General Electric looking at new Auvere fine

Auvere Power Plant.
Auvere Power Plant. Source: Eesti Energia

Repairs of the Auvere power plant that have now taken half a year will likely bring contractor General Electric a fine claim stretching into millions.

Eesti Energia's €610 million Auvere power plant was shut down in the middle of May due to a malfunction of its external heat exchanger. Main contractor General Electric finished repairs that took longer than planned last week. The plant became operational again on the evening of November 19.

The plant has a two-year warranty that started when Eesti Energia took delivery. This period will end in August of 2020. A potential fine for General Electric is the result of a reliability clause.

"Reliability is a criterion included in our contract with General Electric. This means that for every percent reliability is below the agreed upon minimum during this two-year period, a penalty is in order, press representative for Eesti Energia Priit Luts told ERR.

Luts explained that a reliability summary will be put together at the end of the warranty period, while Eesti Energia has been in talks with GE for an interim payment. The energy company refused to talk about a potential sum before an agreement is reached.

Eesti Energia said, when presenting its Q3 financials, that the Auvere plant's planned production output for the third quarter was 300 gigawatt-hours but the target was not reached because of repair work taking longer than expected.

Because demand was modest in Q3, an operational Auvere would likely have required other power plants to generate less power. This would have benefited Eesti Energia because Auvere has a better profit margin. The Auvere power plant is the most modern and efficient in Estonia, meaning less money has to be spent on CO2 quota compared to other production units, making electricity produced there cheaper.

The Auvere plant also holds depreciation and interest expenses for the company. They amounted to a total of €10 million in Q3, Luts said.

General Electric has already paid Eesti Energia fines totaling €106 million for late delivery of the power plant. The fines were for missed revenue due to the fact production could not begin on time.

The 300-megawatt Auvere power plant is Estonia's biggest industrial investment and the country's last oil shale power plant so to speak. It can generate 2.2 terawatt-hours of electricity a year, good enough for 25 percent of total consumption in Estonia. In addition to oil shale, it is possible to use biomass in the form of wood chips for up to 50 percent of the plant's fuel needs, peat for up to 20 percent and shale gas for up to 10 percent.


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Editor: Marcus Turovski

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