Annual Report 2009 - Kostt€¦ · · 2010-09-16Transmision System of the Republic of Kosovo...

Annual Report 2009

Content

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List of Tables 4List of Figures 5List of abbreviations and acronyms 6Basic Data 8Foreword of the Chairman of the Board of Directors 9Foreword of the Chief Executive Officer of KOSTT 10Transmision System of the Republic of Kosovo 400/220/110 kV 12Independent Auditors’ Report 13KOSTT j.s.c. 15Company Objectives for the Year 2010 17Governance and Organization in KOSTT 19The Board of Directors 19KOSTT High Management 19Organizational Structure of KOSTT 20The Role of Audit Commission 22Audit Commission 22Legal and Regulatory Framework 22Regulatory Framework 23Technical Codes Amendments 23Transmission Development Plan 24Development of Transmission Tariff System 25Effective Relations with Stakeholders and Transparency 26Overview of the Kosovo Transmission Network Operation 29Maintenance 2009 29Development and Advancement of the Kosovo Transmission System 39Development of Transmission Network 39Transmission Network Projects (2009) 39Developments in Generation Capacities 42Development of Interconnection Lines with Neighboring Countries 42Development of Controlling and Monitoring Infrastructure 43SCADA/EMS and Telecom Project 43Overview of Electricity System Operation in Kosovo during 2009 45Realized Balance in 2009 Compared to 2008 48Unsupplied Energy 2007-2009 49Kosovo Electricity Market 51The Size of Electricity Market in Kosovo 52Balance of Carried Flows of Energy in the Transmission Network for the PeriodJanuary '09 - December 2009 53Settlement of Parties in the Market 54The Average Price of Electricity and Electricity Imports 55Transit of Electricity 57Energy Losses in Transmission 57Reforms in the Kosovo Electricity Market 58Regional Integrations 59Human Resources Management 61Human Resources Capacity Building in KOSTT 62Information Technology in KOSTT 63Audited financial reports 65Highlights of 2009 71

List of Tables

Tab. 1 The length of transmission lines and their transmitting capacity

Tab. 2 The age of lines

Tab. 3 Transforming capacity of KOSTT’s network for 2009

Tab. 4 Interconnecting capacity for 2009

Tab. 5 Key Technical performance indicators- Transmission Operator

Tab. 6 Implemented projects during 2009

Tab. 7 Status of capital investments in Transmission System of Kosovo for 2009

Tab. 8 Supplied and unsupplied energy

Tab. 9 KOSTT’s data on human resources for years 2008/2009

Tab. 10 Balance Sheet as at December 31, 2009

Tab. 11 Income Statement for the year ended December 31, 2009

Tab. 12 Changes in Equity for the year ended December 31, 2009

Tab. 13 Statemenet of Cash Flows for the year ended December 31, 2009

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List of Figures

Fig.1 Organization Structure of KOSTT

Fig.2 Amending Process of Technical Codes

Fig.3 Structure of KOSTT’s tariffs and charges, applicable from the April 1st, 2009

Fig. 4 In general form, the total number of assets according to the voltage level

Fig. 5 Comparison of Interventions /2007/2009

Fig. 6 Comparison of physical maintenance completion for the period 2007/2009

Fig. 7 Comparison of outages of OHL 2008/2009

Fig. 8 Comparison of outages of AT 2008/2009

Fig.9 Comparison of performance indicators of the TO for 2008/2009

Fig. 10 Planned and completed investments for each project during the year 2009

Fig. 11 Development of capacities of the transmission network during the year 2009

Fig. 12 Losses on monthly basis for years 2008 and 2009

Fig. 13 Unsupplied energy 2007-2009

Fig. 14 Physical flows in transmission network of KOSTT for 2009

Fig.15 Profile of total consumption, including losses in electricity distribution

Fig.16 Non-tariff consumption and tariff consumption of KEK-Supplying with distribution

losses during 2009

Fig. 17 Non-tariff consumption and tariff consumption with monthly distribution losses dur-

ing 2009

Fig. 18 The balance of energy flows for 2009

Fig. 19 Involvement of stakeholders in the electricity market in Kosovo for 2009

Fig. 20 Comparison of average import prices of electricity for 2008 and 2009

Fig. 21 Comparison of average prices of electricity for 2008 and 2009

Fig. 22 Import and export of wholesale electricity by the wholesale dealers

Fig. 23 Transit of electricity in the horizontal network of Kosovo for years 2008 and 2009

Fig. 24 Comparative Statement of losses for the years 2008 and 2009

Fig. 25 Assets 2008/2009

Fig. 26 Revenues

Fig. 27 Expenditures 2009

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List of abbreviations and acronyms

A AmperATR AutotransformerATSO Albanian Transmission System Operator BM Balancing MarketCAO IG Coordinated Auction Office Implementation GroupCAS Computerized Accounting SystemCt Transmission Capacity DC the Main Dispatching Center DF Distributing FacilitiesDSO Distribution System Operator EC European Commission ECLO European Commision Liasion OfficeEDC Emergency Dispatching Center EIA Environmental Impact AssessmentEMS Environmental Management System EMS (Elektromreža Serbije) - Serbian Transmission System and Market Operator EnCT the Energy Community TreatyENTSO-E European Network of Transmission System Operators for ElectricityEPS (Elektroprivreda Serbije) - Serbian Electricity Company ERO Energy Regulatory Office ETSO European Transmission System OperatorsEU European Union F FemaleFAT Factory Acceptence TestFIDIC (Fédération Internationale Des Ingénieurs-Conseils) - International Federation of

Consulting EngineersGWh GigaWatt per hourHE Higher EducationHPP Hydro Power Plant HQ High QualificationsHV High VoltageHVM High Voltage MeteringIFRS International Financial Reporting Standards ISO International Organization for Standardization IT Information TechnologyITC Inter Transmission System Operators Compensation KAS Kosovo Accounting Standards KCB Kosovo Consolidated BudgetKEK Kosovo Energy Corporation KfW German Development BankKOSTT Transmission, System and Market Operator of KosovokV KilovoltKW Kilowat

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KWh Kilowat per hour L Length of lines LQ Low QualificationsM Male MEF Ministry of Economy and Finance MEM Ministry of Energy and MiningMO Market Operator MVA Megavolt amperMW MegawatNACMPF Network Access Congestion Management Power FlowOCGC Operational Codes Governance CommitteeOHL Overhead LineOPEX Operational ExpendituresOPGW Optical Ground WirePBX Commuting (Switching) equipment for telephone networking, connecting lines and

public telephone network POE Publicly Owned Enterprises PLC Power Line CarrierPS Power SystemPSS/E Power System Simulator for EngineeringETR Electricity Tariff Review RG SEE Regional Group South East Europe SCADA/EMS Supervisory Control and Data Acquisition/Energy Management System SDH Synchronous Digital HierarchySEE Southeast Europe SePE Secondary Professional EducationSETSO South East Europe Transmission System OperatorsSn Nominal power SO System Operator SS SubstationSTM-4 Synchronous Transport Modul - level 4SuPE Superior Professional EducationTAS Time Attendance SystemTDP Transmission Development PlanTLF Transmission Loss FactorTNDP Transmission Network Development Plan TPA Third Party Access TPP Thermo Power PlantTSO - Transmission System OperatorUCTE Union for the Co-ordination of Transmission of Electricity UCTE OH UCTE Operational Handbook (summary of principals and regulations that Europian

TSO’s have to implement in electricity systems)UQ Unqualified

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Basic Data

Registered name :

Transmission, System and Market Operator – KOSTT j.s.c

Registered Address :

Iljaz Kodra str. nn, 10000 Prishtinë, Republic of Kosovo

Number of business registration :

70325350

Date of establishment :

July 1st, 2006

Licenses from the Energy Regulatory Office :

License for Transmission System Operation and

License for Electricity Market Operation

The shareholder

Republic of Kosovo, implemented through the Ministry of Economy and Finance

Chairman of the Board of Directors :

Ramadan Paçarada

Chief Executive Officer :

Fadil Ismajli

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Board of Directors appointedby the Government of Kosovo,is obliged, by setting the strate-gic direction and business poli-cies, to preserve and enhancethe value of the company in thebenefit of the shareholder, inthis case the Republic ofKosovo. In view of this primarytask, work of the Board hasbeen run in that direction.

KOSTT in 2009 marked a verysignificant progress, both in im-proving its services in providinga reliable transmission networkand sufficient transmission ca-pacity for its clients, whichmeans that transmission ca-pacity is increased significantlycompared with previous years;this was also associated withincreased levels of operationssecurity.

These improvements have en-abled the completion of nu-merous projects in KOSTT,

which are implemented with aproper control by managementand Board of Directors. This isevidenced by the independentauditor's report without anyqualification, that considerablyfacilitates the work of the Boardand increases the share-holder’s confidence thatKOSTT is in the right path.

And finally, I want to emphasizethat the Board will support pro-fessional management ofKOSTT in implementing majorprojects in the future, and inmeeting the targets for full in-clusion in regional and Euro-pean structures of transmissionsector.

