-FBiH Law on Business Companies ("Official Gazette of FBiH", No. 81/15);
-FBiH Law on Electricity ("Official Gazette of FBiH", Nos. 66/13 and 94/15);
-FBiH Law on Registration of Business Companies ("Official Gazette of FBiH", Nos. 27/05, 68/05, 43/09and 63/14);
-FERC Licensing Rules ("Official Gazette of FBiH", No. 2/17);
-FERK Decision on Amount of One-Time Processing Fees ("Official Gazette of FBiH", Nos. 15/16 and99/16);
-FERK Rulebook on Public Hearings and Resolving Requests, Disputes and Appeals ("Official Gazetteof FBiH", Nos. 57/12, 71/14 and 31/16);
-FERK Rulebook on Reporting for Holders of Licences for Supply of Electric Energy – Second Tier,Independent and Qualified Producers and Operator for RES ("Official Gazette of FBiH", No. 27/16);
-SERC Licensing Rules ("Official Gazette of BiH Nos. 87/12, 98/15 and 63/16);
-SERC Decision on Amount of Fee ("Official Gazette of BiH", Nos. 41/16 and 17/16);
-SERC Rules on Access of Third Parties to Transmission System ("Official Gazette of BiH" No. 103/06);
-RS Law on Electricity ("Official Gazette of RS", Nos. 8/08, 34/09, 92/09 and 1/11);
-RS Law on Gas ("Official Gazette of RS", Nos. 86/07 and 121/12);
-RERS Rulebook on Issuance of the Licences ("Official Gazette of RS", Nos. 39/10 and 65/13);
-RERS Rulebook on Reporting ("Official Gazette of RS", No. 64/12);
-RERS Decision on Amount of One-Time Regulatory Fees ("Official Gazette of RS", No. 49/10);
-RERS Rulebook on Public Hearings and Resolving of Disputes and Appeals ("Official Gazette of RS",No. 70/10);
-RS Law on Business Companies ("Official Gazette of RS", Nos. 127/08, 58/09, 100/11, 67/13 and100/17);
-RS Law on Registration of Business Entities ("Official Gazette RS", Nos. 67/13 and 15/16);
-BiH Grid Code;
-BiH Market Rules;
-Law on Electricity Transmission, System Regulator and Operator in BiH ("Official Gazette of BiH", Nos.7/02, 13/03, 76/09 and 1/11);
-Law on Establishment of the Independent System Operator for BiH Transmission System ("OfficialGazette BiH", No. 35/04); and
-Law on Establishment of the Company for Transmission of Electricity in BiH. ("Official Gazette BiH",Nos. 35/04, 76/09 and 20/14).
Bosnia and Herzegovina ("BiH") is a country consisting of two separate entities; the Federation of Bosniaand Herzegovina ("FBiH") and the Republic of Srpska ("RS"), and one special autonomous district underthe direct sovereignty of the state, i.e. the Brčko District. In each of the three areas, in principle, differentlegal regimes are applicable; however, certain matters are regulated by the national laws which areapplicable in both entities and the Brčko District.
2.1 Electricity Market
In BiH, there are four main regulators of the electricity sector: the two entities' regulators, i.e. (i) the FBiHRegulatory Commission for Electricity ("FERC"); and (ii) the RS Regulatory Commission for Energy("RERS"); as well as (iii) the State Electricity Regulatory Commission of BiH ("SERC"); and (iv) theIndependent Operator of the BiH Transmission System ("ISO").
RERS and FERC are independent regulators responsible for the supervision of the electricity sectors ineach of the BiH entities. RERS is responsible for the issuance of licences for electricity production,distribution, supply and trading within BiH, as well as for the issuance of licences for the construction ofnew and the reconstruction of existing power plants in the respective entity. FERC is responsible, interalia, for the issuance, renewal, transfer or suspension of licences for the production, distribution, supply,trade of electric energy and operator for renewable energy sources and cogeneration. In FBiH the FederalMinistry for Energy, Mining and Industry is the competent authority for issuing licences (i.e. energy permit)for the construction of new or reconstruction of existing power plants.
SERC is an independent state regulator responsible for the transmission of electricity on the mid and highvoltage grid, as well as for transmission system operations and the cross-border trade in electricity,including the issuance of licences for cross-border electricity trading.
ISO is the state transmission system operator responsible for the management of the transmission systemwith the aim of ensuring reliability, management of assets and appliances in the mainstream controlcentre, management of a balanced market, assurance of ancillary services, development and applicationof reliable standards, development and application of guidelines which regulate the usage of thetransmission system, and development and enforcement of market regulations.
In addition, the Company for Transmission of Electricity in BiH ("Transco") is responsible for the properfunctioning and development of the market for electric power, for the stable and rational transmission ofelectric power in BiH, as well as for the construction, maintenance, expansion and management of thetransmission system facilities. SERC is authorised to regulate the work of the Transco.
Two electricity utility companies, both owned by FBiH, JP Elektroprivreda BiH d.d.-Sarajevo and JPElektroprivreda Hrvatske zajednice Herceg Bosne d.d. Mostar - are licensed by FERC for the distributionof electric energy in FBiH.
In Brčko Distrikt, as the district under direct sovereignty of the state, the company "Komunalno Brčko"d.o.o. Brčko Distrikt BiH is responsible for the distribution of electric energy on the basis of SERC's licencefor electric energy distribution.
In RS five companies, that together make up the mixed holding company Elektroprivreda RS, possesslicences issued by RERS for the distribution of electric energy.
Furthermore, according to SERC's Decision on Scope, Conditions and Time line on the Opening of theMarket of Electric Energy in BiH, the electric energy market in BiH has been officially liberalised from 1January 2015 for all end-customers in BiH, including households. Consequently, all end-customers ofelectric energy in BiH have acquired a status as eligible/qualified consumer, i.e. they gained the right tochoose the licensed supplier of electric energy with whom they want to conclude contracts prescribed bythe relevant laws on electricity.
