Банкеръ Weekly



Shortage of electricity was one of the most discussed energy issues during the first month of 2004. According to forecasts of economists and energy experts, Bulgaria will enter the EU in 2007 with increased internal consumption (by 12%-15% at least) and decreased capacities (by 880 megawatts). That means the country will not only be incapable of exporting electricity, but will have to import it. Import could be avoided only if the modernization and construction of new production capacities at Maritsa Iztok 1 are completed in due time, Mityu Hristozov, chief engineer of the National Electricity Company (NEC) admitted. Still in the beginning of this year Energy Minister Milko Kovachev publicly announced that the Bulgarian Government had asked the US company AES - investor in the new 670-megawatt capacity at Maritsa Iztok 1 - to complete the project by the end of 2004. He also announced in front of journalists that his ministry was considering other possibilities for the project's implementation. Possible alternatives are the Japanese Mitsui and the Italian Enel. AES did not reply to the challenge, although the term set by the State Commission for Energy Regulation (SCER) expired on January 31. Until then the US company had to present proof that it had reached an agreement with NEC about the construction. Otherwise, its permission granted in 2002 can be revoked. On Monday (January 26) the issue was publicly discussed by representatives of the chief contractor - the French consortium Alstrom - with which AES signed a contract back in April 2002. According to Yoahim Lishek, head of the Maritsa Iztok 1 project, the two new 340-megawatt turbines could begin operations in the middle of 2008 at the earliest, at that only if construction starts in mid-2005 and is concluded within 36 months. No quicker fulfillment of the project is possible, Mr. Lishek noted. This means that the new production capacities will be connected to the national energy system at least a year after the decommissioning of Kozlodoui N-plant's units 3 and 4. Money has been the most serious problem in front of the project, at least over the last three years. The financial scheme presented by AES in the beginning of 2001 planned the undertaking at EUR996.7MN, of which EUR241.7MN was to be ensured by the American investor, and the balance - by credits (EUR451.8MN from the German agency for export crediting KfW, EUR139.4MN from the US agency OPIC, and EUR133.8MN from the EBRD). In April 2001 AES signed a 15-year contract with NEC for purchase of the electricity generated by the power station at 4.5 cents per kWh. In May the same year the cabinet of former premier Ivan Kostov approved the guarantee letter, demanded by the financial institutions. The commitments undertaken then were that the government would in no way impede the construction of the two new generators at Maritsa Iztok 1, but 32 months later everything is still at the stage of ensuring the necessary financing. The difficult period has been overcome Altrom executives explained to the Bulgarian mass media. The French company has already been restructured and has attracted EUR3.5BN (about EUR2.7BN of it has come from the French Government as financial aid).Mr. Lishek pointed out that a special plan had been worked out (with no state guaranteed required) for the collection of the EUR1BN, necessary for the construction of new capacities at Maritsa Iztok 1. The main part of the money - EUR500MN - will be ensured by KfW, EBRD and other international banks will extend EUR200MN, and the balance will be provided by the US investor AES. The loans will be guaranteed by five agencies for export insurance: the French Coface, the German Hermes, the Czech EGAP, the Italian Sace and the Austrian OeKB. In the words of Mr. Lishek, they were presently carrying out profound analyses of the project, to be completed by the year-end. Altrom will get about EUR700MN for the construction of the power station. Bulgarian subcontractors will fulfill orders worth some EUR200MN. The amount won't be greater due to the requirement of the agencies for export crediting that a certain percentage of participation in the construction should be assigned to the countries guaranteeing the credits.In Bulgaria Alstrom has mainly participated in the rehabilitation of hydroelectric power stations of the Batak and Belmeken-Sestrimo cascades, and is currently modernizing Orpheus-Crichim, worth EUR15MN. The company's Bulgarian office has also won the tenders for rehabilitation of part of the central heating network in Sofia and Pernik.

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