Mining in Romania is listening to its European death toll

Emilia Olescu, George Marinescu
English Section / 08 martie 2021

The European Commission has decided that coal needs to be replaced with renewable sources of energy by 2050

Miners complain that the authorities are ignoring their proposals concerning what will happen to them after the closure of the mines

CE Hunedoara - insolvent, CE Oltenia - the restructuring plan has not been approved

Mining in Romania is on its way out. The recent protests of miners from the Lupeni and Livezeni coal mines have brought to the attention of the public a thorny issue, whose resolution has been kicked down the road by politicians over the last 31 years. The problem has become more acute with the European Commission's approval of the Green Deal Plan, which requires the economic decarbonification of the Union by 2050. This means scrapping coal-based energy systems and replacing them with renewable energy, which, for Romania translates into the total closure of coal and lignite exploitation in the Jiu Valley and the Oltenia Basin.

A signal in this respect was also recently given by First Vice-President of the European Commission, Frans Timmermans, who is responsible for the implementation of the Green Deal, who claims: "As a grandchild of miners, I must be brutally honest. Coal has no future. Why is the coal industry having problems across Europe? For purely economic reasons. Because there is no longer demand for coal, it is sinking. Billions and billions in subsidies granted to this industry. Billions that could be better used to create a future for people who are now working in the coal industry. And then I won't even mention CO2 emissions associated with coal. I won't even talk about that anymore. If we also add to the already difficult economic situation, we need to be honest and admit that there is no future for coal. But there is a future for people currently working in the coal industry. And that should be very clear. We need to mobilize the Just Transition Mechanism to ensure that we help mining communities find their place in a new environment with new possibilities. And I hope that Romania will soon have a plan for the elimination of coal and what it takes to implement it. And I assure you that we, the European Commission, will support Romania in implementing the plan. "

Through the Just Transition Fund -, România benefits from 1.94 billion Euros to deal with the situation in the areas where the coal mines will be shut down. But in order to benefit from the allocated amounts, projects must be drafted and filed rapidly because, otherwise, we risk losing a part of the respective money.

European Deputy Corina Creţu, a former European Commissioner for Regional Policy, recently stated in a post on her Facebook official page: "The problems in the Jiu Valley must be resolved quickly, but suffering can not be solved from one day to the next. A solid, long-term, well thought out project funded through the Just Transition Fund is needed. (...) I will repeat what I said on another occasion: the Just Transition Fund is a mechanism for supporting areas affected by the energy transition and is, from my point of view, the solution for the economic reconversion of these regions. Those who are feeling the most heavily the effects of this transition must be those who receive the most help. The inhabitants of the Jiu Valley deserve this protection that they can benefit from, therefore it is vital that the Romanian government thinks of a long-term strategy. Otherwise, tomorrow's dramas will be even more serious than today. "

According to official data, Romania will be allocated 1.94 billion euros from the Just Transition Fund (about 11%), the fourth largest allocation, after Germany, Poland and the Czech Republic. Last year, however, European Energy Commissioner Kadri Simson said that our country could receive up to 4.4 billion euros through the Just Transition Fund.

2038 - the potential target for closing down coal mines

Under these circumstances, the situation is difficult not only for the Hunedoara Energy Complex, which is insolvent, but also for the Oltenia Energy Complex, whose restructuring plan has not yet been approved by the European Commission. However, if about 4,000 people work for CEH, of which 3000 in mining, 36,000 people depend on the Oltenia energy complex and the complex represents 20% of the national energy system.

Virgil Popescu, Minister of Energy, told us that until the European Commission rules on the documents sent from Bucharest, he cannot comment on the situation in the Jiu Valley and the EC Oltenia restructuring plan. The official said, however, that there are solutions for reducing the CO2 footprint of the Oltenia Energy Complex, but that some of them got stuck in the "jungle" of the local public administrations.

Miners' representatives claim that they do not oppose the decisions made in Brussels, but they are dissatisfied that no national authority is taking into account their proposals on the situation of employees who will be laid off after the closure of the mines.

Dumitru Fornea, Secretary General of the Meridian National Trade Union Confederation, which many of the trade union organizations in the Jiu Valley and the Lignite Oltenia mining basin are affiliated with, said: "The European Commission is asking us for a clear timeframe on coal mining in the Jiu valley. It would be better if they told us a date for shutting down the mines. Germany has set it at 2038, Greece - 2024, Spain has shut them down last year, and in the case of Poland I know that the deadline being discussed was 2050. The signals are increasingly bad from Brussels and we must have a clear date that the Government has committed to, along with trade unions and professional associations. Perhaps we should have 2038 as a deadline, which should be the deadline for shutting down and safeguarding the infrastructure in the Jiu Valley, where the length of the mines equals the distance to Bucharest. It may be that, for economic reasons, we won't make it to 2038, but we have to preserve coal mining, if we look at what happened in Texas ... ".