Sincerely,

Ramadan PaçaradaChairman of the Board of Di-rectors

Foreword of the Chairmanof the Board of Directors

Ramadan Paçarada

"After a close cooperation between the Board of Directors with company’s management and thanks tothe hard work of KOSTT employees, they have achieved the objectives outlined in the Business Planand development policies and they have surpassed the achieved results of the previous year. [...] trans-mission interruptions have been reduced from 28 to 11; transmission loshes have also been reduced;maintenance costs have been reduced; and the net profit has been doubled compared to the year 2008.All these results were achieved after a hard work of management, the Board of Directors and KOSTT’sstaff with the results of which Shareholder is proud and it encourages for the year 2010 to be even morefruitful. "

Ministry of Economy and Finance, POE Policy and Monitoring Unit

For the last four years, KOSTThas shown an outstandingcommitment in advancing se-curity, and improving qualityand reliability of services that itprovides to the users of theKosovo power system.

The above state-ment conclusionrefers to the resultsachieved in almostall fields that are pre-sented more specif-ically in this report. Ifanalysed carefully,the presented val-ues illustrate positivechanges in performance whichare directly attributed to ex-traordinary commitment ofKOSTT employees and its

management . These resultsare an outcome of adequateplanning of human resources,as well as financial and techni-cal assistance received in thepast years, and are reflectedthrough increased efficiency inoperation of the system andtransmission network, as wellas increased confidence by fi-nancial institutions due to theprofessional approach towardsfinancial policies of the com-pany, which are designed toachieve long-term financialsustanibility.

As very important, I put empha-sis on some of the key indica-tors that show presentachievements in comparisonto those of year 2006, whenKOSTT took over system oper-ation as separate entity:

The year 2009 was challengingin terms of implementation ofreliable operation and safety ofpersonnel and equipment in

one side, and parallel imple-mentation of many capital proj-ects, and plannedmaintenance on the other side,as shown/described in the Re-port and which are usually ac-companied withdisconnections of the lines andsupply transformers of electric-ity consumption. With the sign-ing of the loan agreement withKfW (the first foreign state loanfor the Republic of Kosovo -approved by the Parliamentand the President) for infra-structure developmentinKosovo, namely the construc-tion of 400 kV line Kosovo – Al-bania, KOSTT opened a newchapter in development of itstransmission infrastructure,which underlines KOSTT com-mitment for a financial sustain-ability and credibility with regard

to international fi-nancial institutions.In recent yearsKOSTT has pro-gressed with rapidbut safe steps to-wards meeting theinternational techni-cal standards, andthe level of security

of supply is increasingly closerto those standards. Priority inimplementing the long-termdevelopment planning has

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Foreword of the Chief Executive Officer of KOSTT

• transmission capacities increased for more

than 1/3;• number of faults (tripings ) of thesupply

lines nearly halved;• trend in decreasing of losses continuous,

• during this period value of assets is

quadrupled.

Fadil Ismajli

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been given to projects that re-late to meeting these stan-dards, such as N-1 criterionand ensuring qualtitave ancil-lary services .

Last year KOSTT initiated theprocess of preparations for themembership in ENTSO-E (Eu-ropean Network of Transmis-sion System Operators forElectricity) in which functions ofUCTE and ETSO have merged.Many procedures and rules forsystem operationhave beencompiled and existing onesadopted. We believe that dur-ing 2010, KOSTT will succeedin becoming a full-rights mem-ber of ENTSO-E , which wouldensure the implementation ofKOSTT’s rights in the regionaland European level.

For the fourth consecutive year,, the good tradition continueswith regard to financial man-agement of the company, re-sulting with the externalauditor's report opinion withoutqualification.

The year 2009 also marks anadditional KOSTT engagementat the professional level in sup-port of parallel processes in theelectricity sector, suchas priva-tization of Distribution and Sup-ply on one hand, and theconstruction of new generatingcapacity on the other.

Results and achievementsnoted in this report, are a resultof exceptional commitment ofall company structures, starting

from the Board of Directors, themanagement, experts and es-pecially KOSTT staff, the mostvaluable asset of this company,who continue to work diligentlyto achieve company objec-tives.

KOSTT is grateful to all localand international institutions forall forms of support and thisgratitude is best expressedthrough the achieved results,which are also presented in thisAnnual Report.

Fadil IsmajliChief Executive Officer

“I am impressed with the dedication and work done so far by the Chief Executive Officer and KOSTT’sstaff, where I encourage them to continue working by using effective and good governance of the corpo-ration. This should serve as an example to other public enterprises. I was pleased when I learned about the investments made in electricity transmission infrastructure, in-vestments which are made over the past years and I commit myself to give my support to KOSTT intheir efforts to complete the full incorporation in regional and European associations.”

International Civilian Office - European Union Special Representative (ICO - EUSR), Pieter Faith,January the 22nd 2010

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Transmission System of the Republic of Kosovo 400/220/110 kV

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Thermal Power PlantSwich Yard 200 kV

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OPERATOR SISTEMI, TRANSMISIONI DHE TREGU SH.A.

OPERATOR SISTEMA, PRENOSA I TRŽIŠTA A.D. TRANSMISSION, SYSTEM AND MARKET OPERATOR J.S.C.

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KOSTT is an electricity Transmission System and Market Operator of the Republic of Kosovo

Established on July the 1st, 2006, as a result of restructuring of the energy sector under the EnergyCommunity Treaty for Southeastern Europe, KOSTT j.s.c. operates under two licenses issued bythe Energy Regulatory Office:

• License of Transmission System Operator • License of Electricity Market Operator

KOSTT j.s.c. is a public company whose shareholder is the Republic of Kosovo, through the Ministryof Economy and Finance.

KOSTT is responsible for planning, development, maintenance and operation of the transmissionsystem of electricity in Kosovo; providing open and non-discriminatory access; functioning of newelectricity market; providing conditions that encourage competition in Kosovo; cooperation withneighboring Transmission System Operators (TSO) for the benefit of Kosovo and the region.

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KOSTT’s responsibility is to safely and reli-ably deliver electricity from generating unitsto the distribution system, 24 hours per day,

365 days per year.KOSTT manages the transmission network of high volt-age 400 kV, 220 kV and 110 kV, with a total length of1077.06 km.

Currently, Kosovo's transmission network is associated with neighboring countries through sevencross-border lines and will soon begin the construction of the eighth cross-border line.KOSTT’s mission is to provide:

• quality services, by implementing technical and techno-logical advancements in the development of the trans-mission system;

• transparency and non-discrimination in competitive elec-tricity market;

• advancement of the position in regional and Europeanlevel, supported by continued capacity increase ofhuman resources.

KOSTT’s vision is to be a profitable company for secure and stable transmission of electricity, re-sponsible towards society and environment, and integrated in the European mechanisms.

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Company Objectives for the Year 2010

(1) To ensure financial sustainability

(2) Establish an effective and efficient or-

ganization and to achieve continuous

improvements in productivity

(3) To maintain and promote the function

of the system operation

(4) To improve the performance of the

transmission system

(5) To promote the planning and develop-

ment capacities of the system

(6) To ensure the effective construction of

transmission network

(7) To create possibilities for market oper-

ation in accordance with anticipated

developments of the electricity market

(8) To fulfill treaty obligations by actively

participating in the development and

operation of the regional market (to

benefit from regional market and con-

tribute to regional development of the

market)

(9) To build effective relationships with

stakeholders

(10) To ensure that KOSTT is a good and

attractive employer

(11) To ensure that KOSTT will be a respon-

sible organization from an environ-

mental aspect

(12) To create a safe working environment

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To create

a safe working

environment

Governance and Organization in KOSTT

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Fadil RrustemajDirector

Faton DedaDirector

Fatos UkajDirector

Lutfi MaxhuniDirector

Nazmi MikullovciDirector

Ramadan PaçaradaChairman

Fadil IsmajliChief Executive Officer

The Board of Directors

KOSTT High Management

Fadil Ismajli Chief Executive OfficerNaim Bejtullahu Deputy Chief Executive for DevelopmentKadri Kadriu Deputy Chief Executive for OperationsNebih Haziri Director of Finance Department Merita Kostari Secretary of the CompanyBesim Gërxhaliu Acting Head of Transmission Operation DepartmentSabri Musiqi Director of System Operation Department Skender Gjonbalaj Director of Market Department Ilir Shala Director of Project Management and Engineering DepartmentResmije Ahma Director of Legal and Regulatory Affairs Department Jusuf Imeri Director of Human Resources Department Abdulsatar Ibrahimi Manager of Procurement OfficeIsak Kika Manager of Security OfficeShpresa Kursani Manager of Strategic Planning Office

Foto nga takimi i Bordit te Drejtorëve

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The new law on Public Enter-prises No. 03/L-087 adopted inJune of 2008 has foreseen thechanges in corporate gover-nance for Publicly Owned En-terprises (POE) compared withthe previous laws. This law hasadvanced the corporate aspectby focusing on the establish-ment and proper role of theBoard of Directors of POE’s,the establishment of new mon-itoring unit of a POE’s within theMinistry of Economy and Fi-nance (MEF), it has created atransparent approach that anyPOE should have about thepublication of documents asstipulated in the Law, whichconsequently will increase theconfidence of a thirdparty toward the work ofthese enterprises.

The law on POE’s hasprovided that KOSTT stillwill be governed by theBoard of Directors(Board) elected in accor-dance with Article 15.1 ofthe Law. Establishmentof New Board of Direc-tors of KOSTT and AuditCommission and theMonitoring Unit of POEsand their functioninghave been the first stepsthat the Government hasundertaken to imple-ment the law in question.KOSTT has undertaken all ac-tivities necessary to implement

the law and guidelines issuedby the Monitoring Unit ofPOE’s. In order to reflect thechanges in governance andownership of KOSTT assetsand other public enterprisesassets by the Government ofKosovo , in accordance withlaw and with the Decision ofCommission of MinistersNo.218/1, dated 30/09/2009,the Board of Directors ofKOSTT adopted the modifiedCharter and Code of Ethics andCorporate Governance, basedon forms submitted by MEF.Based on this, KOSTT registra-tion of modifications was car-ried out in the BusinessRegister and it was Certified.

