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P 200442Z MAR 06
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UNCLAS SECTION 01 OF 04 LJUBLJANA 000171 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/NCE, EUR/ERA, EB/CBA, OES/PCI 
DEPT PLEASE PASS TO USTR/ERRION 
USDOC FOR ITA/SAVICH 
TREASURY FOR VIMAL ATUKORALA 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD ENRG SI
SUBJECT: SLOVENIAN ENERGY: VULNERABLE BUT DIVERSIFIED 
 
REF: A) BUDAPEST 0309 
 
B) LJUBLJANA 0132 
 
SENSITIVE 
 
¶1. (SBU) Summary: A small, mountainous country with limited 
natural resources, Slovenia not surprisingly relies on 
external sources for many of its fossil fuel energy needs. 
Slightly more than 55 percent of Slovenia's total energy 
supply comes from liquid and solid fossil fuels.  An 
additional 15 percent of total energy is provided by natural 
gas, 20 percent from nuclear power, and the balance from 
renewable sources.  In spite of this reliance on external 
sources, Slovenia's overall energy picture is less bleak 
than some of its Central and Eastern European neighbors.  Of 
note, approximately 90 percent of Slovenia's electrical 
needs are supplied from domestic sources.  Nearly 40 percent 
of electrical consumption in Slovenia comes from domestic 
coal, roughly one-third from hydroelectric plants on 
Slovenian rivers, and, under joint ownership with Croatia, 
about 20 percent of domestic electricity consumption comes 
from nuclear power.  The remaining ten percent of Slovenian 
electricity needs come from imports. 
 
¶2. (SBU) While Slovenia felt the sting of the Russia-Ukraine 
dispute earlier this year, natural gas currently takes up a 
relatively small, albeit growing, portion of Slovenia's 
total energy picture.  Slovenia has limited options to 
reduce its current usage of crude oil products other than 
through efficiency improvements or use of "greener" 
technologies.  With this in mind, Slovenia has made a strong 
commitment to renewable sources of energy, largely through 
hydroelectric power.  Post also understands that Slovenia is 
considering expanding its use of nuclear energy in coming 
years.  End summary. 
 
--------------------------------------------- - 
National Energy Program: Renewable and Nuclear 
--------------------------------------------- - 
 
¶3. (U) In May 2004, Slovenia adopted a national energy 
program.  The program, which looks out to 2015, addresses 
Slovenia's needs by individual energy sources and lays out 
overarching principles to ensure energy security.  The 
program envisions increasing the efficiency of energy use, 
encouraging the use of renewable sources of energy, 
increasing co-generation production of electricity, and 
support for increased use of biofuels in transport.  In 
addition, the program calls for studying the possibility of 
extending the life of the Krsko nuclear power plant, 
increasing the number of hydroelectricity plants, and 
retaining significant state ownership in energy companies. 
 
---------------------------------------- 
Natural Gas: Low But Growing Consumption 
---------------------------------------- 
 
¶4. (U) Slovenia imports 100 percent of its natural gas needs 
and has only limited domestic storage, keeping a supply 
buffer in rented storage facilities in Austria.  As with 
much of Europe, Slovenia relies to a large extent on Russia 
for its natural gas needs.  Approximately 60 percent of 
annual natural gas usage of slightly more than one billion 
cubic meters comes to Slovenia from Russia via Austria.  The 
balance of Slovenia's natural gas comes from Algeria via the 
Italian pipeline.  The pipeline from Austria connects to the 
pipeline in Italy via an approximately 270 km main line that 
transits Slovenia from the northeast to the west.  Slovenia 
is currently in the process of expanding its distribution 
pipeline network, currently just over 500 km, to provide 
broader coverage to all parts of the country.  A monopoly 
until 2003, GOS-owned natural gas concern Geoplin controls 
the vast majority of the market in Slovenia. 
 
