Galp Energia is about to forfeit €8 million for not building a gas fired power station in Sines.
The deposit held by Caixa Geral is payable to the government if Galp fails to build the power station which, after years of delays and excuses, it now is unlikely to.
Galp received the license in 2013 and was all set to build the power plant in Sines, having deposited the €8 million back in October 2007 when it signed the deal under the José Sócrates government.
The combined cycle power plant which uses gas to create electricity, should have come into operation in 2010, but never got off the ground after repeated postponements lodged by Galp’s Chief Executive, Manuel Ferreira de Oliveira.
The money has stayed on deposit and the government now wants it released, following an opinion from the Directorate-General for Energy and Geology that enough time has gone by, Galp formally has handed back the license and the money should be forfeit as per the contract.
Ever since 2009, Galp has been complaining that the project lacked any economic rationale because the crisis had reduced electricity consumption and there was excess production capacity in the market.
Galp, which is owned 38% by Portugal's richest individual Américo Amorim, has been directing its investment effort at oil exploration and production for its refineries at Sines and Matosinhos.
Galp played the game of extending the deadlines time and time again, while failing to appoint a builder for the plant, claiming that ‘further environmental studies were needed.’
Then in December 2011, the company applied for the production license to remain suspended between January 2012 and December 2014, complaining about the crisis in the financial markets and the drop in consumption of electricity.
Then in 2013, Galp said the project would not be economically viable nor important for the country’s energy security and that gas-fired plants cannot compete with renewables (which have priority), or with coal-fired plants.
Galp may complain that its €8 million will be taken and used by the government, but it has only itself to blame and if this is the only cost of withdrawal, it has got off lightly.
