Serbia’s Elektroprivreda Srbije (EPS) and Elektroprivreda Republike Srpske (ERS) continue to face legal and institutional uncertainty over the commercial use of the Drina River, complicating efforts to advance the Buk Bijela hydropower project, whose latest identified official planning value stands at approximately €297 million.
The dispute has become a major obstacle to transforming years of project preparation into a fully financed construction programme. At its centre is the question of 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 planned 118.1 MW Buk Bijela plant near Foča is the principal component of the Gornja Drina, or Upper Drina, hydropower development scheme. Its project company is owned 51% by EPS and 49% by ERS. The wider scheme also includes the Foča plant, with a planned capacity of 44.15 MW, and Paunci, at 43.21 MW. If all three projects proceed according to their published designs, their combined installed capacity would reach approximately 205 MW.
Preparatory investment has already taken place. Serbian authorities reported in May 2026 that around €15 million had been spent on preliminary works, while EPS continued financing the joint project company. Accommodation facilities and supporting infrastructure have also advanced, alongside extensions of concession deadlines.
However, available project information does not establish that a complete financing package has been secured, a main construction contract awarded or a firm commissioning date confirmed. The next stage therefore depends on resolving legal authority, completing environmental approvals, finalising construction arrangements and securing funding.
The central dispute concerns ownership of the river and the authority to grant concessions.
Buk Bijela is frequently framed as a political confrontation between Banja Luka, Belgrade and Sarajevo. The underlying legal issue is more specific: locating an energy project within an entity does not automatically establish ownership of the public resources required for its operation.
Bosnia and Herzegovina’s Constitutional Court has previously addressed the status of river waters and riverbeds within the wider state-property framework, rejecting the argument that their location within Republika Srpska is, by itself, sufficient to establish entity ownership.
This distinction underpins objections raised by state-level challengers. Although an entity has responsibilities for energy development, those powers do not automatically confer unrestricted authority over ownership or long-term commercial use of the underlying natural resource.
Republika Srpska, meanwhile, bases its position on its constitutional responsibilities for development and its ability to cooperate with neighbouring Serbia. Bosnia and Herzegovina’s constitutional framework assigns powers not expressly allocated to state institutions to the entities and permits special relationships with neighbouring countries, subject to the country’s sovereignty and territorial integrity.
The commercial structure is not inherently problematic because EPS holds the majority stake. The more important question is whether the authority granting the concession possessed the necessary legal competence and whether the underlying rights to use the river were lawfully established.
For the project sponsors, this distinction is critical. EPS’s shareholding, the project company’s concession rights and its contractual entitlement to sell electricity are separate legal and commercial matters. Changing the ownership structure would not automatically resolve a defect in the authority under which a concession was granted.
The constitutional 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 address the dispute concerning property rights and concession authority. The ruling did not annul the concessions or permanently prohibit construction, but neither did it provide final legal clearance for the projects.
In January 2023, the court determined that its earlier decision had not been implemented and referred the matter to the Prosecutor’s Office. This concerned the failure to implement the court’s decision rather than a final cancellation of the Buk Bijela project.
For potential lenders, however, that distinction offers limited reassurance. A hydropower investment with a multidecade operating life requires confidence that the legal rights supporting its revenue will remain enforceable throughout construction and operation.
Institutional paralysis continues to increase the cost of delay.
The dispute-resolution mechanism has also faced institutional difficulties. The Bosnia and Herzegovina Concessions Commission has operated with incomplete membership and expired mandates, while efforts to establish a fully functioning commission have encountered political obstacles.
Consequently, characterising the delay simply as a Sarajevo veto overlooks the broader institutional problem.
The dispute concerns competing interpretations of constitutional authority and the potential precedent that a decision on Buk Bijela could establish for other natural resources. Accepting unilateral entity concessions could strengthen Republika Srpska’s control over valuable public assets, while requiring broader state-level involvement could constrain its autonomy in developing energy and infrastructure projects.
For institutions and political parties defending state ownership, Buk Bijela raises questions about the future treatment of rivers, forests, agricultural land and other infrastructure assets. For Republika Srpska, the opposite concern is that state-level intervention could weaken its ability to structure and implement investments within its territory.
The project has therefore become a test case for the relationship between entity development powers and state-property rights.
Similar uncertainty has complicated infrastructure, renewable-energy, mining and other investments elsewhere in Bosnia and Herzegovina, although the specific legal circumstances differ between projects.
Nevertheless, there have been indications that cooperation remains possible. In May 2026, energy representatives from Serbia, Republika Srpska and the Federation of Bosnia and Herzegovina discussed broader cooperation on Drina hydropower. Serbia reiterated its readiness to continue activities on the Upper Drina once the necessary conditions within Bosnia and Herzegovina had been established.
This dialogue suggests that opposition to the current legal structure should not automatically be interpreted as opposition to all Serbian participation in regional hydropower development.
Environmental requirements will also determine the project’s financial viability.
Even if the constitutional and political disputes are resolved, separate environmental and operational questions must still be addressed.
The revised Buk Bijela design provides for approximately 118.1 MW of installed capacity and average annual electricity generation of around 354.3 GWh. An earlier design envisaged approximately 93.5 MW and annual generation of roughly 332 GWh.
The revised configuration therefore increases installed capacity by approximately 26%, while projected annual production rises by about 7%.
This difference has financial implications. Higher turbine capacity could enable the plant to capture periods of stronger water flow and concentrate production during higher-value electricity-market hours. However, increased turbine capacity cannot create additional water or eliminate hydrological constraints.
