Financial and Operational Situation of ERS as of November 2025

The Power Utility of the Republic of Srpska (ERS) is facing serious financial difficulties and operational challenges at the end of 2025. According to announcements from the management, this year is expected to end with a loss of around 29 million KM (≈15 million EUR). The cause of such poor business results lies primarily in two years of unfavorable hydrology (drought), which halved the output of hydropower plants, as well as increased imports of expensive electricity to meet consumer needs. Namely, ERS had to purchase electricity on the market at a price of around 72 EUR/MWh, while households are still supplied at a regulated price of only 34 EUR/MWh. This mismatch between the purchase and sale price resulted in a cumulative deficit, while simultaneously avoiding a drastic increase in electricity bills for citizens. For industrial consumers, prices are approximately at market levels (around 75 EUR/MWh), but the subsidization of households seriously burdens ERS’s finances.

ERS’s financial indicators had already been weakened in previous years. Business year 2024 barely ended at break-even – a symbolic profit of only 3.2 million KM (≈1.6 million EUR) was recorded. The opposition claims that even that year actually ended in a loss (they cite a figure of -20.1 million KM) and that this is the direct consequence of poor management, lack of investment, and questionable concessions. The business trend is therefore significantly below potential: although the Republic of Srpska is rich in energy resources, it has gone from being a net exporter of electricity to an importer, which has been assessed as unacceptable given international electricity prices and the missed opportunity for extra profit. Due to a production drop of around 20% (the estimated market value of the lost production is around 100 million EUR), the Republic of Srpska had to quadruple its electricity imports in the first half of 2025 compared to the previous year. This erased Bosnia and Herzegovina’s status as the region’s largest electricity exporter from previous years.

ERS’s indebtedness has reached an alarming level: the total financial liabilities of the parent company and all subsidiaries exceed 1.3 billion KM. The structure of this debt consists mainly of credit obligations (about 650 million KM across three major loans for capital projects, including Chinese loans for HPP Dabar and HPP Bistrica, as well as a loan for desulfurization in TPP Ugljevik), then liabilities to suppliers (particularly the thermal power plants RiTE Ugljevik and Gacko, which together owe ~165 million KM to suppliers), and obligations arising from lost international arbitrations. Just from the arbitration dispute of RiTE Ugljevik with the Slovenian partner, ERS has the obligation to deliver a significant portion of produced energy to the Slovenians, which is financially equivalent to a debt of over 300 million KM. As a result, about one-third of RiTE Ugljevik’s production goes to foreign partners instead of filling the domestic grid, further reducing available energy for domestic consumption. All these debts have caused the giant “Power Utility of RS” to seriously falter, as even acknowledged metaphorically by the Prime Minister of RS. Experts warn that an independent audit would likely reveal additional “hidden” liabilities in ERS’s balance sheets.

From an operational perspective, ERS consists of one parent company (Mixed Holding) and 11 subsidiaries (thermal power plants, hydropower plants, mines, distribution companies, and the newly established Public Supply Directorate). In the period 2020–2021, the first phase of restructuring was implemented in line with the new Electricity Law and Energy Community regulations, which separated the activities of distribution and electricity supply. As of April 1, 2021, five electricity distribution companies ceased supplying end consumers and became exclusively distribution network operators, while the public supplier was centralized within the ERS Supply Directorate. During this process, surplus employees in the distribution segment were reduced through voluntary severance packages (estimated at ~15% of the workforce), which over 970 employees used. However, despite this organizational adjustment, the overall workforce of ERS remains very large (just in the two mining-thermal power complexes in Gacko and Ugljevik, around 3,700 people are employed), and the RS Government assesses that a “complete transformation” of personnel and an increase in productivity is needed. Insufficient investments in modernization and maintenance of facilities have led to frequent outages – for example, RiTE Ugljevik had 31 unplanned plant shutdowns in 2022, which forced ERS to import extremely expensive energy (up to 700 EUR/MWh in crisis moments). Additionally, a significant part of the distribution network is outdated, requiring further investments in its renewal with the support of the Government and through new borrowing. All the above illustrates that the existing business model of ERS has become unsustainable – production costs in current capacities are higher than the price at which electricity is supplied to citizens, and the company is burdened with debt and structural weaknesses that threaten its liquidity and security of supply.

