Elektroprivreda Srbije (EPS) and Elektroprivreda Republike Srpske (ERS) are seeking to advance the Buk Bijela hydropower development on the Drina River, but a dispute over who can authorize its commercial use remains unresolved. The latest identified official planning value for the project is approximately €297 million. The central question is whether Republika Srpska can independently grant long-term concessions over the river’s water resources or whether Bosnia and Herzegovina’s state institutions must be involved.
The planned 118.1 MW plant near Foča is the leading part of the Gornja Drina, or Upper Drina, hydropower scheme. EPS holds 51% of the project company and ERS holds 49%. If their designs are retained, the companion Foča project, with published capacity of 44.15 MW, and Paunci, at 43.21 MW, would bring the three plants’ combined capacity to approximately 205 MW.
Investment has already been made: in May 2026, Serbian authorities said approximately €15 million had been spent on preparatory works and that EPS continued to fund the joint company. Accommodation and supporting infrastructure have also advanced, alongside extensions to concession deadlines. However, available project information does not show a completed financing package, an awarded main construction contract or a firm commissioning date.
Moving to the next stage will require legal authority, environmental approval, construction terms and funding to be brought into alignment. The project is often discussed in terms of relations between Banja Luka, Belgrade and Sarajevo, but its central legal issue is whether locating an energy project within an entity settles ownership of the public resource it uses.
Concession authority and state-property rights
Bosnia and Herzegovina’s Constitutional Court has previously found that river waters and riverbeds are public goods within the wider state-property framework. It rejected the argument that their location within Republika Srpska alone established ownership by the entity. This distinction underpins the objection that responsibility for electricity development does not automatically give an entity unrestricted authority over ownership or long-term commercial use of the resource.
Republika Srpska bases its position on its constitutional powers to develop the entity and its ability to cooperate with neighbouring Serbia. Bosnia and Herzegovina’s constitutional framework assigns to the entities responsibilities not expressly allocated to state institutions, while permitting 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 problem: the key questions are whether the concession-granting authority had the required competence and whether the river-use rights were lawfully available.
The company’s ownership, its right to use water and its contractual right to sell electricity are separate matters. Serbia’s shareholding does not itself establish the company’s water-use rights, and a change in ownership would not automatically remedy a flaw in the authority to grant the concession. The constitutional proceedings escalated 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 bar construction, but it also did not grant 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, not a final cancellation of Buk Bijela.
For prospective lenders, the distinction offers limited reassurance because a long-lived hydropower project needs legal rights supporting its revenue to remain enforceable through construction and operation. The dispute-resolution mechanism has also been weakened by institutional problems. The Bosnia and Herzegovina Concessions Commission has had incomplete membership and expired mandates, and political difficulties have hindered efforts to appoint a fully functioning commission.
Political deadlock and regional cooperation
Describing the delay simply as a Sarajevo veto does not capture the wider dispute. Acceptance of unilateral entity concessions could strengthen Republika Srpska’s control over valuable natural resources, while requiring broader state participation could limit that autonomy. For Sarajevo-based institutions and political parties defending state ownership, Buk Bijela could set a precedent for rivers, forests, agricultural land and infrastructure assets.
Republika Srpska is also concerned about precedent: allowing state institutions to determine development terms could weaken the entity’s ability to structure energy and infrastructure investments independently. Buk Bijela has consequently become a test case for the relationship between entity development powers and state ownership rights. Uncertainty over property rights is not limited to Republika Srpska; it has also complicated infrastructure, renewable-energy, mining and other investments elsewhere in Bosnia and Herzegovina.
Cooperation has remained possible. In May 2026, energy representatives from Serbia, Republika Srpska and the Federation discussed broader cooperation on Drina hydropower. Serbia said it was ready to continue work on the Upper Drina once the necessary conditions within Bosnia and Herzegovina had been established.
The dialogue indicates that objections to Buk Bijela’s current legal structure should not automatically be read as opposition to all Serbian participation in hydropower development. A settlement on political and constitutional questions would still leave environmental and operating issues to be addressed.