Road and Railway Infrastructure - areas which could absorb the laid-off miners

Dumitru Fornea claims that miners see the implementationenergy transition program differently than environmental protection organizations: "Mining can not shut down in the next few years - which is what some officials in Brussels are rumored to want - because we do not have alternatives for the workers in that segment. Nobody is asking miners what needs to be done, what they want. They were invited to consultations, but they refused to attend because the only thing being discussed was the shut down and for now, they don't accept this, without concrete measures in exchange."

He referred to the meeting that the miners had in August 7, 2020 with former Prime Minister Ludovic Orban and current Energy Minister Virgil Popescu, when the establishment of a new energy complex in the Jiu Valley was decided, according to a study made by a Polish institute, in which it is stated that the deposit must be safe because it can not be abandoned abruptly. Also discussed then was supporting the Paroşeni thermal power plant, where a gas unit would be expected to be created, and the Mintia thermal plant being placed under the management of the Hunedoara County Council.

To start the just transition, we need to start investments in the area. Miners are not qualified to do anything else, because they have not had any other job opportunities so far, but they could work easily in technical professions. With regard to this, I would remind you of the discussion in Petrosani, in 2017, with former European Commissioner on Regional Policy, Corina Creţu, when the involvement of miners in the infrastructure works in our country was discussed.

A national tunnel company can be created, miners could work on highways, viaducts, tunnels, both in the road and rail segments, but the state must also play a role in this and mobilize private companies which absorb all this workforce that will be made available in the mining sector, "Dumitru Fornea said.

The Secretary-General of CSN Meridian also told us that, unfortunately, private investors were not very well received by the local authorities in the Jiu Valley and the Oltenia Basin and ran into difficulties in getting approvals for activities that would have needed workers from the area.

However, the mayors in the Jiu Valley have participated in the discussions at the Ministry of European Investments and Projects, as PWC Romania has drawn up a strategy for the development of the area, which mining trade unions reject.

Dumitru Fornea says: "There is already a verbal fixation that the European and National Authorities have:" We will not leave anyone behind." But miners want to know what that means exactly. I will give you an example: The Oltenia basin has contributed 400 million euros in recent years to the state budget - the value of green certificates - but it got nothing in return in the form of government investment. The Mintia thermal power plant has recently been fined by the environmental auditors. The value of green certificates exceeds the value of assets at Mintia plant. While the Jiu Valley is in a tourist area that can be easily integrated with small investments, the Oltenia basin is at risk and I do not know how the government will solve its situation. I think inter-ministry working groups should be created together with private companies for drawing up projects through the Just Transition Fund. "

He specified that, for example, the Oltenia Basin could, in the long run, become a center for solar energy, taking into account that it has large open areas, constantly exposed to sunlight, in surface quarries, if the lignite exploitation is shut down. Secretary General Meridian CSM claims that Czech company CEZ did the same, when it switched from coal to renewable energy.

"Regarding projects, if there were any discussions, they remained at the purely theoretical phase. Everyone is saying pretty things about the money from the Just Transition Fund, but there is a need for actual implemented projects. The companies from the Jiu valley and Oltenia have debts, they cannot access or implement such projects. There is a need for the involvement of the state or the private business environment, and the latter should receive support in that regard from the central authorities ", concluded Dumitru Fornea.

The fate of CE Oltenia hangs on the decision of the European Commission concerning the restructuring and decarbonation plan

The situation described by the union leader could become dramatic if officials in Brussels do not approve the restructuring plan for the Oltenia Energy Complex (CEO), which 36,000 employees depend on directly or indirectly.

Regarding the environmental part, things are different at the factory in Turceni compared to the one in Rovinari - where the two production units of CE Oltenia operate.

In Turceni, a desulfurization process takes place - unique in our country -, through which the sulfur from the exhaust gases resulting from the production of electricity in coal-powered plants is combined with limestone powders, producing gypsum. The company called Etex uses, based on a contractual relationship, the gypsum resulting from desulfurization, for the making of gypsum board at a factory in the area of the Turceni power plant.

On the other hand, in Rovinari, the waste generated by the plant's activity is dumped out in a field. Gypsum becomes waste, while it could could be exploited in production and, further, in the economic circuit.

In this context, as well as given the fact that Turceni is generating a shrinking volume of electricity, and Etex is starting to experience a shortage of raw materials for the production of gypsum boards, the company's representatives have expressed their intention to invest about 6 million Euros in a desulfurization plant at the Rovinari thermal power plant in order to get the necessary gypsum for their factory.

