date of acceptance of the system, after verification and on the assumption of the normal quality. After the signing of the Concession agreement, Concessionaire and the end-customers are obliged to perform census of all stored spare parts there, where they are and where they are used in the frameworks of the system trusted to him. These spare parts are in the book-keeping of the end-customers by way of their own reserve till the date of entry in the book-keeping of the Concessionaire. Concessionaire realises the receipt at the latest in three months after the acceptance of the Heating system and after the approval of the Grantor of Concession, the receipt will be enclosed to the Concession agreement as an appendix. Warranty on equipment Concessionaire takes the responsibility to keep all accessories built in the structure of the Concession agreement in the proper working state, under the protection of the appropriate warranties in writing covered all parts and performance of the accessories. Concessionaire should inform the Grantor of the concession and the end-customers about the improper work, the components’ failure and same cases, and will make all necessary action for realisation of the warranties. Concessionaire responds for all damage risks or for costs because of components’ or performance’ failure concerned of the property of the Grantor of the concession or the end-customers, which have arisen as a result of the mistake of the Concessionaire in realisation of the warranty rights Use and maintenance of the premises obtained for exploitation Grantor of the concession and/or the end-customers are obliged to provide the corresponding areas to Concessionaire in the buildings possessing land parcels with the object of the installation and the operating of the equipment, and for this reason it should take reasonable measure for prevention of the such equipment against impairment, stealing or abuses. All premises place under control of the Concessionaire should be kept in good state and in the course of validity of the Concession agreement the state of these premises should not be worse, than the state in the moment of the acceptance of the premises by the Concessionaire. Grantor of the concession and/or the end-customers are obliged to provide at disposal of the Concessionaire all those premises that are in direct connection with the trusted energetic system, as for instance: the workshops, the production shops, the personnel rooms attached to the workshops acquired by the Concessionaire, the cloakrooms, the shower rooms, WC-s, the premises of the heating substations and so on, and they are obliged to do so for free of charge during validity the Concession agreement. Grantor of the concession and/or the end-customers should keep in good and proper (closed and covered) condition the objects and premises (buildings and land parcels) aimed for handing to the Concessionaire Concessionaire does not response for the architectural maintenance of the buildings, where are placed the above premises. Providing of access to equipment for concessionaire Grantor of the concession is obliged to provide to Concessionaire the access to the buildings having the land parcels for the purpose of execution of the functions of all kind concerning to the Concession

TASK 5 3-34


Agreement at normal working time, or at any other time if the Concessionaire makes his adequate request with indication of the weighty reason for it. Grantor of the concession and/or the end-customers may not without presentation of the weighty reasons for refusal to interfere to the Concessionaire with execution by him of repair or restoration of system if the Concessionaire considers it necessary. Access to documentation and data Grantor of the concession and/or the end-customers provide at disposal of the Concessionaire all necessary technical documentation on hand connected to the energetic system trusted to him, such as the drawings of the equipment of the trusted system, the operative documentation, various reports and all other documents connected to the energetic system and the services that are presenting subjects of the acceptance. Grantor of the concession and/or the end-customers provide at disposal of the Concessionaire all available documentation connected to the notes and the data on utilisation and power charge of the system for last 3 years at least and primarily based on the invoices issued for energy sources Control of system on the part of the grantor of the concession At any time the authorised representative Grantor of the concession and/or the end-customers from the public sector possess their free access to the equipment and the energetic system for the purpose of control of order on the premises and to check of the state of the energetic system are under the responsibility of the Concessionaire Grantor of the concession and/or the end-customers are authorised, on the assumption of the present of the preliminary notification at least 48 hours before, with help of application of experts elected in accordance with their will, in the presence of the Concessionaire, to execute an detailed professional technical inspection of the equipment that may be made by method of disassembly of the equipment too. The party at fault will pay the costs of the technical inspection with application of the external experts of such kind as well as the costs, connected to the extraordinary shut-down of the energetic system and eventual additional expenses as subsequent result of such shut-down. In case of the either part is right only partially, both the Concessionaire and the Grantor of the concession and/or the end-customers altogether will pay all arisen costs. Operation of the system and planned service interruptions Concessionaire as a provider of the service should be capable on determinate way to provide the contracted energetic services in accordance with the above regulations at all duration of the Concession agreement. Taking into consideration the state of the system and obligations on providing of the end-customers with energetic services, it is necessary strictly to limit in time till minimum the periods of the shut-downs of technical units of the system made irrespective of the reasons, and especially because of control inspections or because of repair. In case of an irrespective of the reasons termination of the agreement, on the demand of the Grantor of the concession, the Concessionaire is obliged to continue his managing and handling services as well as the services connected to the maintenance of the system out of duration of the agreement with the view to provide the continuance of the system operating so long as a new partner will not take away the control. This period can not exceed six (6) months Force Majeure

TASK 5 3-35


Heating system, as a subject of the concession awarding, should run in the contracted period without any interruptions, it means, that the running of the Heating system should not be stopped at any circumstances, with the exception of the preliminary planned shut-downs or the Force majeure circumstances. Force majeure circumstances are such kind of events and circumstances, which are not predictable and that can call the interruption of the normal mode or stopping of operations of the Heating system, and that should consider in accordance with Kosovo and other regulations as Force majeure circumstances In case of Force majeure as follows: such step or legal regulation that confines the free supply of fuel as well the failures in the system or unpredictable incidents, Concessionaire as a provider of the service, with help of the Grantor of the concession and/or the eventual end-customer should do all of his best and should use all possible available modes for the purpose to remove the present difficulties and to restore the system operating In case of the above Force majeure circumstances, as well in the case of absence of readiness to help from part of Grantor of the concession and/or the end-customers and when it is necessary from them, the Concessionaire as a provider of the service will not responsible for providing of the irregular and incomplete service. Insurance obligations In accordance with the obligatory liability insurance (third-party insurance), the Concessionaire is obliged to take out the third-party insurance with a solvent insurance company on those cases, when the Concessionaire bears responsibility or it possible to make him answerable against a third-party. This insurance in case of a person should be made without limit on amount, and the system and the materials should be insured on the amount of their purchasing price. Concessionaire as a provider of the service is oblige to pay the insurance systematically, and on each request of the Grantor of the concession he should show the evidence, that proves the proper payment, with presentation of the insurance policy and appropriate bills of payments. In each case, the Concessionaire as a provider of the service should apply all necessary legal prescriptions and regulations, both in the field of the social insurance and in the field of labour and legal regulations. Concessionaire should prevent an unauthorised access to system or to any part of the system trusted to him, except for the authorised personal possessing with permission or admission for access to the energetic system. Duration of the concession agreement Duration of the Concession agreement is twenty-five (25) years. The beginning of the application of the Concession agreement is the moment of the acceptance of the system from part of Concessionaire, and this fact will be attested by the bilateral protocol of the acceptance of the Heating system. After the contracted period expiring, the Concession Agreement will be automatically concluded again, with condition, that each contracting part will be entitled to enter new conditions in accordance with prolongation of the term of the Concession agreement on a new period. Cessation of the concession agreement and return of the system

TASK 5 3-36


After expiring of the Concession agreement, Concessionaire gives the energetic system in the proper technologic state back to Grantor of the concession and to the end-customer, and this technologic state should be better than the state of the system in the moment of the previous acceptance by the Concessionaire For the purpose of establishing of the technical state of the system, Grantor of the concession and/or the end-customers have right to assign an independent professional company specialised on the problems of such kind, even so if the assignment will vain, the Grantor of the concession and the end-customers will pay the eventual costs .

TASK 6


TASK 6

FINANCIAL AND ECONOMIC ANALYSIS 1.0 INPUT DATA 2.0 FINANCIAL ANALYSIS 3.0 SENSITIVITY ANALYSIS

TASK 6 1-0


CONTENTS

1. INPUT DATA ........................................................................................................................ 1-1

1.1 INVESTMENT COSTS.......................................................................................................... 1-1

1.2 FINANCIAL SOURCES ........................................................................................................ 1-4

1.3 ENERGY PRICES .................................................................................................................. 1-5

1.4 OPERATING COSTS............................................................................................................. 1-5

1.5 CASH COLLECTION ............................................................................................................ 1-6

TASK 6 1-1


1. INPUT DATA Key data on which the financial and economic data are based are:

− Investment costs, − financial sources, − energy prices, − operating costs.