The Board has adopted strate-gic and development plans

proposed by KOSTT, financialstatements and business plan,annual and quarterly reports asrequired by law on POE. TheBoard has appointed the Com-pany's officials (Chief ExecutiveOfficer, Secretary of the Com-pany, Financial Officer), as wellas the Internal Auditor ofKOSTT, who was selected bythe Audit Commission in accor-dance with the requirements ofArticle 15 of the Law on POE.

During 2009, KOSTT also fo-cused on developing an Envi-ronmental ManagementSystem (EMS), which is devel-oped through practices and

overall control, and whichis in accordance with ISOStandard 14001. Basedon this, KOSTT draftedPolicies and a Manual,which support the properdevelopment of the EMS,with special emphasis onarchitecture and requiredprocedures with a view togradually - "step by step"improving environmentalperformance. KOSTT’sstaff is being informedwith mandatory environ-mental aspects, such asEIA (Environmental ImpactAssessment) and stafftraining has been

planned in this important as-pect.

Based on the Boardof Directors deci-sion, KOSTT

arranged the work of theBoard and of KOSTT Com-missions, compensation poli-cies for different levels ofhierarchy (based on Law onPublic Enterprises), operationthrough a Manual, discipli-nary matters, authorizations,procurement plan, etc.

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The Role of Audit Commission

The law on POE has also established an Audit Commissionconsisting of three (3) elected directors. The Audit Commis-sion considers all documents submitted to the Board of Di-rectors and gives its recommendation to the Board. The

Commission acts as an advisory body of the Board of Directors.

Audit Commission• Fadil Rrustemaj• Fatos Ukaj• Ramadan Paçarada

Legal and Regula-tory Framework

KOSTT was established basedon the requirements of Article12.1 (as a Transmission andSystem Operator) and 27.1 (asa Market Operator) of the Lawon Electricity in accordancewith Article 8 of Directive2003/54/EC.KOSTT operates based on theLaw on Electricity, the Law onEnergy Regulator and the Law

on Energy, bylaws of EnergyRegulatory Office (ERO) andpursuant to licenses issued bythe ERO for the TransmissionSystem Operation and for theElectricity Market Operation.KOSTT also operates based onthe Technical Codes which aresubject to approval by the ERO,the Market Rules and otheracts. KOSTT, under the licenseobligations has compiled Tech-nical Codes (grid, metering,etc.) Market Rules (bilateralmodel), Annual Energy Bal-

ances and Long-Term 10-yearEnergy Balance, 2007-2012Business Plan, TransmissionConnection Charging Method-ology, Operational Proceduresand Commercial Agreements,Standards for Security of Trans-mission System and Planningand Operating Security Stan-dards, Transmission NetworkDevelopment Plan(TNDP) forthe period 2007-2013. All thesedocuments are approved bythe ERO and implemented byKOSTT.

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Regulatory FrameworkRegulatory framework for which is responsible KOSTT, is designed in full compliance with primaryand secondary legislation of the Republic of Kosovo in accordance with best practices by the EUclearly defining actions and responsibilities of the Transmission Network and Market Operator, witha commitment to ensure the safe development and operation of the transmission system and elec-tricity market.

Technical Codes AmendmentsIn accordance with Article 26.1 of the Law on Energy Regulator, the Board of ERO has adoptedProcedures for the Management of Technical and Operational Codes, as defined in Article 38.7 ofthe Law on Electricity.Operational Codes Governing Committee (OCGC) - means the committee established to reviewand discuss the changes/modifications to the Technical and Operational Codes of Electricity In-dustry in Kosovo.Implementation of the provisions of the Technical Codes means the implementation of operationalprocedures and provisions that regulate the interaction between the TSO and MO and transmissionsystem users.

This is a process which can be initiated by one of the members of OCGC with a request for furtherreview by OCGC (Operational Codes Governing Committee) which examines the request and itsrationality and upon accordance from the members it is further proceeded to ERO for approval.

Initiation of the process of amending the provisions ofthe Technical Codes (Grid Code, Distribution Code,Metering Code, DSO Metering Code, Electrical Equip-

ment Codes, Electrical Standards Codes, Consumer ProtectionCode) is made according to the specified procedure in the doc-ument: Governance Procedures for Technical/Operational Codes.

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During the period January to December 2009, KOSTT continually reviewed the implementation ofTechnical and Operational Codes and the implementation of their provisions in other relevant doc-uments, and in conjunction with this has made several requests to OCGC for the amendment ofthe provisions of Technical Codes. According to KOSTT request, OCGC has considered proposalsfor amendment of certain provisions in the Electrical Equipment Code, Grid Code and the MeteringCode and it has sent the request to the ERO for approval. During this period at the request of OCGCERO has adopted (Decision V_163_2009) request to amend the Sections 3.2 and 17.4.2.2 of theElectrical Equipment Code

Transmission Development Plan the document which was drafted by KOSTT accordingto the requirements of primary and secondary legislation. This document is prepared by the SystemOperator and is published after approval by the ERO in the website of KOSTT. It is set by Grid Codethat KOSTT shall annually distribute the Transmission Development Plan detailed for the next sevenyears.

in which the year 2009 represents the reference year or so-called year zero. In compiling this doc-ument are taken into account all relevant information such as details of projects, the expected dateof entering into operation of the project, applications for connection in the transmission networkthat occurred during the first and second quarter of 2009. For the preparation of development planappropriate calculations were made with the relevant software PSS/E v. 32, simulating computermodels of the system based on data provided by KOSTT and network users, as well as on theload based predictions. Generation data are provided by KEK-Generation and other generators.The relevant data about new generation capacity (small hydro power plants) were obtained fromMEM. Data for interconnectors that are expected to be built in the region were provided by studiesmade in the Planning Group for Planning of the Regional Transmission Network - SECI, in whichgroup KOSTT contributes through its representatives.

The other particularity is that in this development plan is taken into account energy produced fromthe wind. In Kosovo, since the beginning of 2009, for connection into the electrical network haveapplied some foreign investors with planned total capacity of 157 MW. So far KOSTT has been pre-sented with two applications for connection of wind turbines in the electrical network:

• Shtime project with a capacity of 127 MW, in the southeastern part of Kosovo, and • Kitka project with a capacity of 30 MW, the eastern part of Kosovo.

Currently in Kosovo there is no assessment map of wind potentials, however investors on their ini-tiative have measured wind speeds in certain areas. Development projects for the transmissionnetwork are divided into five categories:

• Reinforcements in the Transmission Network• New connections of distribution load • Revitalization of the transmission network • New connections of the generators.• Supporting projects of Transmission System (management, monitoring, metering and

control)

In compliance with the requirementsarising from ENTSO-E, reviewed doc-ument of Transmission DevelopmentPlan, now unlike the first document

TNDP (2007-2013), will cover the 10-year pe-riod (2010-2019)

25

Development of Trans-mission Tariff SystemTransmission Tariff System wasbuilt and continues to developunder the relevant legislationsuch as : 1) Primary legislation, ap-proved by the Kosovo Assem-bly: a) Law on Energy, b) Lawon Electricity; c) Law on En-ergy Regulator, and2) Secondary Legislation, ap-proved by the Energy Regula-tory Office: a) TariffMethodology; b) Pricing Rulec) Guidelines for Tariff Applica-tion d) Regulatory AccountingGuidelines.Since the KOSTT’s establish-ment in 2006, four Review

Processes of Electricity Priceswere conducted; initiallyThree-years Allowed Rev-enues were set, afterwardsevery year has had Price Re-viewing :ETR 1 – Tariff Setting 2007 –2008; ETR 2 – Tariff Setting2008 – 2009; ETR 3 – TariffSetting 2009 – 2010 andETR 4 – Tariff Setting 2010– 2011.Methodology of ElectricityTariff covers the determina-tion of the total allowed rev-enue that can be earnedfrom regulated tariffs andthe governing principles ofthe structure of tariffs usedto cover these annual rev-enues.

Tariffs of Electricity Transmis-sion are tariffs that reflect nec-essary costs for properfunctioning and operation ofthe Transmission, System andMarket Operator of Electricity inKosovo.

Energy Regula-tory Office deci-sion no.

V_172_2009, dated15.04.2009 has approvedthe Transmission tariffsand charges that are appli-cable by KOSTT from thedate 01.04.2009.

Effective Relationswith Stakeholdersand Transparency

To establish effective relationswith stakeholders, KOSTT per-manently implements the Com-munication Strategy andRegulatory Affairs Policies, sup-ported by procedures for inter-nal and externalcommunication. Developmentof a regular communicationsprocesses represents a crucialelement for enhancing the per-formance of the company andas such are treated with specialattention by KOSTT’s employ-ees, in order to achieve the ob-jectives of the company andtransparency development, asone of the main fields of aproper communication con-duct with stakeholders.

KOSTT is permanently workingto advance the communication

relations with stakeholders.Regular and continuous com-munications are conductedwith independent regulatorybody, Energy Regulatory Office(ERO), Ministry of Energy andMining (MEM), Kosovo EnergyCorporation (KEK), Ministry ofEconomy and Finance and allparties involved in the Trans-mission System. Communica-tions with stakeholders focuson the implementation of obli-gations arising from primaryand secondary legislationwhich itself includes several dif-ferent processes: reporting, in-formation, review, approval,publishing, and a separateprocess, that of monitoring theimplementation of the provi-sions of primary and secondarylegislation.

Considering that the media arebroadcasters of the messagesand they are essential elementof open dialogue, KOSTT paysspecial attention to ethical and

transparent relationship with themedia and stakeholders forpurposes of information/main-tenance of relationships.KOSTT’s achievements during2009, including many capitalprojects that have been imple-mented or have begun imple-mentation, were presented tostakeholders by forms definedin Communication Strategy.During 2009 it is evident the ad-vancement of relations withmedia, readiness for trans-parency and willingness topositively and timely answer thedemands of the media. Interestof the printed media to broad-cast the KOSTT activities anddevelopments increased to60% in 2009 compared to pre-vious year.

Development of genuine rela-tionships with stakeholders ispreceded by promotion oftransparency, as one of themain criteria for the develop-ment of this field. Transparent

26

27

and non discriminatory accessto transmission network by theparties which are not owners ofthe network infrastructure, isknown as Third Party Access(TPA), which is essential for fa-cilitating greater competition,which helps energy market tofunction effectively.

Drafting of Transmission Con-nection Charging Methodologyhas opened the road for net-work development and trans-

parency, and in connectionwith this, the obligations thatderive from Technical Codes.KOSTT is in the final stage ofsigning the ConnectionAGREEMENTto the Transmis-sion Network to all parties con-nected to the TransmissionNetwork (KEK Generation, KEK

Distribution, N.H. "Ibër Lepenci”, Fer-onikel, Sharrcem etc.),while on the other sidehas established ex-cellent relations withneighboring opera-tors, like signing theInter TSO Agreementon January 30th, 2009with TransmissionSystem Operator ofAlbania (AOST), and

establishing relations of coop-eration with the Montenegroand Macedonia TSO’s.

KOSTT drafteddocuments andprocedures by

which stakeholders andparties which are con-nected into the transmis-sion network are equallytreated.

Overview of the Kosovo TransmissionNetwork Operation

Maintenance 2009

Under the license, KOSTT is responsible for maintaining the transmission network. TransmissionSystem includes all lines in the level of voltage 400 kV, 220 kV and 110 kV, and all substations withvoltage levels 400/220 kV, 400/110 kV and 220/110 kV, and high voltage 110 kV facilities in substa-tions at 110 / x kV.

Transmission capacities of KOSTT’s assets are as follows:

The current capacities of lines of transmission network per length unit as of the end of 2009 areshown in the table below.

The following table shows the age of the lines by level of voltage

29

The current transforming capacities of the Transmission Network which is managed by KOSTT areconcentrated on substations 400/220 kV and 220/110 kV. In Table 3 are presented transformingcapacities for 2009.

Interconnection capacity for the year 2009 is shown in following table:

All these assets make up a functional and complex operation that enables the transmission systemin Kosovo.

30

31

In Fig. 4 it is presented in the summary form the number of network elements according to the volt-age transmission.

Quantity of autotransformers is represented by primary voltage.

Maintenance plan is based on OPEX budget, approved by the Energy Regulatory Office, whoseobjectives are:

• Maintenance of all transmission network equipment, including all lines and equipment inSS.

• Revitalization of the necessary equipment as a preventive measure.

Through these objectives, the main goal is to achieve these performances:• Increased security and reliability of operation of the facilities• Increase of existing transmission capacities where it appears as possible.

Within this budget, projects were developed in these devices:• Replacement of 220 kV transmitting lines and strengthening of existing columns with length

L = 17.5 km • Replacement of equipments in 220 kV bay, five complete areas • Replacement of 110 kV areas, 7 areas• Replacement of power metering transformers 110 kV, 220 kV, 400 kV, 33 pieces • Replacement of 110 kV voltage metering transformers, 10 pieces• Replacement of voltage dischargers, 110 kV, 220 kV, 6 pieces• Replacement of relay protections, 110kV, 6 pieces• Replacement of insulators from porcelain to polymer in three lines with an air length of

63.45 km,• Replacement of busbar insulators on the 220 kV side on SS Kosova B, 5000 pieces

Implementation of the Opex plan foreseen for the year 2008 which continued in 2009 reaches thevalue of 3,596,758.6 EUR(€)

While the value of 2009Opexplan which has been realized is 1,291,825.4 EUR

Besides the development of projects, the drafting of preventive maintenance policy is finalized,which was approved by the Board of Directors.

The trend of reduced number of interventions as a result of preventive maintenance and applicationof modern technology can be seen in the chart below.

32

Revitalization of the transmission network andpreventive maintenance in addition to increasingthe transmission capacity has also influencedthe increase of reliability and security of the sys-

tem, which results in a lower number of outages and inter-ventions on the equipment in substations and lines.

In Fig. 6 it is presented the implementation of maintenance plan, where it can be seen that it hadbeen reached a very high percentage of implementation considering the implementation difficultiesof the disconnection due to non-compliance with criteria n-1 (undelivered energy), or as a result ofthe implementation of a large number of projects simultaneously.

In the diagram shown below is the comparison of the OHL outages for the last two years, wherewe see that number of outages for 2009 is significantly lower than the previous year as a result ofcommitment in work and appropriate investments.

33

In general the number of autotransformer outages is lower compared with previous years, as aresult of activities and revitalization of equipment.

Statement of achievement in the transmission network in 2009 can be presented through perform-ance indicators. From the graph we can see that all indicators, like: the number of faults in linesand substations, including relay protections, then the average repair time of these faults and unde-livered energy due to the maintenance of these facilities for this year, are much more positive indi-cators compared to the previous year.

34

35Key Technical Performance Indicators – Transmission Operator **

** Calculation of technical indicators is performed according to Technical Performance Indicatorsdocument, approved by ERO, to which the very same indicators are reported.

37

39

Development and Advancement of the Kosovo Transmission System

Investment in Transmission System infrastructure plays a decisive role in the well-being of the PowerSystem of Kosovo. In this regard, KOSTT in 2009 has made a great effort to implement qualitativelyand in timely manner important projects. Most important projects that directly ehave an impact onthe performance of Kosovo Transmission System and in general the Kosovo Power System are:

• Construction of 400/110/10.5 kV – SS Peja 3 (ATR 300 MVA) together with interconnectinglines 400 kV and 110 kV (SS Peja 3 – SS Peja 1, SS Peja 3 – SS Istog, SS Peja 3 – SS Val-laq/Skenderaj),

• Reconstruction of 110 kV line, V=212, SS Kosova A – SS Bibaj• Installation of ATR1, 150 MVA in 220/110 kV SS –Kosova A• Reconstruction of 110 kV line, SS Gjakova 1 – Deçan

All of these investment projects had an impact in increased transmission capacity hence eliminat-ing the bottlenecks in transmission network, reducing losses, improving voltage profile and supplyof quality electricity for customers, in this way creating conditions for overall development of econ-omy and industry in our country.

Transmission capacity from 930 MW in 2008, increased to 1250 MWat the end of 2009, a positive increase which brought TransmissionSystem Operation from critical phase into a consolidated one. De-velopment process in the transmission network will continue with in-creased intensity in future years, based on long-term TransmissionNetwork Development Plan, in which the requirements are identifiedfor further reinforcements, so that the Transmission System can pur-sue consumption and generation growth, but always meeting thetechnical criteria, in accordance with Grid Code.

Development of Transmission NetworkTransmission Network Projects (2009)Following the establishment of the Transmission System and Market Operator of Kosovo (KOSTT)significant activities took place in the development of the Transmission Network. During this processDevelopment and Investment Plan 2007-2013 has been drafted, which on July the 14th, 2009 wasapproved by the ERO. Based on activities that are underway in KOSTT concerning developmentprojects planned through Development Plan, the following table is presented which includes thelist of projects that were completed in 2009 and which are in final stages of conclusion and whichshall certainly be fully carried out by the end of 2010.

1250 MW

▲930 MW

2009

2007

40

The four projects listed in Table6 are extremely important to in-crease the reliability and secu-rity of Transmission SystemOperation. They directly effectthe growth of transmission ca-pacities of the System. The fifthproject represents support forconsumption - distribution forRahovec region.

This project is characterizedwith great benefits, and has ledto increased transmission ca-pacity, the reduction in networklosses, in the relieve of a con-

siderable number of 110 kVlines, as well as autotransform-ers in SS Kosovo A and SSPrizren 2.Also the completed Project ofAdaptation of 220 kV line (L212)as a 110 kV line and the con-nection of this line in SS Bibajrepresents a very importantproject for transmission net-

work. The effectsof this projecthave enabledthe elimination ofbottlenecks in110 kV supplyline connectingthe SS Prishtina

4 - SS Bibaj, and increasedquality of distribution pointssupply: Bibaj (Ferizaj, Vitia,Theranda and in Sharr).Installing the new ATR1 - 150

MVA autotransformer in the SSKosovo A represents a projectwhich is coordinated with theLine L212 project. Instalation ofthistransformer has eliminatedthe bottlenecks in transforma-tion and has enabled optimiza-tion of operation oftransmission system in terms offlows of active and reactivepower.Also the project of replacementof the 150 mm2 conductorsconnecting SS Gjakova - SSDeçan with 240 mm2 conduc-tors, which was concluded onSeptember 2009, has led to in-crease of transmission capaci-ties of the network andimproved security of transmis-sion system.

Peja 3 Project-Pack representsthe largest stren-

gthening of the transmissionnetwork since the 80’s.

42

Developments in Generation Capacities

During 2009 KOSTT has received six applications for connection of generators (wind and water).In accordance with the Transmission Connection Charging Methodology, KOSTT has preparedaccordingly offers for each applicant. During 2009 there has been no development in terms of in-creasing the generating capacity that would have effected the transmission system.

Development of Interconnection Lines with NeighboringCountries One of the most important capital projects in Kosovo’s Transmission System is undoubtedly Projectof Construction of the 400 kV line, Kosovo - Albania. This project is presented as the immediate re-quirement to fulfill the growing needs for electricity in the region and the elimination of restrictionson regional transmission network interconnection.The project will be financed by the German Development Bank (KfW), 50% will be grant and 50%shall be given in form of soft loan. Terms of the loan for the project in question will be for 12 yearswith three years "grace period", and with favorable interest rate. During 2009 contract for ConsultingServices for the 400 kV Line, Kosovo – Albania has been signed.The first phase for the part of the line that passes through Kosovo (preparation of tender documen-tation), totals the amount of about € 367,000.00, while the second phase of the project totals €788,000.00, which includes supervision of implementation works. Total cost of these services is(for the part of the line that passes through Kosovo) € 1,155,000.00The impacts of this major project, during construction, are:

• Increase of the transmission capacities in the region • Enabling the allocation of new generation capacities by PP New Kosovo • Optimization of operations of both Power Systems of Kosovo and Albania – (complemen-

tary operation) • Improvement of working efficiency for both Power Systems• Increase of horizontal network for KOSTT• Increase of transmission capacities through transmission network • Programming of hydro-thermal resources evenly and sales of energy that make possible

the reduction of annual operating expenditures• Reduced expenses of the ready reserve and reserve in circulation for two power systems

that work together.• A more efficient programming and a better utilization of water resources, as a result of re-

duced specific water consumption per kWh produced by hydro power plants.• Peak reduction of the joint system due to non-simultaneous maximum demand and con-

sequent reduction of the demand for additional capacity to cover the peak.• A more efficient programming and a better utilization of thermal resources as a result of

increased yield of work efficiency of boilers and of turbines that function in an optimal op-erating regime

• An Increase of operating security of the systems.Në kuadër të Planit Zhvillimor dhe Investues të KOSTT-it është paraparë edhe ndërtimi i Linjës 400kV, Kosovë – Maqedoni.

“Our cooperation with KOSTT dates back to the early days of KOSTT as a newly established Transmission Sys-tem and Market Operator. Following successful completion of Peja 3 substation, we extended our financial cooper-ation with KOSTT with another major capital investment - the construction of the 400kV line Kosovo-Albania-and two studies in the area of network expansion and load frequency control. Looking back, key success factor to our cooperation has undoubtedly been the extraordinary committment and pro-fessionalism of KOSTT.”

KfW

Development of Controlling and Monitoring Infrastructure

SCADA/EMS and Telecom Project

Within the infrastructure for monitoring and control, KOSTT is in the implementation phase of theproject SCADA / EMS, which includes the Main Dispatching Center (DC) and Emergency Dispatch-ing Center (EDC), local SCADA with RTU’s in 24 substations of 110 kV level, the implementation ofSCADA with protection in SS Prizren 2 and interconnection of existing SCADA in nine substationsof different voltage levels with DC and EDC, all communication between substations with DC andEDC should be performed through IEC 104 protocol.80% of training has been completed within this project, technical acceptance is performed at thefactory or FAT (Factory Test Acceptance) of SCADA/EMS and EDC is in the implementation stage.The whole project is expected to be completed in December 2010.On the other hand, the telecommunication system has a duty to provide broadcast paths of com-munication of high security, for data exchange and discussions between the Power System unitsand Control Centers (main and emergency) for the following systems and functions:

• SCADA/EMS linked to control of electricity transmission network, including control of sub-stations

• High Voltage Metering (HVM)• Communication and exchange of data in the distance and of measured values from na-

tional control centers of neighboring countries

Main subsystems that enable above-mentioned functions are: • Telecommunication lines that use optical fiber system in the optical ground wire (OPGW),

microwave radio system and PLC system • Multiplex and interface equipment for data collection and voice communication and their

connectivity with telecommunications broadcasting equipment • Commuting (Switching) equipment (PBX) for telephone networking, connecting lines and

public telephone network.

During 2009 in the frame of:

43

-SCADA/EMS and TelecommunicationsProject, 200 km of OPGW (Optical GroundWire) optical cable have been installed.

These cables also provide protection to the electricitynetwork and broadcasting of telecommunicationssignals through optical fibers with very high perform-ance. The goal is implementation by the end of 2010of ''backbone network'' – the flexible optical network,with SDH equipment that operate with high capacityup to STM-4 .

45

After a very long period ofinsufficient reinforcementsin the transmission network,the year 2009 representsthe crucial turning point forthe transmission network.The capital project Peja 3represents the higheststrengthening of the trans-mission network in Kosovo.This project-pack has hadan impacton the quality oftransmission and distribu-tion of electricity in a fairlywide area of transmissionnetwork.

Highly positive impact ofthis project is significant re-duction of active and reac-tive power network losses,and improved voltage pro-file in a large part of the dis-tribution nodes, with specialemphasis on the Dukagjiniarea. Given that the rest ofthe transmission network,namely its southeasternpart, has not stood well interms of operational per-formance and network se-curity, KOSTT, based onTransmission Network De-

Overview of Electricity System Operationin Kosovo during 2009

Consequently,the transmissionsystem in-

creased its transforma-tion capacity from 270MW, by effecting the re-lieve of autotransformersin SS Kosovo B, in SSKosovo A and in SSPrizren 2, and in optimiz-ing power flows in a sig-nificant number of 110 kVlines.

velopment Plan 2007-2013 hascompleted the conversion proj-ect of damaged (dysfunctional)220 kV L212 line into 110kV lineand its connection into very im-portant node in SS Ferizaj(Bibaj). This project has en-abled optimization of powerflows in the southeastern part ofthe Transmission Network too.With direct injection from pow-erful node SS Kosovo A,through this line is achieved avery large improvement of thevoltage profiles, reduction oflosses and relieve of problem-atic 110 kV line Prishtina 4 - Fer-izaj (Bibaj). Also the effects ofthis project have the wider im-pact, by improving the qualityof supply for a substantial partof the consumers (Ferizaj,Sharri, Vitia, Gjilan andTheranda).Another very important projectin the Transmission Network,which ended in 2009 is the in-stallation of 150 MVA 220/110kV autotransformer in SSKosovo A, which has replaced

the defective ATR1 100 MVAautotransformer. The project in-fluenced increase in capacity,safety and operational reliabil-ity of substation SS Kosovo A,eliminating the bottlenecks intransformation.Meanwhile in September2009 the project to strengthen110 kV line Deçan - Gjakova 1was completed, which en-abled the line to increase itstransmission capacity from 83MVA to 114 MVA, after chang-ing the conductors. This linerepresents the importantbranch of ring Gjakova 2 -Gjakova 1 - Deçan - Peja 2 -Peja 1 - Peja 3 and itsstrengthening has led to thereduction of elements that donot meet the criteria N-1 buthas also influenced the re-duction of active and reactivelosses in the transmission net-work.The impact of the strengthen-ing projects of the transmissionnetwork in 2009, that are cate-gorized according to technical

requirements of the Grid Codeis as follows:

46

•Increase of transmis-

sion capacities for 34%

compared to current ca-

pacity

•Increase of security cri-

teria N-1*** for 31%

•Significant improvement

of voltage profiles in 110

kV nodes

•Significant reduction of

active and reactive

losses

•Increased opportunities

for optimizing the flows

of active and reactive

power in transmission

Based on the above conclusions, transmission network requires further reinforcement in order tobe able to follow the growth of consumption and generation, always complying with the technicalcriteria in accordance with the Grid Code. Increased transmission capacity based on time is bestseen in Fig. 11.*** Criteria N-1 means that if any of the network elements, line or transformer is out of operation,the supply however is not disrupted

47

Realized Balance in 2009 Compared to2008As seen from the table, generation, consumption andmaximum load was greater in 2009 than in 2008.

48

Also it can be seenthat the transmis-sion losses were

lower in 2009 than those in2008, which shows the in-creased effectiveness of thetransmission system opera-tion. Losses on a monthlybasis for 2008 and 2009 areshown in the diagrambelow.

Unsupplied Energy 2007-2009The table and diagram below present the energy with which the final customer had to be supplied, but was not supplied, due to the faults or because of implementation of projects carried out by KOSTT,for the years 2007, 2008 and 2009

49

Kosovo Electricity Market

Transiti i energjisë elektrike për vitin 2009 nëpër territorin e Kosovës krahasuar me vitin e mëparshëmështë zvogëluar kryesisht për arsye të topologjisë së re të krijuar të rrjetit të Evropës Juglindore me

51

1 Konsumi total i energjisë elektrike përfshin edhe prodhimin e hidrocentralit të Lumbardhit pasi ky hidrocentral gjeneron në rrjetin distrubutiv, si dhe nuk shkakton humbje nëtransmision.

The Size of Electricity Market in KosovoElectricity market in Kosovo is mainly a regulated market. The only customer in Kosovo who usesthe right of the qualified customer is Ferronickel NewCo, which has the right to choose suppliers.The ratio between the traded energy on a regulated market and traded energy in the non-regulatedmarket is shown in the diagram below:

52

Tariff Consumption in the diagram above is measured at the border TSO - DSO and therefore in-cludes the total losses in distribution.