For such purposes, the following companies in RS obtained a licence issued by RERS for the trade andsupply of electric energy: "Energy Financing Team" d.o.o. Bileća, MH "ERS" MP a.d. Trebinje, "ComsarEnergy Trading" d.o.o. Banja Luka, "LE Trading BH" d.o.o., "INTEH" d.o.o. Banja Luka and "EFT – Rudnikand Termoelektrana Stanari" d.o.o. Stanari.
In FBiH, the following companies are holders of licences issued by FERC for the supply of electric energy– second tier which includes the trade of electric energy in BiH: PROENERGY d.o.o. Mostar, HSE BHd.o.o. Sarajevo, Al Trade d.o.o. Mostar, HEP-Trade d.o.o. Mostar, EZPADA d.o.o. Mostar, ASA Energijad.o.o. Sarajevo, BNT "HOLDING" D.D. Novi Travnik, PRVO PLINARSKO DRUŠTVO d.o.o. Sarajevo, G-PETROL d.o.o. Sarajevo, Vitol Adriatik d.o.o. Sarajeva, Alpiq Energija BH d.o.o. Sarajeva, DanskeCommodities BH d.o.o. Sarajevo, GEN-I d.o.o. Sarajevo, EURO-POWER d.o.o. Tešanj, Axpo BH d.o.o.Sarajevo, PETROL BH OIL COMPANY d.o.o. Sarajevo, JP Elektroprivreda BiH d.d.-Sarajevo, JP"Elektroprivreda HZ HB" d.d Mostar and "Interenergo" d.o.o. Sarajevo.
2.2 Natural Gas Market
In terms of the gas market, it is worth noting that this sector is in its early development stage, meaning thatBiH still does not have a liberalised and regulated gas market. BiH has no domestic production of gas andimports all gas needed to secure local demand from Russia, via Ukraine, Hungary and Serbia. Currently,three companies in BiH are authorised to transport natural gas: BH-Gas d.o.o., as the operator for thetransport of natural gas in FBiH, and Sarajevo Gas - Istočno Sarajevo and Gas Promet Istočno Sarajevo -Pale which also acts as an operator for the transport of natural gas in RS. BH-Gas imports natural gasbased on an agreement with Gazprom which is renewed on a yearly basis. All consumers of natural gas inFBiH are supplied by their respective supplier (BH-Gas d.o.o. Sarajevo or Energoinvest d.d. Sarajevo) atregulated prices. In RS, there are different suppliers, and regulated prices remain only for householdcustomers within the public supply. Since the market for natural gas in RS has been liberalised since 1January 2015, according to the Law on Gas, all customers of natural gas in RS are qualified customersand eligible to purchase natural gas on a liberalised market.
In terms of regulatory framework, this sector is regulated on the entity level. Although the competentauthorities prepared a draft Law on Regulator, Transmission and Trade of the Electric Energy and NaturalGas in BiH, it has not been enacted so far. One of the main aims of the respective law is to harmonise theentity laws governing the gas sector with the European Union Third Energy Package as well as toharmonise the legislation over the entire territory of Bosnia and Herzegovina. Currently, the Regulation onthe Organisation and Regulation of the Gas Industry Sector in FBiH ("Regulation") is the only relevant actin FBiH which regulates this market. The Regulation has been enacted in 2007 by the FBiH Governmentand shall be in force until the enactment of the relevant laws in the gas sector on the federal and statelevel. In general, it contains provisions with regard to certain aspects of distribution, transport, storage, andsupply of gas such as the rights and obligations of the operators of these activities, concessions related todistribution, determination of the customer (or non-eligible consumer), etc. Currently, within the territory ofFBiH, natural gas is distributed by the public companies KJKP "Sarajevogas" d.o.o. Sarajevo and J.P."Visoko Ekoenergija" d.o.o. Visoko.
The latest development in this sector in FBiH is the planned adoption of the New Draft Law on Gas whichwill regulate the gas sector in more detail.
The gas market in RS is mainly regulated by the RS Law on Gas which governs the organisation andfunctioning as well as the performance of business activities in the natural gas sector within the territory ofRS. RERS is the authority competent for the regulation of gas-related business activities in RS; therefore,the regulations adopted by RERS are also of relevance.
Currently, the distribution and management of the system for distribution of natural gas in RS is performedby two licensed companies; Sarajevo-Gas AD Istočno Sarajevo and Zvornik-stan AD Zvornik.
The licensed companies for the trade and supply of natural gas in RS, are Sarajevo-Gas AD IstočnoSarajevo, Zvornik-stan AD Zvornik, BIJELJINA-GAS d.o.o. Bijeljina, GAS-RES d.o.o. Banja Luka,ENERGY PRIME RS d.o.o Trebinje, ALUMINA d.o.o. Zvornik and Društvo sa ograničenom odgovornošću"CNG ENERGY" Banja Luka.
3.1 Electricity Licensing – Regulatory and Corporate Conditions
According to the relevant FBiH, RS and BiH legislation, any legal entity that intends to perform businessactivities of production, distribution, supply and/or trade of electricity must obtain an adequate licence. Inparticular with regard to the trade of electricity, a legal entity which intends to perform trading activitieswithin the territory of BiH must obtain a licence issued by FERC/RERS, respectively ("DomesticLicence"). In addition, if a legal entity intends to directly import electricity, it must obtain the appropriatelicence issued by SERC ("Cross-border Licence") (the Domestic Licence and the Cross-border Licenceare referred to together as the "Wholesale Licences").
