ukraine moves forward but does uran, page-9

At the risk of getting up certain people's noses again
here is something about what's going on in Bulgaria on the energy front.


BULGARIA RULING COALITION AGREES ENERGY SECTOR CONSOLIDATION
13:33 Mon 11 Feb 2008 - Alex Bivol

The leaders of the three parties in Bulgaria's ruling coalition agreed in principle to set up an energy holding company that would take over the state stakes in major energy companies at a meeting in Hisarya on February 9-10 2008.

The holding would be set up by the end of the year and include five companies - power grid operator NEK, gas company Bulgargaz, Kozloduy nuclear power plant, the country's biggest thermal power plant Maritza Iztok 2 and the coal mines with the same name.

"In the EU, the trend is for the consolidation of the sector, so to be competitive, Bulgaria needs to do the same. For too long Bulgaria has lagged behind in this sector," Prime Minister Sergey Stanishev said, as quoted by mediapool.bg.

After consolidation, the holding company would have assets worth 4.0 billion euro, with annual revenues of 1.8 billion euro, and the financial clout of the new corporation would allow it to expand to neighbouring countries, he added.

The consolidation would also make it easier to raise the funds for Bulgaria's planned nuclear power plant at Belene on the Danube, whose construction alone will require four billion euro, but the total costs are expected to rise to 6-7 billion euro. NEK wants to secure part of the financing by offering 49% to a strategic investor, with Electrabel of Belgium, CEZ of the Czech Republic, E.ON and RWE of Germany and Enel of Italy on the final shortlist.

However, the Cabinet's plans to consolidate its energy holdings could meet with regulatory objections from the European Commission, which has been pushing to liberalise the energy sector to promote greater competition and lower electricity prices in the European economic area.

Bulgaria is one of the eight countries that oppose the European executive's plans to split up national power utilities, separating distribution from production, and backed last month an alternative plan in a letter to energy commissioner Andris Piebalgs. The Commission favours breaking up integrated production and distribution businesses altogether, which it calls unbundling, and is likely to be backed by the UK, Italy and Spain, who already have such legislation in place, Reuters reported on January 31.

Last year, Romania, which joined the EU at the same time with Bulgaria in January 2007, said it planned a similar move. Its announcement prompted an immediate reaction from Piebalgs, who asked Romania to keep electricity production separate from transportation, and it's likely that Bulgaria's proposed move will meet the same response.

But under the alternative regulatory plan put forth by France and Germany, which Bulgaria supports, supply activities would be fully separate from from network operations without splitting ownership of utilities' infrastructure.

The success enjoyed by state-owned CEZ in the Czech Republic, which has become a major player in the energy sector in central and eastern Europe, offers an inspiration for the governments in Bucharest and Sofia, but doubts linger whether they have the institutional capacity to make it work.

"One must be careful that such an entity does not close the market - we want progress, not a return of the monopolies," one banker told the emerging Europe energy summit in Frankfurt in November 2007.

"The question is - will this company be a national champion? There is a need for a lot of investment in this sector, and I think this company will not be a champion, but a big company that will need a lot of help," Louis Borgo, from the European Bank for Reconstruction and Development (EBRD) energy department, said about Romania's plans for an integrated energy holding, as quoted by Romanian state news agency Rompres.

With Sofia's plans virtually mirroring the ones drafted across the Danube, it's unlikely that Bulgaria's Cabinet will receive a different treatment.