Банкеръ Weekly



The real deficit of electricity in the Balkans reaches 1,700 megawatts. Currently, Bulgaria compensates up to 70% of it. About 15% of the electricity generated in this country is exported. This will be the situation at least till the end of the heating season as the contracts for the first quarter of 2004 have already been signed. For their fulfilment the domestic energy system relies on the units of the Kozldoui N-plant, which operate at 100% of their capacity. If in the peak hours any of the 1,000-megawatt Kozlodoui generators goes out of order, it will be replaced by reserve capacities of the thermoelectric power plants, the National Electricity Company (NEC) specified. These will be chiefly the Varna and the Bobov Dol power stations, which generate the most expensive electricity. All other thermoelectric power plants using coal as fuel operate at full capacity.Domestic consumption of electricity rose by 3.1% in 2003, the Energy Ministry announced in the end of last week. During the first two weeks of 2004 both economists and financiers forecast economic stir-up and growth and increase of the gross domestic product (GDP), at that not only throughout the current year, but within the entire period till 2007 when Bulgaria should be accepted in the EU. According to the undertaken commitments, however, Bulgaria's admission to the EU is connected with the decommissioning of Kozlodoui's units 3 and 4. Thus, in three years Bulgaria will enter the EU with increased internal consumption of electricity (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, NEC's chief engineer Mityu Hristozov admitted during the week. Import can only be avoided if the modernization and construction of new capacities at the Maritsa Iztok thermoelectric power plant, worth about EUR1.2BN, is completed within due term, he specified. The reconstruction of Maritsa Iztok 3 has already begun. Three of its four 220-megawatt turbines are currently working at full capacity, and in the end of last year the second unit stopped operations for rehabilitation. The modernization will continue seven months. Within that period an overall replacement of the monitoring systems will be carried out and new ones will be introduced, as planned by the foreign investors - the Italian Enel Producione and the American Entergy. After the rehabilitation is completed the capacities of Maritsa Iztok 3 will increase by 60 megawatts. In fact, the project worth a total of EUR580MN was launched in end-1997, but its implementation started in April 2003. Ten Euroepean and Bulgarian banks have financed the undertaking by EUR248MN. The Euroepean Bank for Reconstruction and Development (EBRD) partcipates by EUR12.1MN; the French Credit Agricole and Societe Generale, the Italian Banca Midiocreditor and Bank Austria ensure an agrregate of EUR140.7MN; another EUR75MN has been provided by the Bulgarian financial institutions BULBANK, United Bulgarian Bank (UBB), Biochim and SG EXPRESSBANK, and the regional Black Sea Bank for Trade and Development has allocated EUR20MN. The loan is repayable in 14 years and the interest rate is comparable to that of Westeuropean banks of repute. The money released by the foreign banks was insured against a political risk by the Multilateral Investments Guarantee Agency (MIGA). The guarantees for the credits are purely commercial - a pledge of the power plant's assets and of the company's receivables under its contracts with NEC for purchase of electricity. Enel and Entergy undertook to provide the balance of EUR130MN-plus that is necesssary. Modernization of Maritsa Iztok 2,the biggest coal-fueled electricity power station in the Balkans, has also started. The power plant has eight units for generation of electricity, whose aggregate capacity is 1,440 megawatts (four 150-megawatt and four 210-megawatt units). But due to their worsened state after 30 years of operation and the lack of purification equipment, the station becomes more and more problematic and some of its generators currently work at a smaller capacity. In April 2003 the Japanese company Mitsui Co undertook to rehabilitate the first four turbines of the power plant. The repair will cost a total of EUR280MN. The project will be implemented within 47 months with stage by stage decommissioning of the units. The Japanese Bank for International Cooperation will finance the main part of the reconstruction by an export credit of EUR226MN. The loan is repayable within 15 years at low interest rates. The remaining funds will be ensured from NEC's own resources (EUR6.6MN) and credits under the EU's ISPA programme.Sulphur purifying installations of Maritsa Iztok 2 units 5 and 6 will be constructed with money from the EU, too. The total amount is estimated at EUR80MN. The scheme projects that at least 50% of the funds will come as financial assitance from ISPA, 10% is to ensured by the power station, and the balance will be a loan from the EBRD. According to official information, the request for financing is presently being considerd by the EBRD and the European Commission. We should note here that EBRD's explicit requirement is that the contract for supply of coal from the Maritsa Iztok mines should be guaranteed, as well as at least a 5-year contract for purchase of the generated electricity on the part of NEC. The power plant's managers project to invite the tender for choosing the supplier and the executor of the installation of equipment in March. The term for the units' recommissioning is 30 months. If both projects are fulfilled in due term, in the year 2007 Maritsa Iztok 2 will comply with European requirements and will guarantee environment-friendly generation of electricity by fully rehabilitated and modernized 1,440 megawatts.The capacities of Maritsas Iztok 1 are the most problematicThe project of the American company AES lagged behind the schedule announced in advance and failed to begin in 2003 the construction of two units of 650-megawatt aggregate capacity. The Energy Minister Milko Kovachev even announced in front of journalists that his ministry was considering other possibilities for the constrcution of the units in case the project's implementation did not start in 2004. Possible alternatives are the Japanese Mitsui and the Italian Enel. The building of the new power station has been pre-estimated by experts at EUR850MN. In the end of last year AES confirmed its commitment to the project for the construction of new capacities at Maritsa Iztok 1. In a press release it was announced that the financial state of the US company has considerably improved over the last year. This was confirmed by an independent analysis of the prestigious finance and consulting company Goldman Sachs. By July 30, 2003 the available cash resource in the company's balance sheet totalled USD1.7BN, up from USD780MN in the end of 2002.During the first week of 2004 the Energy Minister publicly announced that the Bulgarian Government had asked the investor AES to complete the Maritsa Iztok 1 project by the year-end. AES again confirmed it had not given up the project. However, the power plant's capacities could be commissioned in the beginning of 2007 at the earliest, energy experts forecast. If all three projects for the coal-fueled power stations in the Maritsa Iztok basin are implemented in due term, new and fully rehabilitated capacities of 2,930 megawatts will be operating in the year 2007. That will not only be sufficient to satisfy the needs of increased domestic consumption and compensate the deficit from the decommissioned nuclear units, but will also ensure possibilities for export of electricity.

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