Elektroprivreda Srbije (EPS) and Elektroprivreda Republike Srpske (ERS) have yet to resolve who can authorize commercial use of the Drina River for the Buk Bijela hydropower project. The project’s latest identified official planning value is approximately €297 million. The disagreement over river-resource rights is holding up the move from years of preparation to a financed construction programme.
Concession authority remains the central legal question
The planned 118.1 MW plant near Foča 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. The companion Foča project has a published capacity of 44.15 MW, while Paunci is rated at 43.21 MW; if those designs are retained, the three projects would have combined capacity of approximately 205 MW.
At issue is whether Republika Srpska can independently grant long-term concessions over the river’s water resources, or whether the arrangements require decisions involving Bosnia and Herzegovina’s state institutions. The dispute is more specific than the political relationship between Banja Luka, Belgrade and Sarajevo: a project’s location within an entity does not, by itself, establish ownership of the public resource it uses.
Bosnia and Herzegovina’s Constitutional Court has previously treated river waters and riverbeds as public goods within the wider state-property framework. It rejected the argument that their location inside Republika Srpska alone was enough to establish entity ownership. That distinction underpins the objection that an entity’s role in electricity development does not automatically give it unrestricted authority over ownership or long-term commercial use of the resource.
Republika Srpska relies on its constitutional development powers and its ability to cooperate with neighbouring Serbia. Under Bosnia and Herzegovina’s constitutional framework, responsibilities not expressly assigned to state institutions belong to the entities, which may establish special relationships with neighbouring states subject to the country’s sovereignty and territorial integrity. The commercial structure is not problematic simply because EPS is the majority shareholder; the key questions are whether the concession-granting authority had the necessary competence and whether the river-use rights were lawfully available.
For the project’s sponsors, the distinctions between share ownership, the company’s right to use water and its contractual right to sell electricity are important. Serbia’s ownership of shares does not settle the other rights, and changing the ownership structure would not automatically remedy a defect in concession authority.
Constitutional proceedings have not cancelled the concessions
The proceedings intensified 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 ordered the competent concessions mechanism to resolve the dispute over property and concession authority. The ruling did not annul the concessions or permanently prohibit 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 addressed non-implementation of the court ruling; it was not a final cancellation of Buk Bijela. For prospective lenders, however, the distinction offers limited certainty because a long-lived hydropower project needs enforceable legal rights to support revenue during construction and operation.
The dispute-resolution mechanism has also faced institutional weakness. 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. For that reason, characterising the delay simply as a Sarajevo veto leaves out part of the institutional picture.
The disagreement extends beyond one power station. Accepting unilateral entity concessions could strengthen Republika Srpska’s control over valuable natural resources, while requiring wider state participation could constrain that autonomy. Sarajevo-based institutions and political parties defending state ownership see a potential precedent for other rivers, forests, agricultural land and infrastructure assets; Republika Srpska, in turn, sees state involvement as potentially weakening its ability to structure energy and infrastructure investment independently.
Buk Bijela has become a test of the relationship between entity development powers and state ownership rights. Uncertainty over property is not confined to Republika Srpska: it has also complicated infrastructure, renewable-energy, mining and other investments elsewhere in Bosnia and Herzegovina.
Cooperation has nevertheless remained on the agenda. 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 had been established, indicating that opposition to Buk Bijela’s current legal structure need not amount to opposition to all Serbian participation in hydropower development.
Environmental conditions will affect project design and returns
A political and constitutional settlement would leave separate environmental and operational matters to be resolved. Buk Bijela’s revised design specifies approximately 118.1 MW of installed capacity and average annual generation of around 354.3 GWh. An earlier design envisaged approximately 93.5 MW and annual generation of roughly 332 GWh.
The revised configuration increases installed capacity by around 26%, while projected annual output rises by only about 7%. The project is therefore not simply adding annual energy: greater turbine capacity could enable it to capture periods of stronger water flow and concentrate generation in higher-value electricity-market hours. The turbines, however, cannot create additional water.