1.1 INVESTMENT COSTS The investment cost for phase I and phase II of the district heating project is 34,641,590 EUR. The financing costs (interests during construction, fees) of the project are 2,850,150 EUR. The value added tax on the investment is 5,196,240 EUR so that the total investment sum amounts to 42,687,980 EUR. In total project costs, investments in the pipeline, heating station in the TPP Kosovo and heating station in Prishtina are included. The pipeline between Prishtina and the TPP Kosovo B will be carried out in two phases. The first phase will take roughly 3 years to be accomplished. If it is assumed that the project starts in 2005, it will be finished in 2007. The second phase will take 2.5 years to be accomplished and this is expected by the end of 2012. The investment costs and the construction dynamics are shown in Table 1.1. and in Figure 1.1 Table 1.1 STRUCTURE AND DYNAMICS OF INVESTMENT COSTS Prices as of January 2005 in 000 EUR

Type of works Structure Total 2005 2006 2007

FIXED ASSETS Civil works 10.3% 3,854 0 592 1,677

Civil works H.S. Prishtina 0.8% 314 0 48 194 Civil works TPP 1.9% 705 0 128 513 Civil works pipeline 7.6% 2,835 0 416 970

Equipment 68.9% 25,815 0 3,842 10,360 Equipment H.S. Prishtina 8.2% 3,069 0 396 1,584 Equipment TPP 7.6% 2,850 0 441 1,764 Equipment pipeline 53.1% 19,896 0 3,005 7,012

Other investments 13.3% 4,973 111 1,425 1,315 Other H.S. Prishtina 2.0% 756 25 248 223 Other TPP 2.1% 797 0 319 319

Other pipeline 9.1% 3,420 86 858 772

TASK 6 1-2


STRUCTURE AND DYNAMICS OF INVESTMENT COSTS Prices as of January 2005 in 000 EUR

Type of works Structure Total 2005 2006 2007

Total 92.4% 34,642 111 5,860 13,351

Financing costs 7.6% 2,850 0 373 1,486 - domestic loan 1.6% 610 0 116 495 - foreign loan 6.0% 2,240 0 257 991 TOTAL FIXED ASSETS 100.0% 37,492 111 6,232 14,837 WORKING CAPITAL 0.0% 0 0 0 0 T O T A L 100.0% 37,492 111 6,232 14,837

VAT 13.9% 5,196 17 879 2,003 GRAND TOTAL 113.9% 42,688 127 7,111 16,839

Table 1.1 - continuation STRUCTURE AND DYNAMICS OF INVESTMENT COSTS Prices as of January 2005 in 000 EUR

Type of works 2011 2012 2013 FIXED ASSETS Civil works 0 462 1,123

Civil works H.S. Prishtina 0 14 58 Civil works TPP 0 13 51 Civil works pipeline 0 435 1,014

Equipment 0 3,310 8,302 Equipment H.S. Prishtina 0 218 871 Equipment TPP 0 129 517 Equipment pipeline 0 2,964 6,915

Other investments 98 1,061 963 Other H.S. Prishtina 13 129 117 Other TPP 0 79 79

Other pipeline 85 852 767

Total 98 4,833 10,388

Financing costs 0 191 801 - domestic loan 0 0 0 - foreign loan 0 191 801

TASK 6 1-3


STRUCTURE AND DYNAMICS OF INVESTMENT COSTS Prices as of January 2005 in 000 EUR

Type of works 2011 2012 2013 TOTAL FIXED ASSETS 98 5,024 11,189 WORKING CAPITAL 0 0 0 T O T A L 98 5,024 11,189

VAT 15 725 1,558 GRAND TOTAL 113 5,749 12,748

Figure 1.1

DINAMICS OF CONSTRUCTION

0

2,000

4,000

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8,000

10,000

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14,000

16,000

2005

2006

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000

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R

Civil Works Equipment Other Financing Costs

TASK 6 1-4


1.2 FINANCIAL SOURCES It is assumed that Termokos will carry out the project which means that VAT on the investment can be compensated by VAT Termokos collects at heat sales. So the total funds needed to carry out the project amount to 37,492 thousand EUR. It is expected that the major part of the project will be financed by one of the international banks. Their share will be slightly over 60%. Furthermore, it is expected that Kosovo Government will, according to current legislation, grant a loan to finance a part of the first phase of the project. The governmental loan will represent 17% in total financing of the project. The rest of the financial sources will be provided by Termokos. Termokos funds will be primarily used to cover financing cost i.e. interest during construction and financial fees. The majority of Termokos funds are expected in the second phase of the project, when Termokos will already realize the financial benefits of the first phase of the project. The financial sources are presented in Table 1.2. Table 1.2 FINANCIAL SOURCES Prices as of January 2005 in 000 EUR

Financial sources Structure Total Phase I. Phase II:

Investors Funds 22.3% 8,354 2,138 6,215 Kosovo Budget funds 0.0% 0 0 0 Grant 0.0% 0 0 0 Domestic loan 16.9% 6,318 6,318 0 Foreign loan 60.9% 22,820 12,728 10,092 Total 100.0% 37,492 21,184 16,308

VAT 13.9% 5,196 2,898 2,298 TOTAL 100.0% 42,688 24,082 18,606

LOAN CONDITIONS

Financial sources Amount Interest Repayment Grace Year

rate period Period-Years of First

thousand EUR Installment

Domestic loan –gover. 6,318 10.0% 10.0 0.0 2008 Foreign loan 22,820 10.0% 10.0 2.0 2008- 2013

TASK 6 1-5


1.3 ENERGY PRICES Energy prices represent one of the key data for a financial analysis. The main data for the analysis are:

• electricity price 32 EUR/MWh • regulated price of heat 37,44 EUR/MWh • heavy fuel oil price 24,49 EUR/MWh • light fuel oil price 44,3 EUR/MWh

1.4 OPERATING COSTS In order to calculate profitability of district heat supply from the TPP Kosovo B it would be enough to calculate the operating costs of the new pipeline and both heating stations. But to get more insight into the financial operation of the district heating system in Prishtina it is quite important to include also the existing operating costs. Total costs of the district heat in Prishtina represent an important information for the presentation of the project. Costs estimation of the existing operation in Termokos Prishtina is based on the Methodology for Temporary Tariffs for the DH Companies in Kosovo – Heating Season 2004/05 and on the Annual Report of Termokos. The operating costs of the district heating system in Prishtina have been calculated in the following way: Fuel costs were calculated on the basis of heavy fuel and light fuel oil spent as well as on the quantities of district heat supplied from the TPP Kosovo B. The value of district heat supplied from the TPP Kosovo B was set by evaluating the loss in the electrical energy production. The electrical energy, which was not produced due to heat supply, was valued by electricity sales price, i.e. 32 EUR/MWh. Costs of maintenance and other material costs are estimated at 0.2% of the value for civil works and 1,5% of equipment investment costs. For the existing system the maintenance and other material costs in the year 2005 amount to 273 thousand EUR. In the next years we assume that material costs of the existing system will increase proportionally with the heat load of the system. Depreciation is calculated by considering 3,3% of the value for civil works and pipeline and 5% of the value for equipment of substations and other costs. For the existing system the yearly depreciation is 810 thousand EUR. In future, the existing depreciation cost will also increase proportionally with the heat load of the system.

TASK 6 1-6


Costs of services are estimated at 0.5% of the investment costs. The existing system costs of services are 321 thousand EUR yearly. The anticipated heat losses from the source to the customers are approximately 10%. It is assumed that because of the new investment no new workers will be employed. The existing yearly labor costs are 554 thousand EUR. They are expected as well to increase proportionally with the heat load of the system. Labor costs are expected to rise due to the new employments and partly due to the increase of monthly wage and other related personal costs. A part of the total costs are also financing costs, which include interests on long term loans required to finance the project and interests on short term loans which are needed for current operation. Profit tax included in the calculations is in accordance with UNMIK Regulation No. 2002/3 –on Profit Taxes in Kosovo. According to the mentioned regulation the taxable profit shall be charged at the 20% rate. 1.5 CASH COLLECTION In the actual company’s life, cash collection represents a serious problem. In the household sector the payment rate in 2002 achieved 18%. In 2003, cash collection improved and it was 29%. In commercial sector (business and budgetary customers) the payment rate in 2002 achieved 24%, and in 2003 it decreased to 20%. At such low payment rates Termokos needs subsidies to cover the operating costs. If in the financial model that we used for calculation of the project profitability such low payment rates were considered, it would be impossible to prove the project profitability. Therefore, the unpaid bills were assumed as a recoverable debt in the model. In the year 2005, a longer receivables collection period (800 days) was assumed. In the next years, the collection period decreases and after a 10 year period, it reaches a 90 day collection period.

TASK 6 2-0


CONTENTS

2. FINANCIAL ANALYSIS..................................................................................................... 2-1

2.1 PROFIT AND LOSS ACCOUNT .......................................................................................... 2-3

2.1.2 Profit and loss account – existing system without connection to the TPP Kosovo B.......... 2-3 2.1.3 Profit and Loss Account - Low Growth scenario .................................................................... 2-5 2.1.4 Profit and Loss Account - Medium Growth scenario.............................................................. 2-7 2.1.5 Profit and Loss Account - High Growth scenario................................................................... 2-9

TASK 6 2-1


2. FINANCIAL ANALYSIS The financial analysis was carried out by comparison of financial results obtained with the district heating connection to the TPP Kosovo B, with the financial results obtained without the connection to the TPP Kosovo B. The difference in the financial results of these two scenarios shows the financial successfulness of the project. The financial analysis was carried out for the following growth scenarios of the heat consumption in Prishtina:

− no growth scenario (sensitivity analysis), − low growth scenario, − medium growth scenario and − high growth scenario.

The main financial results of these scenarios are: FINANCIAL INDICATORS

Low

Scenario Medium Scenario

High Scenario

Average energy production GWh 456 564 758 Investment costs (VAT excluded) million EUR 37.5 37.5 37.5

Financed by loans million EUR 29.1 29.1 29.1 Debt financing % 78% 78% 78% COST PRICE

Average District Heating cost price (Without connection to the TPP Kosovo B) EUR/MWh 46.0 45.3 44.5

Average District Heating cost price (With connection to the TPP Kosovo B) EUR/MWh 19.6 19.2 20.4

ECONOMICS OF THE PROJECT Pay-back period (years) 10 10 9 NPV at a 12% discount rate (million EUR) 25.9 34.8 47.7 IRR 22.2% 24.3% 27.0%

For each heat consumption scenario the cost price of heat was calculated. In figure 2.1 we are presenting the cost price in the time period from 2005 to 2032 for the medium growth scenario.

