29.02.2024.

Kermas Energija / Agreement or Arbitration ?

On behalf of the company Kermas Energija d.o.o. with headquarters in Zagreb, we have sent a Warning letter before initiating an arbitration procedure to the Council of Ministers of Bosnia and Herzegovina.

Kermas Energija owns 97% of the shares in the company Eol Prvi d.o.o. with headquarters in Nevesinje. Eol Prvi is a company that, on October 19, 2012, concluded a Concession Agreement with the Government of the Republic of Srpska for the construction and use of a wind farm at the Trusina location, municipality of Nevesinje, under number 05.05/312-682/12. After the conclusion of the main agreement, the contracting parties also concluded three annexes to the agreement.

The Government of the Republic of Srpska, as the grantor, unilaterally terminated the concluded Concession Agreement by Decision No. 04/1-012-2-615/19 of March 7, 2019, thereby preventing the construction and use of the Trusina Wind Farm.

From the outset, the concessionaire focused on exercising the right to incentives, i.e., selling the produced electricity at a guaranteed purchase price, which is why it planned the construction of five production facilities of 9.9 MW each, so that each could qualify for incentives. The National Assembly of the Republic of Srpska urgently adopted amendments to the Law on Renewable Energy Sources, abolishing incentives i.e. the right to a guaranteed purchase price for wind energy-produced electricity. The Government of the Republic of Srpska terminated the Concession Agreement, stating that the concessionaire did not provide a bank guarantee for the proper performance of the agreement.

Kermas Energija d.o.o. Zagreb, as the majority owner of the concessionaire, headquartered and operating in Zagreb, Republic of Croatia, and based on the Agreement on Encouragement and Mutual Protection of Investments and an additional Protocol amending the Agreement from August 2013, it has the right to initiate an arbitration procedure before the International Centre for Settlement of Investment Disputes based in Washington.

Through the warning sent to the Council of Ministers of Bosnia and Herzegovina, Kermas Energija seeks the return of the unlawfully revoked concession or the payment of a monetary amount of EUR 102,056,122.00. In case of failure to reach an amicable settlement of mutual relations, after the expiration of the 6-month period from the date of sending the warning to the Council of Ministers, Kermas Energija fulfills the conditions for initiating an arbitration procedure.