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AES sees up to $550 mln impairment charge from coal phase-out at Bulgarian TPP

AES sees up to $550 mln impairment charge from coal phase-out at Bulgarian TPP AES Galabovo; Author: AES Bulgaria / All rights reserved.

SOFIA (Bulgaria), June 27 (SeeNews) - U.S.-based energy conglomerate AES Corporation said that it expects to book a pre-tax impairment charge of between $450 million (425.2 million euro) and $550 million in the first half of 2022 in relation to obligations of phasing out its Bulgarian coal-based thermal power generation operations by the end of the next decade.

Bulgaria’s National Recovery and Resilience Plan (RRP), which was endorsed by the Council of the EU last month, foresees the planned shutdown of the company's thermal power plant (TPP) AES Galabovo, formerly Maritza East 1, by 2038, AES Corporation said in a Securities and Exchange Commission (SEC) filing on Friday.

"As a result, a reduction in the useful life was deemed appropriate and it was determined that the carrying value was not recoverable," the U.S. company said.

The impairment charge would be recognised for the period until June 30 under U.S. accounting principles relating to property, plant and equipment, the energy conglomerate explained.

"The impairment charge is primarily related to limiting the useful life to 2038, it is not expected to impact Maritza’s ability to perform its obligations under its current PPA through May 2026, nor materially impact Maritza’s cash flows or cash balances," AES Corporation said further.

The exact amount of the impairment will be communicated in the company's second-quarter financial results.

AES-3C Maritza East 1 is part of AES Corporation, which in 1999 purchased a majority stake in the Maritza East 1 project, renamed AES Galabovo in 2009. The company completed the full acquisition of the 600 MW thermal power plant (TPP) AES Galabovo from Ireland's Consolidated Continental Commerce Limited (3C) in 2005.

Bulgaria's RRP adopted a clear framework for coal phase-out and binding commitments to reduce carbon emissions in the power sector by 40% by 2025. This is backed by planned investments in the renewable energy sector of around 1.7 billion euro.

In May, AES Bulgaria signed a memorandum of understanding (MoU) with the government to explore options for developing a 100-MW solar-plus-storage facility and an 80-MWh standalone battery energy storage system (BESS) in the region of Sofia.

AES Bulgaria will also explore options for switching fully or partially to natural gas or hydrogen, biomass or solid waste fuel at its AES Galabovo coal-fired thermal power plant after the PPA with the National Electricity Company (NEK) expires in May 2026.

($ = 0.9449 euro)

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