Bosnia to guarantee $700 mln Chinese loan to power utility EPBiH

SARAJEVO, Aug 17 (Reuters) - A Bosnian regional government agreed on Friday to guarantee a 614 million euro ($700 million) loan from China’s Exim bank to help Bosnian utility EPBiH to add a new generating unit at its Tuzla coal-fired power plant.

The amount covers 85 percent of the total value of a contract signed last November for the largest investment into Bosnia’s postwar energy infrastructure, the government of autonomous Bosniak-Croat Federation said in a statement.

In 2014 EPBiH picked a consortium of China Gezhouba Group and Guandong Electric Power Design to add the 450 megawatt (MW) unit, but the project has been delayed by red tape and negotiations over financing.

Under its guarantee terms, the government cited a 20-year loan repayment, including a five-year grace period, and a one-off payment by EPBiH of 47.6 million Bosnian marka ($27.7 million) into a regional guarantee fund.

The guarantee deal is expected to receive the required approval from parliament if the issue is put to the lawmakers before Bosnia’s Oct. 7 general election.

The government said the new unit at the 715 MW Tuzla plant is necessary to replace its three outdated units, adding that the latest environment-friendly technologies will be used in its construction.

Environmentalists have voiced objections to the coal projects planned with China, saying they do not meet the latest EU emission directives and could add to already high levels of air pollution while also exposing cash-strapped Bosnia to paying for costly plant upgrades once it joins the European Union.

The Balkan states are increasingly turning to China for project funding as the EU, World Bank and other institutions cut back on coal financing.

In Bosnia alone Chinese companies are considering energy and infrastrucutre projects worth more than 3 billion euros. ($1 = 0.8772 euros) ($1 = 1.720 Bosnian marka) (Reporting by Daria Sito-Sucic Editing by Maja Zuvela and David Goodman)