European Commission approves aid for EPH co-owned Nováky power plant in Slovakia

Slovakia's Nováky power plant has received an exemption from European state aid rules to ensure secure electricity supplies in the area around the town of Bystričiany in central Slovakia. The plant is located in an area with insufficient grid interconnection and too few generation sources nearby.

Insufficient interconnection around Bystričiany prompted Slovakia to notify the European Commission of state aid for the Nováky power plant, which was commissioned as early as 1953. The state aid is to be paid to Slovenské elektrárne a.s., which has committed, in exchange for state financial compensation, to supply the grid with at least 870 GWh and no more than 1,100 GWh of electricity annually from the plant.

However, the European Commission notes in its report that this is only a temporary solution. Support payments must end no later than the end of 2023, or once the electricity grid around the Bystričany grid node has been sufficiently reinforced. This would in effect remove the reason for the state aid.

The company will be compensated by an amount corresponding to the difference between revenues from electricity sales and other services and operating costs, while ensuring a reasonable profit for the operator. The precise prices will be determined by the Slovak regulatory authority. The assumption, therefore, is that electricity generation at the plant remains loss-making even with rising electricity prices.

The promise of a reasonable profit itself may not be insignificant. A reasonable profit is also guaranteed to operators of gas transmission and electricity transmission systems, which are considered highly attractive assets precisely because of the reasonable profit and the certainty it provides through regulation.

However, the Commission recalls that granting an exemption from state aid rules does not relieve Slovakia of any obligations arising from its environmental commitments. This is a lignite-fired power plant that has faced significant criticism over harmful emissions, and it is therefore unclear how it will meet, for example, the strict requirements arising from the best available techniques for large combustion plants (editor's note: see the European Commission's implementing regulation on LCP BAT).

The plant is owned by Slovenské elektrárne a.s., in which Daniel Křetínský's EPH holds a one-third stake through Slovak Power Holding BV.

EPH appears to have long targeted assets that are regulated or may form part of support mechanisms designed to ensure grid security. Its power plants receive support in the form of capacity payments in the United Kingdom, while some of its plants in Germany have been transferred to the capacity reserve mechanism.

The Nováky power plant is located in central Slovakia, approximately 50 km from the Mochovce nuclear power plant. The plant has a capacity of 266 MW and, according to data on the website of an EPH subsidiary, accounts for approximately 8 % of Slovenské elektrárne's electricity generation. The plant burns lignite to generate electricity, while biomass is also co-fired in Unit A.