As announced by Minister of Economy and Energy Assen Vassilev, U.S. bank Citigroup has provided 250 million euro in bridge financing that Bulgarian Energy Holding (BEH) will use to refinance the obligations of its subsidiary NEC to BNP Paribas accumulated because of the NPP Belene project. The maturity date for the payment of 195 million euro for the countr’s frozen second nuclear plant expire on May 21, and if the money was not paid, our energy holding company would turn out to be in a very uncomfortable financial situation.
The Americans were selected after a hastily designed procedure that was concluded within less than two months. Now, however, the money will have to be returned by placing a bond issue of BEH, which also is expected to reach 250 million euro. Investment adviser for it will be again, Citigroup.
Preparation for the issuance of securities will certainly take a long time. Some time ago the holding company received a credit rating of BB + from the Fitch agency with a stable outlook, but has yet to choose a legal consultant for the preparation of papers.
With the money from the bond issue, in addition to debt obligations to Citigroup, BEH plans to ensure its participation in investment projects such as the construction of the Nabucco gas links with neighbouring countries and the development of the grid. At first glance, this sounds good, except that the structure does not have own revenues. All its work is actually funded by the dividends it receives from its subsidiaries. This will mainly be at the expense of the ones that actually work well and generate profit – NPP Kozloduy, Maritsa East II and Mini Maritsa East. Each of these companies have projects that urgently need to be financed. For NPP Kozloduy this is the extension of the operation of 1000 MW 5th and 6th blocks, estimated at hundreds of millions levs. The state thermal power plant Maritsa II, as well as the mines need to be modernized and their management bodies are hardly eager to pay for someone else’s mistakes. In addition, these companies have yet to reduce costs – by a total of 239 million levs. As noted by Minister Vassilev, Maritza East II will cut spending by 100 million levs, Maritsa East mines – by 80 million levs, NPP Kozloduy – by 50 million levs and Electricity System Operator – by 9 million levs. The other participants in the energy system, including the National Electricity Company will continue to seek opportunities to reduce costs, said Minister Vassilev.
In this situation, if the estimates of BEH turn out wrong, it will be hard to find anyone to get it out of the swamp.
The BANKER