Hydrology and environmental conditions
The revised Buk Bijela design envisages approximately 118.1 MW of installed capacity and average annual generation of around 354.3 GWh. An older design provided for approximately 93.5 MW and annual output of roughly 332 GWh. The revised configuration increases installed capacity by around 26%, while projected annual generation rises by about 7%.
The plant would therefore add more capacity than annual energy: higher turbine capacity could capture periods of stronger water flow and potentially concentrate generation in higher-value electricity-market hours. It cannot, however, create more water. The proposed reservoir is approximately 11.5 kilometres long, with total storage of around 15.7 million cubic metres and useful storage of about 11 million cubic metres.
Those storage 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 therefore depends on more than installed capacity.
Developers and lenders need to understand how the plant would perform under varying 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 separate assets. A cascade can use the same water again as it passes through different hydraulic drops, but it cannot generate additional river inflow.
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 show no unacceptable impact on Montenegro and that the planned reservoir does not extend into Montenegrin territory.
A reservoir that stays within one country can still have cross-border effects. Fish migration, sediment transport, ecological flows, hydropeaking and changes in river morphology may extend beyond the dam site. UNESCO has also called for possible effects on the Durmitor World Heritage area to be examined before irreversible decisions are made.
Downstream, authorities in Goražde have questioned how flood risks and cumulative effects have been addressed. Those concerns do not in themselves 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 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 the project’s economics. Limits on rapid discharge changes, additional ecological flows, seasonal operating restrictions or mitigation measures could reduce flexibility, increase CAPEX or lower expected electricity revenues.
Environmental conditions therefore need to be included in the financial model before the project is described as fully bankable. The same conditions will shape how the plant can operate and how much of its potential output it can sell.
Project value and potential revenues
At the 2021 cornerstone ceremony, Buk Bijela was presented as an investment of around €220 million. More recent public-investment planning in Republika Srpska puts the project value at approximately €297 million. These figures reflect different stages of development and should not automatically be treated as evidence of cost escalation alone.
Changes in design and capacity, inflation, construction prices and differences in project scope can all affect the reported investment value. The frequently 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.
At 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; at €120/MWh, it would exceed €42 million. These 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. If annual generation were hypothetically 25% lower while the realised price remained €100/MWh, gross electricity revenue would fall to around €26.6 million. Investors would therefore need to assess dry-year production, expected capture prices, reservoir flexibility and environmental operating constraints, as well as the headline capacity.
Construction preparations and possible settlement
Republika Srpska authorities confirmed in 2026 that they had discussed potential cooperation with Bechtel. A large international engineering and construction group could strengthen execution, contracting discipline and potentially financing options, but contractor involvement cannot replace the project’s basic 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 it cannot settle the constitutional ownership of the river. The dispute does not necessarily require either side to prevail on every issue. One possible arrangement could recognize 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. Equally, recognition of Republika Srpska’s energy-development powers would not necessarily mean the entity could determine ownership of the river resource independently.
Any final arrangement would need to resolve concession authority, revenue allocation, environmental obligations, compensation, liability and long-term operating rights. Buk Bijela is neither merely a political construct nor a project ready for immediate full-scale construction: Serbia and Republika Srpska have established a project company, invested in preparation and continued development despite years of delay. The resource is real, the engineering concept is established and the potential electricity output is commercially meaningful, but the project still lacks a sufficiently durable and uncontested route from concession to operation.
The state-level 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 meaningful scope for the entity to develop energy infrastructure. The two positions could potentially coexist in a negotiated legal structure.
Until such an arrangement is reached, each additional euro invested increases financial exposure without resolving the underlying issue. The decisive step will not be another ceremony, political declaration or revised construction deadline, but an enforceable concession, an environmentally acceptable operating regime, committed financing and a construction programme that EPS, ERS and Bosnia and Herzegovina can demonstrate is capable of surviving political change.