The Krk liquefied natural gas terminal project changed course when the government decided to construct a floating terminal instead of the initially planned land-based terminal. The reason for this decision was to make the terminal operationally faster and reduce costs, since it was clear that the deadlines for making the land-based terminal operation were unattainable. Since the deadlines for building the terminal are short, LNG Croatia is simultaneously undertaking several activities in order to meet them.
As part of its goals, the Act on Amendments to the Gas Market Act sets out a new gas market model. Under the new gas model, on receiving a proposal from the ministry and following approval from the Gas Regulatory Agency, the government will set the maximum price for gas, according to which the wholesale supplier must sell gas to retail suppliers for households. It remains to be seen how this new gas market model will affect consumers, the economy and the overall gas market.
The relationship between INA (the national oil and gas company) and MOL (Hungarian Oil and Gas Plc) goes back to 2003, when INA was privatised through a public procurement process. However, the Croatian government and MOL are in two international disputes over INA. Following a recent decision, the prime minister announced that the government will initiate the process to buy-out MOL's shares in INA.
Recent initiatives in the Croatian energy sector include the construction of the largest solar-powered irrigation system in Europe, which is already proving to be an ideal solution to water management in agriculture. Further, the government recently announced its plan to increase the renewable energy sources incentive fee. As a countermeasure, the government lowered the value added tax rate for electricity supply from 25% to 13%.
Participating countries at the recent Dubrovnik forum signed the Statement on the Three Seas Initiative, with the aim of connecting the north-south gas corridor, reviving cooperation between Adriatic, Baltic and Black Sea countries and unifying the European energy market. One of the initiative's key projects is the liquefied natural gas terminal on Krk Island in Croatia, which will be the backbone of the new gas corridor to the Baltics.
In July 2015 the Competition Agency received an initiative to initiate proceedings against Ytong porobeton (YP) for alleged abuse of its dominant position. YP rejected all of the assertions against it, arguing that the relevant market had been incorrectly determined. Based on expert opinions, the agency concluded that YP was not dominant on the relevant market and thus that it had not abused its dominant position.
Key decisions affecting the Croatian energy sector were rendered in a recent government session, including the expedition of the first of four phases of the floating liquefied natural gas terminal on the island of Krk, and the approval of production-sharing agreements for the exploration and exploitation of hydrocarbons for six onshore blocks in northwest Slavonia. The decisions were issued during one of Croatia's most turbulent political periods.
The Renewable Energy and High Efficient Cogeneration Act recently came into force, replacing a confusing and complicated legal framework which was discouraging to investors. The act is a huge step forward for renewable energy projects in Croatia. In addition, Croatia is implementing its EU objectives successfully and is following the global trend of switching to a clean energy economy.
In January 2016 non-partisan Prime Minister Tihomir Oreskovic formed a new right-wing government. As 2015 was an election year, almost all major projects – most of which had been initiated by the former left-wing government – were halted and related decisions postponed until after the elections. It remains to be seen which energy projects will be supported by the new government.
In a recent case the Competition Agency for the first time accepted the proposed commitments in a case conducted under the qualification of a prohibited agreement, even though all the characteristics of a prohibited horizontal agreement limiting competition were present. By accepting the commitments, the agency abandoned its previous position in favour of a more lenient one.
In a recent ruling by the Croatian Competition Agency (CCA), a decision by the Croatian Insurance Bureau to revoke the power of an insurer to issue motor certificates was found not to constitute a prohibited agreement. Irrespective of this, the CCA noted that it is not the role of undertakings to control the operation of their competitors, and that the parties involved should have reported the insurer if they thought it had breached the law.
The Krk liquefied natural gas (LNG) terminal project is progressing well. The project foresees the construction of an LNG terminal for the receipt, storage and regasification of liquefied natural gas on the island of Krk, with a nominal annual capacity of 6 billion cubic metres. In the latest development, future operator LNG Croatia Ltd recently announced a call for equity, hoping to attract potential industrial and pure equity investors to the project.
The Competition Agency is improving its track record in competition law enforcement. One recent decision concerned a cartel of marina operators which exchanged information on future pricing policies for berthing services. Although the parties agreed not to raise the prices of their services (or to raise them minimally), the information exchange was deemed sufficient for the agency to render a statement of objections.
Following public debate, the Ministry of Economy has issued a revised report evaluating the environmental impact of offshore exploration and hydrocarbon production. In addition, the government has chosen preferred bidders for onshore oil and gas exploration bids and LNG Croatia has announced another tender for consultancy for the liquefied natural gas terminal on the island of Krk.
The Competition Agency recently considered whether Gemicro abused its dominant position on the market by allegedly tailoring and concluding 'non-poaching' agreements with the leasing companies which were its buyers, thereby restricting competition and creating significant barriers to entry into the relevant market. This is the first time that the agency has examined this type of agreement as problematic.
The government has granted 10 licences for the exploitation and exploration of hydrocarbons in the Adriatic Sea. Meanwhile, the Ministry of Economy has opened a public debate on the strategic environmental impact of the exploration and production of hydrocarbons in the Adriatic, and the first onshore licensing round for the exploration and exploitation of hydrocarbons has closed.
In a recent case the Croatian Competition Agency stated that infrastructure that is essential for reaching customers and conducting business should be treated as an 'essential facility'. The agency determined that a bus station owned by Autotrans was not the essential facility for conducting road passenger transport by Slavonija Bus, as there were two further accessible stations with passenger boarding areas in the area.
The Competition Agency recently concluded another proceeding dealing with resale price maintenance, as prohibited under Article 8 of the Competition Act. Although the full decision has not yet been published, the agency's stance on resale price maintenance can be inferred from the announcement and earlier decisions in similar resale price maintenance cases in the food and retail sectors.
LNG Croatia has announced an international tender for business, financial and legal advisers for the construction preparations of a liquefied natural gas terminal on the island of Krk. Among other things, project advisers will be expected to advise on business and legal model preparation and drafting terminal capacities utilisation contracts. Each adviser must have relevant expertise and key personnel must be available.
Despite much debate and opposition, the construction of a 500-megawatt-capacity coal-fired power plant – the Plomin C project – is finally moving forward. The project has been awarded strategic investment project status by the government. The Croatian Electric Utility Company has announced an invitation for expressions of interest for participation in the construction project for the Kosinj/Senj hydropower plant.