Банкеръ Weekly


Sofia Heating Company Launches Impressive Investment Programme

Will the vilified and at the same time indispensable to the capital of Bulgaria, Sofia Heating Company, finally stand back on its feet? The key to answering this question lies in the implementation of the investment programme for the next five years, which will be presented to the public next week.

Undoubtedly the amount set as investment intention for the period 2014-2019 seems very respectable - 496 million levs. Otherwise, at the very first reading of the document, it becomes evident that the company relies on a single possible winning way for its development - namely the production of electricity through cogeneration. While in 2014 it produced 991,240 MWh of electricity from cogeneration, for this year the enterprise has planned 995,660 MWh, which will gradually increase to reach a record 1.314 million MWh in 2019. Such a policy is quite logical, since it is the sale of electricity that brings stable revenue to the company. Unlike heating bills, where the collection rate is about 70%, and for most of the remaining liabilities the litigation process spans for years. Currently the preferential price set by the State Energy and Water Regulatory Commission (SEWRC) is 235.89 lev per MWh without VAT.

This means potential revenues may exceed 233.8 million levs in 2014.

Over the years, many private companies attempted to get their hands on this production of the Sofia Heating Company, but were never able to bring their plans to a successful conclusion. Now we will see what the new management of the company will do with it. Topping the list of future projects is the installation of cogeneration unit, which will work with modified solid fuel. It is the final phase of the Sofia Municipality’s project for waste management of the city.

It includes the construction of a plant for recycling and composting, as well as installation of mechanical biological treatment, which will produce the modified solid fuel in question. About 180,000 tonnes of it will be used annually at the plant, which will have a power production capacity of 58 thermal MW and 20 electric MW. Plans are that after the putting of exploitation of the new unit, the quantity of the natural gas used to decrease by about 11%. Thus the city will be saving 11.5 million levs per year and about 150,000 tonnes of greenhouse gases in the atmosphere. The construction of the plant will be financially supported by EU funds under the Operational Programme Environment and it putting into service is scheduled for May 2019.

Apart from that, the third turbine of the TPP Sofia will be converted to produce both steam and electricity, but the big breakthrough will be the construction of small cogeneration facilities in various parts of the city. The first will be at the site of the current heating plant Ovcha Kupel II. It will have a capacity of 10 megawatts and will operate all year round. The expectations are that its construction may happen with money from the International Fund Kozloduy and may be completed by April 2016. Similar facilities will be built in two other heating plants - Hadzhi Dimitar and Levski - G. One will be with power capacity of 7 MW and is scheduled to be operational in October 2017. For its construction, the city will rely on resources from the state as saved by the agreed with Brussels derogation under European Directive regulating the improvement and extension of the scheme for trading greenhouse gas emissions.

The other installation - in Levski - G will be for 3.5 megawatts and should be operational as of January 2018. For its construction Sofia will rely on an interest-free loan from the Enterprise for Management of Environment Protection, and the money will be paid back by the prospective positive financial results.

All new facilities will require a total of over 355 million levs in the investment programme. The remaining share is designed for investments in transmission network and substations. Intentions are to replace about 34 km of pipes per year, which will increase the efficiency of the heating system in the transmission by 5 percent.

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