Court of BiH annuls ruling that state aid for coal plant Tuzla 7 was illegal

The Court of Bosnia and Herzegovina annulled the ruling of the State Aid Council of BiH that loan guarantees for the Tuzla 7 coal power plant project were illegal. Government-controlled coal and power producer Elektroprivreda BiH pointed out the verdict voids the initial decision and that the case would be returned to the regulatory body for reconsideration.

The Court of BiH annulled the ruling of the State Aid Council of BiH that the state aid in the form of a guarantee from Elektroprivreda BiH (EPBiH) for a loan for the construction of unit 7 at the Tuzla thermal power plant is not in accordance with the Law on the State Aid System.

The Energy Community Secretariat previously initiated a dispute, alleging that the project had received illegal state aid, which the State Aid Council then confirmed. In the latest twist, the Court of BiH annulled its decision.

It means that the ruling that the state aid package is illegal is now void. The case was returned to the aforementioned regulatory body for reconsideration.

The Federal Ministry of Finance was told to take measures to recover the disputed state aid, but the decision has now been annulled

The lawsuit was brought by the Federal Ministry of Finance, as the guarantor. It was obligated to take measures to recover the allegedly unlawfully granted aid, but the decision has now been annulled, EPBiH said. According to the company, the Court of BiH annulled the regulator’s decision because the state aid in question wasn’t used yet.

The Energy Community Secretariat started the initial lawsuit

The State Aid Council’s previous ruling was based on a decision issued by the Energy Community Ministerial Council.

In 2018, the Energy Community Secretariat initiated a procedure against BiH claiming the Government of the Federation of BiH committed an offense by providing the guarantee. It argued that it gave EPBiH a more favorable position than other participants. The dispute was launched under the assumption that the state aid breached the rules of the European Union.

EPBiH paid EUR 24.54 million for loan guarantees to the Government of FBiH

EPBiH now said the sum was approved under the same market conditions under which a bank would issue a bank guarantee and in line with BiH law, regulations, and procedures. The utility paid EUR 24.54 million to the Government of FBiH together with a fee implying the acceptance of commercial conditions.

Block 7 unit on the list of capital projects of EPBiH

EPBiH has included the Tuzla 7 unit in its capital investment projects. According to its website, the company is developing a string of projects to secure the energy future including Tuzla 7 of 450 MW and the Kakanj 8 coal-fired unit.

Tuzla 7 would replace obsolete capacities and produce electricity and heat for Tuzla and the surrounding area, EPBiH added.

However, the main contractor – the Chinese consortium of Gezhouba Group and Guangdong Electric Power Design Institute (GGGC-GEDI), previously informed EPBiH that it could not fulfill the engineering, procurement, and construction (EPC) contract.

The main reason is that General Electric (GE) canceled the contract and withdrew from the project. GE was supposed to provide the boiler, turbine, and generator. FBiH later rejected the Chinese consortium’s proposal to have the equipment delivered by another subcontractor.