Could you give us some information about the company, its present structure and activities?
Entergy Corporation, listed on the New York Stock Exchange as ETR, is a U.S. based integrated energy company headquartered in New Orleans. Entergy's regulated utilities provide generation, transmission and distribution to end-user commercial and residential customers in Arkansas, Louisiana, Mississippi, and parts of Texas. Entergy also has non-regulated businesses. These include nuclear and fossil generating assets in the northeastern and southeastern U.S and one natural gas-fired power station in the UK southeast of London, in Kent. Entergy's non-utility independent power development business unit focuses on developing low-cost power generation assets and delivering value-added products such as innovative tolling agreements, full-requirement contracts, and cogeneration to its wholesale customers. EWO has development and marketing offices in Houston, London, Madrid, Milan, and Sofia, Bulgaria. In terms of size, Entergy is among the top five energy companies in the States by any measure you get to choose.
How do you view the energy sector in Bulgaria?
By international standards it is a small market with about 12,000 MW of installed capacity (for comparison the UK market has about 67 000 MW of installed capacity). Until fairly recently, it was part of an integrated system that was owned and operated by a state entity, the National Electricity Company (NEC). Now the government is in the process of privatizing NEC and bringing the country's electricity market inline with EU directives. The current situation is that generation and distribution activities have been separated from NEC and are now run by separate state owned entities.
Was it only Maritza East III the project that brought Entergy to Bulgaria?
Yes. We saw a good opportunity to develop a project here. We were the first western investors in the energy sector. We came at the end of 1997. We took a look at this opportunity and then we signed a joint development agreement to develop the project with NEC in October 1998. Since then, we have been pushing forward.
What is the current situation with this project?
The project has a very high profile within Bulgaria. It is the first of its kind and developing it has been a learning experience for the Bulgarian side and for Entergy. No one in the energy sector 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. But we have passed major milestones. We achieved one of those this past June when we signed key project agreements with NEC. We are now working on completing the remaining development activities and securing financing for the project.
What are the major challenges for this project?
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 mind set 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.
Like implementing Western standards?
Yes. Bulgaria is going through a transition from a centrally planned economy to a market based economy. This has created huge changes. In the business sphere these include adopting international standards, different business practices, and open market principles.
How do you cooperate in this project with your competitor?
The other American company active in Bulgaria's energy sector is not truly a competitor since the two companies are doing two different kinds of projects. The Maritza East I project is a new build. Entergy is working towards the refurbishment and modernization of Maritza East III power plant. We feel the rehabilitation model is very appropriate for Bulgaria. The Bulgaria energy system does not need new additional capacity. What it does require is rehabilitation of existing capacity. The country's whole energy system has suffered from a lack of investment over a number of years. The system is there, but it is strained. While there is little demand growth in Bulgaria right now --- in fact demand has fallen in recent years with the closure of some heavy industries --- it appears the decline has bottomed and demand is starting to pick up. | However, many of the country's power stations are old and inefficient. What Bulgaria most immediately needs is reliable capacity. Our project aims to provide this by rehabilitating the Maritza East III power plant so that its operating life can be extended for a further 18-20 years The plant is 20-years old and has an output of 840MW.It is one of Bulgaria's key base load facilities and is situated next to a large open cast lignite mine. This mine accounts for about 90% of Bulgaria's domestic coal reserves and so is very important in the country's overall energy balance. Unfortunately the lignite is high in sulphur and the plant, which does not have any emissions control equipment, is a large polluter. Another major aim of the project is therefore to bring the plant in compliance with both Bulgarian and EU environmental legislation. This is a major undertaking and will greatly improve the local environment.
You mentioned the fact that you've spent a lot of money in organizing. Do you have any state guarantee for your business?
Traditionally projects like this in emerging markets have been backstopped by sovereign guarantees, which support the obligations of the host country state entities involved in such projects. Here, we have a slightly different arrangement. We have support from the government, but it is not state guarantee. The reason for that is Bulgaria has restrictions on the amount of such guarantees its government can provide.
Does the Bulgarian market offer possibilities for future export to Turkey or other surrounding countries?
The current regulatory situation is that NEC is the "single buyer" in the country (the single entity that buys electricity from all generators and sells to distribution companies and high voltage consumers). NEC is also the only entity that is allowed to import or export electricity. Exports are very important for NEC and Bulgaria. Bulgaria is often called the "energy hub" on the Balkans. This is correct in that Bulgaria is currently exporting electricity to Turkey, Macedonia, and Greece.
When do you expect the energy sector to be completely market oriented?
That is difficult to stay, but I understand that the government intends to take the first steps in 2002. These might include market liberalization, defining eligible customers, and making changes to the energy law. About half of the countries in Western Europe do not yet have fully liberalized markets. So, liberalizing the Bulgarian market is a challenge, but will be needed for Bulgaria to join the EU.
Do you think there is still place for new players in the Bulgarian energy sector?
Yes I do. The government is currently reviewing its energy strategy and I understand that the proposed new plans will include the sale of some generation assets and some distribution assets. I therefore believe there will be some future privatization opportunities
Could you elaborate on your social commitments to the country?
We take our social responsibilities very seriously. There are 1600 employees at that power plant and we have agreed that when the project closes we will offer all employees a job.
Maritza East is in the Southeast part of Bulgaria. It is fairly a poor region. The power plants and the mine are the main employers. At the moment there are approximately 12 000 employees working at the mine. By implementing our project we are guaranteeing the future of the power plant and indirectly the prosperity of the region for the next 18-20 years.
What would be your final message to our readers?
They have to be patient. Bulgaria is a good place to do business, but it is not a fast place to do business. If you come here you have to be prepared for the long-term.
Note: World Investment News Ltd cannot be held responsible for the content of unedited transcriptions. |
