Energy Community: Bosnia-Herzegovina guarantee for Chinese loan for Tuzla 7 is state aid, breaks EU law
The Energy Community confirmed today that the loan guarantee the Federation of Bosnia-Herzegovina Parliament wants to approve for the EUR 614 million China Exim Bank loan for the Tuzla 7 coal power plant indeed constitutes state aid according to EU law. The Energy Community had commissioned an expert analysis to look into the issue following a complaint by Aarhus Resource Centre and Bankwatch.
5 March 2019
Tuzla. Photo: Development Planning Unit University College London (CC BY 2.0)
‘Independent lawyers have now analysed the State Aid Council’s decision and the underlying public guarantee and have confirmed the Secretariat’s finding that the Tuzla 7 guarantee contains elements of State aid. The opinion was submitted to the State Aid Council,’ the Energy Community Secretariat wrote in a press release sent Monday evening.
‘The State Aid Council should therefore reopen its procedure and re-examine the guarantee in line with the Energy Community State aid acquis. The Secretariat also reiterates that the Parliament of the Federation of Bosnia and Herzegovina should not approve the guarantee, based on a non-compliant decision from its State aid authority.’
The guarantee had been cleared by the the State Aid Council of Bosnia and Herzegovina in July 2018, (1) but in September 2018, the Energy Community Secretariat requested the Federal Parliament not to approve the guarantee (2), after its initial examination of the case indicated that the guarantee would not be in line with EU law.
Under the Energy Community Treaty, Bosnia-Herzegovina must follow EU rules on subsidies in the energy sector. Among other things, in most cases state guarantees may only cover maximum 80 percent of the total loan amount.
The proposed guarantee for Tuzla 7, however, covers 100 percent 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. (3)
The legal analysis commissioned by the Energy Community confirms the reasoning presented by the NGOs to challenge the guarantee.
Last week, while the Parliament was preparing to approve the loan guarantee, the Energy Community Secretariat issued a warning that the Parliament must not approve the loan until its investigation was complete (4). Janez Kopač, the Energy Community Director, was in Sarajevo today to discuss the issue with BiH decision-makers.
“Using public money to support a new coal power plant is unacceptable in any case, but especially when it is illegal,” said Denis Žiško of the Centre for Ecology and Energy, Tuzla. “Tuzla 7, if built, would sentence Bosnia and 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 is clearly saying that, by providing the guarantee, Bosnia and Herzegovina is in non-compliance with EU law. If the Parliament nevertheless votes on March 7 to approve the guarantee, then it is knowingly legalising an illegality. Even more, it willingly pushes the country into a situation where it will be penalised in a few years” stated Ioana Ciuta of CEE Bankwatch Network.
Centar za ekologiju i energiju
Mob: +387 61 140 655
CEE Bankwatch Network
Notes for editors
- Decision No. UP/I 03-26-1-42-4/18 of dated 23 July 2018
- The letter from the Energy Community Secretariat
- For more information, see here: https://bankwatch.org/press_release/use-of-public-money-to-support-tuzla-7-coal-power-plant-must-be-investigated-shows-new-complaint | https://www.energy-community.org/news/Energy-Community-News/2019/02/23.html
Never miss an update
We expose the risks of international public finance and bring critical updates from the ground – straight to your inbox.