Republika Srpska backs Hidroelektrane na Drini with €10 million loan guarantee as funding squeeze persists

Republika Srpska has moved to shore up financing for its hydropower portfolio, approving a state guarantee tied to a new €10 million loan for Hidroelektrane na Drini, a subsidiary of the state-owned electricity utility ERS. The decision underscores how budget-backed risk-sharing is being used to keep capital investment plans moving in Bosnia and Herzegovina’s energy sector amid ongoing financial pressure.

Loan terms and use of proceeds

Hidroelektrane na Drini will secure the financing from the Investiciono-razvojna banka (IRB) of Republika Srpska, with the RS Government providing a guarantee covering repayment obligations. The loan carries an interest rate of 6% and has an 18-month repayment period.

Government documentation states that the funds will be used to support capital investment projects within the company’s portfolio.

How the guarantee works

Under the government decision, Republika Srpska committed to covering all overdue and unpaid liabilities if Hidroelektrane na Drini, together with its parent utility ERS, fails to meet obligations toward the lender. The guarantee mechanism specifies that any unpaid installments would be settled directly from entity budget resources.

Funding strain linked to HPP Bistrica slowdown

The financing comes after Republika Srpska’s Minister of Energy and Mining, Petar Đokić, said earlier this year that construction activity on the HPP Bistrica hydropower project had been reduced due to financial constraints. Hidroelektrane na Drini is identified as the investor behind that development.

The company’s latest annual results also point to continued strain: it ended the previous year with a net loss of around €1.2 million, highlighting persistent fiscal pressure affecting hydropower operations and investment timelines.

For investors and lenders, the structure of the guarantee—direct recourse to budget resources in case of missed payments—signals that credit risk is being actively transferred to public finances rather than absorbed solely by project cash flows. For policymakers, it reflects an effort to maintain momentum on capital spending while addressing near-term liquidity challenges in Republika Srpska’s energy ecosystem.