The proposed reservoir would extend approximately 11.5 kilometres, with total storage of around 15.7 million cubic metres and useful storage of approximately 11 million cubic metres. These characteristics suggest short-term regulation capabilities but do not provide the scale of seasonal storage needed to insulate the project from prolonged drought.
The Drina is formed by the Tara and Piva rivers, while Montenegro’s existing Piva hydropower plant already influences the upstream flow regime. Consequently, the investment case depends on more than installed capacity and projected average generation.
Developers and lenders must assess performance under different Tara inflows, Piva release schedules, drought conditions, ecological minimum-flow requirements and operating restrictions. The three-plant Upper Drina cascade must also be modelled as an integrated system, taking account of how water can be used at successive hydraulic drops without increasing the underlying river inflow.
Cross-border environmental concerns remain another source of uncertainty.
Montenegro has raised concerns about possible effects on the Tara and Piva river systems and protected natural areas. EPS has argued that its environmental studies indicate no unacceptable impact on Montenegro and that the planned reservoir would not extend into Montenegrin territory.
However, the absence of a reservoir crossing an international border does not, by itself, resolve questions about transboundary environmental effects. Fish migration, sediment transport, ecological flows, hydropeaking and changes in river morphology can affect areas beyond the immediate dam site.
UNESCO has also called for examination of potential effects on the Durmitor World Heritage area before irreversible decisions are taken.
Downstream, authorities in Goražde have questioned the treatment of flood risks and cumulative environmental effects. These concerns do not automatically establish that Buk Bijela would increase flooding. The outcome depends on reservoir levels before flood events, available storage, spillway operation, tributary inflows, upstream releases and coordination between hydropower operators.
A credible assessment therefore requires transparent hydraulic modelling rather than general assurances from either supporters or opponents.
Environmental organisations 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 directly affect project economics.
Restrictions on rapid discharge changes, additional ecological flows, seasonal operating limitations and mitigation measures could reduce operational flexibility, increase capital expenditure or lower expected electricity revenues. These requirements should therefore be incorporated into the financial model before the project is considered fully bankable.
The investment requirement has increased as the project has developed.
At the 2021 cornerstone ceremony, Buk Bijela was presented as an investment of approximately €220 million. More recent Republika Srpska public-investment planning has placed the project value at around €297 million.
The two figures reflect different stages of project development and should not automatically be interpreted as pure cost escalation. Changes in design, installed capacity, inflation, construction prices and project scope can all influence reported investment requirements.
The frequently cited figure of approximately €520 million relates to an older estimate for the wider Upper Drina scheme rather than a confirmed current financing package for Buk Bijela alone.
The project could still be commercially attractive if construction, legal and operational risks are adequately controlled. Based on expected annual generation of approximately 354 GWh, an average realised electricity price of €100/MWh would produce gross annual revenue of around €35 million.
At €80/MWh, gross revenue would be approximately €28 million, while a realised price of €120/MWh would increase it to more than €42 million.
These figures are illustrative rather than project forecasts. They exclude operating expenses, concession payments, taxes, financing costs, environmental obligations and other costs.
Hydrological risk is equally important. A hypothetical 25% reduction in annual generation, assuming an unchanged realised price of €100/MWh, would reduce gross annual electricity revenue to approximately €26.6 million.
Investors must therefore evaluate dry-year production, expected capture prices, reservoir flexibility and environmental operating constraints rather than relying exclusively on headline installed capacity.
International construction expertise could help, but it cannot resolve the underlying legal dispute.
Republika Srpska authorities confirmed in 2026 that they had discussed potential cooperation with Bechtel. The involvement of a major international engineering and construction company could strengthen execution planning, contracting discipline and potentially financing options.
However, contractor participation cannot replace the fundamental requirements for development. Before construction risks can be allocated through an engineering, procurement and construction contract, Buk Bijela needs a legally durable concession, final permits, an agreed operating regime, a bankable budget and committed financing.
An international contractor can build a dam, but it cannot independently resolve the constitutional status of the river or guarantee the enforceability of disputed concession rights.
A negotiated legal structure could provide a way forward.
Resolving the Buk Bijela dispute does not necessarily require either side to abandon all of its objectives. A potential compromise 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 maintain its investment position.
Such an arrangement could distinguish ownership of the underlying public resource from the commercial rights required to develop and operate the hydropower facility.
State-level recognition or approval would not necessarily require the Federation or a Sarajevo-based institution to operate the plant. Equally, recognising Republika Srpska’s energy-development responsibilities would not automatically establish that the entity can independently determine ownership of the river.
Any settlement would need to clarify concession authority, revenue allocation, environmental obligations, compensation, liability and long-term operating rights.
Buk Bijela is therefore neither merely a political project nor an investment ready to proceed immediately into full-scale construction. Serbia and Republika Srpska have established a project company, funded preparatory activities and continued development efforts despite years of delays. The hydropower resource is substantial, the engineering concept is established and the potential electricity output is commercially meaningful.
However, the project still lacks a sufficiently clear and uncontested legal pathway from concession to operation.
The central argument advanced by state-level institutions is that Republika Srpska cannot settle disputed state-property rights solely through an entity concession. Republika Srpska, in turn, argues that its constitutional development powers and cooperation with Serbia must leave meaningful room for energy infrastructure investment.
These positions may be reconciled through a negotiated legal framework, but until that happens, continued expenditure increases financial exposure without resolving the fundamental uncertainty.
The decisive milestone will not be another ceremony, political declaration or revised construction deadline. It will be the establishment of an enforceable concession, an environmentally acceptable operating framework, committed financing and a construction programme capable of withstanding political and institutional changes.
