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Sostanj lignite thermal power plant unit 6, Slovenia


The Šoštanj lignite power plant.
Quick facts
Loans from the European Investment Bank (EUR 550 million) and the European Bank for Reconstruction and Development (EUR 100 million) added up to more than 50% of the overall costs of the investment.

In 2013, a senior EIB source described TEŠ6 as “one of those projects that tends to haunt you”.

NGOs such as Focus raised numerous issues with the Slovene government and international financial institutions but they showed no sign of taking concerns into account until the project was considered a fait accompli.

TEŠ6 now looks set to make losses of EUR 70-80 million annually (pdf) for the next few years at least.

Governments in other southeast European countries planning similar projects would do well to take note.


TEŠ6 promises higher efficiency, but not low-carbon energy

Initial concerns around TEŠ6 centred around its climate impact. Its promoters argued that the new unit would increase efficiency and reduce CO2 emissions, but forgot to mention that it would lock Slovenia into high-carbon electricity generation until beyond 2050.

Operating TEŠ6 will result in emissions of 3.4 mt CO2 per year, which is equivalent to almost all of Slovenia’s emissions in 2050 (if it cuts emissions by 80 percent – a minimum according to the European goals of 80-95 percent).

Doubling of initial costs

Since 2006, when the project was announced as part of a government investment wish-list, the costs have more than doubled (pdf) from around EUR 600 million to EUR 1.43 billion. The reasons for this are numerous but include alleged fraud of EUR 284 million that benefitted lead equipment supplier Alstom.

Alleged corruption


(A campaign cartoon portraying the former and directors of the Sostanj lignite power plant.)

In a report from February 2012, the Slovenian Commission for the Prevention of Corruption issued serious warnings that:

    "the project [TES 6] is designed and implemented in a non-transparent manner, lacks supervision and is burdened with political and lobbying influences, and as a result there has been [and still is] a high risk of corruption and conflict of interest".

After a lengthy investigation, in October 2014 ten people were charged with fraud in relation to the project.


Read more in our press releases:

The dirty French-Slovenian connection
February 23, 2012

EBRD freezes loan disbursements in Alstom's coal project over corruption allegations. NGOs call on the EIB to follow suit
April 18, 2012

Dubious economic assumptions

An analysis (pdf) carried out by consultants CE Delft in 2011 showed that the projected price of coal was unrealistic and that the project would be very sensitive to electricity prices.

Both of these issues have already turned out to be serious problems even before the plant goes into commercial operation: The sale price of electricity is currently lower than TEŠ6’s estimated cost of production and is expected to be for the next few years at least.

One of the assumptions behind the project and conditions for the state guarantee for the first EIB loan was that the price of lignite from Velenje mine does not exceed 2.25 EUR/GJ in 2015 or 2.73 EUR/GJ in 2054, and while the current sales price is being kept secret, the production price is around 2.9 EUR/KJ (pdf) so it is not likely that the assumptions behind the project are realistic.

Unrealistic claims about employment

One of the key arguments for construction of TEŠ6 was that it would enable long-term employment in the plant and nearby Velenje mine, and that the Šaleška Valley would otherwise face a social disaster.

However in October 2014, the management of TEŠ announced its plans to optimise the functioning of TEŠ: reorganisation of the company would ensure that half – 226 of the current 452 – employees are laid off.

Lessons to be learnt

TEŠ6 is a good example of what can happen when a project is pushed forward to satisfy narrow interests without adequate transparency, public participation or an examination of alternatives. Had the project been opened up to scrutiny at an earlier stage, the mistaken assumptions behind the project could have been discussed and serious mistakes avoided.

It also vividly illustrates the fact that lignite can no longer be considered cheap and shows that ignoring economic warning signs early on will most likely backfire later on. This is a valuable lesson for Slovenia’s colleagues in southeast Europe who are showing every sign of making similar mistakes with projects such as Plomin C and Tuzla 7.


For more information contact Pippa Gallop, Bankwatch's research co-ordinator

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Latest developments


 

Blog entry | November 14, 2016

Now is the time for southeast Europe to start an inclusive and just transition away from lignite, argues new Bankwatch research.

Press release | November 14, 2016

Promises for new jobs in south-east Europe’s coal sector are exaggerated, a new Bankwatch report reveals. Hardly any coal operations across the region are economically viable, and as a result many coal workers, especially in the mines, are set to lose their jobs, even if the plans for countless new power plants materialise. Governments, coal workers and their wider communities need to work together towards a just transition.

Press release | December 2, 2014

Ljubljana -- A new briefing by Slovenian NGO Focus shows how misguided assessments of future viability and corruption led to TES6 lignite unit costing more than double the estimated amount, bringing annual losses of tens of millions of euros, and creating only a fraction of the number of jobs promised.

Balkans, coal, costs, EU, lignite, TES6
Press release | October 15, 2014

Ljubljana, Slovenia: Slovenian police yesterday reported that ten people had been charged with fraud in relation to the beleaguered Sostanj 6 lignite power plant project, causing a suspected EUR 284 million in financial harm to Slovene electricity consumers. The charges serve as a new warning to decision-makers across the Western Balkans to closely scrutinise coal power plant projects planned across the region if the mistakes made in the Sostanj 6 project in Slovenia are not to be repeated, warned several NGOs today.

Balkans, coal, corruption
Blog entry | January 28, 2014

When Dr. Kim, President of the World Bank, and leaders of other international financial institutions ponder funding new coal power projects this year - like the one in Kosovo - there's one word that should be seared into their memories: Sostanj.

Publications

Briefing | November 14, 2016

Coal is the single biggest contributor to global climate change. But governments and investors planning new coal capacities have a range of flimsy arguments why coal would be the best or the only alternative. This briefing busts a number of myths surrounding coal, such as "coal is cheap", "alleviates poverty" or "coal is clean".

Study | November 14, 2016

This report reveals how and why promises for new jobs in south-east Europe’s coal sector are exaggerated. Hardly any coal operations across the region are economically viable, and as a result many coal workers, especially in the mines, are set to lose their jobs, even if the plans for countless new power plants materialise. Governments, coal workers and their wider communities need to work together towards a just transition.

Available languages:

Bankwatch Mail | March 20, 2014

Bankwatch has been monitoring and campaigning against the ill-conceived EBRD- and EIB-financed Unit 6 at Šoštanj in Slovenia for several years now. Yet the project never ceases to amaze with its myriad flaws and scandals – and the first few months of 2014 have been no exception.

Study | December 9, 2013

The EBRD is about to approve a new energy strategy, yet it is unclear to what extent it will follow other public lenders in halting coal financing. In this paper we step away from the discussions on climate issues to take a look at another reason why the EBRD should be wary of investing in coal projects: corruption.

Briefing | October 21, 2013

The Western Balkans countries are aspiring to become members of the European Union. On 24 October the Ministerial Council of the EC-backed Energy Community will approve a list of priority energy infrastructure projects resulting from the Regional Energy Strategy known as Projects of Energy Community Interest (PECIs) for the Western Balkans, Moldova and Ukraine. These projects would be prioritised for fast-track approval and public financing.