Balance of Carried Flows of Energy in the Transmission Network for the Pe-riod January '09 - December 2009

Figure 18 shows the balance of energy flows through transmission network of KOSTT for 2009.From the total energy that has entered the transmission network of KOSTT about 59% is from localgeneration, about 31.5% is in the form of transit, while about 9% is as import for consumption needsof Kosovo.About 63% of the energy that emerged from the transmission network of KOSTT is dedicated toKosovo consumption and distribution losses, 31.5% was in the form of transit, 3.3% was in the formof export from the generation in Kosovo and about 2% have been losses in KOSTT transmissionnetwork.

53

Settlement of Parties in the MarketOne of the main obligations of the Market Operator as a licensed operator is the settlement of theparties in the market. There have been four generators as participating parties in the electricitymarket in Kosovo during 2009 (TPP Kosovo A, TPP Kosovo B, HPP Ujmani and HPP Lumbardhi),a supplier (KEK Supply) and 12 commercial / wholesale suppliers (ATEL, CEZ, EFT, EGL, ELEM,EPCG, EZPADA, GEN I-SLO, KESH, RAETIA, CE and RE Trading RUDNAP). At the same time thedominant party in the electricity market was KEK Supply

54

The Average Price of Electricity and Electricity Imports Compared with 2008, import of electricity in Kosovo during 2009 has led directly to decrease of thelevel of reductions to about 52% . From August to December reduction of the average price of elec-tricity in the Kosovo system happened due to decreasing demand in the region, directly affectedby the economic crisis.The average price of electricity in Kosovo during 2009 was 25.78 €/MWh, while the average priceof imported electricity in Kosovo was 75.9 €/MWh.

55

2This percentage was extracted from the dispatching log of 2008 and 2009

Transit of ElectricityTransit of electricity for 2009 through the territory of Kosovo, compared to the previous year has de-creased mainly due to the newly created topology of the network of Southeastern Europe with 400kV transmission lines between Macedonia and Bulgaria (see Figure 23).KOSTT is yet to be compensated for the transit of electricity through its network. KOSTT based oninterim agreements, is sending bills to Serbian Operator - EMS for transit compensation, but so farno bill has been paid by the EMS.The total amount claimed for transit for 2009 which EMS should refund KOSTT is 1.4 million euro.

Energy Losses in TransmissionAs a result of more efficient operation, and establishment of new metering groups and the com-missioning of SS Peja 3 (400/110 kV), losses in 2009 are considerably smaller compared to previousyear. Total losses in 2009 were 17% lower than the previous year.

57

58

Reforms in the KosovoElectricity Market Electricity market in Kosovo issupposed to be developed inseveral stages, depending onthe developments and reformsin the electricity sector inKosovo and developments inregional markets. The actualmodel of the market in Kosovois a bilateral transitional modelwith a small number of partici-pants in the market, where KEKplays dominant role in generat-ing and supplying electricity.Current developments in theenergy sector, like: the processtowards privatization of distribu-tion and supply, encouraginginvestors to invest in the NewKosovo Project and KOSTTmembership in ENTSO-Eneeds transition from the exist-ing phase of the market model

into a more advancedphase, which implies de-signing an electricity marketsuitable for investment in theelectricity sector, whichwould also be consistentwith the requirements arisingfrom EnCT .

KOSTT during 2009 has re-ceived consent and neces-sary instructions to begin theprocess of modification ofthe Market Rules that will ad-just to the reforms which areforeseen to occur after theunbundling of KEK, namelyprivatization of Distributionand Supply and Generation.This process will continueduring 2010 and KOSTT to-gether with stakeholdersand the transaction consult-ants will be active in design-ing of a new market model.

Following theadoption ofmarket de-

sign from the KosovoGovernment, MarketOperator will makethe modification of theMarket Rules to createtransparent and nondiscriminatory elec-tricity trading condi-tions between theparties in the market.

3 ENTSO-E – (European Network of Transmission System Operators for Electricity), is associacion of Europe’s TSO’s established by merger of previous associacionsUCTE, ETSO/SETSO TF, Nordel, UKTSOA, BALTSO, ATSOI4 EnCT- the Energy Community Treaty

59

Regional Integrations

In 2009 ENTSO-E as a new as-sociation has been estab-lished. KOSTT beforeestablishment of ENTSO-E wasa member of SETSO TF , aTask Force which operatedunder the umbrella of ETSOand had an important role in theactivities that took place inSoutheastern Europe throughNACMPF , BM ,ITC and CAOIG subgroups. To continueSETSO TF activity, a Southeast-ern Europe Regional Groupwas established, called SEERG under the auspices of theMC of ENTSO-E. KOSTT andATSO have an observer statusin SEE RG and have no votingrights. This position is makingvery difficult the integrationprocess of KOSTT into regionalmechanisms, despite the re-sults achieved in 2008.

In July 2009, KOSTT represen-tatives held a meeting at theEuropean Commission (DGTREN) and ENTSO-E, wherethey discussed the problemsand difficulties of integration of

KOSTT into regional mecha-nisms and membership ofKOSTT in ENTSO-E . At themeeting held at ENTSO-E theEuropean Commission repre-sentative said that there are nolegal obstacles for KOSTT tojoin ENTSO-E and furthermoreKOSTT as a TSO contractingparty of the Energy Communitymust meet obligations that de-rive from European legislation,and in particular the obligationsfrom Regulation 1228/2003.One of the main objectives ofKOSTT is its membership inENTSO-E. For this purposeKOSTT during 2009 has under-taken a variety of activities toaccomplish this goal. KOSTThas made evaluation of the cri-teria and standards to be metfor the entrance into ENTSO-Emembership and has devel-oped the necessary proce-dures foreseen under UCTEOH . KOSTT is still faced withmany difficulties, which havecome as a result of constantobstacles and obstructions ofEMS – the Serbian operator,which is causing major dam-age to KOSTT and electricitysector in Kosovo.

Formal complaint that KOSTThas submitted to the EnergyCommunity Secretariat in Au-gust 2008, against Serbia as acontracting party and that is re-ferred to the abuse from Serbiaof the Energy CommunityTreaty in the implementation ofRegulation 1228/2003 on ac-cess to network and cross-border trade, has not been re-solved yet. Energy CommunitySecretariat is considering theissue and has organized meet-ings between KOSTT, MEM ofSerbia and EMS in order to finda compromise which would re-solve the issue.

Teknologjia Informativenë KOSTTInfrastruktura dhe tërë sistemi iTeknologjisë Informative (TI) në

ENTSO-E

▲KOSTT

5 SETSO TF - Southest European TSOs Task Force.6 ETSO - European Transmission System Operators 7 NACMPF - Network Access Congestion Management Power Flow 8 BM - Balancing Market9 ITC - Inter TSO Compensation 10 CAO IG - Coordinated Auction Office Implementation Group 11 RG SEE – is the regional group under the patronage of MC – Market Committee of ENTSO-E which deals with market issues in SEE. 12 ATSO – Albanian TSO 13 UCTE OH – Operational handbook – summary of principals and regulations that Evropian TSO’s have to implement for operation in electricity systems

KOSTT është relativisht e re, e ngritur sipas teknologjisë së fundit të TI-së, e sistemuar dhe e kon-figuruar sipas standardeve bashkëkohore.

Kjo infrastrukturë shfrytëzohet nga një numër i konsiderueshëm i kompjuterëve personalë dhe nganjë numër i konsiderueshëm i pajisjeve të tjera ndihmëse që janë në shërbim të shfrytëzuesve tëKOSTT-it, e që krijojnë një strukturë të centralizuar, hierarkike, të modelit klient-server, e cila menax-hohet, monitorohet, mbrohet dhe mirëmbahet nën mbikëqyrjen e personelit të TI-së. Ruajtja e shënimeve dhe informatave të rëndësishme të KOSTT-it bëhet në makina (serverë) adeku-atë për ruajtjen e shënimeve, të cilat sipas procedurave mirëmbahen dhe arkivohen në baza tërregullta kohore. Për mbarëvajtje të shërbimit të kontabilitet, financave dhe burimeve njerëzore, KOSTT-i dispononme bazën e shënimeve CAS (Computerized Accounting System – Sistemi i Kompjuterizuar iKontabilitetit) duke ofruar mundësinë elektronike të menaxhimit të shënimeve dhe të të dhënavelidhur me resorët e përmendur të KOSTT-it. KOSTT-i disponon edhe me bazën e shënimeve TAS(Time Attendance System) që bën ruajtjen dhe arkivimin elektronik të prezencës kohore të punon-jësve të KOSTT-it.

Shërbimi i pandërprerë i Internetit sigurohet përmes realizmit të një lidhjeje primare të Internetit dhetë një lidhjeje tjetër sekondare, e cila aktivizohet në mënyrë automatike në rast të dështimit të lidhjesprimare. Me qëllim të mbarëvajtjes së sistemit të automatizuar për ekzekutimin e detyrave dhe përgjegjësive,sjelljes ndaj sistemit të TI-së dhe komunikimit me palët e treta, KOSTT-i ka për

60

61

Human Resources ManagementKOSTT on 31 December 2009 had a total number of 218 employees or 8.95% more than in the pre-vious year. When considering the activity of KOSTT, it is evident that males dominate in the gendershare of the employees with 80.73%, while women make up 19,27% of employees.Out of the total number of KOSTT employees, 35.32% are engineers.