Conclusions of the RS Government from November 13, 2025 – content and legal significance

Faced with the situation described above, the Government of the Republic of Srpska, at a thematic session held on November 13, 2025, adopted a set of conclusions aimed at urgent restructuring and stabilization of ERS. This session, dedicated to the state of the energy sector, resulted in specific tasks for the ERS management and the Ministry of Energy and Mining, all with the goal of ensuring long-term sustainability of the energy system, security of supply, and sufficient quantities of electricity for the needs of RS.

Key Government conclusions can be summarized as follows:

Adoption of Information and improvement plans

The Government accepted the Information on the situation in MH ERS presented by the Ministry of Energy and Mining, thereby formally confirming the existence of problems in operations. At the same time, the parent company ERS and all 11 subsidiaries were tasked to prepare individual dynamic plans of measures and activities for improvement within 15 days of receiving the conclusions, with projections of expected effects. This instruction effectively obligates each company’s management to analyze its business operations and propose short-term savings, restructuring, or revenue-increasing measures to halt further financial deterioration.

Consolidated plan at the holding level

In addition to individual plans, the parent company was tasked to produce a unified (consolidated) dynamic plan at the level of the entire holding within 20 days. This plan should combine proposed measures, remove overlaps, and harmonize activities, and ERS must submit it to the RS Government and the Ministry for review. The consolidated plan is expected to provide a complete picture of restructuring and serve as a basis for further approvals or adjustments by the Government.

Analysis of organizational structure and more functional organization

The Government instructed the Ministry and ERS to analyze the existing organizational structure and explore options for more functional organization. This indicates an intention to reconsider the current management model and company structure: centralization of certain functions, mergers or abolishment of certain entities, or redefining relations between the parent company and subsidiaries may be considered. Legally, any significant organizational change requires compliance with the Law on Companies and other relevant regulations, as well as approval by regulatory bodies where required. Therefore, this task involves preparing a legally grounded restructuring proposal that increases efficiency without undermining legal certainty or existing contracts/licenses.

Supervision of implementation

The Ministry was tasked with monitoring implementation and reporting to the Government. Legally, these conclusions represent binding instructions of the owner and have the weight of executive administrative decisions. Noncompliance may lead to sanctions for management (dismissals, appointment of temporary administrators, etc.), since the Government, as owner, has the right to take measures to protect capital and public interest.

Public statements and political-legal assurances

Prime Minister Savo Minić stated the need to “put the power sector in order through cost reduction and greater control,” expressed optimism, and emphasized that “there will be no privatization of ERS,” a politically and legally significant assurance meant to calm the public and unions.

Prime Minister Savo Minić stated that it is “necessary to put the power system in order through cost reduction and greater control of operations,” and that he is optimistic about the success of stabilization, adding the message that “we need to roll up our sleeves.” He also emphasized that responsibility for possible omissions will be examined, noting that there will likely “be work for investigative bodies” wherever irregularities are noticed. Minister of Energy Petar Đokić stated that “everyone involved in the system must change the way they work,” meaning that a change in business culture and elimination of unnecessary costs will follow. It is important to note that the Prime Minister explicitly guaranteed that there will be no privatization of ERS – this statement has political and legal significance for reassuring the public and unions, making it clear that restructuring will not mean alienation of state-owned assets but that the power utility will remain in the ownership of the Republic of Srpska. Such a guarantee removes (at least for now) the need for applying the Law on Privatization of State Capital but leaves room for internal reorganizations and potential recapitalizations within the framework of state ownership.

The conclusions of November 13, 2025 practically represent the continuation and concretization of earlier strategic plans of the RS Government regarding ERS restructuring. Already in the Economic Reform Program of RS for the period 2023–2025, adopted by the National Assembly of RS, it was foreseen that phase 2 of the restructuring of MH ERS would be implemented, focusing on electricity producers. This phase includes implementation of measures in line with the new Electricity Law and EU directives (the Third Energy Package). To recall, phase 1 (separation of distribution and supply) was successfully completed in 2021. Phase 2 – which would encompass reorganization of production companies (thermal power plants, hydropower plants, and mines) – had not yet been fully implemented by November 2025, partly due to complexity and resistance (for example, unions expressed a clear stance against separating mines from thermal power plants, seeing it as a prelude to partial privatization). The Government's conclusions now place this phase in focus, giving it deadlines and an operational plan, which from a legal perspective represents a binding action plan for ERS bodies. Implementation of these conclusions will require further decisions – it is possible that after submission of the plans, the Government will adopt further conclusions or decrees on adoption of the reorganization program, and amendments to ERS internal acts or by-laws may also be initiated to implement the necessary changes. In summary, the content of the conclusions from 13.11.2025 clearly reflects the Government’s determination to initiate comprehensive restructuring of ERS within a short timeframe and within the existing legal framework, with full respect for the competencies of the line ministry and regulator.