TASK 6 2-2


Figure 2.1

DISTRICT HEATING COST PRICEMedium Scenario

0

10

20

30

40

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st p

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With connection to TPP Kosovo B Without connection to TPP Kosovo B

Figure 1.2 presents the cost price of the district heat for the medium growth scenario without connection to the TPP Kosovo B and for the scenario with connection to the TPP Kosovo B. In case there is no connection to the Kosovo B the cost price in 2005 will be 44.38 EUR/MWh. In the future years, the cost price will increase mainly because of the raise of financing costs. Due to a long receivables collection period the amount of short term debt increases, which results in higher financing costs. In the year 2010 the cost price increase amounts to 46.63 EUR/MWh and in the year 2020, to 69.39 EUR/MWh.

In case of connection of the Prishtina district heating system to the TPP Kosovo B, the cost price in the year 2010, which is after the completion of the first phase, would decrease to 22.72 EUR/MWh. In the year 2020, the price would be 19.70 EUR/MWh which is less than a half of price of the case without the project.

Merely the comparison of cost prices itself shows the economical justification of the project.

TASK 6 2-3


2.1 PROFIT AND LOSS ACCOUNT Two sets of profit and loss account have been made for each scenario of future heat consumption.

2.1.2 Profit and loss account – existing system without connection to the TPP

Kosovo B PROFIT AND LOSS ACCOUNT Prices as of January 2005 in 000 EUR

Items 2005 2006 2007 2008

SALES 5,829 5,990 6,155 6,325 OPERATING EXPENSES 7,601 7,754 7,912 8,074 Costs of materials 5,834 5,988 6,146 6,308 - energy purchase costs 5,561 5,715 5,872 6,035 - maintenance and other material 273 273 273 273 Costs of services 321 321 321 321 Depreciation 810 810 810 810 Labour costs 554 554 554 554 Other production costs 82 82 82 82 Profit (Loss) from operations -1,772 -1,765 -1,757 -1,749 REVENUES FROM INVESTMENTS AND INTERESTS 0 0 0 0 FINANCIAL COSTS 0 156 237 322 - existing liabilities 0 156 237 322 - due to new investment 0 0 0 0 OTHER REVENUES 0 0 0 0 OTHER EXPENSES 0 0 0 0 PROFIT (LOSS) -1,772 -1,921 -1,994 -2,071 TAXES 0 0 0 0 NET PROFIT -1,772 -1,921 -1,994 -2,071

TASK 6 2-4


Without connection to the TPP Kosovo B, Termokos will use heavy fuel oil as primary fuel. At district heating prices set by ERO the revenues will amount to 5.8 to 6.3 million EUR in the period 2005 – 2008. In the same period, the fuel costs will range from 5.8 to 6.3. This means that, at a 100% collection rate the revenues will suffice only to cover fuel costs. All the other uncovered costs will add up to 1.7 million EUR loss from operations. The structure of the operating costs for the year 2005 is shown in Figure 2.2. Figure 2.2

OPERATING COSTS

Labour costs7%

Depreciation11%

Costs of services4%

Maintenance and other material

4%

Other operating costs

1%

Fuel & other variab. costs

73%

TASK 6 2-5


2.1.3 Profit and Loss Account - Low Growth scenario PROFIT AND LOSS ACCOUNT Prices as of January 2005 in 000 EUR

Items 2005 2006 2007 2008 2009 2010 2011 2012

SALES 5,829 5,990 6,155 6,325 6,997 7,741 8,563 9,473 OPERATING EXPENSES 7,601 7,754 7,912 4,400 4,723 5,089 5,511 5,999 Costs of materials 5,834 5,988 6,146 1,775 1,939 2,132 2,365 2,646 - energy purchase costs 5,561 5,715 5,872 1,334 1,473 1,640 1,842 2,092 - maintenance and other material 273 273 273 441 466 493 522 554 Costs of services 321 321 321 417 446 477 512 549 Depreciation 810 810 810 1,571 1,644 1,724 1,811 1,905 Labour costs 554 554 554 554 604 659 718 783 Other production costs 82 82 82 82 89 97 106 115 Profit (Loss) from operations -1,772 -1,765 -1,757 1,925 2,274 2,651 3,053 3,475 REVENUES FROM INVESTMENTS AND INTERESTS 0 0 0 0 0 0 0 0 FINANCIAL COSTS 0 611 1,759 2,126 1,920 1,733 1,488 1,409 - existing liabilities 0 239 274 368 212 115 79 17 - due to new investment 0 373 1,486 1,758 1,708 1,618 1,409 1,391 OTHER REVENUES 0 0 0 0 0 0 0 0 OTHER EXPENSES 0 0 0 0 0 0 0 0 PROFIT (LOSS) -1,772 -2,376 -3,516 -201 354 918 1,565 2,066 TAXES 0 0 0 0 71 184 313 413 NET PROFIT -1,772 -2,376 -3,516 -201 283 734 1,252 1,653

TASK 6 2-6


PROFIT AND LOSS ACCOUNT Prices as of January 2005 in 000 EUR

Items 2013 2014 2015 2016 2017 2018 2019 2020

SALES 10,480 11,594 12,826 14,189 15,697 17,365 19,211 21,252 OPERATING EXPENSES 6,581 8,058 8,314 8,906 9,581 10,348 11,215 12,209 Costs of materials 3,004 3,584 3,573 3,873 4,231 4,651 5,140 5,724 - energy purchase costs 2,415 2,821 2,768 3,023 3,332 3,699 4,129 4,649 - maintenance and other material 589 763 805 850 899 953 1,011 1,075 Costs of services 590 711 760 813 870 933 1,001 1,076 Depreciation 2,008 2,696 2,818 2,952 3,098 3,256 3,430 3,618 Labour costs 853 930 1,014 1,106 1,205 1,314 1,432 1,562 Other production costs 125 137 149 163 177 193 211 230 Profit (Loss) from operations 3,899 3,536 4,512 5,284 6,116 7,017 7,996 9,043 REVENUES FROM INVESTMENTS AND INTERESTS 51 41 136 161 182 214 356 509 FINANCIAL COSTS 2,784 1,672 1,362 1,051 741 483 381 280 - existing liabilities 0 0 0 0 0 0 0 0 - due to new investment 2,784 1,672 1,362 1,051 741 483 381 280 OTHER REVENUES 0 0 0 0 0 0 0 0 OTHER EXPENSES 0 0 0 0 0 0 0 0 PROFIT (LOSS) 1,166 1,904 3,285 4,393 5,557 6,749 7,971 9,272 TAXES 233 381 657 879 1,111 1,350 1,594 1,854 NET PROFIT 933 1,524 2,628 3,514 4,446 5,399 6,377 7,418

TASK 6 2-7


2.1.4 Profit and Loss Account - Medium Growth scenario PROFIT AND LOSS ACCOUNT Prices as of January 2005 in 000 EUR

Items 2005 2006 2007 2008 2009 2010 2011 2012

SALES 5,829 5,990 6,155 6,325 7,149 8,079 9,131 10,320 OPERATING EXPENSES 7,601 7,754 7,912 4,400 4,800 5,271 5,831 6,518 Costs of materials 5,834 5,988 6,146 1,775 1,977 2,228 2,543 2,957 - energy purchase costs 5,561 5,715 5,872 1,334 1,505 1,721 1,998 2,371 - maintenance and other material 273 273 273 441 472 506 544 586 Costs of services 321 321 321 417 453 493 538 587 Depreciation 810 810 810 1,571 1,662 1,763 1,876 2,001 Labour costs 554 554 554 554 617 686 763 848 Other production costs 82 82 82 82 91 101 112 125 Profit (Loss) from operations -1,772 -1,765 -1,757 1,925 2,349 2,809 3,301 3,802 REVENUES FROM INVESTMENTS AND INTERESTS 0 0 0 0 0 0 0 0 FINANCIAL COSTS 0 611 1,759 2,126 1,920 1,741 1,500 1,421 - existing liabilities 0 239 274 368 212 123 91 30 - due to new investment 0 373 1,486 1,758 1,708 1,618 1,409 1,391 OTHER REVENUES 0 0 0 0 0 0 0 0 OTHER EXPENSES 0 0 0 0 0 0 0 0 PROFIT (LOSS) -1,772 -2,376 -3,516 -201 429 1,068 1,801 2,381 TAXES 0 0 0 0 86 214 360 476 NET PROFIT -1,772 -2,376 -3,516 -201 343 855 1,441 1,905

TASK 6 2-8



Items 2013 2014 2015 2016 2017 2018 2019 2020

SALES 11,664 13,183 14,899 16,839 19,032 21,510 24,311 27,476 OPERATING EXPENSES 7,370 9,225 9,268 10,167 11,219 12,475 14,008 15,906 Costs of materials 3,505 4,372 4,039 4,521 5,108 5,848 6,807 8,065 - energy purchase costs 2,872 3,550 3,159 3,576 4,091 4,751 5,621 6,781 - maintenance and other material 633 822 880 945 1,017 1,097 1,186 1,285 Costs of services 642 780 848 924 1,008 1,102 1,206 1,322 Depreciation 2,140 2,870 3,042 3,233 3,446 3,683 3,947 4,240 Labour costs 944 1,049 1,167 1,298 1,444 1,606 1,786 1,987 Other production costs 139 154 172 191 212 236 263 292 Profit (Loss) from operations 4,294 3,958 5,631 6,672 7,813 9,035 10,303 11,571 REVENUES FROM INVESTMENTS AND INTERESTS 44 44 154 214 256 311 479 659 FINANCIAL COSTS 2,784 1,672 1,362 1,051 741 483 381 280 - existing liabilities 0 0 0 0 0 0 0 0 - due to new investment 2,784 1,672 1,362 1,051 741 483 381 280 OTHER REVENUES 0 0 0 0 0 0 0 0 OTHER EXPENSES 0 0 0 0 0 0 0 0 PROFIT (LOSS) 1,555 2,330 4,423 5,835 7,328 8,863 10,401 11,950 TAXES 311 466 885 1,167 1,466 1,773 2,080 2,390 NET PROFIT 1,244 1,864 3,539 4,668 5,862 7,091 8,320 9,560

