Serbia’s Elektroprivreda Srbije (EPS) and Elektroprivreda Republike Srpske (ERS) have yet to resolve who can authorize commercial use of the Drina River as they seek to advance the Buk Bijela hydropower development. The project’s latest identified official planning value is approximately €297 million. The dispute over authority to grant long-term rights to the river remains a major obstacle to turning years of preparation into a financed construction programme.
Project structure and preparation
The planned plant near Foča has an installed capacity of 118.1 MW and is the leading element of the Gornja Drina, or Upper Drina, hydropower scheme. Its project company is owned 51% by EPS and 49% by ERS. The companion Foča project has a published capacity of 44.15 MW, while Paunci is planned at 43.21 MW; retaining those designs would bring the three projects’ combined capacity to approximately 205 MW.
Investment has already gone into preparation. 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 progressed, alongside extensions to concession deadlines.
Available project information does not establish a completed financing package, an awarded main construction contract or a firm commissioning date. The next stage depends on aligning legal authority, environmental approval, construction terms and funding. The current planning value is therefore distinct from confirmation that financing and construction arrangements are in place.
Disputed authority over the river
Buk Bijela is often discussed in terms of political relations between Banja Luka, Belgrade and Sarajevo, but the legal issue is narrower: locating an energy project within an entity does not, by itself, determine 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 raised by state-level challengers. Responsibility for electricity development does not automatically give an entity unrestricted authority to determine ownership or long-term commercial use of the underlying resource. Republika Srpska, in turn, relies 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 allocated to state institutions. It also permits special relationships with neighbouring states, subject to Bosnia and Herzegovina’s sovereignty and territorial integrity. The commercial structure is therefore not problematic simply because EPS is the majority shareholder; the central questions are whether the concession-granting authority 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 the contractual right to sell electricity are separate matters. Serbia’s shareholding does not itself establish the company’s right to use the water, and that right is distinct from its entitlement to sell power. Changing the ownership structure would not automatically remedy a defect 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 prohibit construction, but it also did not provide final legal clearance for the projects.
In January 2023, the court found that its earlier decision had not been implemented and referred the issue to the Prosecutor’s Office. That step concerned failure to implement the court ruling, rather than a final cancellation of Buk Bijela. For prospective lenders, however, the distinction offers limited assurance: a long-lived hydropower project requires confidence that the legal rights supporting its revenue will remain enforceable during construction and operation.
Institutional delays and regional cooperation
The mechanism for resolving the dispute has also been weakened by institutional problems. The Bosnia and Herzegovina Concessions Commission has operated with incomplete membership and expired mandates, while political difficulties have hindered efforts to appoint a fully functioning commission. For that reason, describing the delay simply as a Sarajevo veto does not capture the full situation.
The dispute reaches beyond one power station. Accepting unilateral entity concessions could strengthen Republika Srpska’s control over valuable natural resources, while requiring broader state participation could constrain that autonomy. For Sarajevo-based institutions and political parties defending state ownership, Buk Bijela could set a precedent for other rivers, forests, agricultural land and infrastructure assets.
Republika Srpska is concerned about the reverse precedent: state institutions setting 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 arrangements is not confined to Republika Srpska; it has also complicated infrastructure, renewable-energy, mining and other investments elsewhere in Bosnia and Herzegovina.
There are nevertheless 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 work on the Upper Drina once the necessary conditions within Bosnia and Herzegovina had been established.
The talks indicate that objections to Buk Bijela’s current legal structure should not automatically be read as opposition to all Serbian participation in hydropower development. Separate environmental and operating issues would still need to be addressed even if a political and constitutional settlement were reached. These matters include how the plant would operate under different river-flow conditions and what restrictions environmental approval might require.
Generation, reservoir and operating conditions
The revised Buk Bijela design provides for approximately 118.1 MW of installed capacity and average annual generation of around 354.3 GWh. An older design envisaged approximately 93.5 MW and annual generation of roughly 332 GWh. The revised configuration therefore raises installed capacity by around 26%, while projected annual production increases by about 7%.
The project is not simply adding annual energy: higher turbine capacity could allow the plant to capture periods of stronger water flow and potentially concentrate generation in higher-value electricity-market hours. But the turbines 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.
Those storage figures point to meaningful short-term regulation capability, but not a large seasonal reservoir able to insulate 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 the headline installed capacity.
Developers and lenders need to assess how Buk Bijela would perform 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 rather than as three independent assets. A cascade can use the same water repeatedly as it passes through different hydraulic drops, but it cannot create additional river inflow.
Cross-border and downstream environmental concerns
Environmental objections have been raised both upstream and downstream. Montenegro has focused on possible effects on the Tara, Piva and protected natural areas. EPS has argued that its environmental studies show no unacceptable impact on Montenegro and that the planned reservoir does not extend into Montenegrin territory.
The reservoir’s location does not settle every cross-border question. Effects can extend beyond the dam site through fish migration, sediment transport, ecological flows, hydropeaking and changes in river morphology. 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 treated. Those concerns do not automatically mean 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 technically credible project therefore requires transparent hydraulic modelling rather than general assurances from supporters or opponents.
Environmental groups and independent experts have raised further concerns about fish migration, sediment movement, hydropeaking and the Danube salmon, or huchen. Conditions imposed through environmental approval could directly affect project 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 presented as fully bankable. The operating regime would also need to account for the upstream flow conditions created by the Tara, Piva and existing Piva hydropower plant. These issues remain separate from the dispute over which institutions can authorize the use of the river.
Investment value and revenue assumptions
At the 2021 cornerstone ceremony, Buk Bijela was presented as an investment of around €220 million. More recent Republika Srpska public-investment planning puts the project value at approximately €297 million. The figures come from different stages of development and should not automatically be treated as a direct measure of cost escalation.
Design changes, revised capacity, inflation, construction prices and differences in project scope can all affect the reported investment value. 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. Project economics could still be attractive if construction risk is controlled.
Using 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 to the revenue calculation. In a hypothetical case where annual generation fell by 25% and the electricity price remained at €100/MWh, gross electricity revenue would decline to around €26.6 million. Investors therefore need to consider dry-year production, expected capture prices, reservoir flexibility and environmental operating constraints alongside the project’s headline capacity.
Construction discussions and a possible legal compromise
Republika Srpska authorities confirmed in 2026 that they had discussed potential cooperation with Bechtel. Involvement by a large international engineering and construction group could improve project execution and contracting discipline, and potentially widen financing options. It cannot, however, 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 resolve the constitutional ownership of the river. Contractor involvement would therefore not remove the underlying legal risk.
A resolution does not necessarily require either side to prevail on every point. One possible approach would 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 an arrangement could distinguish ownership of the underlying public resource from the commercial right to develop and operate the hydropower asset.
That distinction may offer a route forward without requiring a state-level institution or the Federation to operate the plant. Likewise, recognizing Republika Srpska’s energy-development powers would not necessarily mean the entity could independently determine ownership of the river resource. Any final structure would need to resolve concession authority, revenue allocation, environmental obligations, compensation, liability and long-term operating rights.
Buk Bijela is neither a purely political fiction nor a project ready for immediate full-scale construction. Serbia and Republika Srpska have established a project company, invested in preparation and maintained 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 legal route from concession to operation, the key basis for large-scale infrastructure financing.
Sarajevo’s central argument is that Republika Srpska cannot settle disputed state-property rights merely 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 that happens, each additional euro invested in Buk Bijela increases financial exposure without resolving the fundamental issue underlying the project. The decisive milestone will not be another ceremony, political declaration or revised construction deadline. It will be the point at which 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.