29/02/2024

Three Chinese Companies Compete for the Largest Hydroelectric Power Plant in Republika Srpska

Bids for the construction of the “Buk Bijela” were submitted by three Chinese companies: “Dongfang”, “Power China”, and “Energy China”.

The decision on the contractor will be made by the end of September.

BANJALUKA – The “Buk Bijela” hydroelectric power plant will be built by one of the three Chinese companies currently competing for this 250 million euros worth project. This will be the third major energy facility that Republika Srpska has entrusted to Chinese companies, as revealed by the CAPITAL portal.

 

The “Buk Bijela” HPP is a joint venture between the “Elektroprivreda Republike Srpske” and the “Elektroprivreda Srbije”, and it is a part of the hydro-energy system project Gornja Drina, which includes the construction of two additional hydroelectric power plants.

The entire project will be financed in a ratio of 51 per cent by “Elektroprivreda Srbije” and 49 per cent by “Elektroprivreda Republike Srpske”, which is also the ownership share in the joint company “HES Gornja Drina”.

Given that Serbia is the majority owner of the joint enterprise, there was no obligation to issue a tender, which is why the management of “HES Gornja Drina” negotiated directly with potential contractors.

A contractor is Required to Secure Financing

According to our information, there were about ten companies in consideration, of which ultimately only three Chinese companies submitted concrete bids.

The lowest bid, worth 248 million euros, was submitted by “Dongfang Electric Corporation”.

The bid from “Power China” amounts to 263 million euros, while the bid from “Energy China” is one million euros higher, totalling 264 million euros.

In addition to construction, the selected company will also need to secure financing. The construction is planned to be carried out on a “turnkey” basis, so the selection of the most favourable bid will also consider financing conditions.

Both the Government of Republika Srpska and the Government of Serbia will provide guarantees for loan repayment, and it will be decided later who will guarantee for what amount.

The fact that these companies are in the running for the construction of “Buk Bijela” was confirmed to CAPITAL by Milan Baštinac, Assistant Minister of Energy and Mining of Republika Srpska, who is also the Chairman of the Board of Directors of the company “HES Gornja Drina”.

Baštinac states that the evaluation of submitted bids is currently underway and should be completed by September 1st.

“As for the construction project of the ‘Buk Bijela’ HPP, preparatory work is currently in progress, which should be completed by the end of September when the location would be ready for the main construction works”, says Baštinac.

However, the actual construction of the hydroelectric power plant is not expected to commence until the middle of next year, as negotiations with the selected contractor regarding specific contractual terms will only begin after the most favourable bid has been chosen.

Disputes Hindering the Project

Moreover, what is slowing down this project are two ongoing disputes.

One dispute is being heard before the Constitutional Court of Bosnia and Herzegovina. In mid-2021, at the request of 24 members of the House of Representatives of the Parliament of Bosnia and Herzegovina, the Constitutional Court determined that there is a dispute regarding decisions on concessions, specifically concerning the fact that the Republika Srpska granted a concession for the construction of the Buk Bijela hydroelectric power plant on the Drina River in the municipality of Foča.

Photo: Capital.ba

The lawmakers from the Federation of Bosnia and Herzegovina who filed the appeal found it problematic that the concession was granted by Republika Srpska rather than by the institutions of Bosnia and Herzegovina, as they argued it was an “interstate” project.

After identifying legal uncertainties, the Constitutional Court ordered the Bosnia and Herzegovina Concessions Commission to resolve the dispute within three months.

As that deadline was not met, the Constitutional Court of Bosnia and Herzegovina extended the deadline for the Commission. However, the Commission was unable to complete the task and referred everything back to the Constitutional Court of Bosnia and Herzegovina, whose decision is still pending.

Furthermore, a dispute is ongoing before UNESCO, initiated by Montenegro, regarding the potential impact on the protected Durmitor area.

