Serbia’s state power utility Elektroprivreda Srbije (EPS) and Elektroprivreda Republike Srpske (ERS) are seeking to advance the Buk Bijela hydropower project in Bosnia and Herzegovina, but a dispute over who can authorize commercial use of the Drina River remains unresolved. The project’s latest identified official planning value is approximately €297 million.
The question is whether Republika Srpska can grant long-term concessions over the river’s water resources on its own, or whether Bosnia and Herzegovina’s state institutions must be involved. The disagreement has hindered efforts to turn years of preparation into a financed construction programme.
Planned near Foča, the 118.1 MW Buk Bijela plant is the main component of the Gornja Drina, or Upper Drina, hydropower scheme. Its project company is 51% owned by EPS and 49% by ERS. If the current designs are retained, the companion Foča project, rated at 44.15 MW, and Paunci, at 43.21 MW, would bring total capacity to about 205 MW.
Preparatory investment has taken place. Serbian authorities reported in May 2026 that about €15 million had been spent on preparatory works and that EPS continued to fund the joint company. Accommodation and supporting infrastructure have also advanced, and concession deadlines have been extended.
Available project information does not show that a complete financing package has been secured, a main construction contract awarded or a firm commissioning date set. The next phase depends on aligning legal authority, environmental approval, construction terms and funding.
Concession authority remains contested
The project is often framed through political relations between Banja Luka, Belgrade and Sarajevo, but the legal issue is more precise. A project’s location within an entity does not, by itself, determine ownership of the public resource it uses.
Bosnia and Herzegovina’s Constitutional Court has previously ruled that river waters and riverbeds are public goods within the broader state-property framework. It rejected the view that their location within Republika Srpska alone was sufficient to establish entity ownership.
This distinction underpins the objection raised by challengers at state level. Responsibility for electricity development does not automatically give an entity unrestricted power to determine ownership or long-term commercial use of the resource.
Republika Srpska bases its position on its constitutional powers over development and its ability to cooperate with neighbouring Serbia. Bosnia and Herzegovina’s constitutional framework assigns to the entities responsibilities not expressly given to state institutions, and allows special relationships with neighbouring countries, subject to the country’s sovereignty and territorial integrity.
EPS’s majority shareholding is not, by itself, the central legal concern. The key questions are whether the authority that granted the concession had the necessary competence and whether the rights to use the river were lawfully available.
For the project’s sponsors, company ownership, water-use rights and contractual rights to sell electricity are distinct matters. A change to the shareholding structure would not automatically remedy a defect in the authority to grant a concession.
Constitutional proceedings gained momentum after 24 members of Bosnia and Herzegovina’s state-level House of Representatives challenged the concessions for Buk Bijela, Foča and Paunci. In July 2021, the Constitutional Court directed the competent concessions mechanism to resolve the dispute over property and concession authority.
The ruling did not cancel the concessions or permanently bar construction, but it also did not give the projects final legal clearance. In January 2023, the court found that its earlier decision had not been implemented and referred the matter to the Prosecutor’s Office. That step concerned failure to implement the ruling, rather than a final cancellation of Buk Bijela.
For prospective lenders, the distinction offers limited reassurance. Long-term hydropower financing requires confidence that the legal rights underpinning project revenue will remain enforceable during construction and operation.
Institutional gridlock adds to delays
The mechanism tasked with resolving the dispute has itself faced institutional problems. The Bosnia and Herzegovina Concessions Commission has operated with incomplete membership and expired mandates, while political difficulties have impeded efforts to appoint a fully functioning commission.
As a result, describing the delay simply as a “Sarajevo veto” leaves out important elements. The dispute is about more than one power station: accepting concessions issued unilaterally by an entity could strengthen Republika Srpska’s control over valuable natural resources, while requiring broader state involvement could limit that autonomy.
For Sarajevo-based institutions and political parties defending state ownership, Buk Bijela could set a precedent affecting other rivers, forests, agricultural land and infrastructure assets. Republika Srpska, in turn, has a strong interest in preventing state institutions from setting development terms in a way that could weaken its ability to structure energy and infrastructure investment independently.
The project has consequently become a test of the relationship between entity development powers and state ownership rights. Uncertainty over property is not limited to Republika Srpska; it has also complicated infrastructure, renewable-energy, mining and other investment elsewhere in Bosnia and Herzegovina.
There are indications that cooperation remains possible. In May 2026, energy representatives from Serbia, Republika Srpska and the Federation discussed broader cooperation on Drina hydropower. Serbia said it remained ready to continue Upper Drina activities once the necessary conditions within Bosnia and Herzegovina were in place.
The discussions suggest that opposition to Buk Bijela’s existing legal structure should not automatically be taken as opposition to all Serbian involvement in hydropower development.
Environmental requirements affect project economics
A political and constitutional settlement would still leave environmental and operating questions to be resolved. Buk Bijela’s revised design specifies installed capacity of about 118.1 MW and average annual generation of approximately 354.3 GWh.
An earlier design envisaged capacity of about 93.5 MW and annual output of roughly 332 GWh. The revised configuration therefore raises installed capacity by around 26%, while projected annual generation increases by about 7%.
The difference has financial implications. Higher turbine capacity could allow the plant to use periods of stronger water flow and potentially concentrate output in higher-value market hours; it does not create additional water.
The proposed reservoir would be about 11.5 kilometres long, with total storage of approximately 15.7 million cubic metres and useful storage of about 11 million cubic metres. These figures indicate meaningful short-term regulation capability, but not a large seasonal reservoir that could shield the project from a prolonged drought.
