Slovenian government drops support for Sostanj coal plant; European public banks must follow suit

Ljubljana, Slovenia -- CEE Bankwatch Network and Slovene NGO FOCUS are calling on the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) to review their plans to provide 650 million euros in loans [1] for the controversial 600 MW TES 6 block at Slovenian lignite plant Sostanj. The call comes after the Ljubljana government announced last month that it will not grant a state guarantee for the EIB 440 million euros first tranche until the economic efficiency of the project is improved [2].

"The Slovenian government's decision was motivated by a damning report on the management of TES 6 issued on April 14 by the Ministry of the Economy," explains FOCUS senior expert Lidija Zivcic. "The report clearly shows that calculations about the economic viability of the project have been done superficially, with potential gains grossly overestimated. In addition, it has been shown that decisions about the management of the plant have been taken in an untransparent manner and without respecting public procurement rules, making them susceptible to corruption."

"The Minister of the Economy found these issues serious enough to send the report to the Commission for the Prevention of Corruption, the General Police Directorate and the public prosecutor," added Zivcic. "In these conditions, our government is right to suspend any plans for budget support for the plant."

According to the report of the Ministry of the Economy [3], the economic viability of the sixth block at Sostanj is much more vulnerable to external factors such the prices of coal, electricity and carbon emission allowances than the main investor TES (Termoelektrarna Sostanj) showed in the investment plan. If either lignite or carbon allowance prices increase by just 10 percent or electricity prices decrease by 10 percent as compared to the levels projected by TES, the 1.2 billion investment into TES 6 becomes unprofitable, the Ministry of the Economy has calculated.

"We have known from the beginning that the new block at Sostanj is a bad investment in terms of the sustainability of the Slovenian energy sector, as it would make it impossible for the country to meet its climate targets over the next decades," comments Piotr Trzaskowski, Bankwatch climate and energy coordinator. "But now we have also learnt that the project is very risky from a financial point of view. The EIB and the EBRD should need no additional reasons to withdraw all European public money from this project right now."

For more information:

Lidija Zivcic
Senior expert, FOCUS association for sustainable development
Tel: +386 15154080
lidija at focus.si

Piotr Trzaskowski
Energy and climate coordinator, CEE Bankwatch Network
Tel: +48 509162988
piotr.trzaskowski at bankwatch.org

Notes for the editors:

1. The EIB has committed to lending 550 million euros and the EBRD 100 million euros for the construction of TES 6. The loans form part of a larger 1.2 billion euros project to replace low efficiency units with a new 600 megawatt (MW) sixth unit, all of them powered by one of the least efficient and most polluting energy sources, lignite. In 2050 projected carbon dioxide emissions from operation of Unit 6 at Sostanj would swallow Slovenia's entire greenhouse gas emissions quota for all the sectors within planned reduction targets for 2050 (if Slovenia cuts emissions by 80 percent – a minimum according to the European targets of 80-95 percent). It also clearly contradicts EC's recent „Roadmap for moving to a competitive low-carbon economy in 2050”, which calls for almost full decarbonisation of the enery sector by 2050.

2. See CEE Bankwatch Network and FOCUS letters to the EIB and the EBRD:

3. See details about the report of the Slovenian Ministry of the Economy: