Банкеръ Weekly

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MARITSA IZTOK IS AFTER EU STANDARDS AND ... PRICES

July proved to be a lucky month for the biggest thermoelectric power station in the Balkans - Maritsa Iztok 2. (It has eight units with a total capacity of 1,450 megawatts. The first four units, with a capacity of 600 megawatts, were commissioned in the 1966-1968 period. Their term of operation will increase be prolonged by 20 years after their repair and their aggregate capacity will go up to 696 megawatts. The station's efficiency will go up from 27% to 36 per cent. The new section of the power plant - units 5 to 8 - were commissioned in the 1985-1995 period and their aggregate capacity is 850 megawatts). Within just three days two things happened that should guarantee problem-free operation of the plant after Bulgaria's accession to the European Union (EU). On Monday (July12) the Energy Minister Milko Kovachev opened officially a pilot installation for treatment of smoke gases by a state-of-the-art technology. The entire project is worth USD8MN, of which USD4.5MN has been allocated by the Japanese Institute for Nuclear Research, USD2.5MN has been ensured by the International Agency for Nuclear Energy, and Bulgaria's financial participation is worth USD1MN, provided by the National Electricity Company (NEC). The facility will be purifying about 10,000-15,000 cu m of sulphur dioxide and nitric oxides per hour. The installation will only partly gloss over the ecology problems of the thermoelectric power plant. Emissions of sulphur dioxide from the big combustion installations in the country totalled 1,082 kilotons in the 1996-2000 period, and 44.4% of them came from Maritsa Iztok 2. The power station also generates 11.43% of the nitric oxides, which also totalled 45.2 kilotons in the above-mentioned period. Even with the new facility the emissions of sulphur and nitric oxides into the atmosphere will still be much higher than both European and Bulgarian ecology standards. They could be met only after an overall modernization and rehabilitation of the power plant's units and installation of the mandatory sulphur purification equipment that should be commissioned by the end of 2006 at the latest. This deadline has again been set by the EU. According to Directive 2001/80 of the EU for reducing the emissions of certain pollutants into the air, for all installations above 50 megawatts Bulgaria should have sulphur purification facilities with 94% efficiency. Only units 7 and 8 of Maritsa Iztok 2 have such installations at present. They were finished in August 2002, after more than four years of work, and they cost EUR61MN. A project for sulphur treatment installations for Units 5 and 6 has been developed as well. Financing will come as a EUR30MN grant from the EU's ISPA programme, a credit of the same amount from the European Bank for Reconstruction and Development (EBRD), and own EUR6.6MN of own funds. But in this case again details regarding the allocation of money delay the start of construction.The project for for the rehabilitation of the plant's units 1 to 6 and the installation of sulphur purification facilities for the first four units is far more important for Maritsa Iztok 2. Plans for a general repair date back to the year 2000 and the final scheme for financing the overhaul was worked out in 2004. But the guarantee and the credit agreement were signed only last week (on July 9). The repair will cost some EUR280MN, the main part of which - EUR226MN - will be extended as an export credit by the Japanese Bank for International Cooperation (JBIC).In any case, the modernization of the thermoelectric power station lags behind the initial schedules of the Energy Ministry. E.g. the installation for treatment of smoke gases was to be commissioned in end-2002. Things regarding the repair stand the same way. Rehabilitation of the first two turbines was projected to start in April 2004, but due to the arguments about the size of the State's guarantee, experts believe it will not begin earlier than September. The importance of Maritsa Iztok 2 for the country's energy balance is due to a simple fact. A serious risk of energy deficiency will arise after the decommissioning of Kozlodoui N-plant's units 3 and 4. The shortage of electricity could be compensated by rehabilitation of the power plants, using local coal as a fuel. That is why Maritsa Iztok 2, with its 1,450 megawatts capacity, emerges as a golden reserve. However, the possibility that the big capacity turns out a mixed blessing should not be ruled out. One of the conditions of European Directive 2001/80, underlying Bulgaria's commitments under the Environment Chapter as well)obliges operators of power plants of over 50 megawatts capacity to use them for no more than 20,000 working hours within the January 1, 2008 - December 31, 2015 period. I.e. only 2,500 working hours for each of the eight years are allowed. And according to the calculations of the Energy Ministry, after the rehabilitation of Maritsa Iztok 2 units, its total electricity output till 2015 will be about 7,300 megawatthours per year with annual use of 5,000-6,000 working hours. It could turn out that the modernized power plant will be operating at only half of its capacity. Few more questions follow here. The first of them are merely financial: how will the thermoelectric power plant pay off the credits (amounting to EUR340MN) if it operates at half capacity? What will be the price of the electricity produced by the renovated blocks then? Currently, the purchase price of electricity produced by Maritsa Iztok 2 is among the lowest ones: BGN27.97 for energy and BGN11.36 for power per megawatt (the only purchase price that is lower is that of Kozlodoui nuclear power plant - BGN12.53 and BGN25.78 per megawatt).The other problem is related to the country's obligations under the Kyoto protocol. The replacement of the ecologically pure production in blocks III and IV of the nuclear plant by the carbon dioxide-vomiting coal turbines of Maritsa Iztok 2 will hardly favour Bulgaria's commitments to reduce by 8% the hothouse gases from the beginning of 2008. Instead of profiting by the noxious emissions, Bulgaria may have to pay for them.What is more important, however, is the fact that even if Maritsa Iztok 2 operates at the highest capacity after 2006, it will again fail to compensate the deficiency from the decommissioned nuclear blocks. The deficit in the country's energy balance will only be avoided if the energy system includes new powers of 700-1,000 megawatt at least. The ledges of brown coal in the Maritsa basin allow for the construction of such a plant in the region. We only have to see if that will happen on the ground of Maritsa Iztok 3 where the Italian Enel company and the US Entergy are rehabilitating the constructed 600 megawatt, or on the Energy Production ground of Brikel (Maritsa Iztok 1 thermoelectric power plant) where the US AES and the offshore 3C companies own the rights to build two new blocks with total capacity of 670 megawatt.

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