By Maja Zuvela

SARAJEVO, Nov 5 (Reuters) - A political row that has blocked operation of the Bosnian national grid Elektroprenos may also endanger a potentially lucrative power deal with Italy and Montenegro, a senior Bosnian official said on Thursday.

Josip Dolic, a board member of the Independent System Operator (NOS), said that Italy's power grid Terna had offered Elektroprenos a stake in its power project with Montenegro but so far the company has ignored the invitation.

Terna wants to build a 100-kilometre underwater power cable connecting power-starved Italy and Montenegro. It would have an initial capacity of 1,000 megawatts, which could potentially be linked with Bosnia by a 400 kilovolt tie-line, said Dolic.

'We have informed Bosnia's state power regulatory commission and the economic relations ministry about the issue but we are not in position to discuss the deal without a consent from Elektroprenos,' he told Reuters in an interview.

Elektroprenos is jointly owned by Bosnia's two autonomous regions, the Serb Republic and the Muslim-Croat federation but separatist Bosnian Serbs have obstructed its work for more than a year after failing to set up their own grid last year.

In an attempt to ensure the continued operation of the company, international peace envoy Valentin Inzko extended the mandate of its board in September and ordered it to appoint a new general director.

No progress has been made since because Serbs said they would boycot its work until the shareholders agree on how to resolve the problems.

Elektroprenos is the only institution authorised to make power transmission development plans while NOS is in charge of their clearance, Dolic explained.

'We found the proposed project interesting and will have nothing against it if the feasibility study has proved justified but the situation with Elektroprenos has handicapped us,' he said.

Dolic said the joint project could hugely benefit Bosnia because Italy cannot meet its power demand while Bosnia is able to export power -- a rare feat in a region where other countries rely on imports to cover between 30 to 50 percent of their consumption.

'There is mutual interest in the project. If Bosnia intends to increase the power output, it has to improve inter-connections and commercial tie-lines,' he said, adding this was also an EU requirement for member and non-member states.

The international peace envoy Inzko has said that the political row has also blocked an estimated 150 million marka in funds designed for infrastructure investments needed to improve the power grid and ensure supply over the past two years.

For example, Bosnia's power supply has been disrupted several times over the past two months and power utilities have had problems approving repairs exceeding 5,000 Bosnian marka ($3,790).

'The situation could not be any worse,' said Amer Jerlagic, the general manager of Bosnia's largest utility Elektroprivreda BiH (EPBiH), expaining that repairs cost Bosnia's three utilities around 20 million marka in September alone.

($1=1.32 Bosnian marka)

(Editing by Michael Kahn and Toby Chopra) Keywords: BOSNIA POWER/

(maja.zuvela@thomsonreuters.com; +387 33 295 484; Reuters Messaging: maja.zuvela.reuters.com@reuters.net;)

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