Chinese Contractor’s Offer for Bosnia’s Tuzla 7 Coal Power Plant Rejected

Sarajevo,15 July 2022:– Just Finance International welcomes the July 14th announcement by the Federation of Bosnia and Herzegovina (FBIH) government that it will reject a proposal for an alternative Chinese subcontractor for the proposed Tuzla 7 coal fired power plant, and calls on the Federation of BiH Parliament to choose to ditch the plant’s construction [1].

This Bosnian government’s decision was based on the analysis of Slovenian experts hired by state-owned electricity provider Elektroprivreda BiH (EP BiH), who delivered their conclusions at the end of May 2022, and after the country’s State Aid Council recently revoked its decision to approve a public guarantee for a EUR 614 million loan from China Eximbank, four years after the Council’s initial clearance [2].

“Several factors have led to this moment – the EU’s Energy Community Ministerial Council decision that found BiH to be in breach of the EU acquis – the agreements entered by EU candidate countries; the subsequent recommendations by Bosnia’s State Aid Council to end state guarantees to Chinese banks; at the global level, Chinese leadership pledged to exit construction of overseas coal-fired power plants; and the two-year construction delay of Tuzla 7 due to two major Western providers of the necessary equipment deciding to stop supporting the fossil fuel industry”, said Boris Mrkela, Campaigner at Just Finance International.

“Just Finance International urges the Bosnian government to fully reject its support for the controversial Tuzla 7 power plant, following a recent decision by Bosnia and Herzegovina’s State Aid Council to overturn its earlier decision and declare the government’s guarantees to a Chinese bank to be in breach with the EU acquis that Bosnia, as an EU candidate country, is party to [3]”, said Mrkela.

As stated in a July 5th Just Finance International press release, the guarantee for Tuzla 7 covered 100 percent of the loan, plus interest and other associated costs, but as a contracting party to the Energy Community treaty, Bosnia and Herzegovina must follow EU rules on subsidies in the energy sector, including the rule that in most cases state guarantees may only cover up to 80 percent of the total loan amount [4].

Now, the final decision on the fate of Tuzla 7 will rest again with MPs of the FBIH Parliament.

“In the upcoming vote, if members of Federation of BiH Parliament must choose to ditch the construction of the polluting and climate-destroying 450 MW coal-fired power plant in the town of Tuzla, it will be a significant milestone on its path to meeting Bosnia and Herzegovina international obligations towards decarbonization and fighting climate change”, said Mrkela.

“Bosnia and Herzegovina’s energy sector must now do an about-turn and take decarbonization seriously. Our decision makers need to speed up sustainable renewables and energy efficiency like they mean it – we can no longer waste time on polluting and expensive projects”, said Denis Žiško, of the Aarhus Centre in Bosnia and Herzegovina.

In 2017, EPBiH took out €614 million loan for the Tuzla 7 project from Export Import Bank of China (CEXIM) to finance a consortium of two Chinese companies, China Gezhouba Group Company (CGGC) and China Energy Engineering Group (GEDI), hired to build Tuzla 7. The following year, the Ministry of Finance of the FBiH notified the Council that it was ready to issue guarantees to CEXIM bank in case of EPBiH default. The Council considered that the guarantees did not constitute state aid and in 2019 both chambers of the FBiH Parliament rubber stamped the deal. 

At the recently held Just Transition Forum in Sarajevo, EPBiH CEO Admir Andelija said that operating Tuzla 7 would require the coal mines of Dubrave and Sikulje to continue operating until 2050.

“At the local level, by abolishing Tuzla 7 power plant, the FBiH government would usher the Just Transition for the last Bosnian miners a whole decade ahead of schedule,” said Mrkela. 

In addition, the local community in the municipality of Sicki Brod lake, who for several years resisted a plan by EPBIH to establish an ash and slag deposit for the planned power plant, scored a victory in mid-2022 when EPBiH publicly declared that it had dropped the lake from its plans [5].

Contact:

Dave Walsh, Communications Advisor
Just Finance International
Mob: +34 691 826 764
press@justfinanceinternational.org

Notes:

[1] Ministar Džindić o Bloku 7 – Prihvaćen prijedlog Elektroprivrede BiH o odbijanju alternativnog podizvođača – Minister Đindić on Block 7 – Accepted proposal of Elektroprivreda BiH to reject an alternative subcontractor

[2] Balkan Green Energy News: BiH blocks Tuzla 7 coal plant project

[3] Guarantee for the Tuzla 7 coal power plant found to be illegal State aid

Ministerial Council Decision 2021/03/MC-EnC on the failure by Bosnia and Herzegovina in Case ECS-10/18

Article 18: Sovereignty over Energy Resources

European Commission – Enlargement – Acquis

[4] July 5th: Bosnia’s planned Tuzla 7 lignite plant on the rocks after state aid U-turn

[5] Jezero Šićki Brod neće biti deponija: Dokaz da građani mogu poremetiti planove vlasti – Lake Šićki Brod will not be a landfill: Proof that citizens can disrupt the government’s plans

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Just Finance works to ensure that the public budget spent globally on development and infrastructure finance is contributing to the advancement of sustainability for populations and the environment.