TASK 6 2-9


2.1.5 Profit and Loss Account - High Growth scenario PROFIT AND LOSS ACCOUNT Prices as of January 2005 in 000 EUR

Items 2005 2006 2007 2008 2009 2010 2011 2012

SALES 5,829 5,990 6,155 6,325 7,358 8,561 9,960 11,587 OPERATING EXPENSES 7,601 7,754 7,912 4,400 4,908 5,536 6,332 7,379 Costs of materials 5,834 5,988 6,146 1,775 2,031 2,369 2,835 3,502 - energy purchase costs 5,561 5,715 5,872 1,334 1,550 1,844 2,258 2,867 - maintenance and other material 273 273 273 441 480 525 576 635 Costs of services 321 321 321 417 463 516 576 644 Depreciation 810 810 810 1,571 1,687 1,820 1,972 2,145 Labour costs 554 554 554 554 634 725 828 947 Other production costs 82 82 82 82 93 107 122 139 Profit (Loss) from operations -1,772 -1,765 -1,757 1,925 2,451 3,025 3,627 4,209 REVENUES FROM INVESTMENTS AND INTERESTS 0 0 0 0 0 0 0 0 FINANCIAL COSTS 0 611 1,759 2,126 1,920 1,751 1,517 1,441 - existing liabilities 0 239 274 368 212 133 108 49 - due to new investment 0 373 1,486 1,758 1,708 1,618 1,409 1,391 OTHER REVENUES 0 0 0 0 0 0 0 0 OTHER EXPENSES 0 0 0 0 0 0 0 0 PROFIT (LOSS) -1,772 -2,376 -3,516 -201 530 1,274 2,110 2,768 TAXES 0 0 0 0 106 255 422 554 NET PROFIT -1,772 -2,376 -3,516 -201 424 1,019 1,688 2,214

TASK 6 2-10



Items 2013 2014 2015 2016 2017 2018 2019 2020

SALES 13,480 15,683 18,246 21,227 24,696 28,731 33,425 38,887 OPERATING EXPENSES 8,768 9,687 10,925 12,472 14,459 17,084 20,592 25,340 Costs of materials 4,459 4,232 4,904 5,805 7,053 8,832 11,374 15,016 - energy purchase costs 3,757 3,316 3,901 4,702 5,835 7,484 9,876 13,348 - maintenance and other material 702 915 1,003 1,103 1,217 1,348 1,498 1,669 Costs of services 723 889 992 1,109 1,243 1,397 1,572 1,773 Depreciation 2,344 3,146 3,405 3,702 4,041 4,428 4,871 5,378 Labour costs 1,083 1,238 1,416 1,619 1,851 2,116 2,419 2,766 Other production costs 159 182 208 238 272 311 356 407 Profit (Loss) from operations 4,712 5,996 7,321 8,755 10,236 11,647 12,833 13,547 REVENUES FROM INVESTMENTS AND INTERESTS 31 39 243 299 367 450 642 835 FINANCIAL COSTS 2,784 1,672 1,362 1,051 741 483 381 280 - existing liabilities 0 0 0 0 0 0 0 0 - due to new investment 2,784 1,672 1,362 1,051 741 483 381 280 OTHER REVENUES 0 0 0 0 0 0 0 0 OTHER EXPENSES 0 0 0 0 0 0 0 0 PROFIT (LOSS) 1,960 4,363 6,203 8,003 9,862 11,614 13,093 14,103 TAXES 392 873 1,241 1,601 1,972 2,323 2,619 2,821 NET PROFIT 1,568 3,491 4,962 6,402 7,890 9,291 10,475 11,282

TASK 6 2-11


In all growth scenarios (low, medium, maximal) the first year of the first phase operation is 2008; in the year 2014, the second phase becomes operational.

When the connection to the TPP Kosovo B becomes operational, in all growth scenarios there is a significant 4.7 million decrease of fuel costs. Taking into consideration other operational costs which increase, the result is a 3.7 million increase in profit from operations. Since 78% of the investment is financed by loans, the interests in the year 2008 amount to 1.8 million EUR. But the net profit is still for 1.8 million EUR higher than in the case without connection.

The differences between scenarios become evident in the year 2014 that is after the second phase becomes operational. In the low growth scenario in 2014, there is an 8.2 million EUR decrease in fuel costs. Due to the increase of other operation costs the result is a 6.4 million EUR increase of profit from operations. The increase of net after tax profit is 5.8 million EUR.

In the medium growth scenario, the decrease of fuel costs is 9.0 million EUR. The increase of profit from operations is 7.2 million EUR and the increase of net profit after tax is 6.7 million EUR.

In the high growth scenario, the savings on fuel costs are 11.6 million EUR. The increase of profit from operations is 9.8 million EUR and the net profit increase is 9.2 million EUR.

In the years after 2014, in all 3 scenarios, the net profit increases, partly due to the increase of heat consumption and partly due to the decrease of interests. The interests diminish each year due to the loan repayment.

For the medium growth scenario the profit and loss account is presented in Figure 2.3.

TASK 6 2-12


Figure 2.3

PROFIT AND LOSS ACCOUNT

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

Year

000

EU

R

Costs of materials Depreciation Costs of services

Labour costs Other production costs FINANCIAL COSTS

OTHER EXPENSES REVENUES

As we can see from the Figure 2.3, after the year 2008, revenues exceed costs, which results in increasing of the net profit. If the district heating sales prices remain unchanged, the return on equity will exceed 20%. This means that the district heating sales prices can be lowered and still 10% - 16% yield on equity can be achieved.

For the medium growth scenario, the cash flow is presented in Figure 2.4

TASK 6 2-13


Figure 2.4

CASH FLOW

-20

-10

0

10

20

30

40

50

60

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

Year

mill

ion

EU

R

Cash receipts from operations Receipts from financing & investment

Disbursements for operations & investment Financing disbursments

NET CASH FLOW

The period till 2014 can be defined as a construction period. In this period, Termokos raise long term loans to finance the investment and short term loans to cover loss from operations. Therefore, the net cash flow in this period ranges around zero. From the year 2014 onward, the net cash flow begins to rise. As we mentioned before, the main reason of the net cash flow rise lies in the expected growth of the district heat consumption which at present district heating prices yields big profits.

TASK 6 3-0


CONTENTS

3. SENSITIVITY ANALYSIS.................................................................................................. 3-1

TASK 6 3-1


3. SENSITIVITY ANALYSIS

The sensitivity analysis serves to show how the project profitability alters with the change of input data or suppositions.

A part of the sensitivity analysis shows what the project profitability would be with the supposition that only the first phase of the project is accomplished and that there is no growth of the district heat consumption. The results of such scenario are shown in Table 3.1

Table 3.1

FINANCIAL INDICATORS

No growth Scenario

Average energy production GWh 185 Investment costs (VAT excluded) million EUR 21.2

Financed by loans million EUR 19.0 Debt financing % 90% COST PRICE

Average District Heating cost price (Without connection to the TPP Kosovo B) EUR/MWh 50.0

Average District Heating cost price (With connection to the TPP Kosovo B) EUR/MWh 25.6

ECONOMICS OF THE PROJECT Pay-back period (years) 9 NPV at 12% discount rate (million EUR) 6.4 IRR 16.3%

As we can see from the Table 3.1 the internal rate of return is 16.3% and the NPV at a 12% discount rate is positive. The pay-back period in this scenario is 9 years. All this indicators show that even at the present scope of district heat sales, the realization of the first phase of the project is economically justified.

TASK 6 3-2


The sensitivity analysis was carried out for the medium growth scenario and following input data:

− investment costs,

− scope of DH production,

− Dh purchase costs,

− HFO price and

− DH sales prices.

