European banks must not support a “new Šoštanj 6” in Bosnia-Herzegovina, warn NGOs
Slovene bank NLB’s offer of a loan for the construction of the controversial Tuzla 7 coal power plant in Bosnia and Herzegovina poses serious risks to the bank and its shareholders due to a slew of legal and economic issues around the project, warned a group of non-governmental organisations in a letter to the bank today (1).
2 December 2019
Photo: Ana Constantinescu
An offer of a loan for the construction of the controversial Tuzla 7 coal power plant in Bosnia and Herzegovina from Slovenian NLB Banka and Italian Intesa Sanpaolo poses serious risks to the banks and their shareholders due to a slew of legal and economic issues around the project, warned a group of non-governmental organisations in a letter to NLB today (1).
A consortium comprising NLB Banka, Italy’s Intesa Sanpaolo and Russia’s Sberbank was recently the only bidder to provide a EUR 74 million to Elektroprivreda Bosne i Hercegovine (EPBIH) to part-finance the Tuzla 7 coal plant (2).
NLB’s shareholders include the European Bank for Reconstruction and Development and the Slovenian government (3), both of which were involved in Slovenia’s disastrous Šoštanj unit 6 coal power plant, which has brought huge losses as a result of cost overruns, alleged corruption and unrealistic economic analyses (4) and which is the biggest CO2 emitter and contributor to climate change in the country.
The remaining 85 percent of financing for Tuzla 7 – EUR 614 million – is to be provided by the China Exim Bank. However controversy is raging about the Federation of Bosnia and Herzegovina’s guarantee for the loan, which is in breach of Energy Community Treaty rules on State aid (5) and is currently undergoing a dispute settlement procedure.
The project has also come under criticism for failing to take into account CO2 prices in its feasibility assessment, as well as for counting on unrealistically low prices of coal.
Tuzla 7’s environmental assessment is also under scrutiny both at the Supreme Court of the Federation of Bosnia and Herzegovina, and under the Espoo Convention, which requires the assessment of transboundary environmental impacts for certain large infrastructure projects.
“As world leaders gather in Madrid to try to address climate change, and the new European Commission takes office pledging to make Europe the world’s first climate-neutral continent, it is nothing less than shameful that European banks, including one part-owned by the Slovenian government and the EBRD, is considering financing a new coal plant in Bosnia and Herzegovina,” commented Denis Žiško of the Center for Ecology and Energy from Tuzla.
“It would be a bitter irony if the Slovene government and the EBRD let NLB contribute to a new Šoštanj 6 in Bosnia and Herzegovina,” commented Pippa Gallop of CEE Bankwatch Network. “Unfortunately Tuzla 7 has many of the same hallmarks as Šoštanj, including glaring deficiencies in its feasibility study and a lack of transparency surrounding its development”, she continued.
Denis Žiško, Centre for Ecology and Energy, Tuzla
Mob: +387 61 140 655
Pippa Gallop, CEE Bankwatch Network
Mob: +385 99 755 9787
Notes for editors
- The letter is available at: https://bankwatch.org/letter-nlb-tuzla
- https://www.focus.si/files/programi/energija/2014/mythbuster.pdf, https://www.counter-balance.org/new-investigation-reveals-how-the-eus-bank-fails-to-tackle-fraud-and-corruption-in-its-investments/
- https://www.energy-community.org/news/Energy-Community-News/2019/03/04.html, https://www.energy-community.org/news/Energy-Community-News/2019/03/26.html
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