Банкеръ Weekly



Is construction of replacing capacities at Maritsa Iztok 1 going to begin at last? The project of the American company AES, worth EUR1BN, has been delayed for five years now. Its implementation will ensure orders worth BGN200MN to domestic building firms, and BGN40MN annually will enter the Treasury in the form of taxes, AES insiders promise. There are two problems in front of the project's financial completion - the agreement with NEC on the price of electricity, generated by the power station, and the AES-demanded new letter for political support of the project. In order to accelerate solving them, an important delegation arrived in Sofia during the week: Robert Hemphill, Executive Vice President, Global Development, Matthew Bartley, Project Director for Bulgaria, Georg Gasteiger, CEO of the construction company Alstom Power, and its Commercial Director Joachim Lischick. I've arrived to sign the contract for purchase of electricity and to discuss further steps with Energy Minister Milko Kovachev, Mr. Hemphill said. However, the Energy Ministry does not seem to share AES' optimism. Ministry insiders have so far refrained from making comments, although the high price of electricity generated by the replacing capacities of Maritsa Iztok 1 (which was until now pointed out as an obstacle for signing the agreement) has already been cut down. The hesitation might be a result of the aggressive campaign of Italy's energy giant Enel and Japan's Mitsui, which are also willing to build a new coal-fuelled power plant, but on the site of Maritsa Iztok 3 (whose majority owner is Enel). It's no more a secret to anyone that after units 3 and 4 of the Kozlodoui N-plant are decommissioned in the end of 2006, Bulgaria will be on the verge of an energy crisis. Therefore, construction of new capacities, fuelled by domestic coal, is imperative. This, and the lack of time for holding a new tender for its construction, is AES' major trump card in its attempts to fulfil its intention.The issue regarding the demanded new letter for political support that will replace the state guarantee, has so far remained without a reply. Such a letter was given by ex-premier Ivan Kostov's government, but the main financing banks want the State to confirm again its commitment. If the letter for political support is not issued within two weeks, the project will be delayed, Mr. Hemphill warned. In 2004 the Energy Ministry tried twice to push through such a text, but it was not successful due to objections on the part of the Ministry of Economy and the Finance Ministry. The main concerns of their experts were that in this way the investor would be able to choose the country in which eventual legal arguments would be settled, as well as specify the terms for privatisation of the Maritsa Iztok mines. However, it is already clear that the Americans have given up insisting on the first one at least: The government support letter will concern Bulgarian courts, Mr. Hemphill commented. In addition to the financial support of ING Bank, BNP Paribas and Calyon, AES expects to be backed by the European Bank for Reconstruction and Development (EBRD), which should ensure EUR150MN. Thirty per cent of the funds necessary for the construction will be provided by the US company. The credits will be guaranteed by two export insurance agencies: the German Hermes and the French Cofface.

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