Croatia's power board eyes investments, new markets

Wed Jun 27, 2012 1:17pm BST

* Four-year investment worth $3.15 billion

* Foreign bond issue possible soon

* Plans to extend business to regional markets

By Igor Ilic

ZAGREB, June 27 (Reuters) - Croatian state power board HEP plans 19.1 billion kuna ($3.2 billion) investment on production, transmission and distribution facilities by 2016 and may issue bonds abroad to raise some of the funds.

"The financing will be secured from our own income, loans and we plan to tap the foreign markets with a bond soon," chief executive Zlatko Koracevic told an energy conference in the Croatian capital.

HEP, one of the biggest state-owned firms in Croatia, needs restructuring to help reduce the country's high dependence on energy imports, Koracevic said.

Croatia, due to join the European Union on July 1, 2013, needs to import up to 30 percent of its electricity consumption and pays 400 million euros ($499 million) for it every year.

This year, HEP plans to invest 3.5 billion kuna improving facilities but will have to cut jobs from among its near 14,000-strong workforce, Koracevic said.

"Some will retire and some will be laid off, but we will also open new jobs, notably for young experts," he said.

HEP also plans to enter regional markets and will release a more detailed plan in the autumn.

"We are already involved in electricity trading, but only when it comes to imports. We have the knowledge, potential and infrastructure to export electricity too and we plan to use it. We want to increase the income and reduce business costs," Koracevic said.

Last year, before new management took over, HEP posted a net loss of 3.3 million kuna.

Koracevic said HEP aimed to increase its role in the renewable energy sector, mainly by investing in wind farms.

"We will also offer a chance for citizens to take part in those investments and become our partners in electricity production," he said.

The first two major projects are a hydropower plant at Ombla near Dubrovnik in the southern Adriatic and a new block of the coal plant Plomin on the northern Istrian peninsula.

Ombla is planned to be largely financed through a loan from the European Bank for Reconstruction and Development, while HEP is preparing to seek investors for Plomin through an international tender later this year. ($1 = 6.0262 Croatian kuna = 0.8019 euro) (Editing by Zoran Radosavljevic and Dan Lalor)