EU Warns World Bank to Back Kosovo Power Plant

Stefan Fule, Commissioner for EU enlargement, and Gunther Oettinger, Commissioner for Energy, warned the World Bank in May not to pull out its financial support for Kosovo’s plans for a new 600 megawatt power plant.

In a leaked letter published in the online website euractiv.com, the pair warned Robert Zoellick, Chief Executive of the World Bank, that its “Partial Risk Guarantee” for the project was crucial to securing a quality investor and ensuring that Kosovo’s government selected the most environmentally friendly options.

The warning came after the World Bank began to reassess its commitment to a major coal burning power plant in light of its new environmental standards.

In 2010, environmentalists and the Bank's board fought over plans to finance a South African coal plant with 3.75 billion dollars of loans, which were eventually approved.

According to internal World Bank documents, the organisation has decided to delay a final decision on its support until a new panel of environmental experts has given its assessment of the Kosovo proposal. A decision by the board is expected in November.

Kosovo’s 600MW plant will be powered by lignite, sometimes known as brown coal.

Kosovo holds the world’s fifth largest reserves of this highly polluting fuel and had intended to build a massive 2000 MW scheme to place itself as a major regional exporter. The economic crisis, delays to the plans and the growing requirements for clean energy eventually sunk the deal last year, leading to the revised, smaller project.

“Should the Bank discontinue its involvement by withdrawing the foreseen Partial Risk Guarantee (PRG) for the forthcoming generation tender, we believe that the Kosovo government would nevertheless go ahead with the project and not give proper attention to its environmental standards,” the commissioners wrote.

Without the guarantee, they added, Kosovo would also find it difficult to comply with the Energy Community Treat’s environmental commitments. The EU's Energy Community includes Moldova, Ukraine and all the Western Balkan nations as contracting parties.

“Should the Bank withdraw from the NKPP [New Kosovo Power Plant], we foresee the risk that Kosovo would renounce on its commitment to close 'Kosovo A' by 2015 and move to prolong the lifetime of the power plant,” the commissioners argued.

The European Bank of Reconstruction and Development and European Investment Bank are together providing 770 million euro of loans to a lignite coal plant in Slovenia.

But the commissioners argue that similar funds would be available to Kosovo. “It is highly unlikely that other European financial institution similar to the Bank could take over and support this generation project,” they wrote.