March 12, 2014 / 3:56 PM / 3 years ago

Bosnian regions break stalemate over national power grid

* Law allows regions to tap the firm's profit to plug budget gaps

* About 330 mln marka accumulated from fees over years

* Executive hopes law will unblock investment

By Maja Zuvela

SARAJEVO, March 12 (Reuters) - After years of deadlock, Bosnia's two ethnic regions won the right to share some of the profits built up by the national power grid, bolstering their budgets, under a law approved by the national parliament on Wednesday.

The grid company Elektroprenos BiH has accumulated an estimated 330 million marka ($234 million) from transmission fees since it was formed in 2006.

Under a previous agreement with the European Commission, the two regions - the Bosniak-Croat Federation and the Serb Republic, which hold 58 and 42 percent respectively of the grid - were banned from distributing the profit before 2016.

Under the new law, the regions established after the 1992-95 Bosnian war will now be allowed to share some 100 million marka between them, in proportion to their shareholdings, in order to plug their respective deficits. They have already included the money in their 2014 budgets.

The remaining funds will be retained by the grid for investment.

The Commission had expressed concern the law could weaken the financial and operational stability of the company by removing protection against the misuse of its funds.

But after talks with Bosnian officials, it approved the changes in January, provided that the regions speed up management appointments, draft a 10-year development plan and proceed with long-delayed investment into the power grid.

Ramiz Mehmedagic, the grid's legal executive director, said the law could only help if it really unblocked the company's operations and enabled investment in the network.

Until now, no funds have been invested in upgrading the grid and the company has been virtually non-functional because the rival regions were unable to agree on any major issue, prompting an international peace envoy to impose a set of rulings enabling it to continue to work.

"I hope the amendments are not just an excuse for the governments to meet their immediate budget needs," Mehmedagic told Reuters. "They should provide for badly-needed investments as power demand and the need to add new power generation facilities rise." ($1 = 1.412 Bosnian marka) (Reporting by Maja Zuvela; Editing by Daria Sito-Sucic and)

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