Alina Mocanu, CFO at Etex Building Performance, told BURSA: "In recent years, the obligations of CEO to supply at least the minimal volumes clearly stipulated in the contract were not honored, which is affecting the activity of our Turceni factory, where we have so far invested over 52 million euros. Our attitude has always been constructive and in order to solve this problem, we have proposed making a new investment in Rovinari, wholly assumed by ETEX. We have made a feasibility study, it was accepted by the CEO Technical Commission and, furthermore, the holding of a call for bids was decided. We will, of course, participate in this call for tenders and wait for the decisions of CEO in the coming period."

Although all the coal-based power plants in Romania have built gas desulfurization facilities, only the Turceni thermal power plant also built the drying installation, while other coal based power plants store of the gypsum slurry mixed with ash on nearby tailing fields. Etex Building Performance had a turnover of 235 million lei in 2019, up about 5% compared to 2018.

It seems that aside from Etex, there are other companies that want to invest in Rovinari. Robert Filip, the mayor of Rovinari, told us that several other companies are interested in developing a desulfurization facility at the CEO plant, but refused to give us the names of any of those companies. "In recent years, CE Oltenia has made large layoffs, and unfortunately failed to provide those laid off with alternatives, although in the restructuring plan they filed with the EU they had a clearly stated commitment to support the creation of new jobs in every way. Over here, two factories have been created in the last three years, which employed over 1200 people. What we want at CEO Rovinari is just the creation of a desulfurization plant that complies with the same Turceni specifications. Very clean and out in the open, it's already been a year since we have been publicly asking for that. We are asking for that factory to get built, and the investors we have been talking about have announced their intention to come to Rovinari and make the dryer that is needed, similar to the one that operates in Turceni, and which has a cost of at least 7 million euros. We have been struggling on that front for a year and a half now, using every possible avenue, and what we ask for is a match of the specification. We are asking for proof that the investor has a deed over the land so they can build the plant, create jobs and get a good price for the product. Those are the terms that had to be abided by at Turceni. They are companies that have expressed their intention in writing both with us and CEO. The Turceni investors just want to install the dryer, get the product and have the whole production process occur over there, they don't want to create jobs here.

For me it's all the same who is making that investment here - it could be Turceni, it could be someone else, it could be Romanians, Chinese, Indians, Africans, etc., all I care is about jobs being created. It seems there is no desire for that to happen, or it's not possible, I do not know. There are interests that are blocking this investment. In Turceni it was fair, legal and appropriate. We want jobs, because soon CEO will layoff people again, 300 people will lose their jobs and we want them to have something to do."

According to Mr. Filip, an investment of that kind could be done in a year. The mayor also said that at Rovinari, after 500 people were sitting in line to get employed in the car parts that were opened in the area, right now there is zero unemployment there, and work is currently ongoing on the third factory, where 100-200 people will work. The new investment belongs to Tetra Pack, which comes to make drums for bottling lines and in about 2-3 months will begin recruiting people.

Daniel Burlan, CEO: "The awarding documentation for selecting an investor in the Rovinari Desulphuration Unit - in the final phase of approval"

The main challenges for CE Oltenia pertain to the approval of the Restructuring and Decarbonation Plan by the European Commission, Daniel Burlan, president of the CEO Directorate said.

He has confirmed that there are three companies that have expressed their intention to invest in Rovinari, in a unit for the recovery of the waste produced by CE Oltenia: "Calcium-based liquid wastes (gypsum slurry) result from the process for the desulfurization of the exhaust gas and the removal of sulfur dioxide removal. At Turceni this gypsum slurry has been used for generating profits since 2011 and there are intentions to exploit it in Rovinari by holding a public call for bids for that purpose. A collecting and gypsum slurry drying plant will be built in Rovinari by the winning investor following the call for tenders procedure. CE Oltenia will make available to the investor the land necessary for the construction of the plant and will deliver the gypsum slurry. The investor will dry the gypsum slurry in the drying plant and will generate the resulting gypsum that can then be used in the production of gypsum cardboard."

According to Mr Burlan, an investor selection procedure will take place through the public procurement system. The awarding documentation is in the final phase of approval and, as soon as possible, will be published on the CE Oltenia website. Potential bidders will have 30 days to prepare the bid and / or request clarifications.

The electricity production capacity of CE Oltenia is 4 330 MW energy units in Rovinari, 4 330 MW units in Turceni, 2 315 MW units in Işalniţa and 2 150 MW units in Craiova, with a total installed production capacity of 3570 MW.

The delivery capacity of CE Oltenia subject to demand for electricity in the national system can cover up to 20% of the demand. The Oltenia Energy Complex currently operates on average with 5/6 energy groups and delivers into the National Energy System about 25,000 MWh daily.

Market conditions were different, demand for electricity dropped by about 30% in 2020, compared to previous years, Daniel Burlan said. Output is estimated to increase 25% in 2021, as the managers of CEO are convinced that things will turn around and the demand for energy will begin to rise.

