New complaints submitted to EC for possible unlawful state aids granted to Oltenia Energy Complex

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Bankwatch Romania addressed the European Commission (EC) to analyse the state aid granted to Oltenia Energy Complex (OEC) by the Romanian Government for expropriations for coal mine expansions and the payment of CO2 emissions certificates (EU ETS).

These are the expropriations for the extensions of Jilț Nord, Jilț Sud, Roșia and Roșiuța coal mines in 2015 and 2018, subsidized by Government Decisions, but also for the ash deposit in the Monastery Valley, in which case the decision has not yet been adopted. Thus, OEC received state aid worth EUR 6.6 million for the payment of expropriations and would be subsidized with another EUR 580 thousand for expropriations in the case of the deposit.

Bankwatch Romania argues that the government’s payments qualify as unlawful state aid as the Romanian government did not notify the European Commission, as EU law requires, before relieving OEC of its obligation to compensate the villagers. Also, Romanian authorities decided that the mine expansions are “national interest public utility projects” and should therefore be fronted by the State, but did not properly justified why the expansions are necessary to secure the energy supply, these motivations being mandatory in these cases.

Romanian coal company OEC has also been unable to afford their mandatory EU Emission Trading System (EU ETS) allowances for several years, so the national government granted them interest-free loans and guarantees. This, too, constitutes unlawful State aid. Not only that, they directly contradict the purpose of the ETS, to decarbonise the European energy system.

As any energy producer, Oltenia Energy Complex should cover its expenses with CO2 emissions certificates from its own budget. It is clear that by 2030 we will not be able to rely on coal anymore – it is already too expensive and polluting. The Romanian state should no longer ignore the opportunities for a just transition and use the state budget to develop the mining regions, instead of keeping an outdated technology alive,” said Alexandru Mustață, Bankwatch Romania campaign coordinator.

Specifically, for 2018, EximBank granted OEC a loan of EUR 17 million and 70% of the guarantees for loans of EUR 89 million from private banks. For the same purpose, the government planned in 2019 to provide a support scheme called the “OEC adequacy tax”, whereby for 10 years all energy consumers would have contributed to the payment of 67.7 million emissions certificates (approx. EUR 1.8 billion). In this case the intention was not communicated in Brussels either, but neither the Government has made a final decision.

A second scheme was provided through a rescue loan of EUR 251 million granted by the Romanian Treasury to OEC to finance the purchase of its ETS allowances in 2019. If the rescue loan will not be repaid, very possible considering the company’s debt, a restructuring appears inevitable. The complaint argues why the rescue loan aid should not have been approved: restructuring plans include converting coal units to gas, which would lock fossil fuels into Romania’s energy mix.

The European Commission may decide to open investigations following the environmental group’s complaints. If the Commission finds that the payouts violate EU law, it will force the authorities to recover the full amount paid out to date. Considering that the European Commission is calling for the cessation of fossil fuel subsidies under the proposal of the European Green Deal, it is hard to believe that State aid to OEC or other emission-generating companies will be granted in the future.

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