Банкеръ Weekly


Bulgarian Politicians Take Energy Hostage to Party Interests

Instead of being the guarantor of national security in recent years, energy has become a hostage. In this profitable sector recently emerged nuclear, coal, gas, green and all sorts of other lobbies, each with the ambition to realize their own interests to the detriment of the general public. In this situation unpardonable politicians chose to follow the behaviour of a chameleon - not to amend the scheme, but simply to install their own people and companies who take lucrative portions and ensure that charges go to political parties. This led to the financial collapse of the NEC. And now they freely talk about the inevitable rise in the price of electricity, as somehow the general public receives also suggestions for a possibility of power cuts in winter, although the elections are forthcoming.

The guilt for this state of devastation is of all but nobody recognizes their own failures. The government of Ivan Kostov in mid 1990s signed

enslaving long-term contracts

with private owners of TPPs Maritza East I and Maritsa East. Back then it was more important to demonstrate the pro-Western orientation and not to think about national interests. Now the country has high hopes that the European Commission may allow the then signed contracts for the purchase of electricity to be renegotiated under more favourable conditions for Bulgaria.

In fact, hardly anyone would worry about tariffs to private Maritsa if there were no megalomaniac projects initiated by governments after Kostov. The Cabinet of Simeon Saxe-Cobourg-Gotha implemented a large-scale privatization in the energy sector (due to which some people have become millionaires) and launched two extremely disadvantageous for the National Electricity Company projects - the construction of HPP Tsankov Kamak and the multibillion-dollar millstone called Belene nuclear plant. The ruling coalition led by Sergey Stanishev continued this line in 2006 and quickly patch up a tender competition for a predetermined Russian contractor of the second nuclear plant. Again, hundreds of millions, even billions of euro sank somewhere along equipment sold for pennies, consulting contracts and fees. So a nice amount built up in the arrears account of the NEC, even before seeing the how the arbitration for the NPP Belene will be settled.

The latter rulers started

indiscriminate distribution of licenses

for the production of green electricity just because it was bought at preferential prices must - again by NEC. The next Cabinet did nothing to stop this vicious practice, and the massively started environment-friendsly plants were built. The result is that Bulgaria fulfilled its obligations under the environmental commitments in the European Union 2020 eight years ahead of schedule. According to the latest data from the European statistical office Eurostat in 2012 the share of renewable energy sources reached 16.3% of final consumption in the country. Although the interim target for the country for 2011-2012 was 10.72%, and by the end of 2020, the share must have been just 16 percent. For comparison, in 2005 the level was 9.4 percent. Today, only two other EU countries - Sweden and Estonia have cdovered earlier requirements for renewables.

GERB at one time understood that they have opened Pandora's box and took measures to restrict the production of green power plants, but it was too late. Another 'achievement' of PM Boyko Borisov could easily be considered the transforming of the supposedly independent State Energy and Water Regulatory Commission into a body to carry out political orders and

appointment of various nepotist candidates in the management

of state energy companies, whose sole purpose was to follow the party directives of GERB.

On the top of that came the Government of Oresharski. Two days ago he said in his Facebook profile, "During our mandate we paid special attention to energy - a system we found collapsed in the middle of last year. Our efforts were aimed at detecting internal reserves in the system, rather than at an increase in the final price and funding of inefficient units and structures by users. The exports were set free from the high transmission fees. We also carried out part of structural measures to prepare for the upcoming liberalization - splitting of the independent transmission operator ESO in accordance with the requirements of European policies. We started balancing the energy market. We licensed an energy exchange, which leads to higher competitiveness of the market and a greater degree of transparency and pricing fairness. Nevertheless, the sector still needs a lot of work."

As to the financial stability of the ESO and exports of electricity experts might fairly need to argue, and the efforts at discovering of internal reserves and pushing down the price of electricity played a bad joke at all. With this guiding principle of economies the now former rulers created such a mess that employers, unions and investors agreed on a common position on emergency measures.

And what can be said about the South Stream project? It has become an iconic example of the rule in Bulgaria where

party-oligarchic interests are above the national ones.

While Oresharski convinced the general public that any work on the facility had been shut down because of the demands of the European Commission, its Regional Development Minister issued a building permit. Last week, it became clear that despite the measures taken by the caretaker government with respect to measures to freeze the project on August 18 the Commercial Register noted an increase of capital of the project company South Stream Bulgaria to 397.6 million levs.

This embarrassment situation needs recalling who are the Bulgarians in the joint-venture company South Stream Bulgaria. Executive Director appointed specially by the socialists and the ethnic Turkish, Vladimir Inkov, is the same man who in the summer of 2009, then a clerk in the unit for EU money in the Financial Ministry, was sacked after a scandal for draining of 4 million Eeros through a project unde the Phare programme. The other two are unknown in the energy sector - Jacquelin Cohen (who managed the once Privatization Fund Multigrupelit together with Nicolay Vulkanov and the late Ilya Pavlov) plus Stefan Radev who deals with the import of auto parts. It is very interesting what made these people ignore the decision of their principal - Minister Vasil Shtonov and the owner Bulgarian Energy Holding? Answers to these questions will have

to establish law enforcement authorities

to which Vasil Shtonov promised to bring the case. In fact, the caretaker minister himself admitted a blunder since during the week - from 11 to 18 August, when the capital increase of South Stream Bulgaria was entered in the Commercial Register, he failed to learn what was happening despite media publications on this theme. Moreover, on August 12 the servicing project state bank Bulgarian Bank for Development certified the fact of contributions made, which is reflected into the single account of the Treasury relating the state of the fiscal reserve. In other words, any transactions around the South Stream should be communicated also to the the Finance Minister.

Ultimately, all party members used the energy sector well in recent years. Their problem is that there is no further room to breathe in the system And now, with all the social concern of former socialist leader Stanishev and their partners from the MRF, the price of electricity will need to be increased.


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