Belene NPP Decision

Economic News

22 Jul 2010
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Bulgaria's national electricity company NEC is in negotiations with utility companies and major financing institutions to resume the construction of the country's second nuclear power plant (NPP) in Belene, near the Danube river. It is planned to substitute four outdated reactors of the Kozloduy NPP, the country's sole nuclear power station, which was partially closed down as a requirement for Bulgaria's accession to the EU. Despite the controversy surrounding the recent closure of reactors at Kozloduy, the ambitious Belene project looks set to secure Bulgaria's long-term future in the sector as it is expected to boost Bulgaria's role as a major regional power exporter.

This week, the Bulgarian state power grid company NETC announced it was in advanced talks with the French bank BNP Paribas to arrange a $339m loan covering the expenses for the first year of construction, including designing, equipment supply and beginning of construction works. The Belene NPP's two reactors are will supply 2000 MW. The first is expected to be in operation by mid-2013 and the second a year later. Other parties NETC may negotiate financing with include the European Investment Bank, Goldman Sachs, Credit Suisse First Boston, Gazprombank and JP Morgan.

Earlier this month, NETC invited bids for a 49% stake in the plant, setting June 6 as the deadline for the registration of interest. The investor will "take part in the ownership, financing, management and exploitation of Belene nuclear power plant and the purchase of electricity generated by the plant," local press reported NETC as saying. The government will retain a 51% stake in the plant for the foreseeable future, while NETC itself pledged a deal of at least 15 years to buy a portion of the NPP's output.

Major European utility firms interested in investing in the plant include Germany's E.ON, Spain's Iberdrola, France's EDF, Italy's Enel, Czech Republic's CEZ and Russia's RAO UES.

End of 2006, NETC provisionally awarded the $5.43m construction contract for Belene to the Russian firm AtomStroyExport, in a deal which was criticised in some quarters for increasing Bulgaria's energy dependence on Russian capital and expertise. However, NETC recently announced the deal is unlikely to be finalised before the end of the year, rather than the previous deadline of mid-2007, as the financing negotiations will be drawn-out.

The Belene plant will fill the gap left by the closure, earlier this year, of two Soviet-built reactors at the Kozloduy NPP, also on the Danube. Two reactors were closed in 2002, and two 1000MW reactors remain operational. The closure of the second pair of nuclear reactors was a prerequisite for Bulgaria's EU membership, but has been deeply unpopular in the country. Indeed, energy represents Bulgaria's largest export sector, notably to countries like Greece, Albania, Macedonia and Romania. However, following Kozloduy's closure, it is expected that Bulgaria will be unable to maintain power export on similar levels until Belene and other projects are completed.

Sceptics of the EU's decision to shut down Kozloduy also say that the closure is an attack on national sovereignty and undermines regional self-sufficiency at a time of increasing awareness of the need to diversify all types of energy, including electricity.

Albanian Prime Minister Sali Berisha publicly called for the reactors to be re-opened after his country suffered brownouts thought to be caused by electricity shortages previously covered by Kozloduy.

Support for the reopening of the reactors has also come from Finnish MEP Ari Vatanen, as well as MEPs from the UK, Hungary and Slovakia, and has become something of a "cause célèbre" for eurosceptics across the continent.

However, international energy experts in the sector told OBG that domestic shortages of power are very unlikely, and that the Belene plant, as well as projects including coal-fired power stations in Maritza East, will reinforce and boost Bulgaria's role as an energy exporter within a decade.

The EU confirmed last month that it will grant Bulgaria $68m in compensation for the decommissioning of the four reactors, as part of a total $750m compensation package, while the European Bank for Reconstruction and Development (EBRD) has been providing funding to other power projects in Bulgaria to help cover the shortfall.

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