In socialist times managers preferred to put their resources into a large mining workforce and mines were starved of capital investment. As a result, productivity was low. The World Bank has estimated that to remain competitive, the state-run Bosnian coal industry would have to reduce its workforce from 15,000 to 3,000 miners.
The revival, through privatisation, of the Stanari coal mine in the Doboj municipality in Republika Srpska is an example of how the Balkan coal industry could be transformed. Stanari is the first coal mine in Bosnia – and indeed, in the whole Balkans – to have been privatised. In 2004 it was on the brink of collapse, with debts of 5.6m Euros, when the energy trading company, Energy Financing Team (EFT), bought it.
In 2006, the mine was able to extract about 1,600 tonnes of coal per worker, compared to an average of 500 tonnes per worker in other Bosnian coalmines.
In 2007 Stanari's output reached 800,000 tonnes of coal. By 2011, it aims to produce over 3m tonnes a year – this, with just 600 workers.
Vuk Hamovic, the Executive Chairman of EFT explains:
"With relatively small investments and relatively simple steps we have changed the situation in a mine which has not functioned for years and even stopped working completely over a short time period. Now there are 400 miners who earn twice the average wage in Bosnia per month. So it is a win-win-situation, which has ended well for all."
The largest public sector buyers of Stanari's coal are Bosnia's largest thermal-power plant (TPP) in Tuzla, 80 kilometres from Stanari, and the local heating plant in Doboj. Stanari is also able to fill the gap in the market during the crucial winter months, when state-owned coal mines cannot increase their output. Other major private clients include the paper producer Natron-Hayat in Maglaj, 30 kilometres south of Doboj, and Sisecam, which produces raw materials for glass-making near Tuzla, both recently bought by Turkish investors.
The mine also attracts small entrepreneurs. Hundreds of trucks belonging to private traders from all over Bosnia and from Croatia come directly to Stanari to buy coal. The location of Stanari mine on the inter-entity border-line (the former frontline) in Republika Srspka is no barrier.
In fact, Stanari is also part of a strategy to take advantage of the growing opportunities in the region's electricity market: EFT plans to build a coal-fired thermal-power plant (TPP) at Stanari, to be supplied by the coal mine. The power plant is due to be finished in 2011. As Vuk Hamovic (LINK) explains:
"The TPP […] will produce about 400 megawatts. This means an investment of 700 to 800 million Euros. It will be the largest foreign direct investment in Bosnia. 3,000 workplaces in the construction phase, and 800 jobs when the plant is running, mean a real boost for the whole region."
Already today, new shops and restaurants, banks, and a new basketball court, are signs of an economic boom in Stanari.
The overall collapse of Bosnia's socialist-era heavy industries, the traditional bulk consumers of energy, has opened up opportunities for selling electricity abroad. Bosnia's energy consumption is currently only about 20 percent of the per capita average in Western Europe. At the same time, its geographic location at the centre of the Balkans, as well as its coal reserves and water resources mean that Bosnia is well placed to export large amounts of thermal and hydro-electric power throughout the Balkans. Its potential to dramatically expand its energy production makes it a central player in energy planning in South Eastern Europe.
Thanks to external assistance, as well as changes to its power grid and the three regional power utilities, Bosnia's energy sector already surpassed its pre-war capacity in 2002. The country has 11 large hydropower plants, as well as numerous smaller ones, in addition to four thermal-power plants.
The reconstruction in 2004 of war-damaged transformer stations in the west of the country, Herzegovina, and in neighbouring Croatia, has allowed the reconnection of the Balkan electricity system with the European system (UCTE). In 2004, Bosnia exported more than 2,000 GWh, 17 percent of its total production and the highest share of any country in the region. By 2006 exports reached 2,500 GWh. Bosnia has become, along with Romania and Bulgaria, one of three energy exporting countries in the Balkans.
Stanari coal mine
All other countries in South East Europe depend on energy imports. In 2004, Macedonia imported 16 per cent of its energy needs, and Croatia imported 23 per cent of its energy requirements. A World Bank report on the regional energy trade in South East Europe described the “energy gap" in the region:
"Investment over the past 10-15 years has been limited, with the average age of capacity now in excess of thirty years, and some plants are over forty years old. Capacity availability is poor by international standards and reliability is declining. In poor hydrological years, parts of the region are unable to meet their energy needs, with resultant load shedding."
Stanari is by no means the only major energy investment being planned. A specialist newsletter, "Energy in East Europe", reports no less than twenty eight ongoing or potential energy projects across Bosnia. Investors from Austria and Germany, Slovenia, and the Czech Republic are among those involved.
Bosnia is also a member of the Energy Community of South East Europe, launched in July 2006, which aims to create "a single regulatory space for trade in network energy" in the Balkans. It includes a detailed plan for the implementation of EU directives on energy market liberalisation and regulations on cross-border network access in the Balkans. A liberalised market for all non-household consumers came into effect in Bosnia on 1 January 2008. The prospect of Bosnian energy production making a major contribution to regional growth is moving ever closer to reality.