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Energy rethink: uncertainty clouds new government's energy policies as President urges 'continuity'.

One of Boiko Borissov's main campaign messages was change, but in the energy sector, the scope of change remains murky. The focus is on three major projects involving Russian companies and the billions of euro in costs that Bulgaria's new Cabinet appears unwilling to spend.

The contracts for Belene nuclear power plant, South Stream gas pipeline and Bourgas-Alexandroupolis oil pipeline, were signed by Bulgarian President Georgi Purvanov and Vladimir Putin in January 2008, during one of Putin's last foreign trips as Russian president.

Even before he was nominated to form the government, Borissov asked the outgoing cabinet for a moratorium on any new contracts for Belene and South Stream, but has left his Cabinet appointments to do the talking since taking office.

Simeon Dyankov, the Finance Minister, said Bulgaria faced a Budget deficit and did not have the money for the projects. "In times of crisis things are done that otherwise wouldn'tbe done. [...] We don't have the financial resources to complete these projects," he said, quoted by the Financial Times.

Traicho Traikov, the Economy and Energy Minister, has criticised the Belene nuclear project, on which work progressed the furthest, but took a milder stance on the South Stream pipeline.

Belene power station lacked a cohesive strategy, had no cost-benefit analysis--a charge that power grid operator NEK, which owns 51 per cent in the project, rejected--had no clear funding strategy and the money was spent non-transparently, Traikov said on August 3.

"Until now, there has been no dialogue with taxpayers on project costs, but [taxpayers] are expected to foot a bill of more than 10 billion euro" Traikov said, as quoted by Dnevnik daily.

Belene costs already surpassed 430 million euro, money spent on preliminary construction works, consultancy fees and equipment orders, he said. Russia's AtomStroyExport has been contracted to build two 1000MW nuclear reactors for a fixed cost of four billion euro, but additional expenses are expected to at least double the final price, analysts have said.

The project will be reviewed together with NEK and its parent company, the Bulgarian Energy Holding, set up to manage the state-owned energy assets. Talks with German utility RWE, which owns the remaining 49 per cent in the company that will build and manage Belene, were scheduled for the first week of August.

Nevertheless, Traikov declined to say whether the project would be binned, saying that it was not clear how much in contractual damages Bulgaria would have to pay, a situation caused by the vague wording of the contracts.

Should the Cabinet decide to cancel the project or put it fully into private hands by selling its majority stake, it would have at least one ally in Parliament--the centre-right Blue Coalition. One of the coalition's co-chairpersons, Martin Dimitrov, who was elected head of Parliament's economic policies committee, said on July 30 that the Government should consider breaking off the deal after taking a look at the contractual clauses.

Presidential plea

Purvanov has been one of the biggest advocates of the joint energy projects with Russia, swiftly reacting to Dimitrov's words a day later.

"I think it is important that when this Cabinet drafts a new energy strategy, there is an element of continuity and not just calculations of what will be done during the current term," Purvanov said during a trip to Veliko Turnovo, as quoted by Focus news agency.

"The big energy projects are an investment in the energy security of the country in the long term. If we wish to be the energy centre of the Balkans, as is our declared intention, we must be very careful what we do," he said.

Purvanov rejected the criticism that the projects were too expensive and further deepened Bulgaria's reliance on Russian energy sources. "I do not accept the view that big projects should be halted because they cost too much and that they should be given to private investors. World experience shows that it is the state that must build up the energy sector," he said.

Despite the lobbying by Purvanov and the former cabinet of Socialist prime minister Sergei Stanishev, even some Russian analysts are not convinced by the reasoning behind them. With the straits of Bosphorus no longer as choked with traffic, the Bourgas-Alexandroupolis pipeline was harder to justify, daily Nezavisimaya Gazeta quoted Mikhail Kroutikhin, a partner in consulting firm RusEnergy, as saying.

South Stream, according to Kroutikhin, was so expensive that "it would be much easier to agree with Ukraine on guarantees for transit under oversight from European observers than build such an expensive pipeline."

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Title Annotation:BUSINESS
Author:Bivol, Alex
Publication:The Sofia Echo (Sofia, Bulgaria)
Date:Aug 7, 2009
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