 THE NUCLEAR OPTION |
In Helsinki in December 1999, Bulgaria made a difficult but - then it seemed - necessary decision. One of the conditions for receiving an invitation to start accession talks with the European Union was to assume the commitment to stop all its four 440 MW WWER reactors at the Kozlodui Nuclear Power Station. In practical terms, that would leave Bulgaria short of some 2000 MW of generating capacities at a time when its economy is projected to reach at least its 1990 level, with regional energy markets doubling their immediate need of electricity supplies.
With two major energy projects, yet to take off and scheduled for completion sometime in 2005-2006, Bulgaria will have partially restored only its thermal generation utilities, while the backbone of its energy infrastructure, the Kozlodoui NPS, will be stripped of 46% of its capacity. The site for a second nuclear power station at Belene, on the Danube, was frozen for more than a decade after some USD 1 billion were invested in its infrastructure. There is an option to have either the Belene project revamped, or to have a new reactor constructed at Kozlodoui. Neither of the two options is currently at a stage that would allow even a broad schedule to be outlined. Still, the nuclear energy option remains open for future investments to the tune of at least USD 1.5 billion at current prices.
In parallel to the gradual deregulation of Bulgaria's economy, the restructuring of the power sector is gaining an increasing priority. Currently, the energy sector is dominated by the National Electricity Company (NEK by its Bulgarian acronym), which is managing the nation's electricity grid and supplies, and Bulgargaz, the natural gas monopoly; both owned by the state.
Transforming the individual power generation utilities into independent state-owned commercial companies made the first steps in the restructuring of the electricity sector. Some of the smaller hydroelectric power stations with output capacities of up to 100 MW were privatized, and major reconstruction projects are underway at the two largest thermal power utilities within the Maritsa Iztok complex.
For the time being, all consumers in Bulgaria are supplied by NEK alone. In 2002, the government plans to enforce a regulation, allowing major industrial consumers to sign electricity supply contracts directly with the producers. The seven regional structures within NEK will be the next to be granted some commercial independence prior to their privatization. According to Milko Kovachev, Minister of Energy, major European and Western companies have started their analyses of the market, which may emerge as the next investors' boom.
By international standards Bulgaria is seen as a small market with about 12,000 MW of installed generation capacities (for comparison the UK market has about 67,000 MW of installed capacity).
"We have a specific position as we are the
bottleneck between Asia and Europe. From that point
of view, Bulgaria is the natural site to switch
flows of electricity, natural gas and oil",
Minister Milko Kovachev said. "Bulgaria's electricity
system is already the backbone of the region, because
we are working in tune with Romania, Serbia, Macedonia,
Montenegro, Albania, Greece and Turkey. These days
we are covering about 45% of the electricity deficit
in the region", he added. "We are transiting
gas to Turkey, Greece, Macedonia and in the future
perhaps to Serbia as well. In addition there are
European projects, which are seen as strongly competitive
transit alternatives." |
"Bulgaria is the biggest energy producer in the Balkans and it is the only country with excess energy production", Deputy Minister of Economy Nikola Yankov said. "All our neighboring countries are in fact net importers of electricity, while we are net exporters; and we plan to preserve this status in the years to come. The energy sector is in good economic shape. It has sustained profitability and good prospects for development. It has a steady history of investments and is relatively modern in technology, while also being environmentally friendly unlike many East-European countries. The privatization of the energy sector has been scheduled for 2002 and we plan to do that as early as possible. Basically, there was deregulation there - the privatization of the energy sector has been delayed due to the deregulation law that had to be put into effect. Now all producers have been registered as separate legal entities and the national energy grid has been separated. The utilities, the distribution networks in the different regions, have also been separated into separate companies. All of them are ready for privatization now.
Two major US companies, American Energy Systems (AES) and Entergy, have already signed the fundamental instruments of two individual contracts for the rehabilitation of the Maritsa Iztok 1 and Maritsa Iztok 3 utilities. The total cost of the two projects is estimated at USD 1.5 billion, while the long-term effects may exceed the financial projections, as the two companies will have to rely on local coalmines close to their operations. Bulgaria would hardly manage to implement these projects by itself while at the same time it is expected to face a certain level of electricity deficit after 2010. By that time Bulgaria has assumed the commitment to close down four 440 MW nuclear reactors and will need to have sufficient replacement capacities in place.
"We saw a good opportunity to develop a project here," Tom Wray, Director for Business Development at Entergy said. "The company's project is for Maritsa Iztok 3. The project has a very high profile, being the first of its kind in this country and a learning experience for both the Bulgarian side and for Entergy. No one in the energy sector has had previous experience with the principles and specific requirements of project finance or with the general concept of private investment in the sector.
It has been a slow process", Wray said. "But we have passed major milestones… There have been a number of challenges. One major challenge has been gaining widespread acceptance that private investment in the sector is a good thing especially since the sector is seen as being strategically important to the security of the country. Then there's the challenge of changing the mindset of the people who have worked for state enterprises. These men and women were accustomed to a very stable work environment. Now, as this whole industry is being segmented, these people are moving into a free market competitive environment. The fact that this is the first effort of its kind in Bulgaria clearly explains the large learning curve."
The Maritsa Iztok projects have a strong social impact. There are 1,600 employees at Maritsa Iztok 1 alone, and Entergy claims it has agreed that when the project closes they will offer all employees a job.
The complex is located Southeast part of Bulgaria, in a region with only a few job opportunities outside the power plants and the mines. At the moment there are approximately 12,000 employees working at the coalmines. "Implementing the projects will guarantee the future of the power plant and indirectly the prosperity of the region for the next 18-20 years", Wray claims. |
