Things seemed pretty stable on the energy front at the beginning of 2006. There was heating (often too much or not enough), there were bills (although it was not as though everyone paid them), people cut their radiator pipes, the heating utilities became angry, and so the cycle continued. Until May.
Ok, at the beginning of the year, natural gas prices had risen by 10 per cent, reflecting the costs of almost three quarters of the central heating stations in the country, but hey, inflation happens.
So, late in the month of May, Sofia municipal council approved a heating tariff hike proposal of 8.75 per cent, to 60.16 leva a MW (VAT included).
The municipalitys central heating provider Toplofikatsia soon became the subject of talks between Sofia mayor Boiko Borissov, the World Bank and the European Bank for Reconstruction and Development (EBRD) to discuss ways of financing Toplofikatsia.
Apparently, the company said, it was experiencing financial difficulties. (Lets all get out our hankies now and cry along.) Through previous agreements with the EBRD, the state had engaged to attract private investment in the company. Because of the failure to fulfil this engagement, Toplofikatsia might not have been able to receive the entire amount of the 30 million euro loan previously negotiated. Well. That was the beginning of June. By the middle of the month, things had turned a bit for Toplofikatsia, which supplies heating to more than 500 000 flats and 900 000 citizens in the capital city.
Sofia municipality inspectorate did a check up on one of the capitals refuse disposal companies, and discovered fraud of over 100 000 leva while examining the management of the refuse disposal funds over the first two months of 2006. This led to, at the instigation of Borissov, an examination of the revenue of Toplofikatsia.
On June 13, Borissov-the-beloved said that according to preliminary data, the losses of Toplofikatsia exceeded one million leva.
On June 30, Borissov said that the inspection revealed that Dimitrov had misused over 16 million leva from the Toplofikatsia funds.
When the first corruption evidence was revealed, Valentin Dimitrov was dismissed from his position of Toplofikatsia executive director, but remained vice president. During a meeting of the company shareholders on June 23, however, Dimitrov was forced to resign.
On the American day of independence, Dimitrov lost his, and was taken into custody on charges of money laundering and tax fraud.
It was later found that he had used funds to pamper himself for his hard work: luxury equipment, fuel, and an aircraft for the company without the sanction of the companys board of directors; Champagne and cheese worth 45 000 euro; Jacuzzi, a solarium, a pearl bath and luxury massage chairs for himself. On September 19, of the expropriated good, there was auctioned a jet, two boats, a massage chair and a running path for 36 325 leva. The total sum from the auction was to be used for partial payment of Toplofikatsias 97 million leva debt to Russian natural gas supplier Bulgargaz.
Perhaps it was this, or perhaps there were other reasons, but in mid-July, a memorandum of understanding signed on July 6 by Sofia municipality, Sofia City Council and the Economy and Energy Ministry indicated that Toplofikatsia, which consists of at least four steam generating plants, should be sold by the end of 2007. The municipality, with its 58.2 per cent of the 107.6 million leva, is the majority owner of the company, while the ministry holds a minority share.
But, in the meantime, we cant forget Bourgas, which was left without hot water on June 8 when Bulgargaz stopped the gas supply to the private company Toplofikatsia-Bourgas (TB), the citys heating company. The reason Bulgargaz gave? TBs debts, which according to Bulgargaz, amounted to 7.3 million leva.
In Sofia again, it was the height of summer, and residents werent just heated up from the weather. On August 10, it was reported that Toplofikatsia clients had paid nearly 30 million leva on top of their actual fees because of inaccurate ways of calculating heating energy consumption. And, the funds could not be returned.
Who knows. At least some citizens took action: the company had a massive collective complaint filed against it by more than 600 Sofianites on September 11.
In the midst of this, on August 2, Parliament approved amendments to the Energy Act providing for the establishment of an independent electric energy system operator. The restructuring model of the current state-owned power grid operator, approved in April 2006, envisaged setting up a new subsidiary company, to be 100 per cent owned by the National Electric Company (NEC) and designed to perform both the functions of power grid operator and the balancing market administrator that will also operate and maintain Bulgarias high-voltage transmission system.
When Plovdiv municipalitys heating utility went up for bid of privatisation in August, 12 companies, including Czech utility CEZ and the Bulgarian units of Germanys E.ON and Austrias EVN, responded. The sales of the steam heating plants in the cities of Rousse and Varna in the following few months was also to be addressed, in an effort to liberalise the domestic energy market ahead of the countrys European Union accession. French energy company Dalkia expressed interest in all three. As it turned out, in October, EVN won the tender for Plovdiv, with an offer of 32 million leva. Dalkia came in second.
