Energy Community Secretariat urges Parliament to postpone decision on Tuzla 7 guarantee

The Energy Community (EnC) Secretariat has urged the Parliament of the Federation of Bosnia and Herzegovina (FBiH) to postpone its decision on a guarantee for the Export–Import Bank of China’s (Chexim – China Exim Bank) loan to state-owned power utility Elektroprivreda BiH (EPBiH) to build a new, 450 MW unit of the Tuzla coal-fired power plant.

The Parliament has scheduled a session for February 28 with the guarantee for the EUR 614 million loan to build the Tuzla 7 thermal power plant (TPP) unit on the agenda, but the EnC Secretariat warned it that there is a “certain probability” the decision to approve the guarantee would bring Bosnia and Herzegovina in a state of non-compliance with Energy Community law, on which the Secretariat would have to follow-up by infringement procedures.

The Secretariat is currently investigating the compliance of the guarantee on the Parliament’s agenda with the state aid rules enshrined in the Energy Community Treaty, and the decision by the State Aid Council of Bosnia and Herzegovina of July 2018 which cleared the guarantee. In these investigations, the Ministry of Finance of the FBiH, EPBiH, and the State Aid Council agreed to cooperate with the Secretariat. The State Aid Council, in particular, declared its readiness to revise its earlier decision in case of new facts and evidence, the Secretariat said in a press release.

The Secretariat, at this stage, considers it likely that the guarantee constitutes state aid and has asked an independent law firm to verify its preliminary findings. The independent assessment, which the Secretariat intends to publish, is expected by the end of this week, according to the press release.

The Secretariat recommended to the Parliament back in September 2018 not to approve the guarantee.

Under the Energy Community Treaty, BiH must follow EU rules on subsidies in the energy sector. Among other things, in most cases state guarantees may only cover maximum 80% of the total loan amount, CEE Bankwatch Network said in a press release yesterday, noting that the proposed guarantee for Tuzla 7 covers 100% of the loan, plus interest and other associated costs.

There are circumstances in which this is allowed, but, as a September 2018 complaint to the Energy Community by the Aarhus Resource Centre and Bankwatch argued, the relevant conditions are not fulfilled in this case, according to the press release.

“Using public money to support a new coal power plant is unacceptable in any case, but especially when it is most likely illegal,” said Denis Žiško of the Centre for Ecology and Energy, Tuzla. “Tuzla 7, if built, would sentence Bosnia-Herzegovina to decades of more pollution and greenhouse gas emissions and is highly likely to generate economic losses. Parliamentarians must not support new coal plants in any way, but must instead act to reduce energy wastage and to use our renewable energy potential”.

“The Energy Community has issued a clear warning that Bosnia-Herzegovina is about to dive headlong into non-compliance with EU law. If the country is serious about its European future, this warning must be headed. This is not just a matter of legal compliance but also of making the clean energy transition a reality and saving public money from being spent on a polluting and obsolete industry,” stated Pippa Gallop of CEE Bankwatch Network.