Few people envy these days the Bulgarian minister of energy who is tasked with a mission impossible – to identify and offer the Bulgarian government a Houdiniesque escape from the Belene conundrum. The equipment is due on the Belene site later in autumn. Despite allegations in the court of arbitration by the Russian side that the reactor and the equipment are already produced, it was not until NEK paid ASE Euro 610 million on December 9, 2016, that the Russian manufacturer engaged in substance.


For Mrs. Petkova, the Bulgarian energy minister, there does not seem to be an easy way out of the deadlock – there is no decision in sight that would not imply new sunken costs.


The year has seen delegations by “interested” parties visiting Sofia and discussing the fate of the NPP Belene. The GoB has promised to transfer all assets into a new SPV that will offer a majority share to potential investors.


The picture is still murky and the bets are on utilizing the reactor and the equipment internally.  The ‘external’ sales and investment options are not seriously considered.


The public is led to believe that the future decision on the Belene project will have an objective and scientific fundament — a key analytical report commissioned to the Institute of Economy of the Bulgarian Academy of Sciences.


To start with it is hard to see how the BASc team will be able to challenge the overwhelming perception that the Bulgarian and regional energy markets do not need, to put it in a nutshell, a new 2200 MW of baseload capacity, regardless of location – Belene or Kozloduyi.


The market, driven by liberalization and decentralization, is reaching a point where long-term PPAs are no longer plausible and state guarantees are becoming indispensable. This refers to brewing conflict between current decision makers, the energy market and reluctant and even protesting consumers, which are denying both governments and state energy companies the right to make the wrong decision on their behalf by limiting their choices and flexibility in a rapidly evolving environment.


Nuclear Power plant projects are experiencing tough times all over the world. The problems are identical – the markets are unable to evaluate and manage NPP developments risks. Henceforth, lacking tacit or apparent sovereign guarantees and full institutional commitment to respond pro-actively in time and fill in regulatory, management and financial risk gaps, it is not worth spending a dime on NPPs — especially if one lives and breathes in a market economy and relies on the business case to convince banks for project financing.


With its Euro 2 billion in the red, Bulgaria does not hold the world record for NPP project sunken costs in early cancellation. At the end of July 2017, one of the most advanced projects in the U.S. and in the world, the V.C. Summer Nuclear project in South Carolina, due next year, was halted by its developers, the Scana Coporation and Santee Coopers, after $9 billion were spent – 40% of the project tally. The two companies raised the white flag and admitted they should account for market gravity, deciding to halt works rather than saddle customers with additional costs.


Earlier in the year, in March, faced with mounting bills at the nuclear sites in South Caroline and Georgia, Westinghouse filed for bankruptcy. Toshiba stepped in agreeing to pay $2.2 billion on the condition that it is relieved of the NPP project in South Carolina. The heavy losses associated with the Westinghouse nuclear projects in the U.S. dramatically changed the balance sheets of the parent company and forced Toshiba to fight to stave off its own bankruptcy.


There are many ways to communicate grave news to investors and the public. The sheer fact is that the risk managers involved failed to do their job and the banks refused to lend any more – putting a terminal brake at a $9 billion, the bulk of which was deemed an irrecoverable loss.


While the global energy sector undergoes a fundamental transition both at the supply and demand stages, most of the trends are transient and yet to provide a more coherent snapshot of the market’s future. Three features of the emerging change are certain –

  1. 1. baseload capacity such as NPPS runs counter to market winds, denying investors and customers flexibility in moving and shifting resources and investment to align within the new energy paradigm. Not the time to put all the eggs in the nuclear power basket.
  2. 2. Renewables are not only the new kid on the block, but the new market-maker – notably when it comes to shaping long-term trends.
  3. 3. Energy efficiency, energy savings and technological breakthroughs have empowered the consumers with multiple supply options, including self-sufficiency. What was extravagant extremism just 10 years ago is gradually becoming a mainstream line for the energy consumers across the world. NPP project developments, given the standard 30-year term from project inception to investment recovery, simply are unable to compete with this new mainstream, thus becoming obsolete.

The renaissance of nuclear power is simply not happening. It is suffice to look at the fate of the NPP Hinkley point, which is already Euro 2 billion above budget and almost a year and half behind schedule prior its first major milestone in 2019. The NPP in Paks, Hungary, where Rosatom has committed to provide all the funding, looks uncertain against a backdrop a dwindling support from the Russian state budget and a lack of access to global capital markets.


Bulgaria’s energy minister and the government have stated on more than one occasion that the decision on the fate of the NPP Belene equipment will be based on the BASc’s report, yet expectations might easily prove exaggerated. Any new study on Belene must prove that they would added value to the existing ones. What is more important is that the BASc’s report would be judged against a history of systemic failures. How will it help the GoB succeed in its project pursuits, where hordes of renown international consultants, investment banks, have miscarried? The BASc’s report will be informative in nature but can barely serve as a professional consultative benchmark for a different management decision by the Bulgarian government and the national parliament.


First, there is a close relationship and financial dependence between the contractor and the contracting authority, which a priori limits the value of the findings, potentially compromising the independence of the judgements passed. The authors have a direct material and financial interests in meeting inflated expectations.



Secondly, the choice of BASc has been pre-ordained – without auction, without competition – which raises questions about a potential institutional prejudice.


Third, none of the authors, either individually or collectively, hold internationally valid certification for consultancy services that hold water with market players. The views expressed in the report would not in any way bind the BASc – the authors can’t be held professionally liable or brought to court for any damages or loss incurred to the GoB or BEH, regarding subsequent management decisions. The report will essentially be an in-house analytica that would carry no weight with investors or third parties – banks, institutions and companies.


In short, the expected new BASc delivery will fall in line with similar previous exercises by the government on the now notorious Belene saga – alluding to copycat “reports” of NEK and BAS 15 years ago, later used to substantiate the need for a NPP project restart some 15 years ago, which ultimately sunk Euro 2 billion.


It won’t be different this time.


By Ilian Vassilev

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