New arrests should dampen Serbia's appetite for coal

On January 27, Vladan Milošević, the general director of the public company Resavica which operates nine underground coal mines in Serbia has been arrested on the charge of corruption [sr]. In a statement, Serbia's Minister of Internal Affairs said that Milošević was caught with a bribe of 14 000 euros of marked money. (The handover has been filmed by the police.)

The case adds to the impression that the dependence on coal creates a stack of vulnerabilities for Serbia’s energy sector, in particular in the aftermath of last year’s floods which turned Serbia’s largest coal pit at the EBRD-financed Kolubara mine into a lake and forced the country to start importing lignite.

With 70 per cent of electricity coming from coal and alternatives developing by far too slowly, keeping Serbia’s coal power plants running is of such urgency that it opens the door for all kinds of negligence or even manipulation. Apart from the corruption case of Vladan Milošević or the choice of China's CMEC as a contractor for the Kostolac power plant without any tender, irregularities have recently popped up also around the coal imports of Serbian state electricity company EPS.

In November 2014 kurir.rs reported that a tender for the import of two million tons of coal from Romania was won by a consortium of three Serbian and Romanian firms. A look at the consortium members must raise eyebrows:

• One of the two Serbian firms is „Virom groupa“ whose owner Dejan Oketić was convicted in 2008 as a member of the so called "oil mafia".
• According to the Romanian Trade Registry, the Romanian consortium member (Coal BVA) was registered on October 24, 2014, less than a month before the contract was signed (November 19). Coal BVA is registered in an apartment in Constanta, with a 20 shares capital worth 45 euros. The two only shareholders also own BVA Structure Trading, a company operating industrial waste and registered at the same address.
• The names of both of Coal BVA’s shareholders have been associated with organised crime and bribes. One of them used to be the administrator of the company Steel Shining SRL, bought in 2007 from one of Romania’s most feared serial criminals [ro] (sentenced to life imprisonment in 2011 [ro]). The other one is being investigated for bribery in a case against the traffic police.
• One of the sub-contractors is Dragan Ćurčić, a member of the so called "custom mafia" who served his time in prison and was released only recently.

Also suspicious is that the winning tender offered a price of 35.8 euros per ton which includes transport costs of 14 euros/ton. The remaining 24.5 euros/ton are still nearly twice as high as the 13.5 euros per ton from a recent contract with the Romanian state-owned Oltenia Energy Complex for importing 1.2 million tons of coal within the next six months.

Gearing up for more coal investments

And still, despite the costs of importing coal, Serbia keeps putting all its eggs in one huge basket – or rather coal cellar. Rather than trying to develop alternative electricity sources, it is gearing up for more coal investments, among others at least at two of the mines under the control of Resavica (Štavalj and Soko), the company of the arrested Vladan Milošević.

Running, financed and planned coal mine projects in Serbia. See an interactive map here.

In a letter from September last year, Milošević urged Serbian Vice Prime Minister Zorana Mihajlović to quickly open the tender for one of the project's components, the Štavalj powerplant.

In December 2014 then, on the margins of the China-Balkan summit in Belgrade Serbia’s Minister of Energy and Mining Aleksandar Antić, after meeting the Czech Minister for Industry and Trade Jan Mládek, announced that an official decision to begin the Štavalj coal project should be adopted in the first half of March 2015. The approximately 800 million euro project – planned in cooperation with the Czech Republic – includes the construction of a new power plant around Sjenica and the development of the existing Štavalj mine to increase production from 50 000 to 2 million tons of coal per year.

The two also discussed the modernisation of another Resavica venture, the Soko underground coal mine for which the Serbian budget foresees a 10 million euros investment this year and another 20 million euros projected for the next two years.

In the mentioned letter to the government, Vladan Milošević also pointed out that investors were interested in other coal projects as well, among them:

• The Russian embassy is interested in a 45 million euros investment in the coal project Poljana.
• The Russian controlled Serbian Oil Industry (NIS – Naftna industrija Srbije) is initiating investments to the new Kovin thermo power plant.
• China is interested in the new TPP Despotovac and in opening new mines in the Despotovac region.

Risky business

Coal is not only there to stay in Serbia, but the push for more investments may well crowd out a renewable sector that is struggling to get its feet on the ground despite the promising potential of both wind and solar.

International financiers of these investments, among them the European Bank for Reconstruction and Development, the Chinese Export-Import Bank, and the German KfW should think twice about putting their money into Serbia’s obsession with coal.