Holders of a Domestic Licence may supply end-customers. According to the FBiH Law on Electricity, allcustomers of electric energy in FBIH are defined as eligible/qualified customers. Both the FBiH and RSLaws on Electricity stipulate that only locally incorporated entities may apply for and hold WholesaleLicences. Therefore, a Wholesale Licence cannot be obtained directly by a foreign entity, whetherincorporated in an EU/EEA Member State or elsewhere. Under the relevant entity laws on businesscompanies, the type of entities which can be established (and apply for a licence) are: limited liabilitycompanies, joint stock companies, limited partnerships (komanditno društvo) and general partnerships(društvo sa neograničenom solidarnom odgovornošću/ortačko društvo). In principle, it is advisable toestablish a Local Corporation in the form of a limited liability company, mainly due to low costs and thesimple procedure for setting up such a company (a limited liability company organised and existing underthe laws of BiH will, therefore, be referred to as a "Local Corporation").
Although both the FBiH and RS Law on Business Companies provide for the possibility of establishing aLocal Branch Office of a foreign company, having in mind the relevant provisions of the FBiH and RS Lawon Electricity, it may be fairly concluded that it is not possible to obtain Wholesale Licences through aLocal Branch Office in FBiH or RS.
3.2 Natural Gas Licensing – Regulatory and Corporate Conditions
The gas sector is regulated differently in FBiH and RS; therefore the main aspects thereof will be outlinedin separate sections below.
3.2.1 Gas sector in FBiH
According to the Regulation, the supply of gas encompasses the procurement, sale and resale of naturalgas and LNG. However, the supply of gas does not include the export and import of gas. The legalrequirements for performing such activities are currently not regulated by the applicable laws either. It isexpected that the regulatory framework for these activities will be covered by the new laws. In any case, alegal entity intending to perform the supply of gas must be incorporated under BiH legislation and hold anadequate licence ("Wholesale Licence") issued by the Federal Ministry of Energy, Mining and Industry("FBiH Ministry").
With respect to the above, a gas Wholesale Licence cannot be obtained by a foreign entity (whetherincorporated in an EU/EEA Member State or elsewhere) directly, and establishing a Local Branch Officewould not suffice for this purpose either. In order to perform this type of activity, a foreign entity would haveto set up a Local Corporation registered for gas Wholesale Activities and subsequently obtain a GasWholesale Licence.
The Regulation does not further address the procedure for obtaining a Wholesale Licence; althoughrelevant aspects of the procedure (e.g. required documents and administrative fees) have beenestablished by the FBiH Ministry. The relevant procedure should be regulated in more detail by the FBiHLaw on Gas. Finally, the relevant legislation does not expressly regulate whether one legal entity mayobtain a licence both for gas related business activities and electricity related business activities.Nonetheless, according to the information obtained from the FBiH Ministry, there are no obstacles for sucha scenario, provided that the respective legal entity fulfils all the relevant legal requirements for obtainingthe respective licence. In any case, it should be noted that there is no relevant practice in this regard,especially since (as previously outlined) there is almost no practice with regard to the issuance of licencesfor gas related activities.
3.2.2 Gas sector in RS
Under the RS Law on Gas, relevant gas related business activities are transport, distribution, supply, tradeor storage of natural gas and management of systems. Each of these activities is subject to licensing byRERS. In terms of trading, the respective licence enables its holder to purchase gas for its resale and saleof gas on the free market to energy facilities and eligible customers ("Wholesale Licence"). This licence,however, does not entitle its holder to export and import gas. The regulatory requirements for performingthese activities are not regulated in the applicable laws.
Although not explicitly stated in the relevant legislation, from an interpretation of the relevant applicableprovisions as well as established practices of RERS, it follows that a Wholesale Licence may only beobtained by a Local Corporation; therefore, a foreign entity (whether incorporated in an EU/EEA MemberState or in another country) cannot directly obtain a Wholesale Licence.
With regard to the possibility of one legal entity obtaining both the electricity and the gas WholesaleLicences, we believe that there are no obstacles for a legal entity to do so, provided that it duly meets allrelevant legal requirements.
4.1.1 Annexes to the application for the electricity Wholesale Licence
As explained above, in order to perform Wholesale Activities, it is necessary to obtain a Domestic Licenceissued by FERC/RERS and a Cross-border Licence issued by SERC.
4.1.2 Domestic Licence in FBiH
According to the currently applicable rules, an applicant for a Domestic Licence issued by FERC, mustenclose, with its application, two groups of documents, i.e. one set of basic documents and one set ofadditional documents.
An applicant for any licence issued by FERC must provide the following basic documents:
-up-to-date excerpt from the competent court register for the legal entities;
-notification on the classification of the applicant's business activities issued by the competent statisticsauthority;
-certificate of the competent tax administration and certificate of Indirect Tax Administration (ifapplicable);
-organisational structure of the applicant with information on number of employees and their professionalqualifications for performance of activities for which the application is being submitted;
-evidence that an applicant has a legal basis for the use of buildings, facilities, installations andequipment for the performance of the activities for which the application is being submitted;
-complete set of financial reports for the previous year (including balance sheets, cash flow statement,changes of capital statement, independent auditor's report, etc.);
-statement on all transaction bank accounts of the applicant with enclosed confirmation of the solvencyof the bank account issued by the relevant bank;
-annual business plans of the applicant;
-evidence that the applicant is performing the electricity related business activity subject to itsapplication, functionally separated, and the operator of the distributive system (ODS) is legallyseparated as well, from the other activities; and
-evidence on payment of a one-time application processing fee.
In addition to the above, an applicant for a Domestic Licence must also submit the following documents:
-overview of facilities, installations and equipment on the basis of which the licensed activity is beingperformed;
-evidence of the registered and paid–in share capital in the amount of BAM 1 million (approximatelyEUR 500,000);
-data on the planned volume of purchase and sale of electricity for supply of end-customers; and
-planned annual volume of the electricity trade within the inside market, excluding the sale to the end-customers.