¶5. (U) In relation to some of its Central and Eastern 
European neighbors, the usage of natural gas as an energy 
source in Slovenia is still relatively low, providing 
slightly less than 15 percent of primary energy needs.  One 
of the main reasons for a lower level of gas consumption in 
Slovenia is that only about 25 percent of municipalities are 
connected to the natural gas pipeline network.  Homes in 
 
LJUBLJANA 00000171  002 OF 004 
 
 
Slovenia are more likely to be heated by wood, heating oil, 
or even coal than by natural gas.  In addition, unlike some 
of its neighbors, Slovenia does not use natural gas to 
supply its electricity needs.  Despite this, Slovenia has 
seen significant increases in natural gas consumption in 
recent years and the GOS expects that this will continue. 
As the natural gas network in Slovenia continues to grow, 
some experts predict a 70 percent increase in natural gas 
usage in Slovenia over the 2000-2015 timeframe. 
 
¶6. (SBU) The Russian-Ukrainian gas dispute of earlier this 
year, while catching Slovenia by surprise, did not impact 
the domestic supply of natural gas.  Supply from Russia did 
drop by one third during the dispute, but this decrease only 
lasted for 24 hours.  Buffer stock in Austria and average 
temperatures no lower than six degrees Celsius helped see 
Slovenia through the brief crisis, according to Miro Vidmar, 
the head of the Division for Energy at the Ministry of the 
Economy. 
 
¶7. (SBU) Vidmar acknowledged, however, that had the weather 
been colder or had supply cuts been longer or more severe, 
Slovenia could have faced a "huge problem."  Noting that 
Slovenia feels "trapped" by its situation, Vidmar said that 
all options for improving gas supply security were on the 
table.  He said the GOS is considering plans to build buffer 
storage facilities within Slovenia where it might maintain 
supply to deal with issues like this in the future.  Vidmar 
also said Slovenia was considering the option of working 
with Croatia on the development of an LNG terminal in the 
Adriatic Sea (ref A).  He noted, though, that Slovenia had 
limited short-term options to diversify its current natural 
gas supply situation and that it would be at least three 
years before significant changes could be implemented. 
Vidmar said that while the Russia-Ukraine situation was 
currently stable, the dispute was "fair warning" that prompt 
action needed to be taken by the government. 
 
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Oil and Gasoline: Total Reliance on Imports 
------------------------------------------- 
 
¶8. (U) Slovenia relies completely on other countries for the 
refining and supply of its liquid fossil fuel products. 
Gasoline, diesel, heating oil, and other crude-based 
products are produced in Italy, France, Bulgaria, Austria, 
Hungary, and Croatia, and are delivered to storage 
facilities or fueling stations in Slovenia by tanker truck. 
Miha Kirn, Manager for oil products supply at market share 
leader (and government-owned) Petrol, told Econoff that it 
is not cost-effective for Slovenia to refine crude oil 
products domestically.  A Petrol-owned refinery in the 
northeastern Slovenian city of Lendava is no longer 
operational and is used for the 90-day EU-mandated storage 
of refined oil products. 
 
--------------------------------------------- -------- 
Nuclear: Extend Existing Plant, Possible New Facility 
--------------------------------------------- -------- 
 
¶9. (U) In commercial operation since 1983, the 675 MW Krsko 
nuclear power plant accounts for nearly 40 percent of all of 
the electricity produced in Slovenia.  Krsko is jointly 
owned by the governments of Slovenia and Croatia through 
electrical utilities Eles Gen (Slovenia) and HEP (Croatia). 
The power that is produced by Krsko, approximately 5.2 Twh 
per year, is distributed equally to Eles Gen and HEP. 
Nuclear power from Krsko currently supplies approximately 20 
percent of Slovenia's electrical needs. 
 
