Croatia, report: TPP Plomin C new unit, project analysis

14. May 2014. / SEE Energy News

Three obligatory bids for the construction of TPP Plomin C are a good signal for Croatia Energy company HEP to be in a position to negotiate for better terms regarding the construction of the power plant. Nevertheless, the HEP should answer to the profession on ten key issues relevant to the economics of the whole business, even more because there were some unfavorable provisions for the HEP in agreement with RWE for Plomin2.

The HEP has received three binding offers for the construction of TPP Plomin C on coal, power of 500 MW. In the national electric power industry they are very pleased with this development, with a good reason. After nearly a year of uncertainty, when it seemed that it might not get more than a single bid, however it turned out that there was an interest and they would have someone to negotiate with. And if you have someone to talk to that means there is sufficient situation to be achieved the better conditions, which is certainly good news. This development should perhaps shut the mouths of those who claim that the death knell for coal in Europe, it is about a harmful project that will cost not only money but also human lives. Obviously construction of TPP Plomin C on coal is going to happen, in the spatial plan of Istria County, despite the obvious need of the people from Istria to reconcile with the facts.

Due to environmental conditions in a few years many of HEP’s plants will need to be cut off and it took a long time to build an adequate replacement, so that feasibility of building power plants has not make sense to be questioned. But in the public, in a democratic states, no one can deny someone’s right to question the energy strategy, the conduct and operations of the state and its associated companies. Even more, every investment of the HEP eventually must be expressed in the price of electricity which is being paid by citizens and enterprises. For the HEP situation is not the same as it was five or six years ago, when the company held a firm monopoly, the crisis wasn’t so deep and when such a great investment would have been better timed for the national economy.

Today the HEP should be smarter and more cunning for itself, its customers and for the economy in general brought out the best possible conditions for cooperation with a strategic partner in the project as well.

The HEP carefully keep from the public the names of the providers of binding offers, because they say that it is in the interests of the negotiating process, which can be understood. What is not clear is why in more than a year before, the HEP didn’t present to the public more details of the business model of building the plant, which would cost around one billion euros. Although some details were set forth, but it is still not entirely clear roles’ distribution of HEP and strategic partner. The power plant will be built mostly with imported equipment, and involvement of local companies can be expected in the construction and installation works, if their offers show their competitiveness.

But one day, when the plant begins its operation, it is not clear who will maintain the new unit and will Croatian companies participate at least partly as well? Who will supply the coal for the power plant and at what price? For the new power plant will be need about two million tons of coal per year, and it can be assumed that will be organized joint supply for the Plomin 2 as well. that next year will be moved to HEP’s hands. If the supply of coal is to be shared, in that case will HEP and its partner decide equally on the supply of coal and how to share profits from that business? Under the proposed model, the HEP plans to redeem 50% of electricity generated from TPP Plomin C, which should be regulated by a contract PPA (power purchase agreement). So far in practice has been shown that the EU does not agree with the PPA contracts in the energy sector because they can be concidered as illegal subsidies that distort market mechanisms.

However, the same European Union, it seems, is willing to turn a blind eye when it comes to the construction of Hinkley Point nuclear power plant of 3,200 MW power, and the United Kingdom, to EDF-and to its Chinese partners has committed to redeem electricity at a price higher than 100 euros per MWh during 35 years, almost 50% more than the current wholesale price in this market. In any case, it seems that the HEP will have a tedious job of proving the validity of conclusion such contracts.

Furthermore, it was reported that the joint company of HEP and strategic partner would trade surplus power, but considering that the HEP ‘s investment in the project is minimal, does that mean that HEP of this trade will not have a profit? How has the purchase of emission allowances for carbon dioxide solved – is there calculating some of the national quota which is allocated by HEP or will emission allowances being bought in the market, and how much they could load the price of electricity according to projections? Who will build the transmission line and switchyard – the HEP alone or strategic partner and how much does it cost? The Plomin C will replace dirty Plomin 1. Has decommissioning Plomin 1 been at all the subject of the tender or the old unit “will take care of ” HEP ? How much will it cost and when will it start ? The tender documents mentioned the possibility that the HEP to the future strategic partner leave management , and even ownership of TPP Plomin 2 power of 210 MW . Such a move would be extremely detrimental to the HEP , because whay someone donate repaid power plant which competitively can continue to operate. Is it the issues of the deal ? It would be good that management of the HEP in the time, explain to the professional and general public economics of the whole deal, even more because in the partnership with RWE was very unfavorable conditions for the HEP for which many do not know yet .

Source; Serbia Energy See Desk

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