The National Assembly passed the law approving a state loan guarantee for a EUR 440m loan from the European Investment Bank (EIB) for generator 6 (TEŠ6) on 18 July on certain conditions, including that the price tag on the project - now set at EUR 1.3bn - does not rise.

Before the loan guarantee agreement can be signed, TEŠ and the state (the ministers for finance and energy acting on its behalf) need to sign a contract setting the framework for implementing the project in line with government conditions.

These include the price, the purchase price for the coal TEŠ will buy from the Velenje coal mine, the timetable for the completion of the project, the expected returns on investment and the upper limit for CO2 emissions.

In accordance with the conclusion passed by the Finance and Monetary Policy Committee, TEŠ also needs to draw up, before the loan contract can be signed, a revised investment programme and have it assessed by an independent expert.

The programme will also have to be endorsed by the supervisors of TEŠ and its owner, the state-run utility HSE. The document will serve as a basis to examine whether the conditions set down in the loan guarantee act have been met.

TEŠ needs three months to start drawing the EUR 440m loan from the EIB. To finance the generator 6 project, TEŠ also took out from the EIB a EUR 110m loan secured with a bank guarantee, and a EUR 200m loan from the European Bank for Reconstruction and Development (EBRD).

TEŠ accessed the EUR 110m loan from the EIB last year, while it has so far also drawn EUR 82.5m from the EUR 200m loan from the EBRD, the STA has learned from the company.

"The biggest difficulty is with the consortium of commercial banks that guarantee for the already accessed EIB loan, and with the EBRD," TEŠ said.

The consortium of banks as well as the EBRD have extended the deadline for the state loan guarantee by 31 July, which TEŠ is now trying to extend further in negotiations with the banks, the STA was told by TEŠ.

In case the state guarantee is not issued, the banks have a right to withdraw their guarantees and request the repayment of the loan that has already been drawn.

This would mean a withdrawal of the EIB's EUR 110m and the EBRD's EUR 82.5m that TEŠ has already borrowed and as a result the cancellation of all agreements. "This would obviously undermine the financial construction of the generator 6 project," TEŠ explained for the STA.

The main power generation equipment for TEŠ6 will be supplied by France's Alstom, which is proceeding with the work on the site after briefly scaling it down in mid-June while awaiting a decision on the state guarantee.

TEŠ has recently also put out to tender a contract to connect the 600-megawatt TEŠ6 with the exiting facilities and new auxiliary facilities in an estimated value of EUR 1.5m. The bids are expected by 10 August at 11 AM and will be opened publicly at the TEŠ headquarters an hour later.

The potential bider needs to have generated at least EUR 6m revenues in the past three years and needs to attach at least three references for the same or similar kind of contract completed in the past five years in the value of at least half a million euros (exclusive of VAT) per contract.