The results of the sensitivity analysis are presented in Tables 3.2, 3.3, 3.4, 3.5, 3.6 and in Figure 3.2

Table 3.2

SENSITIVITY ANALYSIS Investment costs Prices as per January 2005

Change in % IRR NPV Pay-back % mill EUR

-60.00% 47.7% 50 5 -50.00% 40.5% 47 5 -40.00% 35.4% 45 6 -30.00% 31.6% 42 6 -20.00% 28.7% 40 8 -10.00% 26.3% 37 9

0.00% 24.3% 35 10 10.00% 22.6% 32 10 20.00% 21.2% 30 11 30.00% 19.9% 27 11 40.00% 18.8% 25 12 50.00% 17.8% 22 12 60.00% 16.8% 19 12

TASK 6 3-3


Table 3.3

SENSITIVITY ANALYSIS Scope of production Prices as per January 2005 v 000 EUR


-60.00% #N/V 53.6 3.00 -50.00% #N/V 51.2 3.00 -40.00% 47.1% 48.5 4.00 -30.00% 37.1% 45.5 5.00 -20.00% 31.4% 42.2 7.00 -10.00% 27.4% 38.6 8.00

0.00% 24.3% 34.8 10.00 10.00% 21.8% 30.6 10.00 20.00% 19.6% 26.2 11.00 30.00% 17.8% 21.6 11.00 40.00% 16.2% 16.8 12.00 50.00% 14.8% 11.9 12.00 60.00% 13.5% 6.6 13.00

Table 3.4

SENSITIVITY ANALYSIS DH purchase costs Prices as per January 2005 v 000 EUR


-60.00% 26.6% 41.70 9.00 -50.00% 26.3% 40.55 9.00 -40.00% 25.9% 39.40 9.00 -30.00% 25.5% 38.24 9.00 -20.00% 25.1% 37.09 10.00 -10.00% 24.7% 35.93 10.00

0.00% 24.3% 34.77 10.00 10.00% 23.9% 33.60 10.00 20.00% 23.5% 32.43 10.00 30.00% 23.1% 31.27 10.00 40.00% 22.7% 30.08 10.00 50.00% 22.3% 28.90 10.00 60.00% 21.9% 27.72 11.00

TASK 6 3-4


Table 3.5

SENSITIVITY ANALYSIS HFO prices Prices as per January 2005 v 000 EUR


-60.00% 12.1% 0.16 15.00 -50.00% 14.0% 5.18 14.00 -40.00% 16.0% 10.58 13.00 -30.00% 18.1% 16.60 12.00 -20.00% 20.2% 22.65 11.00 -10.00% 22.3% 28.71 10.00

0.00% 24.3% 34.77 10.00 10.00% 26.3% 40.82 9.00 20.00% 28.3% 46.88 8.00 30.00% 30.3% 52.94 6.00 40.00% 32.2% 58.99 6.00 50.00% 34.1% 65.05 6.00 60.00% 36.0% 71.11 6.00

Table 3.6

SENSITIVITY ANALYSIS DH sales prices Prices as per January 2005 v 000 EUR


-50.00% 25.5% 39.63 10.00 -40.00% 25.4% 39.19 10.00 -30.00% 25.3% 38.35 10.00 -20.00% 25.1% 37.37 10.00 -10.00% 24.7% 36.15 10.00

0.00% 24.3% 34.77 10.00 10.00% 23.9% 33.31 10.00 20.00% 23.4% 31.83 10.00 30.00% 22.9% 30.34 10.00 40.00% 22.6% 29.31 10.00

TASK 6 3-5


Figure 3.1

SENSITIVITY ANALYSIS

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

-60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60%Change of input data

NP

V m

ill E

UR

Investment costs Scope of production DH purchase costs

HFO prices DH sales prices

When interpreting the sensitivity analysis results one must bear in mind that the economics of the project were calculated as a difference between two scenarios, the one without connection to the TPP Kosovo B and the other with connection to the TPP Kosovo B. A major cost item in case of no connection to the TPP Kosovo B is fuel oil costs. Therefore the profitability of the project is very sensitive to fuel oil costs. A ten percent change in fuel oil prices results in a 17% change of the project NPV. The second most influential issue is change in the production scope, and in the scope of district heat sales, respectively. The 10% change in the production scope results in an 11% change of the project NPV. The next issue is the project sensitivity to investment costs since a 10% change in the investment costs results in a 7% change of the project NPV. The project is least sensitive to change in the district heating purchase price and district heating sales price. Sensitivity to district heating sales price is small since the change in district heating sales prices affects so the

TASK 6 3-6


scenario with as the scenario without connection to the TPP Kosovo. Actually, the influence of the district heating prices on the project profitability is high. At the existing district heating sales prices the return on equity in the year 2014 is 18.7%. If we decrease the sales prices for 10%, the return on equity in the year 2014 drops to 13.9%. If we decrease the sales prices for 18%, the return on equity in the 2014 is brought down to zero.

TASK 7


TASK 7

ENVIRONMENTAL IMPACT ASSESSMENT 1.0 EXISTING SITUATION 2.0 COMBINED HEAT AND POWER (CHP) PROJECT 3.0 COMPARISON OF AIR EMISSIONS 4.0 ENERGY EFFICIENCY AND ENVIRONMENTAL PROTECTION

TASK 7 1-0


CONTENTS

1. EXISTING SITUATION...................................................................................................... 1-1

1.1 EXISTING HEAVY FUEL BOILERS................................................................................... 1-1

1.2 THERMAL POWER PLANT KOSOVO B ........................................................................... 1-2

TASK 7 1-1


1. EXISTING SITUATION 1.1 EXISTING HEAVY FUEL BOILERS

Heat (hot water) for district heating system of Prishtina has been supplied by two existing heavy fuel oil boilers installed in 1998. During the heating season normally both boilers are in operation. The number of operating hours with one or both boilers in operation depends on the outside temperature (required heat capacity in the distribution net). The existing TERMOKOS heavy fuel boilers have a 2 x 58 MWt capacity (each boiler is ranked as a large combustion unit). The heat supply is insufficient due to bad condition of the existing district heating system. Maximal operating temperature is limited to 100 °C and the operation is interrupted during the night due to substantial leakage of the system. The TERMOKOS heavy fuel oil boilers operation data are as follows:

♦ Heavy fuel oil consumption: - at the maximal (rated) load: 2 x 6 tons/hour (2 x 1.67 kg/s) - at the average (normal) load: 4,31 tons/hour (1.197 kg/s); both

boilers - heavy fuel oil consumption per year: 12.301 tons/year

♦ Number of operating hours: 2.851 hours/year

♦ Boiler efficiency: estimated boiler efficiency is approx. 85 %

Heavy fuel oil with 2 % (mass) sulphur (S) content has been used to run the TERMOKOS boilers. At the maximal load the generated flue gas quantity (one boiler) is estimated to 66,700 mn

3/h (dry basis) with appropriate SO2 concentration of 3,600 mg/mn3 (dry basis).

The emission limit value for boilers with rated thermal input � 50 MWt is 1,700 mg/mn

3 (dry basis, O2=3%); according to Directive 2001/80/EC. The SO2 concentration in flue gases at the existing two boilers outlet is much higher than permitted. In order to operate the boilers in accordance with the emission standards from the Directive 2001/80/EC, fuel oil with sulphur content less than 1 % (mass) is required. Taking into account heavy fuel oil consumption of 12,301 tons per year the SO2 emission from both TERMOKOS boilers amounts to 492 tons per year. Corresponding carbon dioxide (CO2) emission from the existing two boilers amounts to 38,130 tons per year.

TASK 7 1-2


1.2 THERMAL POWER PLANT KOSOVO B

The Thermal Power Plant Kosovo B consists of two units with 339 MW electric power each. Rated thermal input of the unit is 845 MWth. Both units are producing electric energy for the grid and at the time being the units are not connected to the district heating system. The TPP Kosovo B operation data are as follows:

♦ Coal consumption: - at the maximal load 339 MWe: 2 x 416 tons/hour (2 x 115.5 kg/s)

♦ Low calorific value of the coal: 7,327 KJ/kg ♦ Number of operating hours: B1: 5823 h/year; B2: 4657 h/year

♦ Average coal data (chemical analysis) in mass %:

- C: 23.7 % - H: 1.8 % - O: 11.15 % - N: 0.4 % - S: 0.1 % - Moisture (W): 48.20 % - Ash 14.64 %

♦ Concentration of particles in flue gas (dry basis) – measured in 1994:

- average (B1): 80 mg/m3n


♦ NOx concentration in flue gas (dry basis) – measured in 1994:



♦ SO2 concentration in flue gas (dry basis) – measured in 1994:



♦ Ash and wet ash quantity:

- average: 50 – 70 t/h (per unit)

♦ Flue gas quantity at maximal load (per unit): - dry: 1.282,000 m3

n/h (calculated) - wet: 1.615,000 m3

n/h (calculated)

TASK 7 1-3


♦ SO2 concentration in flue gas (dry basis, O2=6 %) – calculated

- average: 650 mg/m3n

♦ Carbon dioxide (CO2) quantity: 362,000 kg/h (per unit at full load)

In case of full load operation of the Kosovo B units B1 and B2 with the number of operating hours listed above, the SO2 emission amounts to 8,733 tons per year. In the same conditions the carbon dioxide (CO2) emission from the Kosovo B amounts to approx. 3.79 million tons per year. The emission limit values for the existing boilers with rated thermal input � 50 MWt (according to Directive 2001/80/EC) are as follows (dry basis, O2=6%):

♦ Particles: 50 mg/m3n

♦ SO2: 400 mg/m3n

♦ NOx: 200 mg/m3n ; Outermost Regions: 650 mg/m3

n ♦ CO: 250 mg/m3

n It is evident that most of pollutant concentrations (particles, SO2 and NOx) in flue gases at the Kosovo B TPP outlet are higher than permitted. The pollutant concentrations at the TPP Kosovo B outlet are not extremely high but, some technical improvements (measures) need to be peformed to reduce the particles and the SOx concentrations particularly. The Prishtina district heating system project (combined heat and power – CHP) foresees an operation of the TPP Kosovo B (units B1, B2) in accordance with the emission standards from the Directive 2001/80/EC.

