The Chinese are asking for additional guarantees of Srpska for construction of Hydropower plant “Buk Bijela”

The Chinese companies that submitted bids for the construction of Buk Bijela hydropower plant requested additional guarantees of Republika Srpska Government in order to sign the contract for this 250 million Euro worth project. As CAPITAL portal learns, the reasons provided in the request are disputes that have been brought up before the BiH Constitutional Court and UNESCO concerning this hydropower plant.

Hydropower plant Buk Bijela is a joint project of “Elektroprivreda Republike Srpske” and “Elektroprivreda Srbije” worth 250 million Euro.

“Elektroprivreda Srbije” will secure 51% of the funds needed, and “Elektroprivreda RS” 49%, which is the amount of companies’ ownership share in the joint company “HES Gornja Drina”.

One of the three Chinese companies that had submitted bids several months ago should be constructing the hydropower plan under the turnkey system. Those companies are “Dongfang Electric Corporation”, “Power China” and “Energy China”.

In addition to the construction, the company selected as constructor should also secure funds, while payment of the loan would be guaranteed by the governments of RS and Serbia.

Although four months have passed since submission of the bids, the decision about the constructor still hasn’t been made.

Đokić: Unfair moves by the Chinese

One of the main reasons, as we have learned, is the request that these companies sent to the governments of Srpska and Serbia. Namely, the Chinese have requested additional guarantees for this project, mentioning disputes involving this project that have been brought up before the BiH Constitutional Court and UNESCO as one of the reasons.

According to our information the Chinese banks do not want to finance this project until the situation is completely clear, namely until both disputes concerning this half a billion BAM worth project are settled.

As we have learned, the RS authorities are not too much worried about the dispute before UNESCO, but are about the one before the Constitutional Court for which there is currently no solution in sight.

Namely, the Constitutional Court of BiH, at the request of 24 members of the House of Representatives of the BiH Parliament, determined in mid-2021 that there are legal dilemmas regarding the award of the concession for this project and ordered the Commission for Concessions of BiH to resolve the dispute within three months.

More than two years have passed since then without the Commission making a decision, and the case ended up in the prosecutor’s office due to non-enforcement of the decisions of the Constitutional Court of BiH.

Although the preparatory works on the project have been brought to an end and three Chinese companies submitted bids for the construction, there is now a new complication, because the Chinese are also wary of these disputes.

The RS Minister of Energy and Mining, Petar Đokić, confirmed for CAPITAL that the Chinese companies that submitted the bids have sought an answer regarding these disputes in order to be able to decide if they will take part in the project.

He considers their request to be unfair.

“The Chinese wanted to have a clear answer to those two questions. However, these are not appropriate questions from their side as they are not investors. I told them that we cannot provide any guarantees concerning the Constitutional Court, because we don’t have that competence”, said Đokić.

He reiterated the opinion that the BiH Constitutional Court has no jurisdiction to decide on this matter, adding that “BiH would probably face an arbitration worth more than a billion Euro if that court renders a decision that is detrimental to the economic interests of RS”.

“None of the three companies have been selected yet, and evaluation of their bids is still ongoing. These companies are still in the game”, claims Đokić

Selection of the most favorable bidder postponed until spring

President of the Board of Directors of the company “HES Gornja Drina”, Milan Baštinac, said for CAPITAL that the Chinese have not officially informed him about the request for additional guarantees, but that they have received inquiries from them about the status of the case before the BiH Constitutional Court.

He added that the technical and financial parts of the bids are being evaluated, but that it will most probably be postponed until spring due to the complexity.

“We will complete preparatory works by the end of December, which were also postponed due to objective reasons. Other project documents concerning fish hatchery, which is an integral part of the project and an obligation under the environmental permit, are currently being prepared,” said Baštinac.

When it comes to the disputes concerning this project, Baštinac says that Srpska still believes that the BiH Constitutional Court cannot make a decision that would contradict the previous decisions and approvals of the RS Government.

“The hydropower plant is being built 11 kilometers off the border with Montenegro, and in upper part of its course Drina is not a border river, which automatically implies that the issue of the concession is completely within the competence of Republika Srpska,” claims Baštinac.

We sent questions about the demands of the Chinese and Serbia’s view of the situation to the Ministry of Mining and Energy of Serbia and “Elektroprivreda Srbije”, but we did not receive an answer.

