China Eximbank provides loan for 39MW Bistrica Hydroelectric Power Plant Construction Project

Project narrative

In December 2019, ICBC participated in talks with Elektroprivreda Republike Srpske (ERS) — a state-owned integrated power company with headquarters in Trebinje, Republika Srpska — about the possibility of financing the 39MW Bistrica Hydroelectric Power Plant Construction Project. Then, in April 2022, Elektroprivreda Republike Srpske — an indirect shareholder in Hidroelektrane Bistrica d.o.o. Foča — secured a EUR 15.3 million loan for three hydropower plants on the Bistrica river in BiH from UniCredit's local branch. In December 2023, Hidroelektrane Bistrica d.o.o. Foča — a special purpose vehicle and a wholly-owned subsidiary of Mješoviti Holding ERS MP a.d. Trebinje ZP Hidroelektrane na Drini a.d. — and China Eximbank signed a loan agreement worth approximately EUR 75,258,000 for the 39MW Bistrica Hydroelectric Power Plant Construction Project. Prime Minister Radovan Višković disclosed that the loan carried a 15 year maturity period, a 4 year grace period, and an approximately 4% interest rate. The total cost of the project is EUR 113 million and the borrower was expected to use the proceeds of the loan to finance two-thirds of the total cost of the project. It is also known that the borrower was expected to use the proceeds of the loan to partially finance an EUR 102.8 million commercial contract between AVIC and ERS, which was signed in December 2019. The Bistrica Hydroelectric Power Plant (HPP) complex consists of three cascade hydropower plants (B1, B2a, and B3) on the lower course of the Bistrica River near Foča. Each HPP consists of a dam, a feed tunnel, a pipeline and a machine building. The combined installed capacity of the three HPPs is 39MW. Aviation Industry Corporation of China (AVIC) is the contractor responsible for project implementation. Construction started on December 28, 2021. Then, in early 2022, HE na Drini reportedly injected additional share capital into Hidroelektrane Bistrica d.o.o. Foča, despite the opposition of minority shareholders. Then, in March 2022, the project’s draft environmental impact assessment (EIA) was finally published for public consultation. Activists have sounded the alarm over the project, noting that it still did not have the necessary environmental permits to begin construction and the draft EIA did not study how the plant will affect the Bistrica River. In June 2022, Jelena Ivanic, vice president of the Center for the Environment, a Banja Luka-based watchdog group, said ‘[w]e have seen the draft [environmental] impact study that was submitted [and] it is very controversial [and] very poorly done. […] [They] do not have specific data, so it is impossible for them to take the necessary measures to protect [against damage].’ Ivanic said that the version of the draft impact study she saw did not mention a nearby hydroelectric plant located along the source of the Bistrica River. According to her organization (Center for the Environment), the project only had permits for preparatory work, not full-scale construction. Ivanic said that, for these reasons, the hydroelectric project was controversial, and it faced strong pushback during an April 2022 meeting between residents and officials, with many locals saying they opposed the project. Dejan Pavlovic, the Acting Director for the proposed hydroelectric complex, said at the time that the permits held by Hidroelektrane Bistrica d.o.o. Foča were valid and sufficient for the work underway, noting that only preparatory work such as building access roads, clearing vegetation, and flattening terrain was being done. Pavlovic also noted that Hidroelektrane Bistrica d.o.o. Foča had applied for permits to begin full-scale construction and expected them to be approved by August 2022. However, questions persisted about the EIA, which was prepared by the Institute for the Protection and Ecology of the Republika Srpska, a public institution under the authority of Republika Srpska's Science and Technology Ministry. Other questions were raised about the financing arrangement for the project since AVIC was placed under sanctions by the U.S. Treasury in 2021 for its close ties to the Chinese military. The project’s originally expected completion date is December 28, 2026.