PHANTOM THERMAL POWER PLANT: How a large Chinese-driven project failed in Banovići and was mediated by Vuk Hamović

Autor/ica 👤Inforadar research team 3.2.2023. u 13:59

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Photo: InfoRadar.ba

Through an international public tender, the company “Dongfang Electric Corporation Limited” was selected as the most favourable bidder (which was favoured) and was appointed as a strategic partner for the financing and construction of the 350 MW block. In November 2015, the Agreement on Cooperation and the Agreement on Engineering, Procurement and Construction under the “turnkey” system, worth as much as 405.3 million euros, were signed, but that was the end.

Author: InfoRadar research team

This draft of the never realized TPP Banovići Block 1-350 MW project was made almost 15 years ago. The thermal power plant is designed to be built in the central part of the coal basin, located only four kilometres from the source of all the necessary resources and is thus isolated from the urban area of Banovići. The realization of the project was announced every two years.

The last promise was at the end of 2021. Should we remind you that the foundation stone has not yet been struck? A lot of money has been spent, but still the policy, for almost a decade and a half, maintains the same mantra.

Almost nine years ago (in 2014), SDA president Bakir Izetbegović promised at the SDA’s central pre-election rally, in front of about 20,000 citizens present, that “Banovići will get a state-of-the-art thermal power plant and that he feels a great debt to Banovići”. He repeated the same in 2015, promising a billion-dollar investment in Banovići.

FAVORABLE TO A CHINESE COMPANY

Almost eight years later, all the contracts signed so far are being “cleaned up” for who knows how many times, where the contract regarding 85 per cent of financing was supposed to be initialled in China with the company Dongfang Electric Corporation Limited by the end of last year, as well as the contract related to for domestic banks. The contracts would go to the FBiH Government and Parliament for approval.

However, everything is already very late – as it has been for years, as it was also late in the very beginning, when the former municipal authorities, and the current one led by Mayor Beg Gutić, favoured this Chinese company.

We remind you that, in order to find a strategic partner for the realization of the project, RMU Banovići d.d. Banovići had to carry out an international public tender procedure through four stages, and in that procedure chose the favoured company Dongfang Electric Corporation Limited as the most favourable bidder (which was obviously favoured) and appointed as a strategic partner for the financing and construction of a 350 MW block. In November 2015, the Agreement on Strategic Cooperation and the Contract on Engineering, Procurement and Construction (EPC Contract) were signed under the “turnkey” system, worth as much as 405.3 million euros.

After all, the project was reactivated again in 2019 and the opening of TPP Banovići was announced for the end of 2021. However, we are already almost in the second month of 2023, but we are still waiting for the initialling of the contract in China, as well as the contract related to domestic banks, and the approval of these contracts by the FBiH institutions.

The President of the Municipal Organization of the SDP Banovići, Kadrija Modrić, was a member of the Federal Parliament from 2010 to 2014. He reminds that it was during this period that the FBiH Government (in 2010) passed the Decision on the declaration of public interest and access to the preparation and construction of power facilities in the FBiH.

With that decision, RMU Banovići was designated as the bearer of activities for the implementation of the Banovići TPP construction project, with a capacity of 350 MW. The list of qualified bidders included 11 companies, eight Chinese, one each from Spain and Russia, and a Polish-Chinese consortium. The chosen partner was expected to provide financing and construction of the thermal power plant Banovići, which will be 100 per cent owned by RMU Banovići, and the mine would repay the loan according to the conditions determined by the contract.

“Today, when we have already stepped into 2023, we are aware of the fact that there is nothing from that project. The question is why and for what reason the Chinese were chosen at that time when Bosnia and Herzegovina could implement the project within the framework of the European Union, through the most eminent bidders. However, they entered the story with the Chinese through the so-called Serbian lobby of Vuk Hamović and large electricity traders modelled on Rudnik in Stanari. So from this point of view, it was a project to master the energy system of Bosnia and Herzegovina”, says Modrić for Inforadar, with whom we spoke during our visit to Banovići.

He emphasizes that from the beginning it was not a state, but exclusively a private political interest, and a local and not a state project.

“At that time, the undisputed ruler of the RMU was Mirsad Kukić, who was among the leaders of the SDA BiH and could achieve everything he imagined through the RMU Banovići. Namely, in the background of everything was the fact that, with the later passing of the Law on Public and Private Partnership, RMU Banovići was completely privatized and came into the hands of various traders and brokers like Hamović”, concludes Modrić.

HAMOVIĆ’S PLAN FOR BANOVIĆ

And Hamović’s companies, which cooperate with China and Chinese banks, were dealt with by American investigative bodies, in addition to European ones. He is known as a user of public goods for the benefit of his own profit and to the detriment of the state in which he operates. His companies in the Republika Srpska entity earned more than a billion KM in ten years of business and concession use. In 2019 alone, an income of 200 million was recorded in Stanari, for which only 8.4 million KM was allocated to the RS budget.

