Sostanj Thermal Power Plant

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The EBRD is considering financing the modernisation programme of Termoelektrarna Šoštanj (TEŠ) which focuses on the replacement of four existing low efficiency units with a new state-of-the art supercritical 600 MW unit 6 with full environmental protection systems (the “Project”) constructed within the boundaries of the existing Šoštanj Power Plant in the town of Šoštanj, north-east Slovenia. The proposed TEŠ’s modernisation programme will substantially decrease the environmental impact from its operations. More specifically, the new unit 6 will improve efficiency by increasing the production of electric energy per tonne of coal. It will also reduce specific CO2 emissions (tonnes of CO2 released per kWh produced). Furthermore, the proposed modernisation programme will enable TEŠ to meet future environmental requirements as set out in the draft EU Industrial Emissions Directive (IED) expected to be implemented by 2012, replacing the existing Large Combustion Plan Directive and the Integrated Pollution and Prevention Directive. The new unit is expected to become commercially operational in 2015. The modernisation Project is expected to increase the generation efficiency of TEŠ significantly and to enhance its environmental compliance through its state-of-the-art technology, while improving Slovenia’s security of supply which will worsen with the planned decommissioning of older units. Termoelektrarna Šoštanj is the owner and operator of the 809 MW lignite-fired Šoštanj Power Plant. TEŠ is fully owned by Holding Slovenske Elektrarne (HSE), which is 100% held by the Republic of Slovenia. TEŠ is located in Slovenia, in the town of Šoštanj 80 km north-east of the capital city of Ljubjana. The EBRD is extending a senior secured corporate A loan of EUR 100 million and is syndicating a B loan of EUR 100 million to fund a portion of TEŠ’s modernisation programme with a total cost of EUR 1.2 billion. The EIB and TEŠ in co-operation with HSE are expected to provide the balance of the financing. EUR 1.2 billion. Environmental classification and rationale The Project, the upgrade and modernisation as well as life extension of an existing power plant, has been categorised A under the Bank’s Environmental and Social Policy (2008), requiring an Environmental and Social Impact Assessment (ESIA) of the proposed investment programme as well as a corporate audit of the associated facilities, namely the lignite mine. An Environmental and Social Impact Assessment (ESIA) disclosure package has been prepared by an independent international consultant. This has utilised the Environmental Impact Assessment (EIA) undertaken by TEŠ in line with National requirements. Due diligence undertaken and outcomes The Bank’s Environmental and Social Due Diligence (ESDD) consisted of an environmental and social audit of the existing power plant and the adjacent lignite mine and an ESIA of the planned investment. The ESDD was undertaken by an independent consultant and included a review of current operations. The ESDD confirmed that TEŠ is currently fully in compliance with National and EU environmental standards, and has a well developed environment and health and safety management systems and culture. TEŠ is subject to IPPC permitting and has up-to-date environmental permits. The ESIA and the ESDD also confirmed that the planned modernisation programme will meet the Bank's Performance Requirements and EU environmental standards. Furthermore, the proposed modernisation programme will enable TEŠ to meet future environmental requirements as set out in the draft EU Industrial Emissions Directive (IED) expected to be implemented by 2012, replacing the existing Large Combustion Plan Directive and the Integrated Pollution and Prevention Directive. The new unit is expected to become commercially operational in 2015. The Project will result in a substantial lowering of carbon intensity of the plant per kWh generated and will not result in an increase of carbon emissions from the plant, as old inefficient units will be closed. The new unit will be designed to be "carbon capture ready", and initial studies indicated that carbon storage may be possible in the area. Further technical information on the proposed technology is enclosed in the ESIA disclosure materials. The ESDD has confirmed that the associated underground lignite mine is well managed and fully complies with the Bank's Performance Requirements and has a good Occupational Health and Safety management system. The independent consultant as part of the ESDD has assessed that the risks of subsidence, mining damage, methane explosions or occupational safety are low. The Bank has also agreed an additional ESAP for the associated lignite mine, which is part of the area of influence of the Project. The ESAP for the mine relates mainly the management practises as well as future recultivation practices and the need for the mining company to maintain a stakeholder engagement plan. The ESIA package and Non Technical Summary (NTS) have also been released for public review by the Project sponsor on its corporate website: www.te-sostanj.si. The English version of the NTS can be found here: http://www.te-sostanj.si/filelib/ebrd/nts_final_eng.pdf. Additionally the NTS is available on the EBRD web site inclusive of a summary of the disclosure and consultation process. Monitoring and reporting The Bank will monitor the implementation of ESAP for this Project as well as the implementation of the corporate ESAP. A commissioning audit will be undertaken of the Project to verify that all the National and ESAP requirements have been implemented. There is an Environmental and Social Impact Assessment available for this project. None.