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Home > Projects > Sostanj lignite thermal power plant unit 6, Slovenia

Sostanj lignite thermal power plant unit 6, Slovenia

In 2016 a new 600 MW unit at the Šoštanj lignite power plant (TEŠ6) started commercial operations. It has turned out to be a financial disaster. Slovenia’s official coal exit date is 2033, but the plant will likely close much earlier.

An aerial view of the Sostanj lignite power plant showing smoke stacks and cooling towers and lots of smoke and steam.
Source: www.focus.si

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Key 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”.

Key issues

  • High carbon lock-in.more >>  
  • Economically unfeasible project pushed through against all odds. more >>
  • Claims about jobs were unfounded. more >>
  • The project shows the need for genuine future-proof planning. more >> 

Background

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.

The TEŠ power plant has made a loss every year since TEŠ6 started operating, except for 2021 when it received compensation from the corruption case related to the unit. In 2023, losses amounted to nearly EUR 46 million. In late 2024, the government stepped in to bail out the plant with EUR 405 million until 2027 so it can continue providing heating to the local community.

The project is a prime example of what happens when planning is based on vested interests instead of evidence and analysis.

High carbon lock-in

Initial concerns around TEŠ6 by civil society groups like Focus centred around its climate impact, since it emits around 3.4 million tonnes of CO2 per year. Its promoters argued that the new unit would increase efficiency and reduce CO2 emissions, but failed to understand the speed of greenhouse gases reductions needed.

Doubling of initial costs

Between 2006, when the project was announced, and 2014, the the costs 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.

Corruption charges

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:
The dirty French-Slovenian connection
Press release | February 23, 2012

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

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

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 turned out to be serious problems.

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 would not exceed 2.25 EUR/GJ in 2015 or 2.73 EUR/GJ in 2054. However, in 2015 the production price was already EUR 3.09 per GJ, while the sales price was lower and thus not sustainable. In 2022, the plant even supplemented domestic coal with lignite imported from Indonesia, due to difficulties in mining sufficient amounts.

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 optimize the functioning of TEŠ: reorganization of the company led to half –  226 of the current 452 – employees being laid off.

The number of workers at the mine has also declined, from 2,465 in 2014 to 1,941 in 2023. 

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.

Latest news

Slovene prosecutors file charges over coal plant corruption

Blog entry | 25 May, 2020

The long-running saga of Slovenia’s overpriced Šoštanj 6 coal power plant took a dramatic turn last week when Slovene prosecutors filed charges including money laundering against 12 people and two companies. Meanwhile, in 2018, the Šoštanj power plant as a whole generated a net loss of EUR 58.5 million. Why are nearby Serbia and Bosnia-Herzegovina – both countries that are planning new coal plants – not learning any lessons?

Read more

Deceptive promises of new jobs in the coal sector don’t help workers, communities or the climate

Blog entry | 14 November, 2016

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

Read more

Overblown job promises in southeast Europe’s coal sector show the need for a just transition – report

Press release | 14 November, 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.

Read more

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Related publications

OLAF decision to investigate corruption at TES 6

Official document | 19 July, 2012 | Download PDF

The European Anti-Fraud Office (OLAF) decided to start an official investigation into the case of the Sostanj lignite power plant in Slovenia due to serious concerns about corruption and conflicts of interests in the granting of the contract to the company Alstom. (Information on OLAF staff has been blackened on request by the Office.)


Corruption cases put EBRD due diligence in the spotlight

Bankwatch Mail | 14 May, 2012 |

In recent months bribery and money laundering allegations levelled at a former EBRD banker, as well as revelations that an EBRD staffer, now suspended, is one of the founders of the far-right, racist organisation the English Defence League have not made for great PR for the EBRD.


EIB urged to dump coal in energy policy review

Bankwatch Mail | 14 May, 2012 |

The European Investment Bank has announced that it will commence a review of its energy policy – “Clean energy for Europe: A reinforced EIB contribution” – in the second half of 2012. Bankwatch welcomed the announcement as the current policy, adopted in June 2007, needs to be brought up to speed and aligned with the latest developments in EU energy and climate policies.


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