How the Municipality of Gacko Lost Millions

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Four years under the same leadership in both the municipality and the thermal power plant have not brought much benefit to Gacko. Investments were lacking, and the local government failed to leverage its good relations with the republic level even for justified actions, such as increasing the so-called mining rent. The mayor did nothing, the municipal assembly's resolution remained just a piece of paper, and the local budget was several million KM short.

During the pandemic, the price of electricity skyrocketed. For instance, in October 2021, it jumped by 80% in one day, reaching 320 euros per MWh, and even surpassed 400 euros. Nevertheless, the Electric Power Industry of RS recognised a production price of only 6.93 pfennig per kWh produced for the producers, primarily the thermal power plants in Gacko and Ugljevik.

Power Plant Revenues Grow, Municipality Rent Declines

On the other hand, according to the provisions of the RS Concessions Law and the Regulations on Concession Fees, thermal power plants have been paying the municipalities of Gacko and Ugljevik 0.0033 KM or 0.33 pfennig per kilowatt-hour produced.

Article 6 of the mentioned regulations clearly states that the criterion for determining the concession fee is the annual revenue generated from concession activities.

There was an opportunity here for these two local communities, which have the (mis)fortune of hosting such facilities, to increase their income due to the rise in electricity prices and consequently the revenues of the thermal power plants.

According to available financial reports, RiTE Gacko's revenue grew from 113 million in 2019 to 178 million KM in 2023. Thus, over five years, it increased by 65 million. During this time, the mining rent did not significantly increase. In 2022, the municipality received 4.24 million KM from this source, followed by 4.8 million in 2023. For this year, due to maintenance and slightly reduced production, they expect 4.6 million KM.

Keeping Everyone Satisfied

However, for RiTE Gacko's revenue to increase, pressure was necessary due to the tensions between Gacko and Trebinje, specifically between the management of the subsidiary and the parent company. Given the costs, Gacko's management believed that the production price of electricity recognised by Elektroprivreda RS (ERS) was unacceptably low. The situation reached a climax in February 2022 when Srđan Milović, then advisor to RiTE Gacko director Miodrag Šešlija, sent an open letter to the public. In the letter, he accused Petar Đokić (RS Minister of Mining and Energy) and Luka Petrović (Director of MH ERS) of destroying the company and criticised Prime Minister Radovan Višković for being uninterested and uninformed.

“The price of electricity you pay RiTE Gacko has been such for years that it cannot cover basic costs. You forced the company to take out loans every year for regular maintenance and annual overhauls, and last year you didn't even provide a bank guarantee for the overhaul. There's no talk of investments and upgrades”, Milović stated in the letter, which caused a significant public stir.

The response from ERS followed, rejecting the allegations and accusing Milović of not respecting the mutual relations between the Parent Company and RiTE Gacko. They described his address as an immature and primitive attempt to manipulate data, all in an effort to justify poor business decisions and the accumulated loss of 25.6 million euros.

“However, the habit of spending megalomaniacally without consulting anyone and distributing money at your discretion, then justifying the losses and business failures with a ‘Stop Thief’ letter that has only exposed you personally and your manipulations, leaves room for investigative authorities to be called in to examine how with 150 million KM you are unable to operate positively and responsibly”, ERS responded.

The investigative authorities were kept aside, and a month later, on March 15, 2022, MH ERS signed an agreement with RiTE Gacko, increasing the production price per kilowatt to 9.18 pfennig, which meant about 30 million more for the company. It was speculated at the time that Milorad Dodik, the supreme authority in the party and the republic, instructed the conflicting parties to calm down and find a compromise to avoid further public embarrassment.

From the Request, Only a Resolution

A whole year later, at the beginning of March 2023, the Gacko Municipal Assembly session discussed changing the amount of the concession fee.

“We advocate for an increase in the concession fee to secure a greater influx of funds into the budget”, said SDS councillor Jelica Bijeković, requesting that a resolution be adopted to mandate the mayor to initiate a request to the RS Government to amend the Concession Law within 10 days.

