Romanian thermal producer renounces 2m EUA

Major Romanian thermal power producing complex Hunedoara forfeited almost 2m free EU allowances (EUAs) after financial difficulties prevented the company from submitting an application last year, ICIS can reveal.

Romania is one of eight countries, along with Estonia, Bulgaria, Poland, Cyprus, Lithuania and the Czech Republic that can receive free allowances for its power producers. The allocation comes with the price of carrying out investments in technology that will reduce CO2 emissions. In other European countries, power generators have to buy all EUAs from the market or auctioning platforms.

Power generators receive fewer free EUAs each year, with data from the European Commission indicating Romania was allocated 14% less in 2014 than the previous year. But the country applied for just over half of its potential entitlement, or 8.6m out of 15.3m EUAs, commission data show (see EDEM 15 April 2015).

Out of that pot, 1.8m EUAs were initially allocated to CE Hunedoara, but the generator did not apply for any. A spokeswoman for the company told ICIS that a lack of financial resources prevented the company from claiming the free EUAs.

In Romania, unlike other countries, power generators are required to first pay for the EUAs into a national fund before they can receive the allowances.

Daniel Urdoi, a legal adviser at the Romanian-based law firm Tonucci & Partners active in the industry, said that unclaimed free EUAs from the previous year are rendered obsolete.

The unallocated pot of free EUAs are auctioned in the following calendar year, a commission spokewoman confirmed. This means they are set to be added to the 2016 auction volume.

The Romanian producers have therefore forfeited its free EUAs for 2014.

Hunedoara owns the coal-fired power plant Deva, made of six units with a combined capacity of 1285MW. The power plant uses thermal coal, a higher quality and more expensive coal type than lignite.

The company has been struggling financially for some months, with an insolvency procedure under discussion. Employees in one of the mines it operates went on strike for three days in May. The government stepped in with a plan to separate the mines from the energy generation side of the company.

The EU approved at the end of May a state aid of €37m to help the company overcome its financial struggles. But no timeline for any improvements has so far come to light.

The biggest issue remains the low energy efficiency in most of the Deva’s units. The units run with a very expensive cost of generation, in some cases even above market prices. Romanian power prices have dropped in the last few years because of a surge in wind and solar capacity installations as well as favourable weather conditions for a healthy hydro output. sophie.udubasceanu@icis.com