Slovenia’s coal plant TEŠ seeks state aid as CO2 costs threaten to sink it

Termoelektrarna Šoštanj (TEŠ) and coal mine Premogovnik Velenje are in financial difficulties caused by CO2 prices, which forced their owner Holding Slovenske Elektrarne (HSE) to ask for help from the Slovenian government, local media reported.

Slovenia’s only coal-fired power plant and coal mine, TEŠ and Premogovnik Velenje, are very close to a financial collapse, Slovenia’s news portal necenzurirano.si reported. It had insight into the HSE report sent to the Slovenski Državni Holding (SDH), a company which manages state property.

The coal power plant, which provides 35% of domestic power output, recorded a loss of EUR 280.4 million in 2020

HSE said it informed the owner of the various scenarios for resolving the issue and attributed the loss to “enormous growth” in prices of emission allowances”. At the end of August CO2 price climbed to a record of almost EUR 61 per ton.

TEŠ, which has a 35% share in domestic power generation, recorded a loss of EUR 280.4 million, compared to EUR 9.6 million at Premogovnik Velenje. The thermal power plant’s assets were impaired last year by EUR 243.5 million, which means the sum was written off from the balance sheet on a drop in value.

Of note, Slovenia is considering a coal phase-out year, and the government has proposed 2033. According to a recent study, TEŠ could record a total net loss of EUR 870 million by 2030.

TEŠ will record EUR 560 million loss this year

According to the HSE’s report to SDH, the company has determined that the remaining EUR 650 million should also be impaired, which means the value of TEŠ would be zero. The thermal power plant will then record a EUR 560 million loss for this year, and become insolvent, necenzurirano reports.

HSE must decide whether to inject TEŠ with fresh capital or write off a large part of its debts to international banks, which are guaranteed by the government. The other alternative is bankruptcy. However, TEŠ could also delay impairments and gain a maximum of three years, but in 2024 the value of its assets would be lower than its liabilities, and the company will still become insolvent.

The power plant will run out of money for salaries and other liabilities in the spring of 2022 at the latest

The situation is even worse in the short term. According to the report, the coal-fired power plant will run out of money for salaries and other liabilities in the spring of 2022 at the latest.

TEŠ’s problems are also making life difficult for coal mine Premogovnik Velenje, because the company is the only buyer of its goods.

HSE is lobbying for TEŠ and Premogovnik Velenje to be spun off and placed under direct state ownership

Due to environmental commitments, the continued operation of the thermal division is financially unsustainable, HSE notes in the report.

According to the news outlet, HSE is lobbying for TEŠ and Premogovnik Velenje to be spun off into a company under direct state ownership, or to become a part of a capacity mechanism under which EU member states can secure strategic energy reserves.

HSE told necenzurirano.si it is considering the possibility to apply for state aid and avoid bankruptcy.