TASK 7 2-0


CONTENTS

2. COMBINED HEAT AND POWER (CHP) PROJECT..................................................... 2-1

2.1 OPERATION OF TERMOKOS BOILERS............................................................................ 2-1

2.2 TPP KOSOVO B OPERATION ............................................................................................. 2-2

TASK 7 2-1


2. COMBINED HEAT AND POWER (CHP) PROJECT 2.1 OPERATION OF TERMOKOS BOILERS

After the Combined Heat and Power (CHP Project) system realization, the existing TERMOKOS fuel boilers will operate to cover peak heat demand only. In order to meet air emission standards light fuel oil shall be used as an energy source (it is also possible to use some heavier fuel oil fractions but, with less than 1 % sulphur (S) content). The SO2 concentration in flue gas at the TERMOKOS boilers outlet shall not exceed 1,700 mg/mn

3 (dry basis, O2=3%). At the maximal boiler load the generated flue gas quantity (one boiler) is estimated to 66,700 mn

3/h (dry basis). The corresponding SO2 quantity will amount to approx. 113.3 kg/h (one boiler in operation). In order to assure full load operation of one TERMOKOS boiler, light fuel oil consumption of 1.6 kg/s is required. The carbon dioxide emission is 4.83 kg/s (17.4 t/h of CO2). Three different scenarios (projections) of heat demand growth which influence the TERMOKOS peak load boilers operating regime as well as air emissions are foreseen. The following peak load heat production using light fuel oil is foreseen: Low scenario: Low heat demand growth (existing heat demand in Pristina + heat demand growth of 12 % by the year 2020); taking into consideration that the existing district heating system is renovated and it operates with acceptable (standard) heat losses. It is foreseen that the average light fuel oil consumption in the years from 2008 to 2032 (25 years) will amount to 7,000.6 MWh/year (592 t/year of fuel). Medium scenario: Middle heat demand growth; it is foreseen that the average light fuel oil consumption in the years from 2008 to 2032 (25 years) will amount to 21,450 MWh/year (1,814 t/year of fuel). High scenario: High heat demand growth; it is foreseen that the average light fuel oil consumption in the years from 2008 to 2032 (25 years) will amount to 75,400 MWh/year (6,376 t/year of fuel).

TASK 7 2-2


2.2 TPP KOSOVO B OPERATION

Once the investment is realized both Kosovo B units (B1 and B2) will be able to operate as a Combined Heat and Power Plant producing electricity for the grid and heat to supply the Pristina district heating system. Compared to the existing TPP operating regime the electric energy production in the power plant will be reduced in order to achieve the required heat production. Reduction of electric energy production in the TPP due to combined electricity and heat production is calculated for different scenarios listed below. Within several scenarios, different heat demand of the town of Pristina was taken into account. Thermal efficiency of 36 % is used to calculate the consumption of coal needed in the process of heat production (portion of coal that belongs to heat production). The emissions calculation is based on the presumption that both units of the TPP Kosovo B will operate in accordance with the emission standards from the Directive 2001/80/EC. The following specific values were used for the air emission calculations (kg/kgf):

♦ Particles: 154 mg / kgf ♦ SO2: 1233 mg / kgf ♦ NOx: 616 mg / kgf (2000 mg / kgf) ♦ CO2: 0.87 kg / kgf

Low scenario: Low heat demand growth (existing heat demand in Pristina + heat demand growth of 12 % by the year 2020); taking into consideration that the existing district heating system is renovated and it operates with acceptable (standard) heat losses. An average coal consumption of 192.528 MWh/year (94.595 t/year of coal) in the years from 2008 to 2032 (25 years), which corresponds to heat production, is foreseen. Medium scenario: Middle heat demand growth; an average coal consumption of 326.908 MWh/year (160.620 t/year of coal) in the years from 2008 to 2032 (25 years), which corresponds to heat production, is foreseen. High scenario: High heat demand growth; an average coal consumption of 442.739 MWh/year (217.531 t/year of coal) in the years from 2008 to 2032 (25 years), which corresponds to heat production, is foreseen.

TASK 7 3-0


CONTENTS

3. COMPARISON OF AIR EMISSIONS ............................................................................... 3-1

3.1 CO2 AND SO2 EMISSIONS BEFORE THE INVESTMENT ............................................... 3-1

3.2 CO2 AND SO2 EMISSIONS AFTER THE INVESTMENT .................................................. 3-1

TASK 7 3-1


3. COMPARISON OF AIR EMISSIONS 3.1 CO2 AND SO2 EMISSIONS BEFORE THE INVESTMENT

The TERMOKOS boilers are using heavy fuel oil; the estimated heat demand amounts to 185,844 MWh/year taking into consideration that the existing district heating system is renovated. Calculated future heavy fuel oil consumption (218.640 MWh/y) is much higher than nowadays (fuel consumption: 12,301 t/y = 140,095 MWh/y) because heat supply has not been sufficient by now and some existing buildings are anticipated for connection. HEAVY FUEL OIL BOILERS (TERMOKOS BOILERS) OPERATION

Year Total heat demand (MWh/y)

Heavy fuel oil

consumption (MWh/y)

Coal consumption

(MWh/y)

Light fuel consumption

(MWh/y)

CO2 emissions

(t/y)

SO2 emissions

(t/y)

2008 185.844 218.640 0 0 59.033 725,89 3.2 CO2 AND SO2 EMISSIONS AFTER THE INVESTMENT

The TPP Kosovo B + TERMOKOS peak load boilers operation; the peak load boilers are using light fuel oil; both TPP Kosovo B and the peak load boilers meet the emission standards.

TASK 7 3-2


LOW SCENARIO: LOW HEAT DEMAND (PROJECTION I) HEAT SUPPLIED FROM THE TPP KOSOVO B + PEAK LOAD BOILER OPERATION LOW HEAT DEMAND SCENARIO

Year Total heat demand (MWh/y)

Heavy FO

consumpt (MWh/y)

Coal consumpt (MWh/y)

Light fuel consump (MWh/y)

CO2 emissions

(t/y)

SO2 emissions

(t/y)

2008 185,844 0 105,461 200.9 45,085 64.24 Average

2008 - 2032 489,799 0 192,528 7,000.6 117,085 175.13

COMPARISON: EXISTING / FUTURE SITUATION LOW HEAT DEMAND SCENARIO Reduction of CO2 emissions (heat demand 185,844 MWh/y): 23.6 % Reduction of SO2 emissions (heat demand 185,844 MWh/y): 91.1 % Increase of CO2 emissions (average heat demand 489,799 MWh/y): 98.3 % Reduction of SO2 emissions (average heat demand 489,799 MWh/y): 75.9 % Average NOx emissions: 256.6 t/y; Average emissions of particles: 20.5 t/y MEDIUM SCENARIO: MIDDLE HEAT DEMAND (PROJECTION II) HEAT SUPPLIED FROM THE TPP KOSOVO B + PEAK LOAD BOILER OPERATION MIDDLE HEAT DEMAND SCENARIO

Year

Total heat

demand (MWh/y)

Heavy FO

consumpt (MWh/y)



CO2 emissions

(t/y)

SO2 emissions

(t/y)

2008 185,844 0 105,461 200.9 45,085 64.24 Average

2008 - 2032 610,730 0 326,908 21,450.0 145,304 233,67

COMPARISON: EXISTING / FUTURE SITUATION MIDDLE HEAT DEMAND SCENARIO Reduction of CO2 emissions (heat demand 185,844 MWh/y): 23,6 % Reduction of SO2 emissions (heat demand 185,844 MWh/y): 91,1 % Increase of CO2 emissions (aver. heat demand 610,730 MWh/y): 146,1 % Reduction of SO2 emissions (aver. heat demand 610,730 MWh/y): 67,8 %

TASK 7 3-3


Average NOx emissions: 322.5 t/y; Average emissions of particles: 24.8 t/y HIGH SCENARIO: HIGH HEAT DEMAND (PROJECTION III) HEAT SUPPLIED FROM THE TPP KOSOVO B + PEAK LOAD BOILER OPERATION HIGH HEAT DEMAND SCENARIO

Year

Total heat

demand (MWh/y)

Heavy FO

consumpt (MWh/y)



CO2 emissions

(t/y)

SO2 emissions

(t/y)

2008 185,844 0 105,461 200.9 45,085 64.24 Average

2008 - 2032 828,371 0 442,739 75,399.3 209,136 393.31

COMPARISON: EXISTING / FUTURE SITUATION HIGH HEAT DEMAND SCENARIO Reduction of CO2 emissions (heat demand 185,844 MWh/y): 23.6 % Reduction of SO2 emissions (heat demand 185,844 MWh/y): 91.1 % Increase of CO2 emissions (aver.heat demand 828,371 MWh/y): 254.3 % Reduction of SO2 emissions (aver.heat demand 828,371 MWh/y): 45.8 %

Average NOx emissions: 437.3 t/y; Average emissions of particles: 33.7 t/y Within “doing nothing” scenario it is presumed that the TERMOKOS heavy fuel oil boilers will operate also in future, using heavy fuel oil and covering the existing heat demand of 185,844 MWh/y. It is considered that the existing district heating system shall be renovated and it will be able to operate with acceptable (standard) heat losses. This represents a basis for the CO2 and SO2 emission reference values definition (CO2 emissions: 59,033 t/y; SO2 emissions: 725.89 t/y). The combined heat and electricity (power) production in the TPP Kosovo B will result in a reduction of the CO2 emissions by 23.6 % and of the SO2 emissions by 91.1 % (taking into account the same heat demand of 185.844 MWh/y). The expected CO2 reduction is 13,948 t/y, while the expected SO2 reduction is 661.6 t/y. Depending on different future heat demand projections the CO2 emissions will increase substantially according to the heat demand growth (see tables above). On the other hand, the SO2 emission quantities will be lower than the reference value even in case of the high heat demand scenario (projection III).