Our sources say that the same plan existed for Banovići as for Stanare, where the thermal power plant was built by the Chinese company Dongfang Electric Corporation. We remind you of the Decision of the RS Government from 2008 to grant a 30-year concession for the mine and the construction of the Stanari Thermal Power Plant to the company EFT Vuk Hamović.

The Chinese Development Bank granted EFT a loan worth 350 million euros for the construction of a thermal power plant, and about 30 per cent of its funds were invested by EFT, which did not have to worry about repaying the loan, because an agreement was made that if EFT could not repay the loan, the bank would take everything: the thermal power plant, concessions, water, etc.

And the whole story surrounding the failed project culminated at the end of 2016, when the then-director of the Banovići Dark Coal Mine (RMU), Munever Čergić, announced that the construction of the Banovići TPP would begin in 2017 and that it would be put into operation at the end of 2019.

The Government of FBiH gave its consent to the proposal of the text of the Letter of Intent, which, on behalf of the Council of Ministers of BiH, was to be sent to the banks Industrial and Commercial Bank of China (ICBC) and China Export&Credit Insurance Corporation – SINOSURE.

The Federal Ministry of Finance is tasked with preparing a Letter of Intent on behalf of the Government of the Federation, in which it will undoubtedly highlight the Government’s intention to issue a guarantee for the total amount of debt for the Banovići TPP construction project when all the necessary conditions are met and to send it to the banks Industrial and Comercial Bank of China (ICBC), China Export & Credit Insurance Corporation – SINOSURE and other financial institutions with which RMU “Banovići” entered into discussions, with the aim of closing the financing structure.

In 2018, it was officially announced that 12 million KM had been spent on this project and that by then it had not yet received building permits, nor had its implementation begun.

Despite this, complete investment-technical and environmental documentation was prepared at the conceptual project level, as well as a number of other projects and studies for all technological units (thermoelectric power plant micro-location, sluicing site, technological water accumulation). On the basis of this documentation, valid environmental permits were obtained for all technological units. Urban planning consent and an energy permit were obtained.

PRIVATE INTERESTS, CLIENTELISM AND CORRUPTION

Kadrija Modrić tells Inforadar that the Chinese banks were initially sceptical about the model by which the project would be co-financed. However, the decision to request a loan from Chinese banks was stopped because it was not defined whose ownership it would be.

“That model is totally incomprehensible from today’s point of view. Even when I was in the convocation of the Parliament of the FBiH, I warned against entering into any shady actions without grounds, even then I said that the key was in the construction of Block 7 of the Tuzla Thermal Power Plant, and not two ‘mega projects’, which amount to four billion, and in addition, the state must provide a guarantee for its initiation. Of course, behind all that, like everything in this country, there is a system of corruption, fixing, and bribery. However, when that final point was reached, then it got stuck and it was not possible to continue with the implementation, that’s why both of these projects, block 7 of the Tuzla TPP, and TPP Banovići Block 1-350 MW, unfortunately, failed”, points out Modrić.

The current Government of the Federation of Bosnia and Herzegovina rejects any responsibility when it comes to the construction of the Banovići TPP. At the end of 2019, the Minister of Energy, Mining, and Industry, Nermin Đindić, announced that this thermal power plant in Banovići will still be built. He pointed out that the Government passed 13 acts on the basis of which a certain number of activities were initiated and obtained 40 different permits, and that among them there are some that have expired and need to be renewed.

He added that in that process the Government of FBiH created and adopted 11 documents, decisions, and conclusions, and the Parliament of the Federation of BiH nine documents. He also emphasized that the BiH Council of Ministers had issued two letters of support for the construction of that block.

For the umpteenth time, the Government of the Federation, at its session on July 21, 2022, adopted the Information on the status of the implementation of this project and gave new approvals for permits and approvals. That same information, seven days later, was accepted by the Parliament of the Federation. All this says that in our energy sector, decisions are made by private interests, incompetence, and people without continuity in their work.

At the end of last year, the departure of a delegation from Banovići to China was announced. Whether the delegation was there and whether they agreed on anything – neither the RMU Banovići nor the Municipality wanted to answer our questions. At RMU, they are delaying the agreement about the date of the interview and the arrival of our team at the place they have determined for thirty days. All this casts doubt on the imminent realization of the project and points to severe clientelism and corruption. How many attempts are there, in all of this, to incorporate personal interests – only time will tell.

In the professional field, in technical, economic, and ecological terms, Banovići Thermal Power Plant is treated as one of the most promising projects in Bosnia and Herzegovina. If personal and party interests had not been looked at for 15 years, but only state interest, this new thermal power plant would be working today.

Our sources, on the other hand, claim that the Chinese company, with the mediation of Vuk Hamović, will not give up building and taking control of this thermal power plant as an essential part of the electricity sector in the Tuzla basin and the Federation of Bosnia and Herzegovina. Just the right moment is being waited for.