As I reminder, the MPs from the FBiH, who submitted an appeal to the BiH Constitutional Court, have challenged the fact that the concession for this project was awarded by Republika Srpska, not Bosnia and Herzegovina, because, as they claim, it is a “transnational” project.

After the BiH Constitutional Court ascertained that there are legal dilemmas, it ordered the BiH Concessions Commission to resolve the dispute within three months.

As that deadline was not respected, the BiH Constitutional Court extended it several time, but the Commission still failed to comply with the court order which is why the BiH Constitutional court passed a decision on non-enforcement of its decision.

The BiH Commission for Concessions on the radar of the prosecutor’s office due to negligence
The BiH Constitutional Court told CAPITAL that after they had passed the decisions on non-enforcement on December 2, 2021 and January 19, 2023 they did not receive any feedback from the BiH Prosecutor’s Office concerning BiH Concession Commission’s failure to act.

“Following such a decision, the BiH Prosecutor’s Office, as an investigative body, must collect all relevant information and reasons why the “enforcer” did not act according to the order of the Constitutional Court, i.e. why the final and binding decision of this court was not enforced,” read the answer of the BiH Constitutional Court to a question related to the HPP “Buk Bijela” case.

Milomir Amović, president of the BiH Concessions Commission, confirms that a decision or a solution to this problem is not even in sight.

Amović told CAPITAL that the Prosecutor’s Office of BiH has requested certain documentation from them in connection with this case, that they submitted that documentation and that they haven’t received any information about what is happening in this matter since then.

He said that the Commission, which should have seven members, is currently functioning with four members whose mandates have expired.

These four members together with three members of the RS Concessions Commission form a joint commission which, by order of the Constitutional Court of Bosnia and Herzegovina, should make the final decision on whether the RS Concessions Commission may grant the concession for HPP “Buk Bijela” or whether that should have been decided by the BiH Concessions Commission.

“The problem is that one member of the commission, Mensur Šehagić, is obstructing the work. He doesn’t want to attend the sessions, and provides a thousand of different reasons. Therefore we did not have a quorum to hold a session at which a decision could have been made. That is why we have passed certain conclusions in which we stated that we do not see what is contentious in the case, and we have submitted the conclusions to the BiH Constitutional Court. However, the Constitutional Court wants a decision, and we cannot give one as we do not have quorum”, said Amović.

A dispute about HPP Buk Bijela is also brought up before UNESCO

In addition to the dispute before the Constitutional Court of Bosnia and Herzegovina, there is also a dispute concerning the Buk Bijela hydropower plant that is brought up before the UNESCO, and it was initiated by Montenegro regarding the potential violation of the protected area of the Durmitor Mountain.

Minister Đokić says that Montenegro had previously supported this project and that he does not see why it would be a problem now.

He pointed out that he will soon visit Montenegro, together with the Minister of Mining and Energy of Serbia, Dubravka Đedović Handanović, and talk with its president and relevant minister in order to confirm the agreement of the Montenegrin side for this project.

As a reminder, the lowest bid for the construction of the Buk Bijela hydropower plant in Foča was submitted by the company “Dongfang Electric Corporation”, “weighting” 245 million Euro.

“Power China” offered to do this work for 263 million Euro, while the bid of the company “Energy China” is 1 million more expensive and amounts 264 million Euro.

In addition to construction, the company that gets selected as the contractor should also provide financing, i.e. the construction is planned on a “turnkey” basis, so the financing conditions will also be considered during the selection of the most favorable bid.

HPP “Buk Bijela” is part of the Gornja Drina hydropower system project, which, in addition to this one, envisages the construction of two more hydropower plants that will be jointly built by Serbia and Republika Srpska.

The value of the first hydropower plant, namely of the HPP “Buk Bijela”, is about 250 million Euro, while the value of the total investment is estimated at about 520 million Euro.

The foundation stone for “Buk Bijela” was laid in May 2021 by the Prime Ministers of Srpska and Serbia, Radovan Višković and Ana Brnabić, whereafter the disputes that still impede this project have started.

The Chinese companies are already working on two large energy projects in Srpska, namely the “Dabar” and “Bistrica” hydropower plants.