The Drina is formed by the Tara and Piva rivers, and Montenegro’s existing Piva hydropower plant already affects the upstream flow regime. The investment case therefore depends on more than installed capacity: developers and lenders need to assess performance under different Tara inflows, Piva release schedules, drought conditions, ecological minimum flows and operating restrictions.
The three Upper Drina plants also need to be modelled as an integrated cascade rather than as three separate assets. A cascade can use water repeatedly as it passes through different hydraulic drops, but it cannot increase the river’s inflow.
Cross-border and downstream effects under scrutiny
Environmental objections have been raised both upstream and downstream. Montenegro has focused on potential effects on the Tara and Piva rivers and on protected natural areas. EPS has maintained that its environmental studies show no unacceptable impact on Montenegro and that the planned reservoir would not extend into Montenegrin territory.
That does not settle every cross-border concern. Effects on fish migration, sediment transport, ecological flows, hydropeaking and river morphology can reach beyond the immediate dam site even when a reservoir does not cross a national border.
UNESCO has also called for possible effects on the Durmitor World Heritage area to be examined before irreversible decisions are taken. Downstream, authorities in Goražde have questioned how flood risks and cumulative effects have been addressed.
Those concerns do not, on their own, establish that Buk Bijela would increase flooding. A dam’s effect during extreme events depends on reservoir levels before a flood, available storage, spillway operation, tributary flows, upstream releases and coordination among operators.
A credible technical assessment therefore requires transparent hydraulic modelling, rather than general assurances from either supporters or opponents. Environmental groups and independent experts have also raised concerns about fish migration, sediment movement, hydropeaking and the Danube salmon, or huchen.
Conditions imposed through environmental approval could affect the project’s economics directly. Restrictions on rapid discharge changes, additional ecological flows, seasonal operating limits or mitigation measures could reduce flexibility, increase CAPEX or lower expected electricity revenue.
Environmental requirements therefore need to be built into the financial model before the project can be considered fully bankable.
Reported investment value has increased
Buk Bijela was presented as an investment of around €220 million at its 2021 cornerstone ceremony. More recent public-investment planning by Republika Srpska puts the project value at approximately €297 million.
The figures refer to different stages of development and should not automatically be read as a direct measure of cost escalation. Design changes, revised capacity, inflation, construction prices and differing definitions of project scope can all affect reported investment values.
An often-cited figure of around €520 million is an older estimate for the wider Upper Drina scheme, not a confirmed current financing package for Buk Bijela alone. The project’s economics could remain attractive if construction risk is controlled.
Based on expected annual generation of approximately 354 GWh, an average realised electricity price of €100/MWh would imply gross annual revenue of about €35 million. At €80/MWh, revenue would be around €28 million, while at €120/MWh it would exceed €42 million.
These figures illustrate gross revenue and are not project forecasts. They exclude operating expenditure, concession charges, taxes, financing costs, environmental obligations and other expenses.
Hydrological risk is also material. A hypothetical 25% reduction in annual generation, with the price unchanged at €100/MWh, would lower gross electricity revenue to about €26.6 million.
Investors therefore need to assess dry-year production, expected capture prices, reservoir flexibility and environmental operating constraints alongside the project’s headline capacity.
Bechtel discussions do not resolve legal issues
Republika Srpska authorities confirmed in 2026 that they had discussed potential cooperation with Bechtel. Participation by a large international engineering and construction group could strengthen execution, contracting discipline and potentially financing options.
However, a contractor cannot replace the project’s fundamental development requirements. Before construction risk can be transferred through an EPC structure, Buk Bijela needs a legally durable concession, final permits, an agreed operating regime, a bankable budget and committed funding.
An international contractor can build a dam, but it cannot determine the constitutional ownership of the river.
A negotiated structure could separate rights
The dispute need not require either side to prevail on every point. One possible arrangement could recognize Bosnia and Herzegovina’s role in determining the legal treatment of state property while retaining Republika Srpska’s practical role as developer and allowing EPS to maintain its investment position.
Such a structure could distinguish ownership of the underlying public resource from the commercial right to develop and operate the hydropower asset. This separation may provide a practical route forward.
State-level approval or recognition would not necessarily mean that the Federation or a Sarajevo institution operated the plant. Similarly, recognition of Republika Srpska’s energy-development powers would not necessarily give the entity sole authority to determine ownership of the river resource.
Any final arrangement would need to establish concession authority, revenue allocation, environmental obligations, compensation, liability and long-term operating rights.
Financing depends on enforceable rights
Buk Bijela is neither merely a political proposal nor a project ready to move immediately into full-scale construction. Serbia and Republika Srpska have established a project company, invested in preparations and continued development despite years of delay.
The resource exists, the engineering concept has been developed and the potential electricity output is commercially significant. But the project still lacks a sufficiently durable and uncontested route from concession to operation, a key requirement for large-scale infrastructure financing.
Sarajevo’s central argument is that Republika Srpska cannot settle disputed state-property rights simply by issuing an entity concession. Republika Srpska’s counterargument is that its constitutional development powers and cooperation with Serbia must leave it meaningful scope to develop energy infrastructure.
The two positions could potentially be accommodated in a negotiated legal structure. Until then, each additional euro invested in Buk Bijela adds to financial exposure without resolving the underlying issue.
The decisive milestone would not be another ceremony, political declaration or revised construction deadline. It would be when EPS, ERS and Bosnia and Herzegovina can demonstrate an enforceable concession, an environmentally acceptable operating regime, committed financing and a construction programme able to withstand political change.
