Банкеръ Weekly



THE COMPANY'S FINANCIAL RESULT IS DOWN OVER TEN TIMES FOR THREE YEARSAfter 2006 Bulgaria will no longer be the Balkans' main electricity exporter. Eventually the expectation was confirmed by Vassil Anastassov, Executive Director of the National Electricity Company (NEC). At present, our energy system has about 800 megawatts of reserve capacity which is as much as the capacity of units 3 and 4 of the Kozlodoui nuclear power plant. When they are decommissioned next year, the energy system will become unable to react adequately and the export of electricity will have to stop so that there will be no consequences for the domestic market, Mr. Anastassov said. Everybody in this branch is aware of the fact that this will seriously affect the financial indicators of the Bulgarian system operator, because its profit is basically formed by the export of electricity to neighbour countries. Since 2000, Bulgaria has been exporting about 6 billion kilowatt-hours every year, mainly to Greece, Macedonia, Serbia, and before April 2003 - to Turkey as well. Officially, the company does not comment on how much it earns from export, but there is an amount equal to BGN335MN written in the electricity customers - export group in its cash flow report as of December 31, 2003. According to unofficial information, the net profit from the then sold 5.8 billion kilowatt-hours amounted to USD50MN. A year earlier, revenues from exported electricity were even bigger - more than BGN437MN. Since the Kozlodoui generators 1 and 2 were decommissioned in the end of 2001 export has started to gradually decrease. That reflected on NEC's financial results, too. In 2001, the accounting profit of the company went beyond BGN244MN, in 2002 it was BGN180MN, and in 2003 - just BGN21.3MN. The 2004 figures show slight improvement - NEC's financial result before taxation amounted to BGN25.7MN and its net profit - to BGN18.9MN. The transitory growth is mostly due to the diminished operating costs (down by BGN16MN) and the reduced technological losses (by 21%).The financial loop will tighten around NEC immediately after 2006. At that time export revenues will become minimal or zero (moreover, import of electricity may become necessary). Besides, a few long-term agreements were signed for purchase of electricity - a 15-year one with Maritsa-Iztok 1 and 2 thermoelectric power plant and another 5-year one with Maritsa-Iztok 2. The company will also have to fulfil the contracts signed with the future new owners of the thermal plants in Bobov Dol, Rousse and Varna - contracts for purchase of electricity and for disposable capacity. One should neither forget that up to now NEC has become a warrantor on credits totalling EUR1,183,276,000. This amount includes the money launched for modernisation of blocks V and VI of Kozlodoui (EUR212MN), for rehabilitation of Maritsa-Iztok 2 thermoelectric plant (EUR260MN), for construction of the Tsankov Kamuk hydroelectric power plant (EUR200MN), etc. Warranties for additional EUR87MN launched for construction of the Yadenitsa dam will soon be added to this amount. The dam will prolong the time for incessant operation of the Chaira pumping accumulative hydroelectric power plant which is currently operating up to four or five hours a day (in the busiest periods). The amounts for which NEC is a warrantor will grow more than twice, if the Belene nuclear power plant project is fulfilled in accordance with the present plans. According to preliminary calculations, the second nuclear plant will cost between EUR2BN and EUR4BN (it depends on how many energy units - one or two, will be build). The State is planning to hold the majority stake in the huge project.The only real opportunities to make profit will remain the transport fee that NEC collects for its power transmission lines, as well as the generation and trade in electricity produced by the hydroelectric power plants which are still its property. That's why all Bulgarian people will have to prey for water waves as the one that passed through the dams of Kurdzhali, Studen Kladenets, and Ivailovgrad in the period December 2004 - March 2005. Apart from increasing the total inflow to the three dams up to 2,665,947,000 cubic metres (on a total constructed capacity of 1,041,550,000 cubic metres), the wave let NEC increase its export by 30% for the first quarter of the year compared to the same period of 2004. However, one should not rely on nature alone. And the NEC managers probably understand that. The Belmeken pumping accumulative hydroelectric power plant and the hydroelectric power plants Sestrimo, Momina Klissura, Batak, Peshtera, Aleko, and Devin were rehabilitated from 2001 till 2004. Three hydroelectric power plants (Teshel, Orpheus, and Krichim) are being repaired. The construction of the Tsankov Kamuk water-power system began, too. Significant amounts are also being invested in the transport network - for rehabilitation and reconstruction of substations and for construction of new ones. To improve the energy network and the hydroelectric power plants, NEC has invested BGN478MN for three years - BGN335MN from its own resources and BGN143MN provided through long-term credits and subsidies. But the question now is whether this money will be sufficient to allow the company at least keep its current financial indicators after the country joins the European Union.

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