The proposed reservoir would be approximately 11.5 kilometres long, with total storage of around 15.7 million cubic metres and useful storage of about 11 million cubic metres. These figures point to short-term regulation capability, but not to a large seasonal reservoir that could shield the project from 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 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-plant Upper Drina cascade also needs to be modelled as an integrated system: water can be used repeatedly as it passes through different hydraulic drops, but the cascade cannot generate additional river inflow.
Cross-border and downstream impacts remain under scrutiny
Environmental objections have been raised both upstream and downstream. Montenegro has focused on possible effects on the Tara and Piva rivers and protected natural areas. EPS has said its environmental studies found no unacceptable impact on Montenegro and that the planned reservoir would not extend into Montenegrin territory.
That does not settle all cross-border questions, because effects can extend beyond the dam site without the reservoir crossing a border. Fish migration, sediment transport, ecological flows, hydropeaking and changes to river morphology may all have wider effects. UNESCO has also sought an examination of possible impacts on the Durmitor World Heritage area before irreversible decisions are taken.
Downstream, authorities in Goražde have questioned how flood risks and cumulative effects have been addressed. Their concerns do not automatically mean that Buk Bijela would increase flooding. The effect of a dam during extreme events depends on reservoir levels before a flood, available storage, spillway operation, tributary flows, upstream releases and coordination between 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 project economics: limits on rapid discharge changes, additional ecological flows, seasonal restrictions or mitigation measures could reduce operating flexibility, increase CAPEX or lower expected electricity revenues.
Environmental conditions therefore need to be included in the financial model before the project is presented as fully bankable.
Reported investment values reflect different project stages
Buk Bijela was presented as an investment of around €220 million at the 2021 cornerstone ceremony. More recent Republika Srpska public-investment planning puts the project value at approximately €297 million. These figures relate to different stages of development and should not automatically be read as pure cost escalation.
Design changes, revised capacity, inflation, construction prices and differences in project scope can all affect reported investment values. The 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 economics could be 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 electricity revenue of around €35 million. At €80/MWh, revenue would be around €28 million, while at €120/MWh it would exceed €42 million.
These figures are gross-revenue illustrations, not project forecasts, and 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 around €26.6 million. Investors therefore need to consider dry-year production, expected capture prices, reservoir flexibility and environmental operating constraints, as well as headline capacity.
Potential contractor involvement would not resolve legal uncertainty
Republika Srpska authorities confirmed in 2026 that they had discussed possible cooperation with Bechtel. Involvement by a large international engineering and construction group could strengthen execution, contracting discipline and potentially financing options. It would not, however, 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 project budget and committed funding. A major international contractor can build a dam, but cannot resolve the constitutional ownership of the river.
A negotiated structure could separate resource ownership from project operation
The dispute may be resolved without either side prevailing on every issue. One possible arrangement could recognise Bosnia and Herzegovina’s role in determining the legal treatment of state property while preserving Republika Srpska’s practical role as project developer and allowing EPS to retain 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. State-level approval or recognition would not necessarily require the Federation or a Sarajevo institution to operate the plant. Likewise, recognition of Republika Srpska’s energy-development powers would not necessarily mean that the entity could independently determine ownership of the river resource.
Any final arrangement would need to address concession authority, revenue allocation, environmental obligations, compensation, liability and long-term operating rights. Serbia and Republika Srpska have established a project company, invested in preparation and maintained development through years of delay; the project has an established engineering concept and potential electricity output described as commercially meaningful.
Yet the available project information does not establish a completed financing package, an awarded main construction contract or a firm commissioning date. The project’s next stage depends on aligning legal authority, environmental approval, construction terms and funding. The central issue remains whether EPS, ERS and Bosnia and Herzegovina can establish an enforceable concession, an environmentally acceptable operating regime, committed financing and a construction programme able to withstand political change.