Montenegro, The new company „EPCG – Željezara Solar“ adopted its business plan last week

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The new company „EPCG – Željezara Solar“ in the first six years of operation will achieve a net profit of 28 million euros, will have four activities and will be fully profitable, it was stated in the company’s business plan, which was adopted last week by the board of directors of Elektroprivreda (EPCG) in which „Vijesti“ had an insight.

The owner of the property of the former Željezara will remain EPCG, and the new company will be its beneficiary without payment of compensation. EPCG bought the property of the former factory for 20 million euros, from the until recently owner of the Turkish “Tosjali Group”.

Installation of the panels begins in March

According to the announcement from the plan, in March of this year, the installation of solar panels on the roofs of the Steel Plant and on the free land will begin, and then the planned Construction plant will also start working. The substructures will start working in June, and the Forge will resume work in September this year.

The former plants and halls of the Željezara have roofs with a total area of 226,000 square meters, on which they plan to install solar panels with a total installed power of 17 megawatts (MW), while they could build photovoltaic systems with a power of up to 30 MW on free land.

“Taking into account the defined solar potential of 1,300 to 1,400 hours per year, as well as the balance potential of EPCG, the economic justification is indisputable”, stated in the business plan.
The loan of 33 million is returned from the profit
A commercial loan of 33 million euros with a repayment period of ten years is planned for the development of a plant for the production of electricity from solar panels, which would be used to build a solar power plant with a total installed capacity of 47 MW. It would annually produce 61 million kilowatt hours of electricity, while the production price would amount to 2.4 cents per kilowatt hour or 24 euros per MWh.

The plan is for “EPCG – Željezara Solar” to sell electricity to EPCG at a price that would be 50 percent lower than the price on the Hungarian energy exchange HUPX, where it is currently around 200 euros per MWh. According to current prices on that stock exchange and purchase orders for the next period, the new company would produce and sell electricity worth 4.7 million euros by the end of this year.
Next year would be the first year in which the solar power plant would operate at full capacity, so it would earn 8.7 million euros from the sale of electricity. From 2025, stabilization of the energy situation and somewhat lower electricity prices on international exchanges are expected, so in that year the sales value of the produced electricity would be worth 5.9 million, and in the following years around 4.5 million.
The monthly installment amount for the loan, which is used to buy solar panels and other equipment for this plant, would amount to 322 thousand euros, including principal and interest, from the beginning of the repayment period, that is, about 3.8 million per year. In each of the first ten years of loan repayment, the value of the electricity sold would be significantly higher than the loan repayment amount, and in the last ten years it would be worth 4.1 million euros.

In 16 years, they would produce electricity worth 75 million euros
For 16 years of operation, which is the technical lifetime, the solar power plant would produce electricity worth a total of 75 million euros, while 38.5 million euros would be spent to repay the loan.

The plan states that when calculating the amount of electricity produced, data from conceptual and technical solutions for those solar panels were used, as well as that they had a conservative approach in order not to overestimate, that is, that the production amount can only be higher.

EPCG itself would benefit from the project because it would gain room to earn on the resale of electricity from this solar power plant, while at the same time it would reduce losses on its import, especially during the summer when Montenegro has a large deficit of electricity and imports it at high prices.

The plan also states that when calculating the purchase price of photovoltaic systems, they used the current highest market prices without any subsidies in the assessment of profitability. Therefore, as they state, there is no danger to the project even if there is an increase in the price of photovoltaic systems on the international market.

“As we have shown the most expensive and therefore the most unfavorable price, there is no risk. If there were to be an extreme increase in prices, ‘Željezara Solar’ could resort to using some of the incentives, and the risk would be minimized,” the plan says.

The target group of users of the future metal processing plants of the new company, as stated, are companies from the EPCG group, as well as companies from the region and the EU that are engaged in similar activities.

Eight million to start metal processing

According to the plan, “EPCG – Željezara Solar” will receive a loan of eight million euros from its parent company, which it would use mostly for the purchase of raw materials and a smaller part for machines and equipment to start production in three metal processing plants. The maximum 6.5 million refers to the Kovačnica plant, which has no competition in Montenegro for that type of production.

“When we talk about the production of structures and substructures, it is planned that EPCG will be the customer, given that in this way, extremely great flexibility is obtained in the field of solar energy, and it is in accordance with the future plans of EPCG, which are based on the intensity of investment in solar energy. Also for these purposes, sales teams were formed within the company, whose goal would be to increase the number of customers, bearing in mind the current situation on the world market and the rise in metal prices, we believe that there is no risk”, it was stated in the business plan of the new company.

The forge would produce 20 thousand tons

The forge would produce metal bars of various types and qualities for further processing in a total estimated amount of 20.4 thousand tons. Other plants would produce structural assembly for solar panels and substructures for photovoltaic systems. The forge would produce about 1,700 tons of metal per month, the selling price of which, depending on the type, would be from 1,680 to 1,950 euros, while the production cost would be lower by about 200 euros per ton.

According to the analysis, the annual sales of Kovačnica products would amount to 36.9 million euros, according to current prices on the stock market, while the Substructure would produce rails and clamps for solar panels with an annual value of 2.2 million euros, and the Construction plant would have an annual income of 5 .4 million euros.

“Prices in the area of the Forge are standard prices on the basis of which Željezara has operated before and which have been agreed with the engineers, while the prices of the construction and substructure have been agreed with both the engineers and EPCG, considering that the buyer will be EPCG”. It is stated in the explanation. The substructure would monthly produce around 163 thousand rails for solar panels, as well as around 26 thousand various clamps.

Due to large investments and the later start of work, the forge would operate with a formal loss of 151 thousand euros this year, but in the following years it would have estimated sales of around 36 million euros, while the net profit would amount to around 2.2 million euros.

This year, substructure would have sales of 1.1 million euros and a net profit of 88 thousand euros, while in the following years, sales would stabilize at around 2.2 million euros, and profit at around 760 thousand.
The construction would have sales of around 4.5 million euros this year, and around 5.4 million in the following years. The expected profit this year would be 546,000 euros, and in the coming years around 850,000.

The steel mill stopped working two years ago, when the price of electricity began to rise on international exchanges. The administration at the time stated that steel production is not sustainable if the price of electricity is higher than 24 euros per MWh.
The first privatization of Željezara was in 2002, and since then there have been five, all of which were unsuccessful. EPCG has six chances.

304 workers needed, salaries from 450 to 1,000 euros
The plan states that the new company will have 304 employees, as well as that prior employees of the Ironworks who have the knowledge to work on future jobs will have priority during employment. There would be 104 employees working in the joint affairs sector, of which 60 workers would be the most in the security service, who would guard the complex of almost one million square meters of land.

In the Solari sector itself, 29 workers would work, Blacksmiths 71, Constructions 80 and Subconstructions 20. In the plan, all jobs are listed in detail with descriptions and amounts of future earnings, which in net values amount from 450 to 1,000 euros. The total annual salary amount would be 2.1 million euros.
The property remains In EPCG, the new company will not have expenses and depreciation
The document states that EPCG bought property valued at 60 million euros with 20 million euros, and that it will continue to be managed by EPCG, and that it will be used free of charge by “EPCG – Željezara Solar”. It will receive fixed assets in the amount of EUR 60 million for use without compensation, which means that they will not incur costs based on the use of the property, but all costs and depreciation will be borne by EPCG, the plan states.

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