Croatia: Marubeni will seek 5 million euros from HEP as compensation for TPP Plomin C project

, SEE Energy News

Japanese company Marubeni, the would-be investor in the project for the construction of coal-fired thermal power plant Plomin C worth about one billion euros, is planning to sue the state-owned power utility HEP.

According to the proposed agreement, HEP would be obliged to purchase the majority of electricity produced at the plant at agreed prices, which was later assessed as irregular state aid that could distort the market by the European Commission (EC). It was advised that the business model should be changed, but that was not favorable for Marubeni due to the high cost of the project.

Marubeni now plans to seek 5 million euros from HEP on behalf of the costs incurred during the preparation of tenders, which the Japanese company is entitled to, according to the agreement signed between the two companies. With this lawsuit as a leverage, Marubeni is now trying to negotiate compensation with HEP in the form of participation in an alternative project. HEP has already hired consultancy company Booz Allen to help it with the potential lawsuit.

Earlier this month, the representatives of HEP said that the redefinition of relations between the power utility and Marubeni is currently ongoing and that the final status of TPP Plomic C project will be known in the next three months. On the other hand, President of Marubeni Europower Hiroshi Tachigami said that the company is still working with HEP on TPP Plomin C project, but refused to discuss the possible lawsuit. Marubeni believes that the project is beneficial to Croatia regarding the environment, the economy and energy security and the company wants to realize the project in order to expand its investments in Croatia. Tachigami concluded that he personally believes in successful implementation of TPP Plomin C project.

TPP Plomin C project envisages the construction of 500 MW unit C which would be a replacement for the obsolete unit A. Japanese Marubeni should build the power plant in four years, and after its commission HEP will be obliged, through a longterm power purchasing agreement, to purchase half of the electricity produced by the plant, while the other half will be sold on the market. However, the European Commission found that the cooperation between HEP and Japanese Marubeni on the realization of TPP Plomin C project is unacceptable as it constitutes as state aid.

In late 2016, the sources from the newly established Ministry of Energy confirmed that the Ministry is working on the new energy strategy, namely low-carbon Croatian energy strategy until 2030, which does not provide the use of fossil fuel for the production of electricity or the construction of any large-scale gas or coal powered plants. This means that the new Government will withdraw from the project for the construction of coal-fired TPP Plomin C, and it will not allow the construction of gas-fired power plants with the output larger than 20 MW.