EU official criticizes Bosnia's backing of Chinese power loan

SARAJEVO (Reuters) - The European Union executive in charge of the bloc’s enlargement policy has criticized the Bosnian authorities for approving a Chinese loan guarantee for a new coal-fired power plant.

FILE PHOTO: Smoke rises from chimneys of thermal power plant in Tuzla, Bosnia, October 30, 2018. REUTERS/Marko Djurica/File Photo

Last week, lawmakers of Bosnia’s autonomous Bosniak-Croat Federation approved a guarantee for a 1.2 billion marka ($681 million) loan from state-funded Export-Import Bank of China.

The EU energy watchdog previously said the loan guarantee constituted state aid and violated EU subsidy rules.

European Commissioner Johannes Hahn said on his Twitter account late on Tuesday the lawmakers’ decision raised serious questions about Bosnia’s commitment to international treaties and EU rules.

He also said it raised questions “about the choice of the energy technology as well as about a sound cost-benefit analysis in a responsible and transparent manner.”

The loan would help Bosnian utility EPBiH build a 450 megawatt (MW) unit at the 715 MW Tuzla coal-power plant and replace three aging units. China Gezhouba Group and Guandong Electric Power Design will construct the new unit.

The project, the largest energy investment in the Balkan state since the war that led to the break up of Yugoslavia, is expected to cost 1.8 billion marka, with EPBiH covering the remainder of cost.

Western Balkan countries are increasingly turning to China for funding as the EU, World Bank and other lenders cut back on financing coal-based projects. Chinese-backed projects in Bosnia alone are worth around 3.8 billion euros ($4.29 billion).

Hahn said of the lawmakers’ vote: “I am sure ... representatives have good reasons for their majority decision and will be able to explain this to their citizens.”

He said issues such as environmental impact assessments, state aid and public procurement procedures would “certainly be closely looked at during the opinion process”, a reference to one of the steps toward joining the EU.

Bosnia applied for EU membership in 2016 but after initial progress, reforms needed to pursue its bid have stalled.

Six Western Balkans nations aspiring to join the bloc are obliged to transpose EU energy rules into national policies.

Reporting by Maja Zuvel; Editing by Kirsten Donovan and Edmund Blair