The mist that has long been covering contracts, agreements and annexes in energy, is slowly beginning to get lifted. Several days ago prosecutors hinted what evil things had been done in the sector over the years, and new details have recently come to light, while probably the most interesting are yet to come.
First, caretaker Economy Minister Assen Vassilev announced that he had decided to declassify all contracts in the energy sector, concluded not only by the government but also by private companies. They will now be removed from the trade secret exemption for publication. In addition, the boards of directors of public companies will be checked for conflicts of interests.
Then the Council of Ministers and the Ministry of Economy, Energy and Tourism finally received confirmation from the European Commission for a forthcoming check of the Bulgarian energy sector. The inspection will begin next week and will be led by representatives of the Directorate General Energy. Experts will scrutinize the legislative framework and the participants in the field, while the goal is to identify the most important problems. The focus will be on several key themes – the powers and independence of national regulators, the role of the Bulgarian Energy Holding, the structure and operation of the gas and electricity market as well as all pricing mechanisms.
In a nutshell, if Brussels really wants to do the job properly, they will have to scrutinize the local energy sector inside out.
To make matters worse, representatives of the Agency for State Financial Control apparently gathered courage and also opened an inspection procedure. In examining the legality of the conclusion and performance of the bridge financing for 250 million euros provided by the BNP Paribas for the Belene project, inspectors brought to light 15 violations. They were made against the provisions of several articles of the Public Procurement Act and apply to procedures performed for a total of 157.5 million levs. The damages inflicted to the state budget amounted to 36.5 million levs, or about 20 percent of total funds.
We should not forget that this is just a part of the more than 1.5-billion-lev sum that was poured over the years into Belene.
A report of the senior auditor of the Bulgarian Energy Holding, Veliko Peev, for example, found out that in January 2005, it was negotiated that the architect-engineer Parsons get around 16.9 million euros for their services. But then, in fact, NEC renegotiated the agreement and paid to the company on June 30, 2009 a total of 69.78 million, or more than four times the originally agreed sum. It was also established that some of the invoices issued by the architect-engineer, were not completed in accordance with the Bulgarian legislation and there were missing names and signatures.
The same document shows that the biggest trick has been made with the purchase of equipment from the old plant. Initially, in a report dated August 2007, the market price was set at 295.98 million euro. However it was subseqeuently cut down to the much more modest 205 million, but even then NEC took a little portion of it. The auditor noted that the power company has issued invoices for received payment by Atomexportstroy for only of 87.61 million. The balance of approximately 117.4 million, strangely, was used to cover the cost of tariffs, transport and further checks of the equipment in Russia.
It will be a nice addition to these contracts, to bring into light the agreements of the golden water plant Tsankov Kamak. In recent days, the page of the Parliament uploaded the scandalous contracts signed for the construction of TPP Maritza East I with the registered in Mauritius offshore company 3C, and another offshore company – Entergy for the rehabilitation of TPP Maritza East 3.
Since the first contract with 3C some things have started to pop out that no one has even expected. It turns out that the clearing of the site of the existing equipment, the relocation of existing transmission lines, the construction and operation of the necessary modern substation for high voltage operation and the maintenance of water were charged to the state, not to the investor. Moreover, for many of the facilities, which are generally part of a thermal powerq 3C required additional funding. These are facilities for unloading and storage of coal and fuel oil, the construction of desulphurisation (without which no modern facility of the kind can exist) … And all these extra goodies have been given, provided that the NEC is required to purchase electricity from the future plant for 15 years, and yet from the beginning of its operation. In the same time the guaranteed price for each kWh is simply mind-boggling. According to calculations of energy specialists, with this agreement the NEC has undertaken to pay for a period of 15 years a whopping 9 billion levs to 3C!
Indeed, judging from the published documents and an amendment from February 2005, the Bulgarian side managed to get a reduction in the price of electricity by 7% mainly due to the impending reduction of the corporate tax. In September 2012, however, it made another adjustment, increasing the amounts due from NEC and electricity prices by nearly 70% due to the inclusion in the tariff of the costs of carbon emissions, which was a measure to be imposed by the European Union on thermal power plants in all Member States .
The construction and commissioning of the two units of the 335 MW Maritza East I cost a little over 2 billion levs.
The big problem with the contract with Maritsa-East III is again the duration – again it is 15 years of compulsory purchase, which posed another obstacle to the liberalization of the electricity market in Bulgaria.
