Investment opportunities in natural gas infrastructure - legal ...

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Investment opportunities  
in natural gas infrastructure 
 - legal aspects - 
 
 

MINISTRY OF MINING AND ENERGY

RUPUBLIC OF SERBIA:

Branislava Lepoti0 Kova0evi0, Ph.d

Aleksandra Babi0

Belgrade, March 8th 2005

 
 
 

2  

Content 

investments in construction of gas pipelines and underground storages existing investment models investment barriers conclusions  

Development of gas pipelines and underground storages 
 
 

 
 
 

4  

Development of gas pipelines and underground storages  
- before The Energy Law is fully enforced - 

administrative procedure for construction of energy facilities is same as procedure for all facilities responsibility of the Ministry for capital investments Building permit and Occupancy permit issued by the Ministry for capital investments  
 
 

5  

Development of gas pipelines and underground storages  
- after The Energy Law is fully enforced - 

Energy permit for constructions of energy facilities responsibility of the Ministry of mining and energy Energy permit is precondition for Building permit issued in accordance with: Energy sector Development Strategy and Strategy Implementation Programme  

Activities in natural gas sector 
 
 

 
 
 

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Activities in natural gas sector 
- provided by the Energy Law - 

gas pipeline transportation and operation of gas transportation pipelines gas distribution and operation of gas distribution pipelines underground gas storage and operation of underground gas storage natural gas trade  

activities of public interests (except natural gas trade), monitored by the Government and the Energy Agency 

 

Existing Models 
 
 

 
 
 

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Existing Models 
 

State-owned enterprise (SOE)/daughter company

    of SOE

Contract on assignment of right to conduct activity of public interest (Assignment Contract) Concession Contract  

SOE/daughter company of SOE 
 
 

 
 
 

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S O E  
- existing models -  
 

founded by 00the Government of the Republic of Serbia investment into SOE: investment into SOE is not allowed so far joint ventures with SOE are possible loan agreements and commercial arrangement are possible  
 
 

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Daughter company of SOE  
- existing models - 

daughter company founded by 00Petroleum Industry of Serbia (SOE) sources of investments Investments in daughter company of SOE Joint venture00  
 
 

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SOE and daughter company of SOE  
- existing models - 

Characteristics:

legislation is in transition procedure (pending adjustments) Petroleum Industry of Serbia (SOE) is approaching restructuring procedure  
 
 

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Model of daughter company of SOE 
 
 
 

additional founder 

daughter

company 

bank

(credit

contract) 

feasibility

study 

Assignment

Contract 

contract

on international

sale of equipment 
 

additional

founding

capital 

credit for

founding

capital 

Modality 1:

credit for

assets 

Modallity 2:

credit for

assets 

gas pipeline

connection

 
 
 

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Model of daughter company of SOE  
- after The Energy Law is fully enforced - 
 
 
 

additional founder 

daughter

company 

bank

(credit

contract) 

feasibility

study 

Assignment

Contract 

contract

on international

sale on equipment 

additional

founding

capital 

credit

for founding

capital 

Modality 1:

credit

for assets 

Modality 2:

credit

for assets 

Modality 1:

energy permit 

Modality 2:

energy permit 
 

energy licence

- Energy Agency

responsibility 

gas pipeline

connection

 

Assignment Contract 
 
 

 
 
 

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Assignment Contract 
- existing models - 

Preconditions:

any form of company can be founded (except SOE) founder of company - domestic and/or foreign person company must be fully in compliance with the legislation (technical conditions for equipment, environmental protection,...)  
 
 

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Assignment Contract 
- existing models - 

Characteristics:

procedure not used so far avoids tendering procedure new legislation pending time period is not legally limited nor defined there is no legal obligation to transfer energy facility into state property  
 
 

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Model 00Assignment Contract 
 
 
 

founder 

new

company 

bank

(credit

contract) 

feasibility

study 

Assignment

Contract 

contract

for international

sale of equipment 

founding

capital 

credit for

founding

capital 

Modality 1:

credit

for assets 

Modality 2:

credit for

assets 

gas pipeline

connection

 
 
 

20  

Model 00Assignment Contract  
- after The Energy Law is fully enforced - 
 
 
 

founder 

new

company 

bank

(credit

contract) 

feasibility

study 

Assignment

Contract 

contract

for international

sale of equipment 

founding

capital 

Credit for

founding

capital 

Modality 1:

credit

for future

equipment 

Modality 2:

credit for

equipment 

Modality 1:

energy permit 

Modality 2:

energy permit 

energy licence

- Energy Agency 
 

gas pipeline

connection

 

Concession Contract 
 
 

 
 
 

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Concession Contract  
- existing models - 

Preconditions:

Grantee 00domestic or foreign person Grantor 00the Government of the Republic of Serbia  

Procedure:

Serbian Government and Parliament to review the application one member of Tendering Commission from Serbian Parliament The Government of Serbia signs the contract  
 
 

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Concession Contract  
- existing models - 

Types of Concessions:

construction, exploitation and maintenance of gas pipeline reconstruction, modernization, maintenance and exploitation of gas pipeline construction, exploitation and maintenance of underground gas storage reconstruction, modernization, maintenance and exploration of underground gas storage conduction of activities of public interest B.O.T. system...  
 
 

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Concession Contract  
- existing models - 

Characteristics:

complex procedure precise procedure tendering procedure is being applied for selection of grantee grantee have to establish concession company concession contract may be valid for the maximum period of 30 years transfer of new energy facility into state property is obligatory after concession expires  
 
 

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Model - Concession Contract 
 
 
 

grantee 

concession

company 

bank

(credit

contract) 

tender bid 

contract

for international

sale of equipment 

founding

capital 

credit for

founding

capital 

Modality 1:

credit

for assets 

Modality 2:

credit for

assets 

gas pipeline

connection

 
 
 

26  

Model - Concession Contract 
- after The Energy Law is fully enforced - 
 
 
 

grantee 

concession

company 

bank

(credit

contract) 

tender bid 

contract

for international

sale of equipment 

founding

capital 

credit for

founding

capital 

Modality 1:

credit

for future

equipment 

Modality 2:

credit for

equipment 

energy licence

- Energy Agency

responsibility 

gas pipeline

connection

 
 
 

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Notes 

one additional procedure for development of energy facilities that are required to secure reliable energy supply is envisaged by the Energy Law development option should be tendered by the Government of Serbia  

Barriers for investments 
 
 

 
 
 

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Barriers for investments 

inconsistency between some applicable Laws high level of administration discretion rights in decision making process lack of secondary legislation  

certain steps to overcome these problems are envisaged 

 

Conclusions 
 
 

 
 
 

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Conclusions 

Concession Contract - the most precise procedure Assignment Contract - avoiding tendering procedure, shorter procedure, transfer of energy facility into state property is not envisaged risk of changes in legislation Investment in daughter company of SOE - the shortest procedure, risk of changes in legislation  
 
 

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Applicable Laws 

Energy Law Law on foreign investments Company Law Law on State-owned enterprises and activities of public interests Concession Law Law on pipeline transportation of liquid and gaseous hydrocarbons  
 
 

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Resume 

investments in construction of gas pipelines and gas underground storage existing models: Investments in daughter company of SOE Assignment Contract Concession Contract barriers for investments conclusions applicable Laws  
 
 

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www.mem.sr.gov.yu 
 

dr Branislava Lepoti0 Kova0evi0

    branislava.lepotic@mem.sr.gov.yu 

Aleksandra Babi0

    aleksandra.babic@mem.sr.gov.yu 

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