Balkan coal projects face mounting challenges as China and CEE leaders meet in Belgrade

Belgrade/Banja Luka/Sarajevo, 16 December 2014: As the third annual summit of Chinese and Central and Eastern European leaders gets underway today in Belgrade, [1] problems are mounting for the lignite projects planned in the Balkan region [2]. Today alone, an official complaint [3] has been submitted to the Energy Community Secretariat on the planned 600 MW Ugljevik III lignite power plant in Bosnia and Herzegovina, and a new analysis [4] has been published showing that the planned 450 MW Tuzla 7 lignite plant – also in Bosnia and Herzegovina – is likely to be economically unviable.

The complaint on Ugljevik III outlines how the EU's Directive on Environmental Impact Assessment has been violated by failure to include in the plant's environmental study most of the important elements needed to assess the plant's likely impact on the environment. Most alarmingly, the data on emissions of SO2, NOx and dust from the plant are demonstrably false. However this was not picked up by the Ministry approving the study, which means that the authorities have not adhered to Republika Srpska law or Bosnia and Herzegovina's obligations under the Energy Community Treaty.

The analysis of Tuzla 7 by economist Vladimir Cvijanovic published today shows that with even relatively minor additional costs for the planned loans, the price of lignite or investments in the lignite mine the investment may turn out to be uneconomic. Rises in all three of these factors are considered likely.[5]

In addition the Federation of Bosnia and Herzegovina appears to be planning to free the project from paying VAT, thus depriving the public budget of an income of EUR 133 560 500 and effectively subsidizing the project. It is also considering the possibility of signing a long-term power purchase agreement which may also be seen as a subsidy for the project and risks subjecting electricity consumers to higher than necessary prices if the deal is badly done.

The new revelations come on top of a disastrous year for coal in the Balkans, which has seen the Kolubara mines in Serbia and Sikulje mines near Tuzla in Bosnia and Herzegovina flooded in May, the Kostolac mines in Serbia flooded in July and August, an explosion at Kosovo A in June which killed two workers, a mine accident at the Raspotocje mine in Bosnia and Herzegovina in September that killed 5 miners, and two fatal accidents at the Kolubara coal mines in Serbia [6].

“The latest revelations show that it's time to stop treating the lignite sector as a holy cow which will save our economies”, said Igor Kalaba of Center for Environment. “When subjected to closer analysis, it is revealed that lignite is no longer a driver of our economy but a drain on it. The last thing we need is another case like the Sostanj plant in Slovenia which is predicted to lose EUR 70-80 million annually and is only employing a fraction of the people predicted”, he added.[7]

“Chinese companies have shown increasing interest in investing in the energy sector in the last 2-3 years in our region, but we advise them and other investors to look at new forms of renewable energy like wind and sun rather than poorly planned lignite projects”, added Rijad Tikveša of Ekotim.

Contacts

Rijad Tikveša, Ekotim, Sarajevo
Tel: +387 33 812 515
Mob: +387 61 554 302
E-mail: rijad@ekotim.net
ekotim@bih.net.ba

Igor Kalaba, Center for Environment, Banja Luka
Tel : +387 51/433-142
Mobile: +387 65/860-796
igor.kalaba@czzs.org

Pippa Gallop, CEE Bankwatch Network
pippa.gallop@bankwatch.org

Notes for editors

[1] For more details see the official summit website at:

[2] For an overview of the new plans and the problems surrounding them, see

[3] The complaint is available at:

[4] The analysis is available at:

[5] These changes in the project conditions are considered likely because:

- the cost of lignite production in the Kreka mine is already above the price needed to keep the project feasible (4.75 BAM/GJ). In 2012 it cost 7.18 KM/GJ to produce.

- the offer from China's Gezhouba is subject to further negotiations before signing any contract and experience from other projects shows that price rises are likely, especially as there were no other final bidders after Hitachi withdrew.

- information is given about the potential loan conditions for a loan for 85 percent of the cost of the project but not about the conditions for the other 15 percent.

- no information about potential loans for expansion of the lignite mines is mentioned.

[6] For more information see:

- Kolubara mines flooding:

- Sikulje mines flooding: (in Bosnian)

- Kostolac mines flooding: (in Serbian)

- Kosovo A explosion:

- Raspotocje mine accident:

- Kolubara accidents (January and November):

[7] For more on the Sostanj plant, see