4.1.3 Domestic Licence in RS
An applicant for a Domestic Licence issued by RERS must enclose, with its application, the following setof documents:
-valid decision on registration in the court register or other relevant register (with attachments);
-registration number and tax identification certificate;
-foundation act with accompanying agreements or the articles of association (statute) of the applicant;
-organisational structure of the applicant (organisational scheme), including data on number ofemployees and their qualifications / education; statement of the applicant that the employed personnelhas sufficient skills and the necessary education to perform the wholesale of electricity; or, optionally, anoutsourcing agreement concluded with other legal or natural persons which have sufficient technical andeducational capacities to perform the wholesale of electricity;
-statement of the applicant that it possesses the necessary facilities, installations and equipment(appropriate office space, computer, printer and fax machine suffices) for the wholesale of electricity; or,optionally, an outsourcing agreement concluded with other legal or natural persons which have sufficienttechnical qualifications;
-annual financial report (including income statement, cash flow statement, and independent auditor'sreport) for the previous 3 (three) years; or, optionally, an initial financial status report for newlyestablished corporations;
-statement of the applicant and a certificate issued by a commercial bank regarding the applicant'ssolvency or the possibility of obtaining loans or bank guarantees;
-statement of the applicant and certificates issued by the banks on all open accounts with a commercialbank including a bank certificate on the balance of these accounts;
-annual and 3 (three) years business plan of the applicant;
-a certification from the competent authority (i.e. court) that the applicant and its legal representatives(i.e. members of the management board and procurators, etc.) are not prohibited from performing therespective profession/activity – criminal record certificate;
-statement of the applicant regarding all licences issued or pending applications for licences with otherregulatory bodies;
-certification by the court of competent jurisdiction that there is no bankruptcy or liquidation proceedinginitiated against the applicant;
-proof of payment of the administrative (procedural) fee;
-proof of the legal basis for the use of the business premises of the applicant (i.e. lease agreement orproof of ownership);
-description of the computer equipment (software and hardware) that will be used for the wholesale ofelectricity;
-proof that applicant has obtained a quality certificate (ISO 9001) and, if not, a statement as to theapplicant's plans to obtain one; and
-annual plan of the quantities of electricity that is the applicant intends to trade / supply.
It should be noted that, in the course of the procedure for the issuance of a Domestic Licence, RERS mayat any time request the submission of additional documentation that it deems appropriate.
4.1.4 Cross-border Licence
An applicant for a Cross-border Licence issued by SERC must enclose, with its application, two groups ofdocuments, i.e. basic and additional documents.
The basic list of documents that must be submitted to SERC includes:
-excerpt from the competent court register for the legal entities;
-certificate or verification on the tax registration;
-articles of association (statute) or the foundation act of the applicant;
-organisational structure of the applicant (organisational scheme), including data on number ofemployees;
-audited financial annual reports for previous 3 (three) years for existing companies or the initial balancesheet for newly established companies;
-business plan for the next 3 (three) years;
-list of fixed assets as per depreciation groups and the last annual statement of depreciation;
-certificate issued by the court or other competent authority that there is no bankruptcy or liquidationproceeding initiated against the applicant;
-certificate issued by the competent court that the applicant or its legal representative are not subject tocriminal proceedings;
-certificate issued by a competent authority (i.e. court) that the applicant and its legal representatives arenot prohibited from performing the respective profession/activity for which the application is submitted;
-statement on all opened transaction accounts with commercial banks and the bank certificate of theirstatus;
-statement on the status of compliance with all regulations pertaining to environmental protection andtheir implementation;
-statement confirming that the applicant will abide by the market rules;
-statement on existing licences or pending applications submitted to FERC or RERS, as well as to anyother regulatory bodies outside of BiH; and
-any other information that SERC finds important for the issuance of a licence.
An applicant for a Cross-border Licence must submit the following additional documents:
-existing licence for trade, production or the supply of electric energy issued by FERC or RERS, if theapplicant is already a participant on the domestic market of the electric energy or evidence that theapplicant has requested issuance of such licence;
-proof of solvency of the applicant;
-proof of the equity of the applicant with an overview of the owners or shareholders with a participation ofmore than 5% (five percent);
-statement issued by a commercial bank or other organisation on the willingness to provide financialguarantees or performance guarantees on the amount of planned or contracted transactions (eligibilityof the guarantor and the quality of the guarantee shall be rated by SERC);
-statement of the applicant on the acceptance of the standardised requirements for licensing; and
-information of the applicant on other electricity markets outside BiH in which it operates (if the applicantoperates outside of BiH).
4.1.5 Procedural rules
In principle, under the FERC, RERS and SERC Licensing Rules the procedure is paper-based; we are notaware of any practice of personal hearings or attendance by the applicant. Nonetheless, the competentauthority may require the applicant to attend a formal hearing. Generally a formal hearing shall be held incase there are certain disputed facts which should be resolved in the process of issuance of the respectivelicence. In any case, upon receipt of the respective application, FERC/RERS/SERC publishes a shortnotice for the public providing basic information concerning the received application. This notice alsocontains an instruction on the form in which interested parties can obtain information as well as submitcomments with regard to the application.
In addition according to the RERS Licensing Rules, once the draft of the licence is determined, RERS isobliged to organise at least one public hearing as well as to invite the public to submit comments to thedraft licence. As part of such process, the public should also be informed of the possibilities to intervene inthe pending procedure before RERS. Similar rules apply in terms of issuance of the licence by SERC.FERC, on the other side, is free to determine the type and number of public hearings, having in mind anysubmitted comments, eventual requests for intervening and other relevant information. As for the timeframe of procedures before FERC/RERS (i.e. for the procedure for the issuance of a Domestic Licence),the Licensing Rules of FERC/RERS specify that FERC/RERS shall render the final decision on therequest for issuance of the licence not later than 60 (sixty) days from the date of the submission of thecomplete application. As for the procedure before SERC (i.e. the procedure for the issuance of a Cross-border Licence), the deadline for rendering the final decision on issuance of the licence depends on thecomplexity of the request whereby SERC shall take the principle of effectiveness into consideration whilemaking its decision in the respective proceedings.
4.1.6 Operational conditions required for the issuance and maintenance of theelectricity Wholesale Licence
According to the FERC/RERS Licensing Rules, an applicant for a Wholesale Licence must submit itsorganisational structure, which includes information on the number of employees, their education, as wellas a statement of the applicant that the employed personnel has sufficient skills and the necessaryeducation to perform the intended activities. Furthermore, in RS the applicant can also be requested tosubmit a statement that it has concluded an agreement with other legal or natural persons who have thenecessary skills and education for the performance of the intended activities. However, the relevantlegislation does not regulate in more detail what type of educational skills and qualification the employeesor contactors of the applicant must possess. On the basis of our experience in previous projects, we arenot aware of any case where an applicant's request for the issuance of a licence for trade activity wasrejected on the grounds that its personnel were not qualified; nonetheless such possibility cannot beexcluded.
In general, there are no special requirements with respect to the premises. However, in order to obtain aDomestic Licence or a Cross-border Licence the applicant should also submit a statement or otherdocument evidencing that it has a valid basis for the use of buildings / premises in order to perform thelicensed activity. Nevertheless the licence holder is required to have a real physical presence with all theassets necessary for performing the licensed activity.
220.127.116.11 IT systems/assets
In terms of IT systems, the FERC/RERS Licensing Rules stipulate that the applicant must possess theequipment and assets necessary to perform the intended activities. Furthermore, the applicant is obligedto submit a description of the necessary computer equipment, including software and hardware. In RS, inorder to obtain a Domestic Licence the applicant must submit proof of holding a quality certificate
(ISO 9001) or a statement as to its plans to obtain one. However, the relevant legislation does not furtherregulate what kind of equipment and assets an applicant must ensure / possess in order to perform theactivities nor what the quality certificate should stand for. With regard to the Cross-border Licence, theSERC Licensing Rules do not explicitly request the applicant to provide evidence proving possession or
ownership of IT systems or any other equipment or assets.
4.1.7 Financial Guarantee
The FERC/RERS Licensing Rules do not provide for an explicit obligation of the applicant to submit a bankguarantee in order to obtain a Domestic Licence. However, as already mentioned above, an applicant inRS must submit a statement and certificates issued by commercial banks confirming that the applicant hasfunds available (cash deposits) or that the applicant has access to loans or the possibility to obtain a bankguarantee. An applicant for a Domestic Licence in FBiH must only provide evidence of registered andpaid-in share capital in the amount of BAM 1 million (approximately EUR 500,000). According to the SERCLicensing Rules an applicant for a Cross-border Licence must provide a statement issued by a commercialbank or other organisation on the willingness to provide financial guarantees or performance guarantees tothe amount of planned or contracted transactions. However, one of the main criteria for issuance of aSERC licence is proof that the applicant has registered and paid-in share capital in the amount of at leastBAM 1 million (approximately EUR 500,000).
4.1.8 Procedural costs
According to the SERC Decision on Fees, the procedural administrative fee for the submission of anapplication for a Cross-border Licence amounts to BAM 2,000 (approximately EUR 1,000). According tothe FERC Licensing Rules, the fee for filing and processing an application for the issuance of a DomesticLicence amounts to BAM 3,000 (approximately EUR 1,500). Under the RERS Licensing Rules, theprocedural fees amount to BAM 2,000 (approximately EUR 1,000). FERC/RERS/SERC determine theamount of the regulatory fee (i.e. recurring annual fee) that a licence holder (e.g. a holder of WholesaleLicences) has to pay during the licence term. In general, the amount of the regulatory fee is determined bya decision rendered by FERC/RERS/SERC on an annual basis for each licence holder individually. Theannual regulatory fee for Domestic License holders consists of a fixed and variable part.
4.1.9 Term of the Wholesale Licences
Under both the FERC and RERS Licensing Rules, a Domestic Licence is issued for a term of up to 5 (five)years. In case the respective licence is issued for the first time, it is issued for a period of 2 (two) years. Inany case, the respective licence can be renewed in FBiH and extended in RS. Although the respectiverules in RS use the term "extension of the licence", in effect, the applicant must obtain a new licence,under the same procedure as for the previous licence, and must continue to satisfy all requirements.
A Cross-border Licence can be issued for a period of at least 5 (five) years but for a maximum of 40 (forty)years. Although the applicant indicates the preferred period for which the licence is requested, SERCdecides on the term for which the licence is eventually granted. In practice a Cross-border Licence isusually issued for 5 (five) years, which may be renewed after expiry.
According to the FERC Licensing Rules, a licence holder is obligated to submit a request for the renewalof the licence at least 120 (one hundred and twenty) days prior to expiration of the licence. In RS, theapplication for the extension of the licence must be submitted at least 3 (three) months prior to itsexpiration. On the other hand, according to the SERC Licensing Rules, the licence holder is obligated tosubmit the request for the renewal of the licence at least 120 (one hundred and twenty) days prior toexpiration of the licence.
4.2 Natural Gas
4.2.1 Natural Gas in FBiH
The Regulation does not provide for a list of documentation to be submitted to the FBiH Ministry with theapplication for a Wholesale Licence. However, according to the information which may be obtained fromthe FBiH Ministry, in practice, inter alia, the following documents are required:
-decision on the registration of the entity at the competent court;
-concession agreement for the construction of a distribution system pipeline and for the distribution ofnatural gas in the relevant municipality;
-approval of the location of the distribution pipeline;
-decision on the approval of the construction of a low-pressure gas distribution network on the route ofthe pipeline;
-decision on the issuance of the environmental permit;
-normative acts of the legal entity (statutes i.e. articles of association, rules on procedures, rules on jobclassification, rules on safety at work);
-proof of the possession of a suitable office space (lease contract or proof of ownership);
-evidence of labour and equipment, measuring and testing equipment and instruments, professionalstaff;
-proof of payment of contributions to the FBiH Pension and Health Insurance Fund; and
-proof of registration of employees to the FBiH Pension and Health Insurance Fund.
