New investment plan for Belene

25 November 2009

RWE's departure from Bulgaria's new Belene nuclear plant put extra pressure on government to find new shareholders while it redefines the scope of investment it needs.


The Bulgarian government, in power since July, has announced a new strategy for the development involving a reduction in its stake from 51% to 20-30%. This allows a new player or consortium to step in for up to 80%, while the state's 20-30% would be held by Bulgarian Energy Holding (BEH).
"In addition to decreasing BEH's share in Belene, we are replacing Deloitte Touche as an adviser on the new investment as the previous government did not specify well enough the binding conditions of investment, including RWE's commitment to secure a minimum of €500,000 ($748,000)" said Traicho Traikov, the Bulgarian minister of energy and economy.
RWE pulled out of Belene after failing to to find around €2 billion of funding for the €4 billion ($6 billion) project in current recession conditions. It also was unable to sign a final agreement with BEH and the agreed constructor AtomStroyExport in time for a deadline at the end of July. 

The Bulgarian prime minister, Boyko Borisov, has already alerted his Italian and the French counterparts about the search for new investors during recent official visits to the respective countries. During the first tender, won by RWE, other major European utilities including Electrabel, Enel, CEZ submitted indicative bids.
"So we are looking for a new bid while considering a consistent €4 billion ($6 billion) offer from Russia's state-owned Rosatom, where the important thing is that if new bidders join, they will need to go further than expressing interest and looking at the list of the commitments, thus sharing the responsibilities on them in a binding contract," Traikov said.         
However, the Bulgarian nuclear industry is fearing that delaying a response on Russia's offer may delay Belene's construction, according to Svetoslav Georgiev, chairman of the Bulgarian Nuclear Power Association. "Considering Russia's offer is a purely political matter," he said.
Meanwhile, Traikov has indicated that it will be a few months before the new bidding procedure starts, taking into account the need for thorough consideration to avoid the mistakes of the first process. In the new structure of the deal, the Bulgarian government will not provide state guarantees for any future loans.


"We have a new Bulgarian government, which wants to review all options on this project and this is normal, including the change of advisor on the new bid, thus looking to replace Deloitte as it was appointed by the previous government, not the current one," said Georgiev. He said that it was beneficial for Belene that RWE has not protracted the announcement of its decision to pull out, thus allowing a new procedure to go ahead without falling behind schedule.
"Investor outlook on Belene is much more positive now than two years ago when the first tender has run," Georgiev said, "Now it has got almost completed technical documentation together with the [construction] permits." He expects the permissions process to be finished next year in time for the completion of the new tender.


Giorgiev was supportive of Russia's offer of finance and said "Bulgaria has nothing to lose by accepting the offer." He added that "Belene is an international project already with Areva and Siemens taking part." Belene's reactors are to be of the Russian VVER-1000 class with the Western companies are providing instrumentation and control systems.
"It is better to get involved with a player who is willing to get involved and pursues its interest to take part in a new nuclear plant in an EU country," Georgiev said. "Russia has proven itself in new nuclear power projects in China and India, but not the EU, which explains its interest and the fact that the Russian government has allowed €3.8 billion ($5.6 billion) for Belene in its national budget since last year."


Experts in the Cambridge University Energy Policy Institute support this position, saying that EU needs to get used working with Russia while it works to establish itself further as EU's leading energy partner.