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Monday, October 7, 2024

What is behind the government’s bailout of TEŠ? Primarily the short-term and selfish logic of Golob’s marketers

By: Vida Kocjan

Golob’s team informs us that the financial situation of the Šoštanj Thermal Power Plant (TEŠ) has deteriorated to such an extent that, without government intervention, TEŠ faces bankruptcy by 2025. However, experts and locals from the Šalek Valley argue that this reflects the short-term and selfish logic of Golob’s marketers, who are solely interested in personal profit, which increases with the import of expensive electricity.

This electricity will become even more expensive if citizens do not prevent the liquidation of the strategic TEŠ, which supplies a third of Slovenia’s electricity, even when the sun is not shining or when water levels in Slovenian hydropower plants are low.

The Ministry of the Environment, Climate, and Energy, led by Bojan Kumer, a loyal agent of the energy lobby, is reportedly addressing the situation at TEŠ with an emergency law to establish a public heating service. The government claims intervention is essential, as the Holding Slovenske Elektrarne (HSE) can no longer finance TEŠ due to EU regulations.

Operating at a loss, what about carbon credits?

HSE’s thermal division, which includes TEŠ and the Velenje Coal Mine, is expected to operate at a loss of between 150 and 200 million euros next year. The division is expected to have a negative EBITDA of 125 million euros and a negative cash flow of 195 million euros.

Since TEŠ is the sole heat supplier for the Šalek Valley, its bankruptcy would pose an unacceptable risk to more than 35,000 residents and the economy, prompting the need for immediate action, as noted by Minister Kumer. The temporary solution devised by the ministry involves limiting TEŠ and the Velenje Coal Mine’s operations to heating only, thereby establishing a public heating service directly connected to HSE’s thermal division. Kumer also emphasised the need to comply with EU state aid rules in addressing the problem.

Under this plan, TEŠ and the Velenje Coal Mine would be separated from HSE and managed directly by the Slovenian Sovereign Holding (SDH). The estimated annual cost to the state for maintaining these entities is about 150 million euros.

While this scenario would not completely end TEŠ’s market activities, it would significantly restrict them. The ministry intends to find the “optimum operating regime”. However, there is still no mention of the carbon credits some are profiting from.

The measure is intended to remain in place until an alternative heating system is established, but all principles of a just transition will need to be respected. “To prevent the costs from being passed on to the people in the valley or taxpayers, I will do everything in my power to ensure that the profits of energy companies are used for this purpose,” announced Kumer. However, his promises are more like optimistic but unrealistic wishes. He also met with the mayors of Šoštanj and Velenje, as well as the management of HSE, representatives of the Slovenian State Holding (SDH), and trade unions. He expects that solutions will be refined in collaboration with them over the coming weeks, and the public will be informed of the progress.

He cannot influence it, but he is the minister!

He acknowledges that not everyone will be satisfied with the solutions but claims he cannot influence the “current circumstances.

Without intervention, around 2,500 workers would lose their jobs overnight, and the state would be left with €286 millions of unpaid debt to the European Investment Bank. The emergency law would also buy time until the adoption of two laws that will determine the future of the Šalek region: the law on regional restructuring and the law on the gradual closure of the Velenje coal mine.

According to unofficial information from the ministry, without separating the thermal division, HSE, which is currently highly profitable, would eventually go under.

HSE has also warned that state intervention is necessary, as, starting in 2025, they would no longer be able to finance Teš due to EU state aid rules. “Without an appropriate solution, Teš will become insolvent in 2025, and consequently, so will the Velenje coal mine, as Teš is its sole customer,” stated HSE. Over the past year, HSE, along with the management of Teš and the Velenje coal mine, as well as external experts, has studied various scenarios and conducted numerous analyses related to the restructuring of the thermal division.