Furthermore, and according to the practice of the FBiH Ministry, once the application is received, an adhoc expert commission is formed (consisting of experts from various fields depending on the type ofapplication in the given case) ("Commission"), which assesses the application and passes the finaldecision on whether to grant the licence or not. In any case, the Commission can require additionalnecessary documents from the applicant.
The time frame depends on the preparedness of the applicant. The formation of the Commission isrelatively short and its procedural time frame depends on the required documentation and preparationthereof. Nevertheless, according to information which may be obtained from the FBiH Ministry, the finaldecision should be passed within 15 (fifteen) days from the date of all necessary documents beingsubmitted.
The applicant is obliged to pay an adequate administrative fee for processing of the application as well ascompensation for the Commission's costs which shall be determined in accordance with the separategovernmental decree.
4.2.2 Natural Gas in RS
18.104.22.168 Annexes to the application for the gas Wholesale Licence
The applicant for a Wholesale Licence is required to submit the following documents with its application:
-valid decision on registration with the court or other competent register (with attachments);
-registration number and tax identification certificate;
-foundation act with accompanying agreements or articles of association (statute) of the applicant;
-organisational scheme of the applicant, data on systematisation of job positions and personnel,including professional experience of personnel, etc.;
-statement of the applicant on the possession of the required facilities, installations and equipmentnecessary for conducting the respective business activity;
-annual and 3 (three) year business plan of the applicant;
-agreement concluded with the participants in the gas market;
-financial annual statements for the previous 3 (three) years for existing companies or initial balancesheet for newly formed companies;
-statement of the applicant and certificates from commercial banks that the applicant has sufficient fundsin its bank accounts or the possibility of obtaining loans or bank guarantees; that it has ensured bankguarantees, which are necessary for regular conducting the intended activities;
-statement of the applicant and certificates from commercial banks on open bank accounts of theapplicant, including information on the status of these accounts;
-loan agreements with repayment plan, if conducting of the intended activities is financed by loans;
-proof that the applicant has obtained a quality certificate (ISO 9001) and, if not, a statement as to theapplicant's plans to obtain one;
-a certification from the competent authority that the applicant and its legal representatives (i.e. membersof management board and procurators, etc.) are not prohibited from performing the respectiveprofession/activity;
-certificate issued by the competent authority that the applicant is not undergoing bankruptcy orliquidation proceedings; and
-proof of payment of the one-time regulatory fee.
In addition to the above listed documentation, it is also necessary to submit the following additionaldocuments:
-proof of the legal basis for use of the business premises of the applicant (lease agreement or proof ofownership);
-list of fixed assets, especially IT equipment;
-general terms and conditions for natural gas supply;
-number of purchasers in total and by categories of consumption and the respective group of purchasersand number of the potential purchasers for the next 3 (three) years according to the annual supplyplans;
-description of the manner for monitoring the quality of the delivered natural gas;
-templates of the standard agreements and supporting documentation for conducting the given activity(e.g. trade and supply of natural gas); and
-planned scope of annual supply/trading in natural gas for the next 3 (three) years.
22.214.171.124 Procedural rules
The procedure for the issuance of a Wholesale Licence is in general paper-based; the documents need tobe submitted via post and electronically. Although RERS schedules at least one public hearing during theprocedure for the issuance of the licence, the presence of the applicant is not obligatory.
According to the RS Licensing Rules, RERS shall issue the natural gas Wholesale Licence within 60(sixty) days at the latest following the receipt of a complete application.
126.96.36.199 Operational conditions required for the issuance and maintenance of the gasWholesale Licence
The applicant is required to submit its organisational structure (organisational scheme), which includesinformation on the number of employees, their professional competences, as well as a statement of theapplicant that the employed personnel has sufficient skills and the necessary education to perform theintended activities. An applicant may also submit a statement that it has concluded an agreement withother legal or natural persons who have the necessary skills and education for the performance of theintended activity. However, none of the applicable legislation regulates in more detail what type ofeducational skills and qualifications the employees or contactors of an applicant for a Wholesale Licencemust possess. Therefore, it can be fairly concluded that RERS will, at its own discretion, decide whetheran applicant meets the requirements related to the engaged staff.
In principle there are no special requirements with respect to the premises. However, in order to obtain aWholesale Licence the applicant should submit, together with the request, evidence that it has a valid legalbasis for the use of business premises. Nevertheless, the licence holder is required to have a real physicalpresence with all the assets necessary for performing the licensed activity.
Under the RERS Licensing Rules the applicant for a natural gas Wholesale Licence is required to submit alist of its fixed assets and especially a description of the IT technologies used for the performance of thegiven business activity (i.e. software, hardware and communications). However, the relevant rules do notfurther stipulate as to what IT systems are deemed adequate for the performance of the given businessactivity.
188.8.131.52 Financial Guarantees
In the course of the procedure for the issuance of a natural gas Wholesale Licence, RERS assesseswhether the applicant meets the financial criteria necessary for the performance of the given businessactivity. In this respect, the applicant is required to submit a statement and the certificates issued by itscommercial banks confirming that it has enough funds and proof that it may take out a loan or a bankguarantee. The amount which the applicant should have on its account or the amount of the guarantee,are not defined as exact amounts. Therefore, it can be fairly concluded that RERS will, at its owndiscretion, decide whether an applicant fulfils the financial criteria or not.
184.108.40.206 Procedural costs
Under RERS Licensing Rules, the applicant is required to pay a procedural fee when submitting anapplication for the issuance of the respective licence. The amount of this fee is determined by a specialdecision of RERS; currently it amounts to BAM 1,000 (approximately EUR 500).
In addition to the above, the applicant (once it has obtained the licence) is obliged to pay an annuallyrecurring regulatory fee determined by RERS in the form of a special decision.
220.127.116.11 Term of the Wholesale Licence
The Regulation does not define the term for which a natural gas Wholesale Licence can be issued. Thismatter will be covered by the FBiH Law on Gas (once in force).