¶10. (SBU) The agreement that launched Krsko in the late 
1970s stipulated that all aspects of the Krsko venture 
should be shared equally by Slovenia and Croatia: 
investment, power production, and waste.  Since the breakup 
of Yugoslavia, however, problems with this sharing 
arrangement have cropped up on a regular basis.  A dispute 
over allegedly insufficient payments for power by Croatia 
led to Slovenia cutting off the power supply from Krsko to 
Croatia in 1998 and once again in 2002-2003.  Following an 
agreement signed by Slovenia and Croatia in 2003, however, 
the power was turned back on.  President of Krsko Stane 
 
LJUBLJANA 00000171  003 OF 004 
 
 
Rozman told COM during a visit to the power plant on 15 
March that the 2003 agreement had helped resolve 
differences. 
 
¶11. (SBU) Croatia and Slovenia also have yet to come to 
terms on disposal of radioactive waste from the power plant. 
The 2003 agreement envisioned a sharing of waste and an 
ongoing development of a "waste fund" (paid for in a tax on 
electricity prices).  According to Post contacts, Slovenia 
has set aside sufficient money in a fund to address waste, 
but Croatia has yet to do so.  Rozman, and his Croatian 
managing partner Hrvoje Perharic, told COM that Croatia is 
currently assessing a tax on electricity to seed a fund, but 
that a formal fund had yet to be established.  Moreover, 
according to the Slovene Nuclear Safety Agency, Croatia has 
yet to accept any portion of the waste from Krsko and has 
said that it never will.  Both Rozman and Perharic made 
clear, however, that Croatia understood its obligation to 
pay its share for waste disposal.  All waste, including 
highly radioactive spent fuel rods, are currently stored on 
the grounds of the Krsko facility. 
 
¶12. (SBU) The future of Krsko and nuclear power in Slovenia 
will depend on resolution of the waste issue, according to 
Rozman.  Rozman acknowledged that a long back-burnered plan 
to build a second nuclear facility was gaining some 
momentum, but that a plan for the storage of waste from 
Krsko would have to be finalized first.  Contacts familiar 
with nuclear energy insiders in Slovenia tell Econoff that 
there is "tacit" agreement among politicians to move forward 
with the discussion of a second plant.  We also understand 
that the public sentiment may not be overly negative. 
Despite this, a new plant is a very long-term prospect 
according to Rozman, requiring ten years from a political 
agreement until a plant could be operational.  In any case, 
Slovenia will likely move forward with an extension of the 
life of Krsko.  Currently scheduled to be decommissioned in 
2023, Rozman told COM that his team was investing and 
upgrading the facility in line with a plan to extend the 
life of Krsko beyond this date, possibly by as much as 
twenty more years.  Rozman seemed confident in the future of 
nuclear power in Slovenia, particularly given the 
limitations of other options. 
 
--------------------------------------------- 
Coal: Will Remain Major Source of Electricity 
--------------------------------------------- 
 
¶13. (U) Coal-fired power plants in Slovenia provide nearly 
40 percent of Slovenia's electrical needs.  By far the 
largest coal electrical facility is located in Sostanj, 
directly across the road from the Velenje coal mine.  Owned 
by the GOS-controlled energy provider Holding Slovenske 
Elektrarne (HSE), the 750 MW Sostanj plant currently 
supplies 3.6 Twh of electricity annually, or nearly 30 
percent of all of Slovenia's electricity.  Contacts tell 
Post that usage of coal as a primary source of energy will 
continue for the foreseeable future, with the Velenje mine 
estimated to be viable through 2040. 
 
¶14. (SBU) Uros Rotnik, the head of the Sostanj facility, 
says that Slovenia will continue to have coal as a mainstay 
of its energy strategy for the foreseeable future.  Rotnik 
told Econoff that the GOS, through HSE, is investing 40 
million Euros to add new turbines to the Sostanj facility. 
He said this upgrade to the plant will increase operating 
efficiency by 38 percent when the new turbines come online 
in 2008.  This performance improvement would enable Sostanj 
to continue to use coal at the same rate as it does now, 
approximately four million tons per year. 
 