According to him, CE Oltenia had, in 2019, a turnover of approximately 3 billion lei, and in 2020 it decreased to approximately 2.5 billion lei, due to the restrictions on its activity, respectively by the decrease of the consumption of energy to limit the spread of the COVID-19 pandemic.

CE Oltenia has 12.200 employees. Daniel Burlan said: "Throughout last year, the number of employees decreased from 12,800 to 12,200 employees, due to meeting the retirement age. In the next five years, the staff will be reduced by about 41%. The downsizing will occur naturally, (via retirement), as well as through restructuring and professional reconversion for the exploitation of the new production capacities that will be implemented, but also for other external activities. We are considering redistribution programs within CE Oltenia and there will also be voluntary redundancies according to the Restructuring and Decarbonation Plan - the only solution to make the transition from depletable and polluting resources (lignite) to renewable and less polluting resources. Thus, at the end of 2025, the number of employees will be about 7,200."

The restructuring and decarbonation plan for CEO involves the diversification of the energy mix through the introduction of renewable energy and electricity based on natural gas

The restructuring and decarbonation plan is to be implemented between 2021-2025 and involves diversifying the energy mix by introducing renewable energy and natural gas electricity into the company's portfolio. One of the main points of this plan is the construction of eight photovoltaic parks, with a total capacity of 725 MW, as the head of the complex told us. Also, that plan further includes the rehabilitation and upgrading of the Turceni microhydroelectric with 10 MW installed power, the construction of a 475 MW natural gas electrical power plant in Turceni and the construction of an 850 MW natural gas electrical plant at Işalniţa.

The total installed electricity production capacity will go from 3570 MW in 2020 to 3094 MW in 2026, with the weight of lignite reaching 50% of the total capacity.

The ultimate goal will be to reduce the specific emission at the company level from 0.82 tonnes CO2 / MWh in 2020 to 0.51 tonnes CO2 / MWh starting with 2026, representing a reduction of about 38% CO2 emissions.

Last year, in addition to the installations previously implemented for the desulfurization of exhaust gases and for the evacuation of slag and ash in a dense fluid system, having all the energy units compliant in that regard, emission reduction installations were put into operation in 4 energy units, with such installations to be implemented on two more units. Among other things, the Roşia quarry is set to be unlocked, which is the largest quarry of CE Oltenia and which provides the coal necessary for the operation of the Rovinari electric power plant, with a major importance in ensuring the continuity of coal-produced energy.

Daniel Burlan also said: "Given the drastic drop in industrial energy consumption, output in thermal power plants decreased by about 20%, the price of CO2 certificates has exceeded the level of 30 euros, energy imports are rising, CE Oltenia only has one chance: creating its own mix of resources, adding solutions that are not pollutant or pollute less, such as units based on natural gas and photovoltaic parks along with coal, which, since it is the safest source of energy production, cannot be totally ruled out."

In order for state aid to be approved, the Romanian authorities must make substantial changes to the initial plan (the most plausible hypothesis) or, alternatively, and unlikely, to bring solid counter-arguments to meet the European Commission's objections. Otherwise, the Commission will prohibit the implementation of the restructuring plan proposed by CEO, qualifying it as incompatible state aid.

On February 5, the Brussels Commission announced the opening of an in-depth investigation of the state aid for the restructuring of CEO. The beginning of a detailed analysis of state aid signals that there are serious doubts on the compatibility between state aid and the internal market. In order for the state aid to be approved, the Romanian authorities must make substantial changes to the initial plan (the most plausible hypothesis) or, alternatively, and unlikely, to bring solid counter-arguments to meet the European Commission's objections. Otherwise, the Commission will prohibit the implementation of the restructuring plan proposed by CEO, qualifying it as incompatible state aid.

Until the final decision of the European Commission, the government has no right to grant the financial aid that CEO needs. If it does, CEO will be legally forced to refund the aid. The European Commission does not have a formal deadline for completing an in-depth investigation, and its duration depends on a multitude of factors, such as the complexity of the case, the quality of the information received and the level of cooperation with the Member State concerned.

By the end of April, the CEO must acquire greenhouse gas emission certificates for 2020. If it does not obtain the European Commission's agreement for the payment of state aid, a penalty of 100 euro / ton of CO2 will be applied for failing to acquire the certificates, which would be a serious financial blow on the company's budget. According to the information provided by the European Commission in the decarbonation plan, the company's emissions are over 7 MT CO2 for 2020. At the current price of the certificates, the amount that the company has to pay will exceed 266 million euros.

If CEO fails to buy emissions certificates by the end of April, the total amount to be paid, including penalties, will be 966 million euros for the 2020 emissions alone. Unpaid amounts will be carried over into next year. Total expenses generated by company emissions may exceed euro 3.68 billion over the next ten years, even without taking into account the potential penalties. CEO does not have those amounts and will no longer be able to access them in the form of state aids.

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