HSE GROUP ON THE WAY TO BECOMING THE MOST AGILE AND FLEXIBLE GROUP OF COMPANIES IN THE ENERGY SECTOR
HSE has entered its twenty-first year of existence. In other words, it will reach adulthood according to American criteria, turn green with the new logo the European way, and slowly but carefully embark upon its third decade the Slovenian way, and this will be primarily transitional. The road along which it will travel has been paved with previous achievements but has some cracks that need to be filled. It is a winding road, with quite a few blind corners, sometimes wide, other times narrow and occasionally barely passable.
But this is the situation in the energy sector and the HSE Group has, without hesitation, set up its plans to travel this interesting road where we can foresee many environmentally friendly projects, new locations and new modern products.
Dr Viktor Vračar, the Managing Director of HSE, says that in twenty years, when we celebrate our fortieth anniversary, HSE will be an optimised, agile and flexible energy company that will be among the key producers of electrical and other synergy forms of energy produced by environmentally friendly technologies, as well as a major supplier of energy and energy sources as a wholesaler and retailer. The energy sector, in which the HSE Group will dominate, will be entirely “green” and connected to other sectors such as, for example, transport. We have the appropriate knowledge and experience as well as a clear vision and goals, and we have more than 3,200 fully engaged employees with whom we are embarking on this journey to achieving the set goals.
You have been the General Manager of HSE for a year and a half, prior to that you were the CEO and before that a member of HSE d.o.o. Supervisory Board for three years. You have learned quite a lot about the company and HSE Group in all this time. How would you describe them in a few sentences? Which obvious changes have occurred in the group, among its employees, for instance in the past five years?
The HSE Group is represented by more than 3,200 employees, whose harmonised work contributes to the business and market success of each individual company and the HSE Group as a whole. I can confirm that this harmony of colleagues at the Group level has improved in the past few years, and they have become even more connected. The merging of business processes, which was initially not accepted well by a large number of employees, quite certainly contributed to that success, but it has been proven over time that the decision to unify what used to be duplicated work was the right one. Recently, we have taken a more natural and soft approach to connecting our employees: via joint projects and collaboration at the operational level, meetings of individual expert areas and via joint training. We wish to strengthen our collaboration in the future, as I am convinced that this is one of our main advantages: the invaluable expert knowledge and experience which are further evolving through joint projects, and all this impacts the engagement in performing work. I would like to emphasise our pool of key staff, where the most promising colleagues will further develop their skills. We also carry out the so-called monthly Megawatt hours at the Group level, via which various projects of the company and HSE Group are presented to the employees. And finally, I am quite pleased that the organisational atmosphere at the level of the parent company and the entire HSE group is constantly improving.
The energy markets have become more dynamic in the past few years, and the companies of HSE Group strive to adapt effectively by becoming agile and flexible in all areas of operation.
The first months of the year are the time to do a full assessment of the previous year. How would you evaluate the operations of the company and the HSE Group in 2021? What are you most proud of?
I can gladly say that, despite the spiking prices of emission coupons that burden our thermal division, and despite the challenges in the area of technical reliability of operations, we ended the year 2021 quite successfully. The major milestones include the EUR 261 million settlement with General Electric, the conclusion of the contract on purchasing the majority share in ECE and Energija Plus and laying the foundation stone for the largest solar power plant in Slovenia, Prapretno SE.
The past year was also a year of records, mostly achieved by the DEM and SENG hydro power plants due to great hydrology conditions in the first half of the year. The first consolidated but unaudited numbers are already known: net sales revenue in 2021 was by 55 percent higher than in 2020 and exceeded EUR 2.8 billion, the generated EBITDA amounted to approximately EUR 350 million or 2.5-times higher than planned. This was mostly affected by the settlement with GE and high electricity prices in the markets along with a satisfying operation of our hydro power plants and thermal power plants as well as successful management of high market volatility, especially in the last quarter of 2021.
A new company joined the HSE Group last year, i.e. the ECE company. This took the HSE Group into the retail electricity market. Which activities will be implemented in this area in the future? How has the work at HSE been organised in the area of retail sale?