¶15. (SBU) Rotnik further noted that HSE is evaluating the 
addition of another block to the current facility in 2011, 
at a cost of approximately 500 million Euros.  He said that 
once this new block was operating, the Sostanj plant would 
phase out usage of older parts of the facility.  In 
addition, Rotnik said both investments would help the power 
plant decrease its production costs by nearly 25 percent and 
that cleaner coal-burning technology would help Slovenia to 
meet its Kyoto commitments. 
 
 
LJUBLJANA 00000171  004 OF 004 
 
 
--------------------------------------------- -- 
Hydroelectric power and other renewable sources 
--------------------------------------------- -- 
 
¶16. (SBU) Slovenia currently receives approximately one 
third of its electricity from hydroelectric power and has 
five additional plants in planning or under construction. 
These additional units would bring hydropower's share of 
electricity supply in Slovenia to approximately 40 percent 
by 2018.  Given the seasonal fluctuations in river levels 
and the potential negative impact of low rainfall years on 
power production, however, it is unlikely that Slovenia 
would increase hydro share beyond this level. 
 
¶17. (U) As part of an EU directive, Slovenia is currently 
working on its plans for introduction of biofuels.  The GOS 
has said, however, that Slovenia will be late in meeting the 
EU targets of biofuel as a share of total energy 
consumption.  Due to a lack of domestic production capacity, 
Slovenia may not meet the target of 5 percent by 2010.  In a 
move to address the capacity constraint, the GOS has 
committed to converting a factory currently used to produce 
sugar from sugar beets to a biofuel plant by the end of 
¶2007. 
 
¶18. (SBU) Western Slovenia has been touted as a potential 
site to develop a different source of renewable energy. 
Plans to build wind power facilities in an area of the 
country known for its strong air currents have long been 
suggested as an alternative source to imported fossil fuels 
and nuclear power.  In 2004, the GOS supported a plan to 
invest approximately USD 250 million in the development of 
three wind-powered electrical plants.  Largely due to 
concerns over native species in the proposed locations, 
however, the Agency for the Environment blocked further 
development of the project until the environmental concerns 
could be addressed.  As Post understands it, serious 
discussion on wind power as an important energy source is 
not/not happening at the current time. 
 
--------------------------------------------- --- 
HSE and Privatization: On the Horizon?  Sort of. 
--------------------------------------------- --- 
 
¶19. (SBU) From production to distribution, the government 
controls nearly all aspects of the energy sector in 
Slovenia.  The GOS has historically taken a very 
conservative view of privatization (ref B), preferring to 
move more cautiously than some of its regional neighbors. 
The GOS has, however, said that it intends to create a more 
competitive market by selling off at least part of HSE to a 
private partner and by creating a second "energy pillar" to 
compete with the national utility HSE.  Despite the stated 
plans, conservatism continues to rein.  Minister of the 
Economy Andrej Vizjak has said that privatizing HSE "should 
happen" but that it is not urgent.  Contrasting Slovenia 
with some of its neighbors, Vizjak has said that Slovenia 
doesn't need to "patch up holes in its budget" by selling 
off HSE in an expedient manner.  Claiming that it would be 
"too risky to let market forces run the system", Joze 
Zagozen, general manager of HSE, has also said he favors a 
partial privatization of the utility, but that the state 
should retain at least 51 percent. 
 
------- 
Comment 
------- 
 
¶20. (SBU) The Slovenian Government was jolted by the Russian 
cutoff of gas to Ukraine and appears to be focused on the 
question of energy security.  For the time being, Slovenia 
has sufficient diversity of energy sources so that officials 
are not in a state of alarm.  Nevertheless, our energy 
contacts tell us that now is the time to take steps to 
improve energy efficiency, increase use of renewable energy 
sources and explore other measures to secure the country's 
energy supply. 
ROBERTSON