ICBC provides EUR 259.25 million loan for 350 MW Banovići Thermal Power Plant Project

In November 2015, Brown Coal Mines "Banovići“, joint-stock company (or RMU Banovići) — a state-owned company — and Dongfang Electric Corporation Limited (DEC) signed a strategic cooperation agreement regarding the 350 MW Banovići Thermal Power Plant Project. In the event that it was awarded an EPC contract for the 350 MW Banovići Thermal Power Plant Project, DEC agreed to make efforts to facilitate a syndicated loan from China Eximbank, ICBC and Raiffeisen Bank International AG to cover 85% of the of the cost of the EPC contract. RMU Banovići and DEC later signed an EPC contract on November 24, 2015. Then, in July 2016, a project financing agreement was signed by RMU Banovići, ICBC, and DEC. ICBC reportedly agreed to provide an EUR 259.25 million loan that would finance 85% of the cost of an EUR 305 million commercial contract between RMU Banovići and DEC. The loan reportedly carries the following borrowing terms: a 15 year maturity, a 4 year grace period, and an interest rate of 6-month EURIBOR (-0.188%% in July 2016) plus a 2.2% margin. The borrower was also reportedly required to buy a credit insurance policy from Sinosure. However, this project subsequently encountered a variety of implementation difficulties and its overall cost escalated to EUR 412.4 million. As of 2018, RMU Banovići and ICBC seemed to be renegotiating their financing agreement and potentially involving a broader set of banks. An environmental permit was issued for this project on January 11, 2016. However, in February 2017 the EU Energy Community ruled that the Banovići Thermal Power Plant would be considered a new plant under the Industrial Emissions Directive (IED) Chapter III, and would therefore need to comply with the stricter emission limit values for plants that entered operation after January 2, 2019, requiring amendments to the permit for the plant issued by the Ministry that did not specify this requirement. The decision came in response to a July 2016 complaint filed by the environmental NGO Ekotim. In December 2017, the Federal Ministry for Spatial Planning in Bosnia-Herzegovina decided not to issue a new construction permit for the 350 MW Banovići Thermal Power Plant Project, noting that several key issues such as water supply, coal supply, wastewater, flue gases and ash disposal had not been resolved. A lawsuit challenging the plant's environmental permit from the Federal Ministry of Environment and Tourism, issued in January 2016, was ongoing. Then, on May 21, 2019, it was reported that the Government of the Federation of Bosnia and Herzegovina (FBiH) had tasked the EPBiH (the state-owned power utility) ‘to accelerate all activities related to the projects for the construction of new units at existing coal-fired thermal power plants Tuzla (unit 7) and Kakanj (unit 8), as well as the project for the construction of Banovici [Thermal Power Plant] near the coal mine of the same name.’ In September 2019, RMU Banovici was denied a water permit for the coal plant, on the grounds that the application did meet the required conditions for a planned water reservoir.

Additional details

1. The Chinese project title is 巴诺维奇火电站项目 or 巴诺维奇火电站项目建设 or 巴诺维奇项目尚 or 波黑巴诺维奇电站超临界350MW循环流化床机组总承包项目 or 波黑巴诺维奇电站项目 or 巴诺维奇电站项目. The Bosnian project title is TE Banovići or Termoelektrana Banovići or Termoelektranu Banovići, blok 1-350 MW or TE Banovići Blok 1 - 350 MW. 2. In July 2018, local media reports indicated that the total value of the Banovići Thermal Power Plant Project had increased to 405 or 412.4 million euros, of which 85% would be funded by a syndicate of Chinese banks and the remaining 15% and a syndicate of local banks. However, as of July 2018, the project had not yet started because the credit line from the local syndicate of banks had not been guaranteed. This issue merits further investigation. 3. The November 2015 strategic cooperation agreement can be accessed in its entirety via https://www.dropbox.com/s/8rkyrge1112y8y8/Sporazum_14.10%20TE_Banovic.pdf?dl=0. 4. The November 2015 strategic cooperation agreement suggests that China Eximbank may have co-financed this project with ICBC. This issue warrants further investigation. 5. The other 15% of the commercial contract cost may have been financed by Raiffeisen Bank International AG. This issue warrants further investigation.

Number of official sources

24

Number of total sources

40