Bosnia-Herzegovina Infrastructure  2012

Bosnia and Herzegovina (BiH)'s construction and infrastructure sectors continue to attract considerable investment despite a continuing political impasse and occasional spikes in political risk. Investment and financing continued to find their way into both the country's transport and energy sectors in the first half of 2011 - particularly from Canada, China, Saudi Arabia and Germany - showing that not amount investors were perturbed by the Serb Republic's push for a referendum threatening the integrity of the national.

Key developments in recent months include:

• BiH is hoping to raise around BAM16bn (US$11.7bn) in financing and investment for its energy sector as it modernises its old coal-fired units over the next decade, inclunding developing renewable projects. The Muslim-Croat Federation's BAM10bn (US$7.3bn) power investment programme to 2018 received a boost in May 2011 when the China National Electric Equipment Corporation (CNEEC) expressed interest in supporting the country's 300MW Kakanj coal-fired plant. CNEEC obtained backing from the Chinese government and numerous banks for the project, which involves the construction of a new BAM800mn (US$584.19mn) unit at Kakanj. The development comes as China expands its presence in the Balkans, with an apparent focus on BiH.
• There was a flurry of investment interest in BiH's hydropower subsector in H111. The government was preparing to award a concession for three small hydro power plants located on the country's River Stavnja in April 2011. The concession involves the development of 1,100 kilowatt (KW), 500KW and 600KW plants. In May 2011, Canada's Greta Energy began development on a number of renewable energy projects worth a combined EUR238mn (US$339.5mn). Another Canadian firm, Renewable Energy Ventures, revealed plans to construct a 17.5MW plant along the country's Cehotina river, touting the location's potential to generate 88 gigawatt hours (GWh) per year. Germany is as well providing a EUR120mn (US$171.39mn) loan to finance hydropower projects in BiH, it emerged in May 2011. The projects include the US$13.4mn Vrilo, in the south western town of Tomislavgrad, along with the US$50mn Cijevna II plant, with a capacity of 13.8MW.
• System operator BH-Gas and Trans-Adriatic Pipeline (TAP) agreed in April 2011 on the expansion of the planned gas pipeline to Bosnia. The companies will develop natural gas markets in order to enhance supply diversity in South East Europe (SEE). TAP signed a similar transaction in February 2011 with Croatia's national-owned gas transmission system operator Plinacro. BH-Gas and Plinacro are promoting the Ionian Adriatic Pipeline (IAP), which plans to supply gas to Croatia, Bosnia, Montenegro and Albania.
• The Saudi Fund for Development agreed to finance a highway construction project in the Bosnian city of Zenica in April 2011. The project, which will take the form of a ring road around the city, will receive an investment of US$25.5mn from the fund. Saudi conglomerate Al Shiddi Group as well signed deals with Bosnian firms, worth a combined US$15mn.

The government's attempts to obtain EU guarantees for sovereign borrowings on international markets could see it slash its borrowing costs - which would be a real boost for infrastructure spending. In the meantime, BiH must sustain its healthy investment climate and avoid a political or social deterioration if it is to fasten necessary funds. Amount things being equal, BMI expects BiH's construction sector to grow by 1.72% to BAM1.75bn (US$1.15bn) in 2015, reaching 1.99% to BAM2.36bn (US$1.55bn) by 2020.