Bosnia and Herzegovina: TPP Tuzla project might get EnC sanctions

, SEE Energy News

The continuation of the online public debate, which started on 9 October, is scheduled for 6 November before the Energy Community Advisory Committee, where the investor – state-owned power utility EPBiH will be represented by law firm, contracted for more than 200,000 euros.

Spokesperson for the Energy Community (EnC) Barbora Poyner, said that Bosnia and Herzegovina is facing the possibility of new sanctions imposed by the EnC due to the state guarantee issued for the construction of unit 7 at coal-fired power plant Tuzla.

In June, the EnC Secretariat submitted a Reasoned Request to the Ministerial Council for a Decision under Article 91 of the Energy Community Treaty. The case concerns compliance with the Energy Community State aid rules by a decision of the State Aid Council of Bosnia and Herzegovina of 23 July 2018, deciding that a guarantee issued by Federation of Bosnia and Herzegovina (FBiH) in favor of the Export-Import Bank of China to secure a loan to power utility EPBiH does not constitute state aid within the meaning of Article 18(1)(c) of the Treaty. The case was submitted after carrying out a preliminary procedure. The Ministerial Council will take a decision on the alleged breach of the Energy Community acquis at its meeting on 27 November 2020. In late 2019, The EnC Secretariat and representatives of the Federation of Bosnia and Herzegovina (FBiH) terminated their negotiations related to the construction of unit 7 at coal-fired thermal power plant Tuzla without having reached an agreement. The negotiations became futile after the entity signed a guarantee agreement in November, without prior clarification of compliance with Energy Community state aid rules.

Last April, the House of Peoples of the Parliament of the Federation of Bosnia and Herzegovina (FBiH) confirmed that the FBiH will provide a guarantee for the 614 million euros loan from Chinese Exim Bank for the purpose of the construction of unit 7 at thermal power plant Tuzla. The guarantee was previously approved by the House of Representatives. Previously, the Energy Community Secretariat has sent an Opening Letter to Bosnia and Herzegovina in which it addressed its concerns regarding the state aid compliance of a public guarantee granted in favor of Chinese Exim Bank for a loan by the latter to the state-owned power utility EPBiH. This guarantee has been found by the State Aid Council of Bosnia and Herzegovina not to contain elements of state aid. By sending the Opening Letter, the Secretariat initiated a preliminary procedure, the purpose of which is to give Bosnia and Herzegovina the opportunity to react to the allegation of non-compliance with Energy Community law within two months and to enable the Secretariat to establish the full background of the case.

In November 2017, EPBiH signed a loan agreement with Chinese Exim Bank for financing the construction of unit 7 at TPP Tuzla on the sidelines of a meeting of the heads of Governments of China and 16 Central and East European countries held in Budapest. The net agreed price under the EPC contract is 722.35 million euros (without VAT). The maturity of the loan from China’s Exim Bank is 20 years, with a 5-years grace period. The loan will cover 85 % of the investment, while the remaining 15 % will be provided from EPBiH’s own funds. TPP Tuzla has 6 units with overall output of 715 MW. New unit 7 will be replacement capacity for units 1 and 2 (32 MW each), which have already been shut down and units 3 (100 MW) and 4 (200 MW) which should be put out of operation in 2018, but will most likely continue to operate until 2020. When unit 7 is completed, it will provide almost a quarter of electricity produced by EPBiH.