Then, at the end of October, EVN, the owner of electricity distribution companies in Stara Zagora and Plovdiv, admitted that it had over-billed more than 7500 subscribers because of software mistakes and bill collectors negligence. This over-billing was discovered due to a Ministry of Economy and Energy-launched investigation into the companys billing methods. The investigation was ordered because of a large number of complaints from residents of Plovdiv, Stara Zagora, Yambol and Bourgas for what they said were excessive electricity bills. Turns out they were right.
And about the privatisation of Sofias Toplofikatsia, of course the Government and the municipality hold different views: the former wants the utility to be divested 100 per cent, while the latter favours saving the transmission and power generation operations and selling only the transmission division. That was in late September. This is January. Were still waiting.
Enough! And on to more present matters: the end-2006 EU-required decommissioning of Kozloduy nuclear power plant (NPP) units 3 and 4 (to eventually be followed by units 5 and 6), and the planned again-construction of Belene NPP. Now, lets think for a minute. EU Energy Commissioner Andris Piebalgs said in October that EU member states should seriously address the issues of energy efficiency and renewables. He said that member countries should, before considering nuclear energy, first look into local resources and possibilities for energy efficiency. At present, Bulgaria takes only about 2.5 to 3.5 per cent of its energy from renewable sources, which, at the current rate, isnt going to cut it with the EUs goal for member states to take at least 21 per cent of their energy from renewable sources by 2010.
There is, however, some hope: in early June, we heard that new wind farm projects in Bulgaria were to receive state support through the first-class investors certification initiative. Two projects were to be built: on Cape Kaliakra, near the northern Black Sea town of Kavarna, by The Bulgarian Wind Centrals company, a wholly owned subsidiary of Frances Societe industrielle de latlantique, and Inos-1, local representatives of the Mitsubishi Corporation; and in the Suvorovo municipality in north-east Bulgaria, as part of the Bulgarian-Spanish venture Eolica.
With four Kozloduy units reacting, Bulgaria was able to export energy to neighbouring countries. The NPPs closure of units 3 and 4 will end this. And the hang-up with this? It could affect electricity prices and the Balkans energy stability, according to Energy and Economy Minister Roumen Ovcharov.
Still, household electricity prices in effect as of October 2006 would remain unchanged until July 2007, said Konstantin Shoushoulov, head of the state energy regulator.
On signing the agreement on November 29 to again-build Belene NPP, the Russian Atomostroyexport said that the power plant was going to be among the most modern facilities in Europe. For nearly four billion euro, it should be. The NPP will consist of two 1000-megawatt reactors, the first of which is to be completed in six and a half years.
Preparing the site for construction and inspection of the already-available equipment was to start immediately. The NPP was to be built entirely through foreign crediting (loans and the attraction of strategic investors), which would be paid with future electricity sales, Ovcharov said, and no longer from the states pockets. The NEC was to own 51 per cent of the project, while the strategic investors would get the other 49 per cent. This, let it be said, all becomes officially official once the final contract undergoes the pen and hand(s) by April 15 2007.
In the case of Varna, they might resort to burning more coal. On November 28, the Varna power plant management said that the facility could be shut down, if electricity prices do not increase by nearly 20 per cent. Currently, the Varna power plant loses 10 leva for each sold kilowatt-hour of electricity. And while losses had been compensated by the state, with the closure of Kozloduy NPP, this has become a non-possibility. Coal, used to fuel production, has become both more expensive and scarcer (at least in terms of Varnas coal-storage bins).
But that's not to forget Bulgarias future natural gas supply from Russia. On December 18, state-owned gas supplier Bulgargaz signed a memorandum with Russian giant Gazprom, setting up the main parameters for import and transit of Russian natural gas to Bulgaria until the end of 2030. The current agreement expires in 2010.
Bulgaria examined a law on December 14 concerning stimulation of the usage of and investment in renewable energy sources and alternative and bio fuels. In the end of November, the Cabinet approved a long-term programme for the encouragement of the use of renewable energy resources. The programme is to be carried out until 2015. By 2010, they say renewable energy sources will be used for eight per cent of our national electricity production.
They might have been spurred on by Austria, as in late November several Austrian companies said that they were interested in launching renewable energy resource projects in Bulgaria.
And theres still the Maritsa Iztok 1 thermal power plant station and its project worth $1.4 billion, to be undertaken by the US company AES. Its construction was supposed to start in 2005, but didnt receive the go-ahead until June 2006. Once completed in about 3.5 years, it should guarantee Bulgaria a leading role in the electricity market in the region and some of the lowest production costs for electricity in Europe.
So, see? Its not all bad.