ECE company officially joined the HSE Group at the end of October 2021. Our cooperation so far has been good. In 2022, the main task will be to harmonise the processes between HSE and ECE. Whereas ECE will focus on sales processes for end consumers, HSE will take over the management of portfolios, digitalisation and the development of new sales products for the end or retail sale market. By upgrading gas trading, HSE plans to boost sales to end consumers via our new company.
Besides selling energy sources, activities will also be implemented in sales and the development of comprehensive energy solutions such as solar power plants, heating systems and similar, as well as e-mobility by introducing the settlement of production and consumption at the level of the entire HSE Group. After adding the company Energija Plus, which will happen at the end of 2022, we will continue exploiting synergies by including all companies in the HSE Group.
This year is also a year of new projects. In spring, we are planning to transfer the first Mwh of electric power from the Prapretno solar power plant in the network. Which projects would you like to emphasise in the near future?
The main task of HSE Group is to guarantee a reliable production of electricity, which is the precondition for a reliable supply of electricity in Slovenia. All our future projects serve this primary goal. We will mostly invest in those that are economically and environmentally justified. Therefore, in those that will be sufficiently profitable and at the same time harmonised with the adopted strategic guidelines in the area of the decarbonisation of society and sustainable development.
Prapretno solar plant is an exceptional example of how to use a degraded area and ensure a just transition of a coal mining region to a location for the production of electricity from renewable energy sources. But it is not the only one: HSE Group is preparing several projects for the exploitation of solar, wind and geothermal energy. I would like to highlight the Zlatoličje-Formin solar power plant, which is in the second construction phase, while the third major phase is being prepared. Here, as with the hydro power plant on the middle Sava River project, we will continue with the procedures of space placement.
Solar and wind energy exploitation projects are planned for the Dravske elektrarne Maribor and Soške elektrarne Nova Gorica. Their hydro power plants will be subject to many renovations this year. For instance, the Hubelj small hydro power plant, while the more than eighty years old Doblar hydro power plant will have secondary systems replaced and museum activities initiated. As for our thermal division, comprising the Velenje Coal Mine and Šoštanj Thermal Power Plant, the most important project will encompass the start of preparation for the restructuring of both companies in accordance with the adopted National Strategy for Terminating the Use of Coal and the Restructuring of Coal Regions. We are also hoping for a quick adoption of the Velenje Coal Mine Gradual Restructuring Act that will ensure the financial resources for a controlled decarbonisation of Slovenia. At the Šoštanj Thermal Power Plant, we are studying the development of carbon dioxide capture and storage technology, and planning the setup of the pilot device scheduled, if possible, for this year. We are also planning cooperation with several consortium research and development projects related to hydrogen technologies and the exploitation of geothermal energy.
»Net sales revenue in 2021 was by 55 percent higher than in 2020 and exceeded EUR 2.8 billion, the generated EBITDA amounted to approximately EUR 350 million or 2.5-times higher than planned.«
You have mentioned the construction project for the hydro power plant on the middle Sava River, where not much has evolved since 2020, when the concession agreement was signed. Which obstacles still need to be overcome and when do you expect construction to start?
This is an important potential investment in the generation of electricity from renewable sources and the reduction of greenhouse gas emissions. When they are completed, the hydro power plants on the middle Sava River will generate an extra 1,105 Gwh of electricity, which will suffice for the supply of 250,000 households.
The project is in the phase of key milestones, which are not very visible because the first three power plants, Suhadol, Trbovlje and Renke, are currently in the process of spatial placement. HSE and HESS partner company technical experts are currently designing and preparing the comprehensive environmental impact report together with colleagues from our infrastructural company HSE Invest. We are implementing thirty demanding comprehensive environmental impact assessments, the findings of which will help us to find the optimal solutions for the planning of power plants by interfering with nature to the least possible extent. Hydro power plants are multi-purpose facilities, the placement of which must take into consideration the natural environment for animals and plants alongside and in the water. The spatial placement of the first three power plants where the road, railway and the Sava River meet in the canyon is instrumental especially for the local people, because it also comprises the regulation of local roads that are in quite a bad condition due to natural conditions. We will also regulate flooding areas and protect the river bottom against erosion.
