Банкеръ Weekly



The sale of the thermal power plant in Bobov Dol at the beginning of the week put an end to a story that had started back in 2004. As everybody expected, the plant went into the hands of Hristo Kovachki, a businessman from Samokov, who from the very beginning of the privatization procedure didn't hide his ambition to add the plant to his energy empire. The question is what the state gained from this sale.
We managed to achieve a favourable financial effect. In the privatization agreement there are many requirements to the investor and many clauses devised to preserve the plant's core activity, said Todor Nikolov, executive director of Privatization Agency, after signing the contract. However, the price remained at BGN100MN, or exactly what the initially announced price was, and the intended tender did not take place at all. The sum is by BGN40MN less than what the Greek company PPC offered at the previous procedure for the sale of the plant. It is true that the difference is somewhat compensated by the investment promises of the buyer, Consortium Energia MK. The entity, owned by Mr. Kovachki, will have to invest at least EUR35MN in the next five years. The most pressing job will be the installation of sulphur filters because the plant is among the largest polluters in Bulgaria. This was the reason why its first unit was closed down at the beginning of 2008. The same fate may be awaiting its other two reactors. If they fail to meet the norms of exploitation as set by EU, they will have to stop operation in 2010 and 2014 respectively.
The investments promised will not be carried out that soon, though. The price that the thermal power plant sells its electricity at is among the highest in Bulgaria - BGN 55.26 for a MW/h, VAT excluded. The investment will additionally increase the price, which is all well known to Mr. Kovachki and the people around him.
We will build sulphur-detaining facilities, but this won't happen in the next two to three years, because the investment is very expensive. The term for making the whole energy sector comply with the requirements of the European Union is very short. If the government fails to find ways for its prolongation, the price will jump by at least 40% to 50%, Mr. Kovachki said immediately after signing the contract.
At present he manages two more thermal power plants, Brikel and Maritza-3, that will have to be closed down in 2012 and 2016 respectively. The strange thing is that in spite of periodical pollutions in Haskovo region (the last one of which took place a week ago) the plant seems to be evading troubles and operates without problems from authorities. The State Energy and Water Regulatory Commission has awarded to this plant the highest price in the country - BGN58.33 per MW/h, VAT excluded. Apart from that, Maritza-3 sells a significant part of its production on the deregulated market.
Thus, having in mind the favourable attitude of the ruling circles and the regulatory bodies, the situation with Bobov Dol TPP may get quite similar to that with Maritza-3. Mr. Kovachki himself admitted he was already negotiating the complete environmental licence to the plant with the Ministry of Environment and Waters so that the functioning of the plant's first unit may be resumed. Allegedly the ministry, led by minister Dzhevdet Chakarov, was quite benevolent (what for?). The same ministry refused to make any compromises for the Greek PPS with regard to a change in the licence and the deal then broke through.
But even if Mr. Kovachki figures out a way to cope with Bulgarian authorities, Brussels and the Commissioner on environment, who by the way is from Greece, Stavros Dimas, are not very likely to turn a blind eye to a re-launching of Bobov Dol's first unit or to a possible extension of the terms for operation of the plant's other two units. Still, the new owner may have a B plan.
The Bobov Dol's facility may host two more units of 200 MW each. The infrastructure for them has already been built. In the mines of Bobov Dol and Radomir there are between 500 million and 600 million tones of coals and an additional capacity at the plant will optimize the mine extraction business and help in the development of the region, Kovachki added.
Its is no secret that the businessman from Samokov is the owner of Beli Breg, Chukurovo, Stanyantsi, Oranovo, Otkrit Vagledobiv and Balkan MK coal mines that are the main suppliers of raw materials to the power plant. Which means, that if Mr. Kovachki receives permission for building new capacities, he will secure stable income from both electricity production business and the additional coal extraction activities.
The only use for the country is, as it turns out, that we are probably not to see miners' protests in the streets of Sofia any more.

The buyer undertakes:
* not to transfer the ownership of the shares, that are being now sold, nor part thereof, for a period of three years;
* not to decrease his stake in the enterprise's share capital to below 51% even in case of share capital increase;
* to preserve the enterprise's core activity;
* to avoid insolvency, bankruptcy and transformation;
* in case of default under any of the above obligations, the buyer is liable to pay a penalty to the extent of 50% of the purchase price;
* to keep the expenses on workforce at least at their 2007 level for a period of three years;
* to guarantee that by 31 December 2011 the enterprise buys at least 1,750,000 tonnes of coal produced in Bulgaria.

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