TASK 7 4-0


CONTENTS

4. ENERGY EFFICIENCY AND ENVIRONMENTAL PROTECTION ........................... 4-1

TASK 7 4-1


4. ENERGY EFFICIENCY AND ENVIRONMENTAL PROTECTION

The Kyoto Protocol objectives and, more recently, the constraints on energy sources enhanced the priority given to energy efficiency policies. Transport and energy production remain the sectors where the achievements (results) concerning efficient energy use are still insufficient (particularly in Kosovo region). Carbon dioxide (CO2) emissions that must be reduced following the Kyoto Protocol objectives are strongly connected to energy efficiency. Besides natural gas introduction instead of coal (replacement of energy source), the energy efficiency is one of the most effective measure to reduce the CO2 emissions from the thermal energy production units. The specific CO2 emissions (kg CO2 per calorific value of fuel) of different fuels are as follows:

♦ Coal: 0.119 kg CO2 / MJ ♦ Heavy fuel oil: 0.078 kg CO2 / MJ ♦ Light fuel oil: 0.074 kg CO2 / MJ ♦ Natural gas: 0.056 kg CO2 / MJ

It is evident that the specific CO2 emission using natural gas is approximately twice as low as in case of using coal. But in Kosovo they have large domestic coal mines and very limited possibilities of natural gas supplies. Therefore, the efficient use of coal in the existing thermal power plants is the most realistic and feasible technical option. The Combined Heat and Power (CHP Project) is a fuel efficient energy technology that, unlike conventional forms of power generation, puts to use the by-product heat that is normally wasted to the environment. Simultaneous generation of useful heat and power can increase the overall efficiency of fuel use to even more than 75 % (approximately), compared with around 36 % from conventional (Kosovo B) electricity generation. The supply of heat provides an economic benefit for supplier and user alike as well as providing environmental benefits. From the environmental point of view the advantages of the Pristina CHP project are evident. Due to an increase of the overall fuel efficiency the specific emissions of carbon dioxide will be reduced. Residents of Pristina who are now using electricity for heating purposes should switch over from electricity to district heating system. It is estimated that approximately 9,000 MWh / year of electricity generated in the TPP that is used for heating purposes will be replaced with heat supplied from the district heating system. Namely, electricity is the most expensive and the most valuable energy source which should not be used for heating. It is not acceptable to

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use electricity generated in a power plant for heating while in the same time the by-product heat is wasted through the cooling system. Each MWh of heat produced in a thermal power plant CHP process results in a reduction of the electricity generation for approximately 0.2 MWhe only. As mentioned before, the most of pollutant concentrations (particles, SO2 and NOx) in flue gases at the TPP Kosovo B outlet are higher than permitted but, they are not extremely high. Emissions from the unit B2 are a little bit higher than from the unit B1 (unit B1 is obviously in better condition). Comparison of emission concentrations from the unit Kosovo B2 with emission standards shows the following results (index of exceeding):

♦ Particles: 171 mg/mn3 � 50 mg/mn

3 (index: 3.42) ♦ SO2: 726 mg/mn

3 � 400 mg/mn3 (index: 1.81)

♦ NOx: 939 mg/mn3 � 650 mg/mn

3 (index: 1.44) With some technical improvements (measures) in view of particles, SOx and NOx concentrations reduction from the Kosovo B TPP the Combined Heat and Power project will bring significant benefits to the Prishtina region as regards environmental protection.

TASK 8


TASK 8

IDENTIFICATION OF SOURCES OF FINANCE 1.0 SURVEY AND IDENTIFICATION OF POTENTIAL FINANCIERS 2.0 PROJECT FINANCING

TASK 8 1-0


CONTENTS

1. SURVEY AND IDENTIFICATION OF POTENTIAL FINANCIERS........................... 1-1

1.1 FINANCIAL SOURCES ........................................................................................................ 1-1

1.2 BUILD, OPERATE AND TRANSFER (BOT) MODEL....................................................... 1-2

1.2.1 DEFINITION........................................................................................................................... 1-2 1.2.2 PARTIES TO BOT PROJECTS ............................................................................................... 1-2 1.2.3 ADVANTAGES AND DISADVANTAGES OF BOT PROJECTS ............................................ 1-3

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1. SURVEY AND IDENTIFICATION OF POTENTIAL FINANCIERS

1.1 FINANCIAL SOURCES There are many types of finances potentially available to energy projects and it is usually a mixture of different sources of finance which results in a financial package. The key issue which influences the selection of financial sources is the capital structure (or debt equity split). The next major role determining the financial sources have the participants in the project such as investor, suppliers of equipment, contractors, and financiers (banks and other financial institutions). The main financial sources available to energy projects are:

− The World Bank Group, − European Bank for Reconstruction and Development (EBRD), − The European Investment Bank (EIB), − Government export financing agencies, − Domestic government, − International commercial banks, − Venture capital companies, companies that are interested in taking an equity stake in

the project and − contractors and suppliers debt financing.

Connecting of the district heating system in Pristhina to the TPP Kosovo B can be identified also as an environmental project. Owing to the project the overall SO2 emissions will be reduced. Moreover, due to the economical use of fuel (cogeneration) CO2 emissions will be reduced as well. Consequently, by pointing out the environmental benefits and efficient use of energy, the project can compete for Global Environment Facility (GEF) funds. The international development banks can play an important role in financing of the district heating project in Pristhina. World Bank is currently or has recently financed district heating projects in Latvia, Lithuania, Bulgaria and other countries. Also EBRD has recently financed district heating projects in Bulgaria, Poland, Czech Republic and other countries. In the process of potential financers identification the financing capabilities of the company TERMOKOS should be checked as well. The funds availability of the Pristhina municipality should be also considered. When the TERMOKOS and municipality financial sources are established, the general outlines of a financial package can be set. As a general rule, the maximum debt equity split required by the international financial institutions is 70% debt and 30% of equity financing. If TERMOKOS and the local community can not assure at least 30% of their own financial sources, concession or BOT model of financing would be appropriate.

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1.2 BUILD, OPERATE AND TRANSFER (BOT) MODEL 1.2.1 DEFINITION BOT is an approach to infrastructure development, which enables direct private sector investment in the infrastructure projects.

The theory of BOT is as follows:

Build – A private company (or consortium) agrees with a government to invest in a public infrastructure project. The company then secures their own financing to construct the project.

Operate – the private developer owns, maintains, and manages the facility for an agreed concession period and recoups their investment through charges or tolls.

Transfer – after the concessionary period the company transfers ownership and operation of the facility to the government or relevant state authority.

1.2.2 PARTIES TO BOT PROJECTS There are a number of major parties to any BOT project and all of them have particular reasons to be involved in the project. The contractual arrangements between those parties, and the allocation of risks, can be complex.

The major parties to a BOT project will usually include:

1. Government Agency A government department or a statutory authority is a pivotal party. It will:

• grant the sponsor the “concession”, that is the right to build, own and operate the facility,

• grant a long term lease of or sell the existing facility to the sponsor, and

• often acquire most or all of the service provided by the facility.

The government co-operation is critical in large projects. It may be required to assist in obtaining the necessary approvals, authorizations and permits for the construction and operation of the project. It may also be required to provide comfort that the agency acquiring services from the facility will be in a position to honor its financial obligations.

The government agency is normally the primary party. It will initiate the project, conduct the tendering process and evaluation of tenders, and will grant the sponsor the concession, and where necessary, the off-take agreement.

2. Sponsor The sponsor is a party, usually a consortium of interested groups (typically including a construction group, an operator, a financing institution, and other various groups) which, in

TASK 8 1-3


response to the invitation by the Government Department, prepares the proposal to construct, operate, and finance the particular project.

The sponsor may take the form of a company, a partnership, a limited partnership, a unit trust or an unincorporated joint venture.

3. Construction Contractor The construction company may also be one of the sponsors. It will take construction and completion risks, that is, the risk of completing the project on time, within budget and in accordance to specifications.

4. Operation and Maintenance Contractor The operator will be expected to sign a long-term contract with the sponsor for the operation and maintenance of the facility. Again the operator may also inject equity into the project.

5. Financiers In a large project there is likely to be a syndicate of banks providing the debt funds to the sponsor. The banks will require a first security over the infrastructure created. The same or different banks will often provide a stand-by loan facility for any cost overruns not covered by the construction contract.

6. Other Parties Other parties such as insurers, equipment suppliers and engineering and design consultants will also be involved. Most of the parties too will involve their lawyers and financial and tax advisers.

1.2.3 ADVANTAGES AND DISADVANTAGES OF BOT PROJECTS Potential benefits of BOT financing for infrastructure include:

BOT provides a modality through which commercial financing can be attracted for infrastructure projects. As global private capital flows increase and play an increasingly important role in financing, especially for developing economies, BOT will help to make infrastructure projects accessible to the growing sources of private sector capital, and thus accelerate infrastructure development.

Competitively awarded BOTs lower the cost of providing infrastructure and the tariffs for consumers. If suitable pre-qualification criteria are adopted, private sector involvement will ensure good quality services provided to the customers. A competitive BOT bidding process will involve a larger pool of investors to ensure the best qualified bidders to win the contract at best available prices. In comparison with joint ventures, competitively bid BOTs encourage more competition, which reduces costs.