Construction will start when the designers finish their work and after acquiring all the permits that are required for the administrative procedures. Three hydro power plants and a solar power plant on the Prapretno plateau are the start of the green transformation of the Zasavje region, which was quite burdened in the past from the environmental perspective. Our projects, however, are taking the region, Slovenia and Europe towards carbon neutrality.
GSE Group is the largest Slovenian producer of electricity from renewable energy sources and there are many plans in this area. Dravske elektrarne Maribor have many developmental projects for building new units to generate so-called green electricity: wind, geothermal, solar power plants. Do you support them? Which project could be realised first?
I support Slovenia’s efforts and the activities of our companies in the HSE Group towards decarbonisation. Projects in renewable energy sources are a step in the right direction. According to plans, Dravske elektrarne Maribor could in the second half of this decade increase installed power plant power by approximately one quarter and consequently increase the production of electricity from renewable sources, which is the goal of DEM and the entire HSE Group.
Dravske elektrarne Maribor have currently nineteen development projects under way and they should be reviewed and rationally selected according to their economic perspective and technological feasibility. A smaller part or the second phase of the solar power plant on the input and output channels of the Zlatoličje and Formin hydro power plants, with an installed capacity of 2.5 MW, will start operating as early as this year. Several other locations have been identified – these are mostly degraded areas where new solar power plants could stand. DEM is also planning to build three wind parks in north-east Slovenia. At the latest Supervisory Board session, I encouraged them to speed up the activities to build the pilot wind generator in the area of the Muta Municipality, which could be used as an example for generating electricity from wind energy and the cohabitation of such a production unit with nature and people. The company is also quite active in the pilot project of using dry drilling holes for extracting geothermal energy to generate electricity, which will be realised this year. Deep geothermal exploitation is an area that will also have bright prospects in future years, assuming the acquisition of EU funds to support it. Geothermal energy is a reliable source for which production can be implemented almost all days of the year.
A taxonomy that determines which activities and technologies enable green transition has been adopted at the EU level. How do you assess the EU taxonomy and how will it impact HSE Group operations?
The EU taxonomy has not been adopted entirely, but we can almost certainly say that it will have an important impact on the operation of energy companies. The aim of taxonomy is to redirect European funds and private capital into those investments or technologies that will enable the green transition and achieve ambitious climate goals. These include the chain of hydro power plants on the middle Sava River, solar and wind power plants and our pilot projects in geothermal and hydrogen technologies, or perhaps in gasification for the production of synthetic gases.
Considering the energy mixture and limited natural features of Slovenia, I believe that gas technology, in the form of direct exploitation in gas-steam co-generation or via natural gas pyrolysis, is the technology that can help us achieve ambitious European and national climate goals and partially replace electricity generated from coal. The inclusion of gas and nuclear technology in the taxonomy is quite positive, as appropriate flexibility from low-carbon resources will have to be ensured to preserve the reliability of supply while eliminating coal, i.e. as the counterweight to the increased scope for unreliable production of electricity from renewable sources. The key role of gas as a transitional source for achieving the climate goals for 2030 was also confirmed by the European Council in December 2020, and an important role of natural gas as the transitional energy source in the transition to a no-carbon economy has been highlighted by the recently adopted Gas Supply Act.
»I support Slovenia’s efforts and the activities of our companies in the HSE Group towards decarbonisation. Projects in renewable energy sources are a step in the right direction.«
Will our future projects or developmental investments be in accordance with the taxonomy?
The HSE Group actively supports the Paris Agreement on Climate Change and strives for climate neutrality by 2050, therefore, all our investments in the future production capacities are based on no- or low-carbon technologies. As such, they will be harmonised with the EU taxonomy. This will enable access to investment funds. I hope that such projects will also gain an advantage in spatial placement as this is the largest problem in planning green projects. All the above means a new obligation for the HSE Group and more reporting work because, as of next year, this will be a mandatory part of the annual or sustainability report.
