Tough decisions ahead for the Bulgarian government

24 August 2009

The new Bulgarian right-of-centre government could soon be making very tough decisions on the country's long-term energy security, with RWE rumoured to be ready to pull out of the Belene project.


How Belene could look - assuming
money for construction can be found
The German utility was reported by the country's Financial Times to be on the verge of pulling out of taking a 49% stake in the two-reactor power plant before new prime minister Boiko Borisov and his economy and energy minister Traicho Traikov conclude their assessment of Belene.


The government came into power only a month ago, but has made a priority of reviewing all contracts signed by the previous government regarding Belene, including a last-minute deal signed in June between the former prime minister Sergey Stanishev and Russia, which offered to finance the project's estimated €4 billion ($5.7 billion) cost. This agreement remains unratified before the Bulgarian parliament.


RWE last year beat out nine other companies for 49% bid for Belene but has since struggled to find the financing for the deal. None of the other bidders now seem interested and no more have come forward.


The FT report said that the Bulgarian government would soon announce RWE's withdrawal from the deal. Such a move could spell the end of the project, with ramifications for a host of companies involved as sub-contractors and partners for Belene's construction, including the Russian nuclear power construction company AtomStroyExport, the French nuclear power company Areva and the German engineering group Siemens. Contracts were placed for the major components of the two VVER-1000s with OMZ Izhora in June, a construction permit has been issued and some work has already taken place at the site.


The government has yet to outline its strategy for Bulgaria's long-term energy security, but while in opposition its members demonstrated their support for Bulgaria's long-term nuclear future if in line with the country's interests.


Bulatom, a Bulgarian trade group representing the interests of more than 100 national and international firms involved in nuclear power, said in a statement that "Bulgaria needs the 2000 MWe of capacity envisaged to be produced by Belene and this capacity needs to become available by 2015."


"Without it, the energy balance of the country would be disrupted. Bulgaria should learn the lessons surrounding the closure of the perfectly safe and efficient reactors three and four in Kozluduy and should not allow doubts about Bulgaria's nuclear future."


However, "Large-scale, Russian-sponsored energy projects in the Balkans are economically unfeasible and the Russian leadership is well-aware of this fact," said Rumen Kanchev, associate professor in geopolitics and strategic studies at New Bulgarian University.


Kanchev has argued that the Kremlin's efforts to take part in energy projects including the South Stream gas pipeline, the Burgas-Alexandroupolis oil pipeline as well as Belene, were intended to extend Russia's influence. This is consistent with Russian prime minister Vladimir Putin's strategy for using Russia's energy resources as a foreign policy instrument, said Kanchev. Most importantly, he expects that the new Bulgarian government, and Borisov in particular, will adopt a "pragmatic" attitude towards Bulgaria's relations with Russia.


In the absence of a provisional governmental statement on a possible financial investment alternative to RWE regarding Belene's construction, the latest results from state-owned Bulgarian Energy Holding (BEH) and from NEK (the national electricity company) do not give confidence in Bulgaria's ability to pay for a new nuclear power plant. BEH has just reported a net loss for the first half of the year, whereas its subsidiaries Electricity System Operator (ESO) and the mining company Mini Maritsa Iztok filed a net loss of €44m from January to June 2009.