Under the RS Law on Gas, a natural gas Wholesale Licence is issued for a term of up to 10 (ten) years.
5.1 Electricity Licensing – Regulatory and Corporate Conditions
No Additional Licence is needed for supplying industrial end-customers other than that described in Point 4.1.
5.2 Natural Gas Licensing – Regulatory and Corporate Conditions
No Additional Licence is needed for supplying industrial end-customers other than that described in Point 4.2.
The licensing requirements for obtaining the necessary licence in order to trade electricity in BiH aredetailed under Point 4.1.
6.2 Natural Gas
The licensing requirements for obtaining the necessary licence in order to trade natural gas in BiH aredetailed under Point 4.2.
7.1 Most Important Legal Rules and Operational Requirements
In FBiH, the minimum share capital of a Local Corporation in the form of a limited liability company is
BAM 1,000 (approximately EUR 500), whereas in RS the minimum share capital is BAM 1 (approximatelyEUR 0.50). In FBiH, at least 50% (fifty percent) of the share capital (but not less than BAM 1,000) must bepaid prior to submission of the application for registration with the competent court. It is important to notethat the SERC Licensing Rules stipulate that a company intending to perform cross-border trading ofelectricity must have a registered capital of BAM 1 million (approximately EUR 500,000). A company maybe established by one or more domestic or foreign natural persons or legal entities. In any case, theshareholder(s) is(are) responsible for the obligations of the Local Corporation up to the amount of theirshare in the share capital.
The management conducts the business operations of the Local Corporation and represents it in domesticand foreign trade. The management may consist of managing director and executive directors. Themembers of the management do not have to be the Local Corporation's shareholders. The shareholders'meeting appoints and dismisses the members of the management. The managing director (and/ormember(s) of the management) may be a foreign citizen. However, in this case he/she is obliged toresolve its work and residence status upon the registration of the Local Corporation with the competentcourt. In addition to the management, a Local Corporation may also have a procurist. In particular,shareholders can grant procura (power of attorney) to third parties for representation of the LocalCorporation.
In principle, the procedure for the establishment of a Local Corporation consists of three main stages:
-execution of the relevant corporate documents in the form of notarial deeds (e.g. decision onestablishment and articles of association of the Local Corporation);
-registration of the Local Corporation with the competent court; and
-post-registration phase which includes informing the relevant competent authorities of the newlyestablished Local Corporation and obtaining the relevant licences and approvals necessary for theperformance of business activities (e.g. opening a bank account, obtaining a tax identification number,VAT number, etc.).
Under the relevant FBiH and RS legislation, a Local Corporation has to have an actual corporate seat onthe territory of FBiH or RS. Such residence is registered with the competent court in the course of theregistration procedure.
7.2 Procedural Rules
In order to proceed with the setting up of a Local Corporation the following documents must be provided:
-decision on establishment of the Local Corporation or agreement on establishment of the LocalCorporation, prepared by a local notary in the form of a notarial deed;
-excerpt from the Commercial Register of the founder of the Local Corporation (notarised and apostilled,if necessary, and, translated into the local language by an official court translator);
-certified statement of the founder confirming that it is not a majority shareholder in a local companywhich has due and outstanding obligations to creditors, i.e. unsettled taxes;
-statement of the managing director, executive director (if any) and procurist (if any) on their acceptanceof the function within the Local Corporation;
-relevant court forms, which persons authorised to represent the Local Corporation (e.g. managingdirector) have to sign and verify their signatures (i.e. specimen signature);
-announcement in the official gazette on the establishment of the Local Corporation (required only inFBiH);
-certified copies of the passport of all persons authorised to represent the Local Corporation or certifiedcopies of ID cards for local authorised persons, if any (at least 3 copies provided of each);
-proof of payment of the initial share capital – minimum initial capital for a limited liability company inFBiH is BAM 1,000 (approximately EUR 500), while in RS it is BAM 1 (approximately EUR 0.50); in casethe Local Corporation intends to perform cross-border trading of electricity, the initial share capital mustbe BAM 1 million (approximately EUR 500,000) (the initial share capital has to be paid in prior to thesubmission of the application for registration with the court);
-proof of payment of court fees; and
-Power of Attorney, if any of the steps in the process of registration are conducted by a third party(notarised and apostilled), including a translation by a certified court interpreter.
7.3 Time frame for Establishment of a Local Corporation
The FBiH Law on Registration of Business Companies provides that the court is obliged to issue adecision on registration within 5 (five) days from the submission of the documents to the court, whileunder the RS Law on Registration of Business Companies the same procedure lasts up to 2 (two) daysfrom the day when the court receives the application. In practice, the courts usually exceed the setdeadline, whereas the actual duration of the procedure varies on a case by case basis.
The administrative fees in FBiH (including court fees, notary fees, post registration etc.) altogetheramount to approximately BAM 1,500 (approximately EUR 750) if the initial share capital of the LocalCorporation is BAM 1,000 (i.e. minimum initial capital for a limited liability company). As for theregistration of a Local Corporation in FBiH which intends to carry out cross-border trade and thus has tohave a registered capital of at least BAM 1 million (approximately EUR 500,000), the administrative fees(including court fees, notary fees, post registration, etc.) altogether amount to approximately BAM 4,000(approximately EUR 2,000).
The costs of the establishment of a Local Corporation in RS include notary fees, court fees for thesubmission of the application for registration and the court fees for the registration of the company. Theexact amount of the costs varies on a case by case basis. In general, if the company's share capital isBAM 1 (approximately EUR 0.50), the registration costs amount to around BAM 650 (approximatelyEUR 320).
Wholesale Activities may be performed only by a Local Corporation which holds electricity/gas WholesaleLicences issued by the local regulatory authorities. Such a Local Corporation is subject to the local taxrules, accordingly it must obtain an ID/tax number for the payment of direct taxes (e.g. corporate incometax) and a VAT/custom number for the payment of indirect taxes (e.g. VAT, custom duts
There are no additional direct taxes applicable to the performance of Wholesale Activities in BiH.
