Croatia: Planned contract for Plomin C coal plant most likely illegal state aid, says legal analysis

, SEE Energy News

A planned long-term power purchase agreement in which Croatian electricity company HEP  will commit to buying at least 50% of electricity from the planned Plomin C power plant  for 20-30 years will most likely be illegal under EU state aid rules, according to a new legal analysis by Hungary’s Environmental Management and Law Association (EMLA)

EMLA’s analysis finds that since HEP is state-owned, a long-term power purchase agreement would be considered state aid. State aid provided to economic actors is generally illegal in the EU, however particular aid can still be allowed in certain circumstances. In the case of Plomin C, however, EMLA considers it virtually impossible that HEP could fulfil the necessary criteria for the agreement to be considered legal. This could present a serious obstacle to the project’s implementation.

A tender process is currently ongoing to find a strategic partner for the 500 MW Plomin C coal power plant in Istria. On 1 May the Croatian government reported that three consortia had submitted bids. Although the government said it could not name the companies involved due to the tender rules, local media  reported that the consortia consist of Marubeni and Alstom; Daewoo and Croatian pension funds; and Edison and Samsung.

“At a time when starting new coal projects is going seriously out of fashion in the EU , the very fact that three consortia have submitted bids shows that HEP must be offering very generous – maybe too generous – incentives to potential investors. However EMLA’s legal analysis raises the question of whether HEP is making promises it cannot keep,” said Bernard Ivcic, President of Zelena akcija/Friends of the Earth Croatia.

“There has been no public debate about what kind of incentives HEP is offering for Plomin C, and what kind of costs this could bring to taxpayers. Considering that Plomin C will cost at least EUR 800 million, it is high time that the public gets to hear exactly what impact this will have on their bills”, concluded Zoran Tomic of Greenpeace Croatia.

Source: Bankwatch