Why do they believe this time it will be different with the NPP Belene?

Why do they believe this time it will be different with the NPP Belene?

Christo Kovachki
Christo Kovachki

The news on the expression of interest from Rosatom, CNNC and the South Korean Hydro Nuclear Company to act as strategic investors in The Belene NPP comes as no surprise. The three companies could have filed a similar non-binding EoI a year ago without risking much, if anything. The other ‘contenders’ serve more a PR purpose, as they deal with the supply of equipment and the purchase of electricity which are irrelevant at this stage. The supplies and the subcontracting parts are sequential to the selection of the strategic investor(s). So are the long-term PPAs that should be executed at a much later stage. Mixing different items into one tender does not make much professional sense.

However it is good to make headlines – a proof that there is interest in the Belene NPP.


Let’s try to dissect the news and separate the essentials. Why the promoters believe the outcome will be different this time? Why the fourth attempt will succeed where the previous three trials have ended in failure?


Firstly, the government today is under the total control of the oligarchs, which allows any extreme project pitch to be rubber stamped in Parliament, thus absolving any of those involved from any responsibility. Once the National Assembly votes, prime ministers, ministers, CEOs of a state-owned company are granted impunity.


Prior to the previous Belene NPP round, PM Borisov did not feel like he was in the driver’s seat so he kept his distance from then President Parvanov and the energy minister Ovcharov. This allowed him to manoeuvre and be perceived as an objective and balancing factor.


Never before, neither under socialism, nor in the early years of transition, has the oligarchy ever managed to subjugate the state apparatus, the judiciary, the executive and the legislative power to such an extent that it felt virtually omnipotent and invulnerable. Key regulatory institutions of the state are totally blocked by oligarchic interests. Suffice it to mention the Competition Protection Commission’s recent refusal to even consider the coordinated manipulation of electricity prices by companies affiliated to a leading Bulgarian energy oligarch. Thus, the CPC has publicly recognised Mr. Kovachki him, giving him a kind of certificate of omnipotence, which comes as an introduction to his pretence to play a “strategic investor” role in the largest ever infrastructure project in Bulgaria.


The traditional lobby group for Belene NPP, had to play with a different player, and Christo Kovachki fitted perfectly. The project is synonymous for the model of government in the country, core of the core, the ultimate epitome and the base of it.


The previous known players are keeping a lower profile, fully aware that they cannot fit into the “strategic investors” shoes, nor would be they allowed a prominent role, least of all because they can’t put the numbers right – billions in turnover and experience with NPPs. At any rate, such professional credentials do not seem to be of a concern to the Energy Ministry with some of the ‘interested parties’ being purpose registered companies with few levas in capital and zero experience.


During the years of impasse over the Belene NPP, the former promoters were disciplined with the help of the prosecutor’s office.


Mr Kovachki is confident that he can negotiate with Rosatom and the Chinese nuclear company.


What he has to offer is not only the ability to manipulate the energy market with impunity but that the selling price of future nuclear energy remains high enough to make economic sense. He claims to be able to complement at a private level the strategic partnership of Russian and Chinese investors, guaranteeing them subservient and kneeling bureaucracy at every stage of the transaction. Worth drawing a parallel – where the Russian official army is unable to operate, Putin’s private armies step in. What the Bulgarian state is unable to offer above board, the private proxies are free to engage in.


In other words, Mr. Kovachki’s message is straightforward: “it doesn’t make sense for you to negotiate with the government, whatever it is. Those guys with the titles “prime minister”, “minister” and “CEOs”, negotiating on behalf of the authorities, just come and go. What governments can promise and fail to deliver, I can guarantee”. The proof lies in what is actually happening in the energy sector and his projects, where he is blatantly ignoring laws and standards in transactions with power, where authorities are casting a blind eye on the import and incineration of toxic garbage with partners from the criminal world, with the whole administration and regulatory authorities looking the other way, the dubious quality of the exhaust filters on his TPPS and the games played with the emission permits. There are no rules, no institutions, and no limits.


The proposal tabled by the top Bulgarian energy strategist is almost perfect – while he wins an entry ticket to the investors’ elite table in the tender for the Belene NPP, acceding a cash flow that will consolidate his power base for years to come, his current introduction and reise to prominence is funded by the Bulgarian taxpayer and consumer – directly via higher electricity prices and indirectly via the goods and services produced with more expensive electricity.


In the meantime all is quiet – no protests, the least guilty are removed – such as the former head of the NEC. Kovachki is a better front for the whole gang than Peevski, especially with his lesser public exposure.


The public opinion – just like the experiment with the frog, got used to the higher temperature – higher prices – without feeling the coming danger. In addition, at the right time, two of the critical decision makers, Jacklen Cohen and Ivan Yonchev, were placed at the top of the institutional hierarchy and the tender committee – the ones that will decide on the outcome of the NPP Belene procedure. The same duo was behind the cheap electricity sales from Kozloduy NPP to companies associated with the same Bulgarian ‘strategic’ investor.


It obviously doesn’t matter that BEH’s new boss has been designated a high personal credit risk by the European Investment Bank. The impact is not confined just to this project or just international financial institutions; it will pass on to every other major BEH project and other lending institutions in the West considering lending to the Energy Holding companies.


