Former Nato commander Wesley Clark has returned to Kosovo, the country whose independence he helped win from Serbia, as an investor in a planned coal project. But reactions to his plans to launch production of synthetic fuels using relatively untested underground coal gasification (UCG) technology are mixed.
While the government is eager to secure an investment of up to €5bn and boost Kosovo’s energy security, the opposition and many NGOs question the transparency of the project and its environmental impact.
Clark, who led allied forces during the Kosovo war, is now the chairman of Canada-based Envidity Energy. According to a power point presentation made to the Kosovan government and obtained by bne IntelliNews, the company wants to invest in coal-to-liquids and UCG technology in the tiny Balkan country.
It plans to start by building a coal-to-liquids plant, which will produce 1,200 barrels per day (bpd) of synthetic fuel. In the second phase of the project, production would be raised to 20,000 bpd and cash flow from the plant used to confirm the economic viability of UCG in Kosovo. The third and final phase of the project would involve the launch of UCG in Kosovo, where coal is converted into synthetic natural gas, provided this was found to be viable. Planned investments amount to $130mn - $150mn in the first phase, $1.8bn - $2bn in the second and up to $5bn in the third.
This is very attractive to the government of a country that saw FDI drop by 40% to just €97.5mn in the first half of this year. Additional factors include the 500 construction jobs in the first phase and 3,500 in the second, as well as indirect employment, which will help to bring down Kosovo’s extremely high unemployment rate.
Envidity stresses that the investment will make Kosovo self-sufficient in transportation fuels; currently the country is wholly dependent on imports. It buys around 500mn litres of fuel from abroad every year, according to a 2015 report from the GAP Institute for Advanced Studies think tank in Pristina, mainly from Greece, Italy and Macedonia.
Envidity submitted three applications for licences - including one to explore coal reserves on around one third of the country’s territory - back in May 2013, but Pristina has been slow to issue them. However, at a session on August 25, the government backed the plans, which now require the approval of the parliament.
Finance Minister Avdullah Hoti told ministers that the government’s public-private partnership (PPP) committee had “concluded that the project helps the overall economic development of the country”, a statement from the prime minister’s office said.
However, details on the project beyond the information in the company’s 28-page powerpoint presentation (a large chunk of which is devoted to stressing the benefits of its technology) are scanty. As a result, opposition MPs have asked for more information about Envidity’s plans and a vote by the parliament commission has been delayed.
An investigation by Balkan Investigative Reporting Network (BIRN), published on September 9, showed that the government had approved plans to give Envidity the right to search of coal on more than one third of Kosovo’s territory, which would give it a virtual monopoly of coal production in the country.
BIRN also revealed that the government had amended the law on mining to allow coal research rights to be granted without a public tender shortly before the August 25 meeting. Clark’s hero status within Kosovo - streets are named after him in several Kosovan cities - has raised questions about his capacity to influence local politicians.
Short on detail
US officials are not forbidden to return to countries in a commercial role, according to reporting by the New York Times, and Clark is not the only former US official to return to Kosovo. The race for the privatisation of state telecoms company PTK pitted Albright Capital Management, a fund founded by former US Secretary of State Madeleine Albright, against a rival consortium advised by former US special envoy to the Balkans James Pardew. (In the event, however, the successful bidder was Germany’s ACP Axos Capital.)
Nonetheless, the lack of information about the project has aroused suspicions. “What Clark has been proposing … really lacks transparency and information. The information is very superficial. There is no financial plan, no technological due diligence, no tangible information that MPs can see before voting,” says Visar Azemi, coordinator of the Kosovo Civil Society Consortium for Sustainable Development (Kosid) NGO.
There has been no consultation with people in the affected areas, and it is also not clear what the financial benefits to the Kosovan state will be, as Azemi says “despite collecting some royalties there are no economic benefits for Kosovo; everything will go to the private investor as far as I can see”. Nor is it clear where Envidity plans to sell its products and, if Kosovo is the intended market, what the commercial impact of this will be.
Envidity’s website is also short on detail about its actual projects, while the company says it “uses proven commercial and clean technologies to convert low-grade coal resources into high value-added commodity end products”. Its website also stresses its “great respect for the environment” and its ability to help the countries where it invests reduce their reliance on fuel imports. In 2011, the company announced the launch of a similar $1bn investment in Mongolia, but the current status of that project is unclear.
However, environmentalists object to both coal-to-liquids and coal gasification, which they say produce large amounts of toxic waste and emissions, as well as being water-intensive, another potential problem in Kosovo. While proponents say UCG is less polluting since the carbon dioxide produced can be captured and re-injected, the technology is relatively untested, with the only major commercial operation so far being in Uzbekistan. Some Kosovans object to their country becoming a test case for the technology.
Kosovo’s small economy and heavy dependence on imports are a source of concern for the government, and its eagerness to facilitate Envidity’s investment is hardly surprising. In an interview with bne IntelliNews in May, Kosovo’s Trade and Industry Minister Hykmete Bajrami said the country had been slow to rebuild industries devastated by war, hampering its economic growth and pushing up the trade deficit.
Earlier this year the International Monetary Fund (IMF) commended Kosovo’s economic reform progress but stressed the need to increase competitiveness and “unlock investments in its export sectors”.
Aside from the Envidity investment, Pristina has also been hopeful about other mega-projects that could potentially transform the economy but again these have been problematic. A memorandum of understanding was signed with US-based ContourGlobal on the construction of the €1bn Kosova e Re power plant, but environmentalists have objected to the construction of a new coal-fired power plant close to the capital. There are also hopes of reviving the giant Trepca mining and metallurgical complex, but with part of it claimed by Serbia, the prospects of attracting a strategic investor are slim.