Human Resources Capacity Building in KOSTT During 2009 KOSTT has undergone through a training process by investing in human capacity

building, a budget of around € 139,000 was allocated for this purpose, which included around

180 people.

This was shown by the Indicator which is higher than last year for 76.5% (from 3.28 to 5.79).The main activities of this sector in the field of training during 2009 focused on developing profes-sional skills. Trainings, which were conducted during 2009 are as follows:

1. Trainings of technical nature• In the telecommunication area and SCADA-s• Trainings within the SCADA/EMS and Telecommunications project• Trainings for metering groups and relay protection within the transmission network projects

2. Trainings of economic and commercial nature• “Assets Management” training• "Price Management and Tariffs" training• FIDIC Contracts Rules training• The seminar "Summary of international standards of accounting and financial reporting".

3. Trainings for increase of operating efficiency of the company • "Performance, Motivation and Development Management" training• Corporate practices and their respective protocols training • Management and maintenance of documentation and internal evaluation according to

ISO 9001:2008 • Computer courses for 11 employees

62

For the purpose of professional develop-ment and monitoring of new technologicaladvancements KOSTT engineers in 2009

were involved in a considerable number of trainings.

In addition, during 2009, in order to bring forth experiences from advanced companies, our staffhas participated in the study trip to UK within the project financed by the European Union, managedby ECLO.

Information Technology in KOSTTInfrastructure and the entire system of Information Technology (IT) in KOSTT is relatively new, es-tablished according to the latest technology of IT, settled and configured according to contemporarystandards.This infrastructure is used by a considerable number of personal computers and a considerablenumber of other auxiliary facilities that are in service of KOSTT users, and which create a centralizedhierarchical structure of client-server model, which is managed, monitored, protected and main-tained under the guidance and supervision of IT personnel.Data, records and relevant KOSTT information are maintained and stored in appropriate machines(servers) for data maintenance and storage, which are maintained and archived according to theprocedures on a regular basis time.For proper functioning of accounting, finance and human resources services, KOSTT possessesthe CAS database (Computerized Accounting System), which offers the possibility of managingelectronic records and data regarding the above-mentioned KOSTT departments. KOSTT also hasa TAS database (Time Attendance System) that performs storage and electronic archiving ofKOSTT’s employees time attendance.Uninterrupted Internet service is provided through the execution of a primary Internet connectionand by another secondary link, which is activated automatically in case of failure of primary con-nection.

For proper functioning of the automated system for duties and responsibilities execution, attitudetowards IT system and communication with third parties, KOSTT has drafted according policiesand procedures.

IT system provides support for other KOSTT projects through the current infrastructure and existingapplications.

63

Internal and external communication is per-

formed through an official e-mail ex-

change.kostt.com. Publication of

information classified as open to the public, but also

protected information and information intended only

to third parties and authorized persons by KOSTT is

performed via electronic webpage www.kostt.com

65

Audited financial reportsBalance Sheet 31.12.2009, Table 10

Më 31 dhjetor 2009 Më 31 dhjetor 2008Shënimet

(në EUR 000) (në EUR 000)MJETETMJETET JOQARKULLUESEProna, Impiantet dhe Pajimet 4 75,195 43,295Mjetet e tjera të paprekshme 5 46 61

75,241 43,356

Mjetet qarkulluese (kapitali punues)Stoqet 6 1,016 1,257Mjetet e arkëtueshmet tregtare 7 10,200 7,576Mjetet e arkëtueshme të tjera 8 8,504 10,506Paraja në bankë dhe në arkë 9 9,137 4,360

28,857 23,699

MJETET (AKTIVA) TOTALE 104,098 67,055

EKUITETI DHE OBLIGIMET Ekuiteti i aksionarëveKapitali aksionar 10 25 25Premiumet aksionare 11 28,347 28,347Fitimet e mbajtura 10,786 3,853

39,158 32,225

Detyrimet joqarkullueseGrantet e shtyra 12 57,362 30,038

Detyrimet qarkullueseDetyrimet e pagueshme tregtare dhe të tjera 13 7,578 4,792

64,940 34,830

EKUITETET DHE OBLIGIMET (Pasiva) TOTALE 104,098 67,055

Autorizuar për lëshim nga Menaxhmenti dhe Bordi i Drejtorëve dhe nënshkruar në emër të tij më13 maj 2010.

Z. Fadil Ismajli Z. Nebih Haziri_____________________ ___________________Kryeshef Ekzekutiv Zyrtar Kryesor Financiar

Table Nr.10

Balance Sheet is a financial statement showing the financial position (assets, liabilities and equities)of the Company at a specified date.Compared to previous year, there was an increase in these positions:

• Non-current assets for 74% • Current assets (Operating capital) for 22 % • Shareholders equity for 22% • Payable obligations (liabilities) for 58% • Deferred Grants for 90%

This shows that during the 2009 KOSTT j.s.c. for capital investments in most part has used gov-ernment grants and other grants.The year 2009 is the first year when KOSTT j.s.c. has financed a part of capital investments withfunds from operating activities based on increased operating revenue, compared to operating ex-penses.

66

67

Icome Statement, Table 11

Janar- dhjetor 2009Shënimet Më 31 dhjetor 2009 Më 31 dhjetor 2008

(në EUR000) (në EUR 000)

Të hyrat operativeTransmisioni i energjisë 14 20,061 15,212Të hyra të tjera 15 1,196 647

21,257 15,859

Minus: Shpenzimet operativeKosto e stafit 16 2,338 1,982Zhvlerësimi dhe amortizimi 4-5 3,001 2,221Riparime dhe mirëmbajtje 17 918 1,144Humbjet nga transmisioni i energjisë 5,212 5,258Shpenzimet e tjera operative 18 1,001 774Rregullimi sekondar 996 986Energjia, telefoni dhe uji 225 150Derivate dhe lubrifikante 79 83Materiale 32 51

13,802 12,649

Fitimi para tatimit 7,455 3,210

Tatimi në fitim 19 522 -6,933 3,210

Fitimi neto për vitin

Të hyra të tjera gjithëpërfshirëse - -

Total të hyra të tjera gjithëpërfshirëse 6,933 3,210

Statement of incomes and expenditures is one of the financial statements showing the economicperformance (revenues, expenses and profit / loss) of the Company during the accounting period.Compared to the previous year, operating incomes increased for 34%, while operating costs haveincreased for 9%.

Table Nr.11

Statement of incomes and expenditures is one of the financial statements showingthe economic performance (revenues, expenses and profit / loss) of the Companyduring the accounting period.Compared to the previous year, operating incomes increased for 34%, while operatingcosts have increased for 9%.

Investments made in the transmission network, have led to great reduction of costs from energylosses in transmission, despite the fact that this year we had the greater flow of energy than theprevious year.Gross profit value was 7,455 thousand Euros and net profit was 6.933 thousand Euros.

68

Fitimi bruto kap vlerën prej 7,455 mijë euro dhe fitimi neto, pas tatimit, 6,933 mijë euro.

Pasqyra e ndërrimeve në kapital më 31 dhjetor 2009, Tabela 12

Kapitali Premiumi Fitimet TOTAL aksionar i aksionarëve e mbajtura

----------------------(në EUR 000)---------------------

Bilanci më 1 janar 2008 25 28,332 643 29,000

Fitimi gjatë vitit - - 3,210 3,210

Shtime - 15 - 15

Bilanci më 31 dhjetor 2008 25 28,347 3,853 32,225

Fitimi gjatë vitit - - 6,933 6,933

Bilanci më 31 dhjetor 2009 25 28,347 10,786 39,158

Statement of changes in equity is a financial statement showing changes in equity of the Companyduring the accounting period.

69

Statement of changes in equity is a financial statement showing changes in equity of the Com-pany during the accounting period.

Table Nr.12

70

Statemenet of Cash Flows-Table 13

Më 31 dhjetor 2009 Më 31 dhjetor 2008

Shënimet (në EUR 000) (në EUR 000)

Rrjedha e parasë nga aktivitetet operative

Statement of Cash flow is a financial statement showing the cash flow (receipts and payments incash and cash equivalent) of the Company during the accounting period.

Based on cash flows, the company KOSTT j.s.c. during 2009 was considerably liquid despite thelarge investments in investing activities.

6,933

3,001(219)

18(890)8,843

241(2,624)

2,0012,786

11,247219

(20,892)

(20,673)

15,181(978)

14,203

4,777

4,3609,137

Fitimi gjatë vititPërshtatur për:Zhvlerësimi dhe amortizimiTë hyrat nga interesiShlyerja e mjeteve, impianteve dhe pajimeveTë hyrat nga grantetFitimi operativ pas përshtatjeveZvogëluar (rritur) në stoqeRritje në kërkesa nga tregtiaZvogëluar (rritur ) në kërkesa të tjeraRritur në pagueshmëri tregtare dhe të tjera

Gjenerimi i parasë nga aktivitetet operativeRrjedha e parasë nga aktivitetet investiveInteresi i pranuarInvestime në Prona, Impiante dhe Pajime

Rrjedha e parasë nga aktivitetet investive, neto

Rrjedha e parasë nga aktivitet financiareGrantet e pranuaraGrantet e kthyera

Rrjedha e parasë nga aktivitetet financiare, neto

Ndryshimet neto të parasë

Paraja në fillim të vititPARAJA NË FUND TË VITIT

4-515

412

99

3,210

2,221(95)

12(533)4,815

(44)(2,495)(2,957)

1,091

41095

(12,157)

(12,062)

14,370(585)

13,785

2,133

2,2274,360

Statement of Cash flow is a financial statement showing the cash flow (receipts and paymentsin cash and cash equivalent) of the Company during the accounting period.Based on cash flows, the company KOSTT j.s.c. during 2009 was considerably liquid despitethe large investments in investing activities.