Do you think that there is a possibility of reviving the SRF project – co-incineration?
I wish that this option existed, at least while the fossil blocks at Šoštanj Thermal Power Plant continue to operate in the traditional way, because in the wider social context such co-incineration is effective and environmentally acceptable and as such it should be adopted within the scope of establishing the principles of the circular economy. The project was, regardless of the prevailing public opinion, good in technical, environmental and financial terms. But it will not happen without the consensus of the key stakeholder – the local community.
What are the plans for the energy location in the Šaleška dolina Valley after the termination of coal mining?
In accordance with the adopted National Strategy for Terminating the Use of Coal, the plan for investment in technologies based on renewable energy sources will be prepared. The energy location in the Šaleška dolina Valley has great potential for developing new activities and projects and preserving jobs in different areas that are indirectly or directly connected to the energy sector, i.e. from photovoltaic, hydrogen, aquatic potential, mechanical engineering, electrical engineering, mechatronics … By considering the guidelines in sustainable development and society decarbonisation. HSE, Šoštanj Thermal Power Plant and Velenje Coal Mine have approached the preparation of plans last year and we have been studying various possibilities in solar energy, biomass and geothermal energy use for the production of electricity and the use of hydrogen and carbon dioxide capture and storage for quite some time. TEŠ could also partially replace operations using the primary energy source, coal, if Velenje Coal Mine could not supply sufficient quantities of coal or upon the coal mine closure.
Activities and actions connected to the implementation of the National Strategy for Terminating the Use of Coal and the expected Velenje Coal Mine Gradual Termination Act will impact a number of stakeholders, especially employees of HSE Group. Not only employees of the Velenje Coal Mine and Šoštanj Thermal Power PLant.
For sure. The Velenje Coal Mine and Šoštanj Thermal Power Plant are inseparable members of the HSE Group and in this way part of the safe and reliable electricity supply in Slovenia. The mentioned activities will not have a direct impact on employees in other companies, but we should not neglect the indirect impact that will, in my opinion, be reflected mostly in worry, doubt and low morale.
The fact is that the 2033 target year does not mean that the Velenje Coal Mine and Šoštanj Thermal Power Plant will be finally closed, as the shutdown procedure will last for two more decades. HSE places the social security of employees first and this will remain our priority during that sensitive period. We will continue to regularly communicate with all employees in the HSE Group about the restructuring of the thermal division and other milestones. All our efforts will be focused on a socially just transition to a decarbonised society with minimum stress. We will continue introducing new technologies and preserve the ene
»The energy location in the Šaleška dolina Valley has great potential for developing new activities and projects and preserving jobs in different areas that are indirectly or directly connected to the energy sector, i.e. from photovoltaic, hydrogen, aquatic potential, mechanical engineering, electrical engineering, mechatronics … By considering the guidelines in sustainable development and society decarbonisation.«
In 2021, HSE celebrated its 20th anniversary. What will the next twenty years look like? What will we as a group have to show in 2041?
We will be an agile and flexible energy group, optimised for the increasingly dynamic situation in the energy sector. By that time, the HSE Group will be entirely decarbonised and digitalised. I believe that it will remain the largest domestic producer of energy and will flexibly regulate its diverse balance group and operate at the highest environmental standards. The locations of TEŠ and PV will be rehabilitated. We will successfully build a chain of hydro power plants on the middle Sava River, spatially place numerous wind and solar parks and introduce geothermal cogeneration sites. HSE Group will be the largest producer of green hydrogen in Slovenia and the largest Slovenian wholesaler and retailer of electricity. We will be among the leading producers of electricity from renewable energy sources in the EU and at the same time the best Slovenian employer. We are determined to embark along the road of achieving excellence under a wide array of criteria.
»HSE places the social security of employees first and this will remain our priority during that sensitive period.«
Mag. Petja Rijavec, Corporate Communication Officer of the HSE Group