According to claims from Montenegro, the construction of the Buk Bijela Hydroelectric Power Plant in Foča would compromise the protected Durmitor area.

In this regard, at the end of last month, a meeting was held in Paris between representatives of the Government of Republika Srpska and Lazar Assomo, the Director of UNESCO’s World Heritage Center. During the meeting, it was agreed that an additional ecological study would be conducted for this hydroelectric power plant, focusing on potential impacts on the protected area of the Durmitor National Park.

It’s worth noting that the foundation stone for “Buk Bijela” on the Drina River was laid in mid-May 2021 by the Prime Ministers of Republika Srpska and Serbia, Radovan Višković and Ana Brnabić. Shortly after that, the dispute began before the Constitutional Court.

According to the project, the “Gornja Drina” hydroelectric system consists of three power plants that will be jointly constructed by Serbia and Republika Srpska.

The value of the first power plant, the “Buk Bijela” HPP, is approximately 250 million euros, while the total investment value is estimated at around 520 million euros.

Environmentalists Against Hydroelectric Power Plant Construction

The Center for the Environment in Banja Luka has stated that they have engaged in discussions regarding this project with representatives of the local community and institutions of Republika Srpska to assess the extent to which this project serves the public interest and how much harm it may cause to the environment.

They assert that the location of this hydroelectric power plant, as well as two other planned plants, is situated in the upper watershed of the Drina River, which is one of the most significant natural assets in Republika Srpska.

“We are absolutely against this project due to the fact that we already have an adequate supply of electricity and hydroelectric facilities. What we lack is solar and wind energy, and solar energy, in particular, is something citizens could produce themselves”, stated Vladimir Topić from the Center for the Environment, speaking to CAPITAL.

Chinese Companies Constructing “Dabar” Hydroelectric Power Plant

With the construction of the “Buk Bijela” HPP, Chinese companies will continue their expansion into the energy sector of Republika Srpska.

Namely, this HPP marks the third major energy project undertaken by Chinese firms in Republika Srpska.

As a reminder, construction of the “Dabar” hydroelectric power plant also commenced at the end of June after several delays. The project is being executed on a turnkey basis by the Chinese company Gezhouba Group.

The contract for this project, valued at 338 million euros, was signed back in May 2020.

Photo: ERS

The Government of Republika Srpska has provided a guarantee for 85 per cent of the contract value, while Elektroprivreda RS has contributed 15 per cent along with other fees.

The construction of the “Dabar” HPP is being financed by the Export-Import Bank of China.

The total value of the “Dabar” HPP is estimated at around 660 million KM, and CAPITAL previously reported that the construction cost increased by 300 million KM in just a few years.

The CEO of Elektroprivreda RS, Luka Petrović, previously stated that the deadline for completing the work is 46 months.

In addition to the “Dabar” HPP, Chinese companies are also constructing the “Bistrica” hydroelectric power plants in Foča.

The foundation stone for the construction of the “Bistrica” river hydroelectric power plants was laid on December 27, 2021, in the presence of Prime Minister of Republika Srpska, Radovan Višković, and the Minister of Energy and Mining of Republika Srpska, Petar Đokić. This was done without the necessary construction and environmental permits, as well as without funding for the construction.

The construction of the energy system for the “Bistrica” hydroelectric plants, consisting of three power plants, will cost a total of 102 million euros, and the funding for the construction is supposed to be provided by the investor, the company “Hidroelektrane Bistrica”, which is mostly owned by “Hidroelektrane na Drini”.

“Hidroelektrane na Drini” as the investor has faced several challenges in securing funds for this project, and this remains a significant issue as seen in the company’s shareholder meetings.

During the latest shareholder meeting of “Hidroelektrane na Drini” held at the end of July, some shareholders raised concerns about the substantial allocations from this company for the recapitalization of the “Bistrica” HPP, stating that it financially strains “Hidroelektrane na Drini”.

 

CAPITAL

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