Thermal power plants dig for local coal

Newsroom 24/03/2008 | 15:33

The development of thermal power plants worked hand in hand with the mining sector. “The restructuring process of the mining sector was started in 1997, when 81,000 miners were dismissed. Towards the end of last year there were 32,000 workers in this sector,” said Mihai Sorin Gaman, director with the Economy Ministry.
.According to the Economy Ministry representative, beginning with 1998 and up until 550 mines and quarries were closed.
“Due to the reorganization in this field, we have now just four mine operators: SNLO Targu Jiu, SNC Ploiesti, CNH Petrosani and CNU Bucharest with a total of 22 mines. The reorganization process is meant to make the mining sector profitable,” said Gaman.

Digging for investments
Now, the mining sector finds itself looking for investors. The Economy Ministry already evaluated the investment needed in this area. For this year the sector must receive EUR 55.5 million, with EUR 22 million from private resources, and for 2009-2012, a total of EUR 194.5 million for the lignite and mineral coal. From this, approximately EUR 92 million is expected to come from private investors.
The need for funds is bigger for hard coal mines, which must become self-sustainable by 2010 when the government will end subsidies.
“If you asked me five years ago I would have said ‘shut down hard coal.’ Now, I am not so sure, given the oil and gas trend. Maybe some cash should be put in upgrades to boost productivity at the mines with good resources,” said a World Bank official who wished to remain anonymous.
The state – owned company SNLO announced already for this year EUR 40 million investments. “We will invest in new production lines, equipments, land acquisitions, research and social activities. Also, the company will spend EUR 6 million each year ,” said Eugen Davidoiu, general manager of National Company of Lignite Oltenia.
He said that this year’s production is estimated at the level of last year, when the company dug up 18.8 billion tones of coal. SNLO estimates for this year a turnover of EUR 300 million, compared with EUR 272 million reported for last year.
For now, the government has ruled out privatization plans for the industry this year, saying it needs more time to analyze potential solutions.

Thermal power plant projects rely on imported coal
Industry data shows that Romania is importing coal for other countries. In case Romania will not find resources to invest in the development of this sector, the need for imported coal will be more pressing in the near future, if we take into account the numerous projects for thermal power plants announced.
SNLO received in January this year the authorization to become an energy supplier. “We plan to find the finance sources to invest in two thermal power plants running on lignite,” said Eugen Davidoiu, the company’s GM.
Italian energy company Enel plans to invest EUR 1 billion in a thermal power plant on coal with a capacity of 800 MW in Galati area. The works will start next year and are estimated to last two years. Energy Holding, another energy company, announced that it would finance the construction of a thermal power plant on lignite.
“According to the strategy of Societe Bancaire Privee, Energy Holding has important investment plans regarding energy production. We are now selecting a consultancy firm to draft a feasibility study for a thermal power plant,” said Corina Drumeanu, deputy general manager of Energy Holding.
All this projects will mean more imported coal for Romania instead of reliance on local resources. Representatives from companies with this type of projects say that they might have to take into account bringing the coal from China or even Brazil. “We are looking at international markets. Everything is linked to the transportation price and the quality of the coal,” Marian Nastase, VP of the Administration Council of Alro Slatina told Business Review. The local aluminum producer declared recently that would invest in a thermal power plant with a capacity of 1200 MW/h which will be functional in two years. The investment is estimated at USD 1 billion. “We need predictability regarding the energy price for 20 years, especially because 35 percent of the production costs represents energy. This is why the project is imperative for us,” said Nastase of Alro.

By Dana Ciuraru

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