They would have to pay market prices for electricity

HSE adds that by 2025, they will have limited authority and options for financing the ongoing operations of Teš and the Velenje coal mine. At that point, they will no longer meet the conditions for using existing financing methods, which include paying market prices for electricity combined with periodic recapitalisations or paying an electricity price based on a cost-plus method. After this date, HSE would only be able to pay Teš the market price for electricity, and any other form of financing the thermal division could be inconsistent with EU state aid rules.

The Velenje coal mine welcomed the state’s involvement in solving the issue. In a press release, General Director Marko Mavec explained that they will gradually reduce coal production: “This will take place at one excavation site and will be concentrated in the Preloge mine, while we will simultaneously begin closing mine facilities in the Pesje mine.” According to him, the company hopes for the swift adoption of the law on the gradual closure of the coal mine, which will provide funds for closure work and environmental restoration.

Trade unions also welcomed steps toward resolving the coal exit issue. Teš trade union president Danilo Tajnik expressed hope for prompt legislative solutions that would lay the foundation for a just transition. Simon Lamot, president of the Velenje Coal Mine trade union, made a similar appeal: “The solutions presented at today’s meeting with the minister are one of the starting points for ensuring social security for employees at the Velenje Coal Mine and the Šoštanj Thermal Power Plant until at least 2033, and I believe even beyond that,” he said.

Velenje Mayor Peter Dermol pointed out that the challenges and needs of the Šalek valley have been highlighted for a long time, but even with the announcement of the emergency law, it seems no one is listening. According to him, alongside the emergency law, they should also adopt the laws on regional restructuring and the gradual closure of the coal mine. Without these two laws, he believes the state’s measures will jeopardise the region’s fair transition.

Business community concerned, “NGOs” at work again

The business sector is also closely monitoring Teš’s financial problems with concern. The Slovenian Chamber of Commerce (GZS) warned that by reducing Teš’s operations, the country would become even more dependent on electricity imports and more vulnerable if another energy crisis occurs.

Regarding the developments around Teš, NGOs have also weighed in, as is often the case under Robert Golob’s government. Greenpeace Slovenia reminded that over a decade ago, together with other civil society organisations, they loudly warned of the anomalies surrounding the Teš 6 project. They also drew parallels with the planned JEK 2 project, which GZS strongly opposes.

Teš has been operating at a loss since 2014, before the sixth block began trial operation in mid-2015. In subsequent years, it posted its smallest loss in 2019, which was just under €20 million. However, the loss ballooned to €280.4 million in 2020, €500,000 in 2022, and around €45.9 million last year. The exception was 2021, when Teš received €261 million in compensation due to Alstom’s price increase for building the sixth block and ended the year with €7.1 million in net profit.

Albin Vrabič, Velenje: “It is a strategic asset”

Local resident Albin Vrabič, a mechanical engineer, master’s degree holder, and former teacher of mechanics and principal of a mechanical, mining, and environmental protection school, posted on X in mid-August: “In the evening peaks, the price of electricity is already €800 per MWh. Without the modern and well-maintained Teš, which provides a third of Slovenia’s electricity, the price of imported electricity would be significantly higher. And the government would liquidate Teš. No, because it is a strategic asset.”

Janša’s realistic view of Teš

Janez Janša, president of the SDS party, stated as early as the first announcements of the current coalition: “We can close Teš only when the second block of NEK is built. Not before. And that certainly will not be before 2030. Unless the KUL-Svoboda coalition is planning two days a week without meat and without electricity.”

GZS: Comparison between Teš 6 and JEK 2 is entirely misguided

GZS stated: “We are concerned about the response of certain NGOs who are trying to use the problems of Teš 6 as an argument against building JEK 2 by merely playing on the public’s fears about potential financial risks in building JEK 2. These are sweeping assessments, unsupported by expert arguments, and they harm the democratic debate about the project of the second block of the Krško Nuclear Power Plant (JEK 2), which will become relevant in the coming months, leading up to the expected referendum.”

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