SARAJEVO (Reuters) - Bosnian lawmakers approved on Thursday a guarantee for a Chinese loan to help power utility EPBiH expand its Tuzla coal power plant, despite a warning from the European Union energy watchdog that it violates EU subsidy rules.
The Energy Community, a body established by the EU to extend the bloc’s energy policy to would-be members, has said approval of the loan could mean Bosnia would have to repay any state aid it had committed to the project once it joins the EU.
Earlier this week it urged Bosnia’s State Aid Council to re-examine the government guarantee of the loan, and the parliament of the autonomous Bosniak-Croat Federation to reject it.
The parliament however approved the guarantee on Thursday after receiving assurances from the regional government that it had passed measures to prevent any damage to the budget should EPBiH fail to service the loan.
It did not elaborate on those measures.
Western Balkan countries are increasingly turning to China for funding as the EU, World Bank and other lenders cut back on financing coal-based projects. Chinese-backed projects in Bosnia alone are worth around 3.8 billion euros ($4.28 billion).
In 2017, EPBiH picked China Gezhouba Group and Guandong Electric Power Design to build a 450 megawatt (MW) unit in Tuzla at a cost of 1.8 billion Bosnian marka ($1.04 billion) to replace three ageing units at the 715 MW plant.
The project, which is the largest postwar energy investment in the Balkan state, is due to be financed by a 1.2 billion marka loan from the state-funded Export-Import Bank of China, with the remaining funds provided by EPBiH.
Environmentalist groups complained to the Energy Community over the project, saying it does not meet EU standards and might expose cash-strapped Bosnia to costly plant upgrades once it joins the bloc.
They have also urged EU policy makers to take a tougher stance on air pollution from the Western Balkan’s coal power plants, blaming the fumes for 3,900 deaths across Europe and health costs of up to 11.5 billion euros a year.
Reporting by Maja Zuvela; Editing by Jan Harvey