SNSD councillor Siniša Šuković mentioned that he had previously called for changing the fee amount because the basic principle of the Concession Law is that it should be proportionate to the achieved revenue. His estimate at the time was that the concession fee could increase from 5 to 7 million annually.

“We should address the Commission for Concessions appointed by the NSRS”, said Šuković and proposed preparing appropriate material for the next session and sending an official request to the NSRS for a fee increase.

On March 10, 2023, the Official Gazette of Gacko Municipality published a resolution stating: “The Gacko Municipal Assembly mandates the municipal leadership, in cooperation with political parties, municipal administration staff, and other experts familiar with the concession field, to prepare a well-founded material to initiate the amendment of the Concession Rulebook to increase the concession fee for the use of electricity facilities, thereby increasing Gacko Municipality's revenue. Present the initiative to the Gacko Municipal Assembly, then adopt it to forward to the RS Government and NSRS”.

However, the mayor remained without a majority until late autumn, the Assembly did not convene, and the initiative did not move beyond the municipal Official Gazette. Unofficially, we heard that the majority of council members, who are also in the leadership of RiTE, discussed abandoning the initiative because it would impose an additional burden on a company already in a difficult financial situation.

360 Million Contract Between Skoko and Petrović

Meanwhile, at the end of February 2023, Maksim Skoko was appointed as the acting director of RiTE Gacko, while also serving as a member of the RS National Assembly. About ten days

after the publication of the aforementioned municipal resolution, Skoko, visibly pleased, signed a contract with Luka Petrović in the presence of Milorad Dodik in Gacko. The contract with ERS was worth 360 million KM, stipulating the delivery of 3,000 GWh of electricity over two years. Despite the presence of top republic officials, Elektroprivreda, and RiTE Gacko's leadership with the mayor, there was no mention of increasing the concession fee to supplement the municipal budget.

In a brief response, Maksim Skoko stated that, as always, he supports any initiative that would increase the so-called mining fee and thus boost the budget of Gacko Municipality. “Your information that RiTE Gacko opposes such an initiative is completely false because such an increase would not significantly affect the financial condition of the company”, Skoko asserted.

However, when asked if he had advocated for this initiative in the RS National Assembly to benefit the local community, he did not respond. It remains unclear whether anyone from the municipality sought his support, despite the resolution indicating that other experts familiar with the field would be involved in its implementation. As the acting director and an assembly member, Skoko is certainly one of the most qualified individuals to be engaged in this effort.

There are those who seek compensation

In contrast to the municipal budget, where efforts for public benefit are often half-hearted, private property matters are handled quite differently.

Despite the municipal budget being reduced to 150,000 KM (with the remaining 12 million being reserved), the mayor of Gacko, Ognjen Milinković, has not taken any steps to partially fill the financial gaps by increasing the concession fee. These gaps have widened following the RS Government's decision to raise the minimum wage to 900 KM. As a result, the municipal budget is roughly 400,000 KM in deficit, and the trend continues.

The Mayor Doesn't Respond to Questions

The increase in the minimum wage to 125 KM will undoubtedly cause financial headaches for the mayor. When asked why the initiative stalled and whether he had discussions with representatives from the government or ministry, as instructed by the Gacko Municipal Assembly, we received no response from the head of Gacko. He did not answer calls or respond to the questions we sent.

We were also left without an answer on whether anyone from the RiTE management suggested that increasing the rent amount would be a significant burden for the company. Petar Marković, the president of the SNSD councillors’ club in the Gacko Municipal Assembly and an executive director of RiTE Gacko at the time of the conclusion, did not respond to our questions either.

In contrast, Miloš Tepavčević, the executive director for finance at RiTE Gacko and a councillor for Demos in the Gacko Municipal Assembly, answered the call and promised to send responses “in the next few days”. However, by the time this text was concluded, the responses had not yet arrived.

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