Economic and political justification of ERS restructuring

Economic logic of restructuring

Given the described situation, the economic justification for urgent restructuring of ERS is difficult to dispute. A company that is generating losses, accumulating debt, and facing structural inefficiencies must undertake radical measures to restore sustainability. The goals of restructuring – cost reduction, increased control over spending and procurement, optimization of the workforce, and better investment planning – are fully aligned with the requirement that ERS return to profitable business operations and ensure secure electricity supply to consumers. The current financial burden (subsidizing low electricity prices for households, repaying enormous loans and arbitration obligations) would very quickly lead to insolvency without changes, or require continuous interventions from the RS budget, which is fiscally unsustainable. Therefore, restructuring is economically justified as the only path toward long-term sustainability – as the Government itself stated, the goal is “to ensure long-term sustainability of the electricity system of the Republic of Srpska.”

Measures such as centralization of control functions (e.g., unified control of public procurement, which the Prime Minister emphasized as necessary), establishment of clear lines of accountability and improved oversight of all organizational units, and rationalization of the workforce should lead to reduced operating expenses. Minister Đokić emphasized that “everyone in the system must reduce spending to only what is necessary to maintain system vitality,” implying cuts to unnecessary expenditures (business travel, representation, sponsorships, unproductive staff, etc.). ERS management acknowledges that productivity is low and that external factors (drought, imports, obligations to Slovenians) have further worsened the situation. At the same time, the electricity price for end consumers in RS has remained the lowest in the region, which is favorable for citizens and the economy but means that ERS did not capitalize on record high electricity prices in the European market in 2022–2023 to accumulate profit. On the contrary, as the opposition states, the opportunity to achieve extra profit in times of expensive electricity was missed, and due to poor planning, the company found itself in an import position and losses.

Economically, restructuring should enable ERS to become a net exporter again in wet/normal hydrological years and to generate profit during periods of high prices, which would flow into the RS budget as dividends, instead of being a chronic loss-making enterprise. It is also relevant that other energy companies in BiH (e.g., EP BiH in the Federation) have also fallen into difficulties and initiated similar savings and reorganization measures, as the entire sector faces transitional pressures (decarbonization, rising fuel costs, production variability due to climate). Therefore, restructuring ERS is not an isolated impulse but part of a broader economic imperative for restructuring energy companies in the region.

Political dimension and influence

Restructuring ERS undoubtedly has significant political implications in the Republic of Srpska. The power utility is the largest public enterprise and employer in RS, and the price of electricity is a politically sensitive topic that directly affects citizens’ living standards and inflation. Therefore, the government finds itself in a delicate balance: on the one hand, it must save the company from financial collapse, and on the other hand, it must avoid social unrest – mass layoffs or a sudden increase in electricity prices could trigger dissatisfaction and protests.

The government’s statements so far show awareness of this political sensitivity. Prime Minister Minić categorically ruled out the privatization of ERS, pre-empting rumors that restructuring could be a cover for selling national energy assets. This position reflects a broad political consensus in RS that the energy sector should remain under state control – even the energy sector union stated that they see “breaking up the company” (such as separating mines from thermal power plants) as unacceptable because it could open the door to privatization. The ruling party, especially SNSD, does not want to risk losing political support for this reason, so instead of privatization, it emphasizes internal reforms and state control.

The opposition, meanwhile, uses ERS’s financial collapse as proof of poor governance by the ruling structures. PDP representative Bojan Kresojević openly said that ERS’s losses are the result of a bad government that did not ensure investments and allowed questionable concessions. He even cited a representative of the ruling party (Ilija Tamindžija from SNSD) who admitted that due to poor planning, ERS went from an exporter to an importer and lost 20% of its production. It is expected that the opposition will continue closely monitoring the restructuring process – any failure or withdrawal from the announced measures will be criticized as continued incompetence, while any unpopular measures (such as layoffs or increases in electricity prices) will be used as grounds for political attacks for harming citizens. Therefore, the political justification of restructuring will depend on whether the government succeeds in improving ERS’s condition without major negative consequences for the population and employees. Essentially, this represents a test of credibility for the new RS Government (led by Savo Minić since 2024) and its determination to solve inherited problems, in contrast to past practices where issues were often postponed.