Table Nr.13

71

JANUARYKOSTT and Transmission Sys-tem Operator of Albania signedon January the 30th the Agree-ment for the implementation ofthe 400 kV line Kosovo - Alba-nia project. Project for con-struction of 400 kVinterconnection line Kosovo -Albania consists in of a highvoltage 400 kV line over 238 kmin length, of which 85.5 km inthe territory of Kosovo and153.5 km in the territory of theRepublic of Albania.Also, the InterconnectionAgreement was signed be-tween KOSTT Kosovo and Al-banian TSO.

FEBRUARYChief Executive Officer ofKOSTT Mr. Fadil Ismajli with hisassociates, on February the27th made an official visit to theTransmission System Operatorof Montenegro (PRENOS CrnaGora) in Podgorica. At thismeeting of technical coopera-tion, companies discussedsome technical issues of mu-tual interest as two neighboringsystems, and they agreed toestablish working groups ontechnical issues they dis-cussed. While in early Decem-ber a delegation fromMontenegro visited KOSTT andin this case it was discussedabout the opportunities to ad-vance the cooperation be-tween these two operators.

MARCHKOSTT j.s.c. in front of thestakeholders of the energy sec-tor on March the 12th pre-sented medium-termtransmission capacity develop-ment plans of Republic ofKosovo. Based on KOSTTmedium-term developmentplan, with the implementation ofplanned projects and theircompletion, significant increaseof carrying capacity can beforecasted.

Highlights of 2009

27FEBRUARY

72

APRILAfter submitting the final applica-tion for the review of tariffs byKOSTT on January the 18th, 2009,the Energy Regulatory Office hasanalyzed and finally reviewed theapplications and has brought thedecision for approval of transmis-sion tariffs and charges to be ap-plied by KOSTT from April the1st,2009.

MAYWithin KOSTT commitment to de-velop the transmission network ofthe Republic of Kosovo, in Apriland May 2009 the project was im-plemented to replace the 110 kV(kilovolt) OHL 126 / 1 transmis-sion lines that connects 110/35 kVsubstations SS Deçan with SSGjakova. The purpose of implementing thisproject in the amount of1.079.925.00 Euros, which was fi-nanced from the KOSTT’s budget,is elimination of bottlenecks of thetransmission network, thus provid-ing higher quality of supply interms of transmission to the Duk-agjini Region.

JUNEBased on the new Law on PubliclyOwned Enterprises no. 03/L-087,on June the 2nd, 2009 the firstmeeting of new Board of Directorsof KOSTT was held, consisting ofMr. Faton Deda, Chairman, Mr.Fadil Ismajli, member – Chief Ex-ecutive Officer of KOSTT, Mr.Rrustemi Fadil - member, Mr.Fatos Ukaj - member, Mr. LutfiMaxhuni - member, Mr. NazmiMikullovci - member and Mr. Ra-madan Paçarada - member. In thefirst constituent meeting, KOSTTpresented to the members of theBoard of Directors Company per-formance to date, and the appli-cable acts that regulate the activityof KOSTT.---------------------------------------On June the 25th, 2009 at the 13thmeeting of the Permanent HighLevel Group (PHLG) in Sarajevo,which is the body of SEE EnergyCommunity, presented KOSTT’spositions on matters related tomarket developments, the WorldBank's Report, KOSTT’s supportfor establishing CAO, study for thedevelopment and establishmentof the Coordinated Managementof Congestion - where it was re-quired that the system of Kosovoshould be presented separately inaccordance with the geographicalframework of the Treaty.

01Aprill

1.079.925.00

euro

73

JULYThe Energy Regulatory Office, onthe Board meeting held on Julythe 23rd, 2009, upon the requestof KOSTT j.s.c. has approved thedocument " Kosovo TransmissionSystem Development Plan 2007-2013 ”----------------------------------------On July the 7th, 2009 separatemeetings were held in Brussels withrepresentatives of DGTREN andENTSO-E. The purpose of themeetings was information with thedevelopments in KOSTT with re-gard to cross-border mechanismsintegration and membership inENTSO-E. In the meeting withDGTREN was concluded thatKOSTT should continue to work onfulfilling the technical criteria to beaccepted as a full member and thatKOSTT should file the applicationfor ENTSO-E membership. At thesame time ENTSO-E representa-tives were very interested in devel-opments regarding KOSTT andconcluded that other subsequentmeetings should be organized,particularly before the applicationprocess in order to clarify proce-dural and technical requirementsthat are necessary before and dur-ing application.----------------------------------------On July the 29th, the EuropeanCommission has sent a letter toChairman of ENTSO-E, express-ing full support of Commission forKOSTT membership in ENTSO-E.

AUGUSTKOSTT in 2009 has successfullycompleted the project on servic-ing of tap changers in severalsubstations: 220/110 kV SSPrizren 2, 220/110 kV SS Prishtina4, 220 / 110 kV SS Kosovo A,which was implemented by thecompany Končar from Croatia.Accomplishment of this project isan important part of the transmis-sion network electricity equipmentmaintenance. This Service is fore-seen to be performed every 6 (six)years. Implementation of this proj-ect primarily impacts the lifecycleof equipment, as well as increas-ing security in energy supply interms of transmission.

SEPTEMBERIn the presence of the highest au-thorities of the Republic ofKosovo, the German Governmentand representatives of the Gov-ernment of the Republic of Alba-nia, on September the 24th, thecontract for consulting services for400 kV interconnection lineKosovo - Albania was signed.---------------------------------------Also, on September the 24th , ona solemn ceremony it has beenunveiled a plaque of acknowledg-mentfor the Federal Republic ofGermany and the Republic ofKosovo who have co-financedproject construction of 400/110 kV(kilovolt) Substation Peja 3.

Kosovo Transmission

System Development Plan

2007-2013 ”

DGTREN

and

ENTSO-E

increasing se-

curity in energy

supply in terms

of transmission.

74

OCTOBERUnder the joint organization ofthe Alb - Konfindustria, KOSTTand KEK, and with the supportof the Ministry of Energy andMining, especially MinisterJustina Shiroka - Pula, , on Oc-tober the 5th and 6th the Inter-national Forum "Kosovo - AnEnergy Opportunity" was held.International Energy Forum wasthe meeting place for manylocal and international energyrepresentatives and experts,who had the opportunity to holddiscussions on energy issuesand where the opportunities of-fered from Kosovo were pre-sented to potential investors.

NOVEMBERIn the vicinity of Istog, in thepresence of the high delega-tion of Kosovo Government,German Embassy and keylocal and international stake-holders in energy sector, onNovember the 17th the400/110/10.5 kV substation SSPeja 3 was inaugurated, whereKosovo Prime Minister Mr. Hashim Thaçi solemnly en-ergized the substation. Substa-tion SS Peja 3 is already mostmodern substation in Kosovoand at the same time is the firstand most important investmentin the electricity transmissionsystem of the Republic ofKosovo since the early 80's.

DECEMBER- Minister of Economy and Fi-nance, Mr. Ahmet Shala, re-gional director for Kosovo,Albania and Macedonia of theGerman Development Bank(KfW) Ms. Ute Rodrian andCEO of KOSTT Mr. Fadil Ismajli,on December the 23rd, in Pr-ishtina, signed the Loan and Fi-nancing Agreement for 400 kVinterconnection line Kosovo-Al-bania. The agreement foreseesa budget of 33.5 million Euros,of which 17.0 million are long-term commercial loans, withsoft credit terms, and 16.0 mil-lion are a grant from the Ger-man Government.-------------------------------------On December the 13th, 2009,at 19:00 hrs., a peak electricitytransmission of 1072 MW wasrecorded.

1072MW

peak electricity

transmission

75

Annual Report 2009 coordinated by:Naim Bejtullahu, Deputy Chief Executive for Development

Zana Bajrami-Rama, Communication Manager

With contribution of KOSTT employees:Arjeta Gashi, Azem Kastrati, Besim Gërxhaliu, Bukurije Dauti, Fëllënza Xhelili, Gazmend Kabashi,Gjokë Karaqi, Gonxhe Haziri, Ibrahim Gashi, Ilir Shala, Jusuf Imeri, Kadri Kadriu, Kimete Fazliu,

Labinot Gashi, Merita Kostari, Musa Kadriu, Nadire Klaiqi, Nagip Syla, Naim Bejtullahu, Nasip Bresilla,Nebih Haziri, Nergize Rezniqi, Resmije Ahma, Rexhep Gerguri, Sabri Musiqi, Sadudin Havolli, Safete Orana, Sahit Halimi, Shaban Neziri, Sherif Dedaqi, Shpresa Kursani, Shukrije Fetahaj,

Skender Gjonbalaj, Visar Hoxha, Vjosa Rezniqi, Xhavit Sadiku, Zana Bajrami-Rama, Zera Ymeri

Images by: KOSTT j.s.c. except pg ( 1, 14, 18, 28, 38, 44, 51, 60)Dizajn and layout: Ashagraphics

Transmission, System and Market Operator - KOSTT j.s.c. Iljaz Kodra str. nn10000 Prishtina

Republic of Kosovo

Tel: + 381 (0) 38 501 601 5Fax: + 381 (0) 38 500 201

E-mail: [email protected]: www.kostt.com

Printed on July 2010This publication is not for sale

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