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In comparison with the modality of equity plus traditional debt financing often secured on a credit or asset basis, BOT allows limited recourse financing secured partly by project-generated cash flows. It can decompose the underlying investment risks and allocate the risks to the parties that are most suitable to mediating them. This leads to reduction of costs of financing.

On the operation and management side, BOT provides a mechanism and incentives for enterprises to improve efficiency through performance-based contracts and output-oriented targets. It reduces the role of the public sector mainly to developing a framework conducive to fair competition, formulating strategic policies and setting up strategic objectives and targets. It leaves the decisions on how to achieve the targets to private sector.

Potential disadvantages of BOT include:

It involves multiple entities and requires a relatively complicated legal and institutional framework. As a result, it may take a long time and considerable up front expenses to prepare and close a BOT financing deal. This is especially true in countries where the legal and policy framework are not well developed. The up front expenses tend to be fixed regardless the size of the project. Therefore the BOT modality may not be suitable for small projects.

Even with a good framework, it may take time to develop the necessary institutional capacity to ensure that the full benefits of BOT are realized, such as development and enforcement of transparent and fair bidding and evaluation procedures and the resolution of potential disputes during implementation.

TASK 8 2-0


CONTENTS

2. PROJECT FINANCING ...................................................................................................... 2-1

2.1 DEBT EQUITY RATIO AND AMOUNT OF DEBT............................................................ 2-1

2.2 LOAN AMORTIZATION ...................................................................................................... 2-2

TASK 8 2-1


2. PROJECT FINANCING 2.1 DEBT EQUITY RATIO AND AMOUNT OF DEBT Total investment costs without financing costs and VAT amount to 34,642,000 EUR. Total investment costs can be divided among those investments that belong to Termokos Prishtina and those that belong to KEK – TPP Kosovo B. Division of investment costs between two companies is presented in Table 2.1 Table 2.1 INVESTMENT COSTS Prices as per January 2005 in 000 EUR Termokos TPP Kosovo B Total Civil works 3,149 705 3,854 Equipment 22,965 2,850 25,815 Other 4,176 797 4,973 Total 30,289 4,352 34,642

Investment share 87.4% 12.6% 100.0%

As a general rule, the debt equity ratio acceptable to international financial institutions is 30% to 40% of equity financing and 70% to 30% of debt financing. In 2003, total assets of Termokos amounted to 27.0 million EUR. If grants are treated as some kind of equity, then 61% of assets were financed by equity and 39% by loans. In the same year, total assets of Korporata Energjetike Kosoves (KEK) amounted to 421.7 million EUR; 86% of them were financed by equity and 14% by loans. In future, the amount of assets and the debt equity ratio for both companies will change. The investment cost of both phases of the district heating project that belong to KEK is 4.3 million EUR. Compared to KEK assets in 2003, this represents a 1% increase in the assets. If KEK raises a 4.0 million EUR loan to finance his part of the project, the debt equity ratio will be practically the same as in 2003. In case of realization of this project, KEK will not be heavily encumbered with debts. At present, KEK has great needs or opportunities to finance various projects. Therefore, other projects could represent quite a threat for the realization of the district heating project.. Also KEK low collection rates (60% in 2003) can represent a problem with reference to the district heating project financing.

TASK 8 2-2


In 2003, total assets of Termokos amounted to 27 million EUR. The investment cost of both phases of the district heating connection to the TPP Kosovo B that belong to Termokos is 30.3 million EUR. Compared to Termokos assets in 2003, this represents a 112% increase in the assets. Actually, the investment will be carried out in two phases and that second phase will be finished in 2013. If we neglect this fact and compare the influences of the project on the Termokos balance sheet of the year 2003, the assets, as mentioned before, more than redouble. If 25.1 million EUR loans are raised to finance the project, the total loans of Termokos will amount to 35.6 million EUR. Taking into consideration the existing debt and the expected loan to finance the district heating project, the total debt financing will represent 62% of total assets. This means that raising a 25.1 million loan brings us close to a debt equity ratio that is still acceptable to the financial institutions. Discussing the amount of debt that Termokos can raise for the district heating project financing, we can not by pass the low bill collection rate. The 20% collection rate represents a serious problem. At such collection rates the money collected does not suffice to cover fuel costs. With such low collection rates, even with governmental or local community guarantees, raising of loans in financial institutions becomes practically impossible. Low collection rates lead the project in a vicious circle. Due to low collection rates there are no funds to carry out the connection to the TPP Kosovo B, which will enable substantial savings on the fuel costs. Lower fuel cost can result in lower district heating prices. 2.2 LOAN AMORTIZATION The sum of all loans to finance both phases of connection to the TPP kosovo B is 29,138,000 EUR. The distribution of loans between Termokos and KEK and between the first and the second phase is presented in Table 2.2 Table 2.2

Loan from Kosovo

Government

Bank loan I. phase

Bank loan II. phase Total

thousand EUR

thousand EUR

thousand EUR

thousand EUR

Termokos 6,318 9,214 9,593 25,125 KEK 0 3,441 572 4,013 Total 6,318 12,655 10,165 29,138

TASK 8 2-3


Amortization schedule for Termokos loans

Loan name Kosovo government Loan amount 6,318 thousand EUR Interest rate 8.00% p.a. Repayment period 10.0 years Grace period 0.0 years Installments yearly 2 First year of loan repayment 2008 in 000 EUR No. Interests Loan Total Outstanding repayment debt

0 6,318 1 253 316 569 6,002 2 240 316 556 5,686 3 227 316 543 5,370 4 215 316 531 5,054 5 202 316 518 4,738 6 190 316 505 4,422 7 177 316 493 4,106 8 164 316 480 3,791 9 152 316 468 3,475

10 139 316 455 3,159 11 126 316 442 2,843 12 114 316 430 2,527 13 101 316 417 2,211 14 88 316 404 1,895 15 76 316 392 1,579 16 63 316 379 1,264 17 51 316 366 948 18 38 316 354 632 19 25 316 341 316 20 13 316 329 0

TASK 8 2-4


Loan name Bank - first phase Loan amount 9,214 thousand EUR Interest rate 10.00% p.a. Repayment period 10.0 years Grace period 2.0 years Installments yearly 2 First year of loan repayment 2008 in 000 EUR No. Interests Loan Total Outstanding repayment debt

0 9,214 1 461 0 461 9,214 2 461 0 461 9,214 3 461 0 461 9,214 4 461 0 461 9,214 5 461 576 1,037 8,639 6 432 576 1,008 8,063 7 403 576 979 7,487 8 374 576 950 6,911 9 346 576 921 6,335

10 317 576 893 5,759 11 288 576 864 5,183 12 259 576 835 4,607 13 230 576 806 4,031 14 202 576 777 3,455 15 173 576 749 2,880 16 144 576 720 2,304 17 115 576 691 1,728 18 86 576 662 1,152 19 58 576 633 576 20 29 576 605 0

TASK 8 2-5


Loan name Bank - second phase Loan amount 9,593 thousand EUR Interest rate 10.00% p.a. Repayment period 10.0 years Grace period 0.0 years Installments yearly 2 First year of loan repayment 2013 in 000 EUR No. Interests Loan Total Outstanding repayment debt

0 9,593 1 480 480 959 9,113 2 456 480 935 8,634 3 432 480 911 8,154 4 408 480 887 7,674 5 384 480 863 7,195 6 360 480 839 6,715 7 336 480 815 6,236 8 312 480 791 5,756 9 288 480 767 5,276

10 264 480 743 4,797 11 240 480 719 4,317 12 216 480 695 3,837 13 192 480 672 3,358 14 168 480 648 2,878 15 144 480 624 2,398 16 120 480 600 1,919 17 96 480 576 1,439 18 72 480 552 959 19 48 480 528 480 20 24 480 504 0

TASK 8 2-6


Amortization schedule for KEK loans

Loan name Bank - first phase Loan amount 3,441 thousand EUR Interest rate 10.00% p.a. Repayment period 10.0 years Grace period 2.0 years Installments yearly 2 First year of loan repayment 2008 in 000 EUR No. Interests Loan Total Outstanding repayment debt

0 3,441 1 172 0 172 3,441 2 172 0 172 3,441 3 172 0 172 3,441 4 172 0 172 3,441 5 172 215 387 3,226 6 161 215 376 3,011 7 151 215 366 2,796 8 140 215 355 2,581 9 129 215 344 2,366

10 118 215 333 2,151 11 108 215 323 1,936 12 97 215 312 1,720 13 86 215 301 1,505 14 75 215 290 1,290 15 65 215 280 1,075 16 54 215 269 860 17 43 215 258 645 18 32 215 247 430 19 22 215 237 215 20 11 215 226 0

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Loan name Bank - second phase Loan amount 572 thousand EUR Interest rate 10.00% p.a. Repayment period 10.0 years Grace period 0.0 years Installments yearly 2 First year of loan repayment 2013 in 000 EUR No. Interests Loan Total Outstanding repayment debt

0 572 1 29 29 57 543 2 27 29 56 515 3 26 29 54 486 4 24 29 53 458 5 23 29 51 429 6 21 29 50 400 7 20 29 49 372 8 19 29 47 343 9 17 29 46 315

10 16 29 44 286 11 14 29 43 257 12 13 29 41 229 13 11 29 40 200 14 10 29 39 172 15 9 29 37 143 16 7 29 36 114 17 6 29 34 86 18 4 29 33 57 19 3 29 31 29 20 1 29 30 0

Documents

CHP Feasibility Study