The broader impact of restructuring can also be viewed in the context of energy policies and relations within BiH and the region. The Republic of Srpska has already adopted certain reform laws aligned with EU directives on electricity markets and decarbonization, which Minister Đokić emphasized, noting that the period of tumultuous changes in the energy sector across Europe (due to “directives that slow down energy activity” and the consequences of the war in Ukraine) has partly affected us as well. Therefore, ERS restructuring is also a requirement for RS to keep pace with Energy Community obligations – for example, to close or environmentally modernize the oldest thermal power plants by 2026, integrate more renewable sources, etc. Politically, the RS Government seeks to demonstrate that it can independently, proactively, put its energy sector in order, which is important for affirming the entity’s autonomy in the field of energy (which is, under the constitutional arrangement, an entity competence). Successful restructuring would strengthen RS’s argument that it controls energy policy and can attract investments (e.g., from China or Serbia) independently. On the other hand, failure or deepening of ERS’s crisis would open the possibility for greater involvement of state-level BiH institutions or international financial institutions, which the authorities in Banja Luka want to avoid. Therefore, the political imperative is to save and strengthen ERS within the RS framework, so it remains a pillar of energy sovereignty and economic stability.

The potential effects of restructuring are manifold. In the short term, certain belt-tightening measures can be expected – reducing unnecessary expenses, possibly freezing employment or even reducing the number of workers with a social program, postponing lower-priority investments – all aimed at stabilizing finances. It has already been ordered that consolidation measures be defined within 15 days, which suggests that internal cuts and work reorganization will soon follow. This could cause dissatisfaction among employees (especially if relocations or layoffs occur) and among local communities economically dependent on large energy facilities (e.g., the municipalities of Ugljevik and Gacko, where the thermal power plants are the main employers). The Government will need to carefully balance these measures with adequate severance packages and social plans, as previously done in the distribution sector, to prevent social protests and strikes.

In the long term, if restructuring is carried out successfully, ERS could become a more efficient company resting on healthier foundations. This means: modernized facilities (Prime Minister Minić emphasized the necessity of investments, especially in thermal power plants and completion of ongoing hydropower projects), diversification of sources (greater capacity in solar energy, which is also planned), and better management practices. A stable ERS is a prerequisite for continuing to provide electricity to citizens at an affordable price, but without generating losses that burden the budget. Also, a restructured ERS could be a generator of growth – by restoring export capacities, it could bring foreign currency revenue into RS and finance new projects. The political effect of success would be a strong argument for the government that it protected the national interest and economically rehabilitated the public enterprise “family,” while failure in restructuring would likely affect public trust in the ruling group and potentially lead to personnel changes at the head of ERS or even in the Government. Therefore, ERS restructuring is economically necessary and politically highly risky, but certainly justified as a step that can no longer be postponed.

Recommendations from the perspective of AK Standard Prva

As legal advisors monitoring reform processes in the energy sector, the law firm AK Standard Prva provides the following recommendations to ensure legal certainty, protect clients’ interests, and take advantage of opportunities arising from ERS restructuring:

Legal certainty and regulatory compliance

Every restructuring step must be grounded in the applicable legal framework. We recommend a detailed compliance review of planned measures with the RS Electricity Law, the Law on Companies, the Labor Law, and other relevant regulations. It is necessary to determine whether implementation of the plans will require amendments to existing laws or by-laws. For example, if the consolidated plan anticipates status changes (mergers of subsidiaries, spin-offs of activities, or creation of new legal entities within the holding), all procedures for registration, obtaining the founder’s approval (RS Government), and approval of the Regulator (RERS) for transfer or issuance of licenses for performing energy activities must be followed. AK Standard Prva recommends creating a legal roadmap for restructuring that identifies all required formal actions and deadlines, so the process proceeds without legal gaps and so that all interested parties (including creditors, minority shareholders if any, employees, etc.) are protected in their rights.

Transparency and due diligence

To preserve legal certainty, the process must be transparent. We recommend engaging independent financial and legal advisors to conduct due diligence of ERS and its subsidiaries. This includes reviewing financial liabilities, contracts (especially long-term loan agreements, equipment supply contracts, concessions, arbitration agreements), and potential disputed issues. The goal is to identify “hidden” obligations and risks (which even ERS leadership has acknowledged) so the restructuring plan can address them. For our clients – whether investors, creditors, or business partners of ERS – it is important that there are no surprises in the form of unknown debts or legal disputes that could surface later and jeopardize implementation of measures. Transparency toward the public and market (publishing summaries of the plan, consultations with unions and local communities) is also advisable to build broader consensus and reduce the risk of social conflict or legal challenges (e.g., lawsuits by workers or suppliers who feel threatened).

