Банкеръ Weekly



The project for the construction of a new generating capacity with a combined production cycle (thermal and electric energy) on the site of the Sofia thermoelectric power plant is slipping for a second year now. The main hindrance remains the inability of the executor - the US company Horizon Energy Development - and the National Electricity Company (NEC) to reach an agreement about the price at which the electricity generated by the power station would be purchased. Negotiations were due to complete by end-July but were postponed due to the summer season and the holidays of executives. Talks should be resumed in the first two weeks of October. I expect all financial, legal and technical issues to be clarified then, said Bruce Hail, Vice President of Horizon. The stumbling block for the time being is article 162 of the Energy Act, stipulating that the public supplier is obliged to buy at preferential prices the entire amount of electricity from the highly-efficient combined generation of heating and electric power for each station with capacity up to 50 megawatts. Above that amount the price of electricity produced through cogeneration will be additionally negotiated. Horizon's project for the Sofia power plant is worth EUR100MN, 30% of which are projected to come from the US company's own funds, and the balance is to be attracted. The money should be spent on the construction of two gas and one steam turbines with an aggregate electric capacity of 100 megawatts. But this automatically places the new power station above the line, specified by law. A possible way out of the situation is to change the project and build two separate capacities of 50 megawatts each. Thus, legislative requirements will be observed and the entire amount of generated electricity will be purchased at the maximum price of BGN80/megawatthour. The other disputable question is the duration of the contract's validity. The US company insists on signing a 5-year contract, including an option to extend it by five more years. The investor demands a 12-year long contract for operation of the power station. Horizon has already closed a contract with the Sofia Central Heating company for the sale of the generated heating energy within 15 years. There is a possibility for the US company to finance also the laying of 6 km of pipes to link the Sofia thermoelectric power plant with the residential quarters Hadji Dimitar, Levsky G and Suhata Reka. Presently, heating energy in these areas is produced by reactors, fuelled by black oil which function only during the heating season and pollute the atmosphere with harmful emissions above the admissible quantities.

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