According to the SERC Rules on Access of Third Parties to the Transmission System, the rights andobligations of licence holders having access to the transmission system on the one side and the relevantstate entities on the other side are regulated in an agreement. However, these rules do not provide for anyfurther regulation in this regard (e.g. procedures for the conclusion of an agreement, mandatory contentthereof, specific rules for breach of rights and obligations stipulated in the agreement, dispute resolution,etc.).
In terms of grid connection, the SERC Rulebook on Grid Connection stipulates that the user (i.e. a legal ornatural person which transmits or takes electricity from the transmission grid) and Transco must concludea connection agreement in line with the Grid Code. This defines, inter alia, the technical, legal andeconomic conditions for the connection to the grid as well as all details concerning the construction of theconnection to the grid, future ownership relations, etc. In addition, the respective rulebook provides for alist of issues that such an agreement must contain; however the parties can include and regulate under theagreement additional issues as they find fit. ISO shall be provided with one specimen of the relevantagreement.
In addition to the above, the FBiH Law on Electricity stipulates that, with regard to the supply toeligible/qualified customers, the buyer and the supplier determine in an agreement the amount, dynamicand price of electricity which is to be supplied. Finally, according to the ISO Market Rules, each licenceholder connected to the grid must also conclude a balancing agreement with ISO, primarily regulatingpayment methods, including terms relating to security instruments. The licence holders, as a balancedresponsible party, is obliged to ensure a bank guarantee up to the amount of BAM 2 million (approximatelyEUR 1 million) in favour of ISO, as security for due payment under the balance agreement.
9.2 Natural Gas
There are no detailed provisions on the contractual relationships of the gas market. The Regulation forFBiH defines a "take or pay" agreement as an agreement by which the gas distributor is obliged todistribute the agreed amount of gas, and the buyer is obliged to pay for the agreed amount irrespective ofthe fact whether it has obtained such amount or not. We are not aware of any such contracts beingexecuted. Please note that the RS Law on Gas defines substantively the same agreement / clause.
According to the FERC and RERS Licensing Rules, the holder of a Domestic Licence is obliged to filereports on its financial, technical, organisational and other data to FERC/RERS. The holder of a DomesticLicence issued by FERC/RERS is obliged to file various types of reports, including: reports accompaniedby the holder's documentation, reports on important events which may influence the business activities ofthe Domestic Licence holder, technical, energetic and financial data on the prescribed forms for reportingas well as other relevant reports. Also, licence holders are obliged to file to FERC/RERS, inter alia, acomplete set of financial reports in line with the applicable regulations within 30 (thirty) days (in FBiH) and15 (days) days (in RS) from the date of submission of the financial reports to the competent authorities.The reports should be filed to FERC/RERS within the deadlines and by the method prescribed by thespecial forms for reporting determined by FERC/RERS.
In addition, FERC/RERS are entitled and obligated to monitor the performance of the licensed activity and,inter alia, control and observe that all terms as well as all other provisions and rules are respected duringthe term of licence. In relation to this, they may request the provision of data and they can enter thepremises of licence holders and carry out a physical inspection of the premises and the documents relatedto the licensed activity. Those inspections may be periodic, announced and unannounced. Also, in case ofa complaint/appeal raised by third parties against the Domestic Licence holders, FERC/RERS examinesthe justification of the complaint/appeal and checks whether the business practice of the respective licenceholder is in compliance with the conditions set out in the Domestic Licence.
Similarly to the above, the holder of a Cross-border Licence must submit to SERC the reports listed underthe terms and conditions for obtaining the licence, for the period of the licence. In addition, SERC isentitled and obligated to monitor the conduct of the licensed activity and can enter the premises and carryout physical inspections of the premises and related documents. Moreover, SERC also checks by carryingout announced and unannounced visits that licence holders are in compliance with all aspects of the termsand conditions for obtaining a licence, as well as all other laws and regulations of SERC. Also, SERC shallinform RERS and FERC about all observed irregularities and issues related to the business activities oflicence holders issued by FERC or RERS. According to the SERC Decision on Standard Conditions forUse of the Cross-Border Licence, the holder of a Cross-border Licence is obliged, inter alia, to file anannual business report to SERC within 90 (ninety) days of the end of the business year. Furthermore,licence holders are obliged to file audited financial reports within 180 (one hundred and eighty) days of theend of the business year. In addition, licence holders shall prepare and file to SERC monthly reports onthe realisation of contracts as well as the plan i.e. estimation of the scope of activities for the followingmonth related to the licensed activity.
10.2 Natural Gas
10.2.1 Natural Gas in FBiH
According to the Regulation, the operator of the distribution system is obligated to submit annual reports tothe FBiH Ministry. These annual reports are related to the reliability, safety and efficiency of the system,the execution plan for the development of the system, quality in meeting the needs ofconsumers/customers, maintenance of equipment on the systems and the fulfilment of other duties andexercise of rights under this Regulation. These reports are also obligatory for all other activities performedin relation to gas, i.e. storage and supply of gas.
10.2.2 Natural Gas in RS
During the term of the Wholesale Licence, licence holders are obliged to report to RERS, on a monthly,semi-annual and annual basis, with regard to all or some of the following matters depending on the type oflicence:
-relevant events which may have an influence on the business (e.g. changes of the company'sorganisation, statutory changes, investments, sale, transfer and pledge of fixed assets, etc.);
-technical, energy and financial data in the prescribed forms for reporting; and/or
2. ORGANISATION OF ELECTRICITYMARKET AND GAS MARKET
3. CONDITIONS FOR APPLYING FORELECTRICITY AND NATURAL GASWHOLESALE LICENCE(S)
4. OBTAINING THE WHOLESALE LICENCE(S)
5. DIFFERENT RULES APPLICABLE FORSUPPLYING INDUSTRIAL END CUSTOMERS