Protection of client and contractual interests

Restructuring can affect existing contractual relations. We recommend ensuring legal protection of creditors’ and partners’ rights. For example, equipment and fuel suppliers, construction companies engaged on projects (such as HPP Dabar, HPP Bistrica), and other clients of AK Standard Prva may fear that changes in organization or cost-cutting measures will jeopardize fulfillment of obligations toward them. We recommend timely communication between ERS and all creditors, and, if necessary, debt restructuring by agreement (if some subsidiaries, such as RiTE Ugljevik, have overdue liabilities they cannot pay). Existing contracts (e.g., coal supply contracts between mines and thermal power plants, renewable energy purchase agreements with feed-in tariffs, etc.) should be reviewed in light of the new organization to avoid legal vacuum or double invoicing. If mergers occur within ERS, provisions on status changes must be followed – including the transfer of contracts and employees to the legal successor, with preservation of acquired rights of employees in accordance with the Labor Law. Standard Prva can prepare individual legal strategies for clients to protect their interests (whether related to claims, contract rights, or investments) during and after restructuring.

Investment opportunities and partnerships

Paradoxically, ERS’s crisis and restructuring may open doors for new investments to help modernize the sector. We recommend that the RS Government and ERS consider models of public–private partnerships or joint ventures for priority projects. For example, completion of HPP Dabar, expected to increase electricity available to RS consumers, could be accelerated with additional capital from a strategic partner – with careful contracting to ensure ERS retains control and RS interests are protected. Similarly, plans for solar and wind capacities (mentioned by the Prime Minister as necessary) could attract private investors if attractive conditions are offered (e.g., guaranteed offtake or profit-sharing instead of fixed loan interest). Standard Prva’s legal team can support structuring such investment arrangements, drafting PPP agreements, consortium agreements, etc., ensuring resource sovereignty and compliance with domestic laws (PPP Law, Concessions Law, etc.). Restructuring of the distribution segment could also create opportunities for network investments (e.g., “rehabilitate-operate-transfer” models for distribution infrastructure), improving supply quality and reducing losses. Through all such investment opportunities, the role of legal counsel is to ensure clear and fair contracts, protect RS’s ownership interests, and secure appropriate dispute-resolution mechanisms.

Regulatory oversight and tariff policy

Restructuring must be accompanied by appropriate regulatory measures to preserve market stability. We recommend close cooperation with RERS throughout the process. Any change that may affect supply conditions or prices should be presented to RERS in a timely manner, and tariff adjustments initiated as needed. It is worth recalling that already in 2022, a transition to block tariffs (higher price for higher consumption) was announced to encourage electricity savings. We recommend such tariff reforms be implemented transparently and gradually, with protection for vulnerable consumers, to avoid sudden shocks. RERS, as an independent regulator, must ensure that ERS operates non-discriminatorily and transparently after reorganization, in accordance with the EU Third Energy Package. For our clients – especially large industrial consumers – it is important that the regulator prevents attempts by ERS to shift losses onto them through inappropriate tariffs. Regulatory oversight of supply quality (e.g., reducing the number and duration of outages) must remain strict after restructuring so that citizens and businesses do not suffer due to internal changes in ERS. Standard Prva remains available to mediate communication between investors, consumers, and the regulator to ensure that all stakeholders are heard and that the Government’s conclusions are implemented in line with legal standards and best practice.

Final conclusion

In conclusion, the restructuring of the Power Utility of the Republic of Srpska is a complex undertaking that must be carried out carefully and thoughtfully. Financial and operational indicators clearly show that changes are necessary and urgent. However, the way in which these changes will be implemented will determine whether ERS stands back on its feet as a stable and successful energy system or whether problems will escalate. From a legal standpoint, predictability and legality of every step are crucial – only this way can trust be preserved and additional complications avoided. AK Standard Prva will continue monitoring the development of the situation, ready to provide legal support to its clients and to those implementing the process, with the goal of achieving the common interest: a secure, sustainable, and prosperous energy sector of the Republic of Srpska.

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