Банкеръ Weekly



SELLING PRICE EXPECTED AT USD320-380MNThree of the 11 approved candidate buyers are officially quitting the contest before April 27 (the deadline for submission of final offers for the privatisation of the three electricity generating stations in Rousse, Varna, and Bobov Dol, the Energy Ministry announced. These are the US company AES, the Japanese J Power, and the British International Power Group. They have already notified the Privatisation Agency (PA) that they are not going to file binding offers. The US company said for the BANKER weekly that all their efforts at present are directed to the construction of a new 670-megawatt capacity on the site of the Maritsa Iztok 1 thermoelectric power plant. The project should be financially completed by mid-2005. Thus, the bidders for the three thermoelectric power plants will be the French Dalkia, the Greek РРС, the Russian RAO, the Italian Enel, the Japanese Mitsui, and the three new owners of the Bulgarian distribution companies - the Czech CEZ, the Austrian EVN, and the German E.ON. According to sources in the know, however, only five candidates will have probably filed final offers by the deadline, April 27, namely, the three owners of Bulgarian electricity distribution companies, Italy's Enel, and Russia's RAO. The ambitions of the three new owners of the Bulgarian electricity distribution companies to control electricity generation as well are more than understandable. But they will hardly offer the highest bids. The most serious competition is expected between the Italians and the Russians. After the loss in the tender for an electricity distribution company due to which Enel's regional manager Enrico Viale was withdrawn, the Italian company will be playing safe (otherwise there might be more senior officials withdrawn or expelled). Enel will most probably submit a sufficiently high purchase offer for the Varna power plant, but they will not give up the stations in Rousse and Bobov Dol either. After the opening of the regional energy market Enel will be able to directly export electricity from the Rousse-based plant to the Romanian electricity distribution utility Electrica Dobrogea, purchased by the Italians almost two years ago. Enel will also bid for the power plant in Bobov Dol, despite its outworn equipment, extremely inefficient fuel (local brown coal) and minors' protests. The Bobov Dol station is located on quite a strategic place for the Italians - near a trunk gas conduit and close to the high-voltage power line that will soon become part of the unified paneuropean transmission network, through which the electricity from the station could go directly to Italy. For the Russian RAO the acquisition of a big Bulgarian electricity generating station is a matter of both prestige and policy, and strict economic calculations. Although the Russian Government officially announced during the week that RAO would be closed down in the end of 2006, the mega company which is one of the top electricity conglomerates in Europe is still state-owned. For RAO it is a matter of prestige to step onto Bulgaria, especially after it was not even admitted to take part in the tenders for the electricity distribution companies. Its participation in the competition for the three power station is also motivated by economic interests: the turbines in all the three thermoelectric power plants were made in Russia, and the stations in Varna and Rousse use Ruissian coal as fuel. Thus, the electricity generated in the two plants by imported coal, may turn out to be quite advantageous to the Russians. Economically, however, it would be much more profitable for RAO to use natural gas as a fuel for the three power plants. We should neither forget the fact that the Russian gas giant Gazprom already holds 10% of the giant RAO, more than 25% of Mosenergo, and stakes in a number of other regional energy systems (in Russia itself and in the CIS countries), a considerable part of which generate electricity. Thus, the natural gas for the Bulgarian thermoelectric power plants will come cheap to RAO/Gazprom and what is more important, the price of the produced electricity will be one of the most competitive in the region. Of course, the fuel basis in the stations should be replaced before that (currently only one of the Varna plant's 6 turbines and one of the three units of the station in Rouse operate on natural gas). Therefore, the investments for modernization of the power plants will be considerable. This fact, in turn, will influence the purchase prices, to be offered for the three electricity generating stations. The five sure bidders will hardly offer high prices for the Bulgarian thermoelectric power plants, which need significant modernization and rehabilitation in order to continue their operation after the 2008 as well (when restrictions under the Kyoto Protocol on carbon emissions will enter into effect, especially those coming out from electricity plants, operating on coal). According to expert evaluations, the price for the three power stations is expected between EUR320-380MN, the bulk of which for the Varna utility (EUR180-200MN). The lowest price will be probably offered for the Bobov Dol station, although its capacities are more than three times bigger than those of the Rousse-based plant.

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