Банкеръ Weekly

Briefs

34 GAS FIRMS HAVE 45 SUBSCRIBERS EACH

Only 1,530 household subscribers are currently using natural gas, the State Commission for Energy Regulation (SCER) announced. These households use about 2,600,000 cu m of gas, or less than 0.1% of the aggregate gas consumption in Bulgaria, which exceeds 3 billion cu m. But despite the extremely small number of subscribers, the SCER has already issued 34 licences for distrubution of natural gas. All permits are from the 2000-2001 period and guarantee a regional monopoly status to their holders. Two licences have been granted for each of the population centres Bankya and Bozhurishte. But this does not mean that the local monopoly would be crushed, because in both cases the licence holder is Overgas through its wholly owned subsidiary Sofiagas. In fact, the Bulgarian-Russian JV Overgas (50% of whose shares are in the hands of Gazprom) holds 23 of the issued licences. The company has set up distribution networks in 18 population centres in the country and has 1,200 household subscribers. According to the granted licences, 32 population centres in Bulgaria should already had gas supply, i.e. a gas distribution network should had been set up or at least its construction should had begun. And the number of households, included in the network should had become several hunred thousand. But the real situation is quite different. The heap of licences guarantees a regional monopoly without fixing the terms for establishing the network itself and for attracting subscribers. For years now the licensed companies have not been carrying out whatever construction. Explanations are usually laconic: investor is being sought.The construction of gas distribution networks for households is a very expensive investment. On the other side, the low living standards in Bulgaria have narrowed to the minimum the circle of potential subscribers, who should pay between BGN2,000-3,000 in order to bring natural gas to their homes. Therefore, the only way for real entering of gas in households is to demand guarantees from all potential investors for implementation of the project, SCER's Chairman Prof. Konstantin Shushulov said in front of the BANKER weekly. According to him, serious investors could be attracted only through public and transparent tenders. The energy regulator intends to invite such tenders for all gas regions in the country. Under the plans, the tender dossiers for each of the regions should be ready by end-October 2003, relying on the team of consultants, financed by the World Bank. The circumstance that the local gas market is not developed gives an opportunity for establishing it on a firm and stable basis. In the words of Prof. Shushulov, its is certain that potential investors will be obliged to present financial guarantees for the project's implementation in the respective population centre. They should also be experienced in the exploitation of gas networks. The offers of big gas companies (with more than 100 subscribers) will be discussed first. Thus, according to SCER's Chairman, the market risk will be less, lower prices for delivery would be guaranteed, and better conditions for the consumers will be ensured.The regions for which tenders for a gas monopolist will be invited, shall be announced by the Energy Ministry. Back in May the establishment of eight gas distribution regions was projected. In each of the regions there will be one big town with many potential clients, which would ensure a quicker return of the investment.The local gas distribution companies which already have been granted regional licences, will keep them and the ownership on the set up networks. But if they remain autonomous, they will be forced to buy the gas not from Bulgargas, but from the regional monopolist. Each of the licence-holders could participate in the tenders. Experts point out that small gas companies have been recently merging and seeking foreign partners. Therefore, it is possible that one and the same candidate bids for several neighbouring regions.Gazprom is the certain foreign partner in the Bulgarian gas distribution netweorks. The Russian giant has set aside USD50MN for the purpose, Russian President Vladimir Putin announced during his official visit in Sofia last week. A month earlier Gazprom's head Alexey Miller annouced the Russian company's readiness to acquire shares in Bulgarian chemical and gas firms in exchange of the lower price of natural gas. Italian and German companies and private firms from Greece are also expected to show interest in the future distribution of the Bulgarian gas market. After the passing of the new energy law in June 2003 it will be possible to specify also the privileged gas consumers. All of them should be prompt payers of Bulgargas. The ceiling for their annual consumption is still arguable. The draft bill projects an annual limit of 80,000,000 cu m, but the ceiling will be probably lowered to 25,000,000 cu m. By end-March the SCER will prepare a schedule for a stage-by-stage opening of the market. It is true that even now direct deal with privileged consumers are allowed, but they include a trifling percentage of the natural ags consumption in Bulgaria.As far as the liberalization of import is concerned, its is possible only on paper as the Bulgarian pipelines are connected only with Gazprom's network. It depends on Gazprom's good will as well if there will be gas consumers in Southwestern Bulgaria. The reason is purely technical - only a transit gas pipeline passes through that part of the country and its entire capacity is being paid for by Gazprom. For years the Russian mastodon has been refusing Bulgarain consumers to be connected to it. According to pundits, however, the taboo was lifted during President Putin's recent visit to Bulgaria. The first official permission for supplying natural gas to the households network in Samokov (set up by Comex AD in compliance with the licence granted in February 2001) was given then.

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