At first glance, the current procedure is practically doomed. Once the hyperboles and big headlines are removed, the situation has not changed much since 2006, with the possible exception for the interest from Chinese and South Koreans. This time, however, there are no West Europeans in the RWE category. The “mixed” procedure fall shorts of the professional standards in the previous one, not due to lack of a professional consultant, but as the process is exposed to tacit manual political engineering. Intentionally.


At the same time, the cannibalization in the Bulgarian energy sector is in full swing and, no one seems able to halt it.


This government engages in a zero-sum game – the projects in the nuclear energy sector come at the expense of coal-fired generation, the liberalization of the market is overloaded with conditionalities and variables, with the only constant feature – oligarchs keep on siphoning off revenues from the energy industry. None of the grand projects, least of all the NPP Belene, pretend to fit into a long-term energy strategy or relevant climate policies of Bulgaria.


The innovation in the Belene NPP’s resuscitation attempt is the nuanced support from the climateists, as opposed to the outright rejection of the nuclear power by the ecologists in the previous attempt to revive the project. Leading climateists have acknowledges in public that the NPP Belene could help Bulgaria meet its climate goals as a clean energy source.


The notion that nuclear energy is ‘clean’ rests on the false pretence that its environmental footprint is neutral – there is not toxic waste, no radioactive spent fuel that requires costly and challenging waste management system, to say nothing about the exorbitant decommission costs. Ultimately the state and the budget underwrite the nuclear risk and this is not accommodated into the balance sheets of the NPP operators.


To say nothing about the parable of the “cheap” nuclear power, to this date used to substantiate the need for a mass support for nuclear power plants.


If one factors in the end price of NPP Kozloduy’s power, a real cost of the nuclear risk management, in line with the EU top standards, as well as the cost for decommissioning of the respective units – about 3 billion euro per reactor, which should altogether add between Euro 200-300 million each year to the cost structure, the price would jump 2-3 fold and the myth of the cheap nuclear price will be debunked. On top there are no assets to depreciate in Kozloduy NPP, while at Belene NPP amortization costs will span for at least 20 years. Under the current most lenient scenarios of nuclear risk management the price of NPP Belene’s power should be well above BGL 220 per MWh, well above anything that the market can take.


For now, nuclear energy in Bulgaria seems to enjoy a free ride, gambling on the fate of people, assisted by hefty state budget guarantees. The profits end up with the casion; the costs are borne by everyone else.


On the climate issue, the government seems to be kicking the can down the road, downplaying adverse effects, and pretending that the radicalization of climateists and new ‘voluntary’ high targets does not affect us. The bad boy of the EU, Victor Orbán, has made it clear that climate targets should not compromise Hungary’s developments and the wellbeing of his people, and the share of renewables will reach 20% in 2030 (!?). His main line is energy security is part of national security and it has a priority over the benchmarks that come from Brussels.


The Bulgarian government has reacted too late with too little, and now we have trapped ourselves – prices for carbon permits are raising, costs for coal mining and coal based power generation have shot through the roof, sinking TPPs in further into debt. One part of our electricity sector – the TPPs – the pillar of our energy independence and security, subsidizes the RES and most importantly providing avenues for positive state intervention in nuclear power projects, bending key market principles.


We are in the final leg of the demise of the coal based power generation, freeing space for new nuclear power capacities, forewarning of major defaults and closures of mines and power plants.


Another novelty in the home work of the lobbyists of the NPP Belene is their success in taming the trade union leaders in Maritza Iztok. Most of this taming power rests with the current Bulgarian “strategic”player in the NPP Belene. One can only speculate on the background specifics – but in all likelihood it will be a mix of carrots and sticks.


At the same time, the current government approach completely ignores the alternatives for resolving climate equations by gas-to-power projects and by an increase in the consumption of natural gas in households and industry. Both Turkey and Greece have cut back on electricity imports due to low natural gas prices and have restarted gas generating capacities. In Bulgaria, however, expanding the use of natural gas is not an issue, as it might divert resources and attention away from the focus – the Belene NPP. Behind the scenes Ahmed Dogan negotiates with Gazprom for strategic investments in gasifying the Varna TPP.


Much talk is spent on the gas hub; billions will be invested in the expansion of the transit system allowing new billions of cubic meters of cheap natural gas to flow through the country. Yet, the government is afraid to make this gas accessible to local consumers and households.


The chances of long-term power purchase contracts for NPP Belene power with Kovachki’s traders companies are negligible. No bank will agree to underwrite his pledge at the level of commitment, required to kick start the project. The power market shifts away from 10 or 20-year long PPAs’ and Mr. Kovachki can change little, safe to engage the state.


What Mr. Kovachki and the Dogan-Peevski tandem behind him can come up with is just that a plethora of hidden and overt channels for subsidies – both real and quasi state – that could be pushed through Parliament with the votes of all parties.


The current criticism coming from the Socialists and from President Radev is just a grumbling – part of jockeying for position in the final deal structure.


The ‘good’ news is that the geopolitical risk of a Russian-Chinese coordinated NPP project in the EU and NATO countries is too high to be managed by any of the Bulgarian players – both corporate – such as Peevski and Kovachki, and/or institutional as PM Borisov or President Radev.


By Ilian Vassilev

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