Slovenia proceeds with new power plant unit though cost nears $2 billion

LJUBLJANA Wed Jan 15, 2014 11:46am EST

LJUBLJANA Jan 15 (Reuters) - Slovenia's government will continue building a new unit at its Sostanj coal-fired power plant, even though the cost has doubled to nearly $2 billion, its prime minister said.

"We don't have the privilege to decide whether this project can still be stopped. The data we have show halting it would be more expensive than completion," Prime Minister Alenka Bratusek was quoted as saying by the national STA agency on Wednesday.

The project to add the 600 megawatt (MW) block is the biggest energy investment underway in Slovenia, which narrowly avoided a bailout last month as the government pumped 3.2 billion euros ($4.4 billion) into its debt-laden banks.

The European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) provided 650 million euros in loans for the project to replace two exisiting units at the 791 MW power plant and boost its electricity output by 30 percent.

French power and transport engineering firm Alstom is among the contractors on the project, which started in 2012. The unit is scheduled to enter test operation in 2015.

Analysts say the viability of the investment rests on the price of coal from nearby Velenje coal mines, a subsidiary of the state-run power utility HSE which operates the project. They say the price of 2.25 euros per gigajoule, on which the project is based, is too low.

But HSE says the agreed long-term coal price was crucial to securing loans from international lenders. ($1 = 0.7306 euros) (Reporting by Almir Demirovic; Writing by Maja Zuvela; Editing by Anthony Barker)