The Government of the Federation of Bosnia and Herzegovina (FBiH) rejected an offer from China to build unit 7 of coal-fired thermal power plant Tuzla that would be equipped with the technology of Chinese manufacturers, which opens the way for the final termination of the contract on the realization of the project, which has long been disputed by the European Union.
The new unit 7 at TPP Tuzla was supposed to be a replacement for the existing three outdated blocks, and the Chinese consortium won the public invitation for its construction, led by state-owned company China Energy Engineering Group (GGGC- GEDI). Chinese state-owned EXIM bank offered a loan of more than 600 million euros to power utility EPBiH, which would finance the construction of the unit, but they demanded guarantees from the state, which was finally approved by the decision of the entity’s Parliament in 2019.
The European Union and the Energy Community warned that in this case it was illegal state aid provided to a Chinese investor, with the new investment in coal-fired electricity generation also being controversial.
In late 2020, US General Electric (GE), which was supposed to manufacture and design a key piece of equipment, withdrew from the project, and this was subsequently done by the German Siemens, who was supposed to be the replacement. The US company was supposed to deliver a boiler and a steam turbine generator, but GE announced that it intends to withdraw from the coal energy market.
The installation of this technology was a necessary prerequisite in order to guarantee compliance with environmental standards, that is, to reduce the release of harmful particles from the operation of the thermal power plant. The Chinese consortium then offered to supply the parts to Shanghai Boiler Works and Shanghai Electric Group. The expert team formed by EPBiH determined that the installation of this equipment would not ensure the implementation of the conditions from the original contract, so the proposal was rejected.
Given that the Chinese investor was not able to fulfill the terms of the contract, it is now possible to cancel it, but the decision on this will ultimately rest with the Federal Parliament.
The rejection from the Federal Government came few days after the State Aid Council of Bosnia and Herzegovina annulled its decision from 2018 where it found that a guarantee granted by FBiH in favor of the Export-Import Bank of China for a loan by the latter to power utility EPBiH for the Tuzla project does not constitute state aid.
