Economic Policy Review ISSN 1313 - 0544

Belene for Ever!

Author: Krassen Stanchev / 31.10.2007
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What are the conclusions from the developments in the negotiations about the building of NPP Belene during this week?

Very simple - the project is clearly becoming a lost cause and the negative forecasts of the skeptics are being proven or exceeded

The balance

For details everybody can look through the papers.

The more general picture consists of the following:

-          A bit over 2% of the GDP will be the state warranty - for the time being,

-          Only 1/16 of the expected costs will be financed by syndicated loan,

-          The actual financing will be with state warranties, loans and contract for purchase of the electric energy from the new power plant,

-          There are disagreements with the leading the tender Russian company with reference the evaluation of "the old equipment and activities".

Translated into more common language this means:

-          The private sector believes that not more than 6-7 per cent of the activities and the deliveries for "Belene" could be banked;

-          The participants in the tender are motivated mainly by the state warranties;

-          The ambiguities about the activities will continue regardless of the decisions at this stage and this will continue to increase the cost of the project and probably will take more time;

-          The National Electric Company (NEC) is something like a mail box through which pass the contracts of the participants in the construction of the power plant in order to become burden for the finances and respectively the tax payers for the lifetime of about one generation;

-          NEC undertakes the indeterminateness and the risks in regional electricity market, but the dividends of the participants in the consortium look certain.

Political sense

In the language of political developments during this week could also be clearly formulated. We are talking about:

-          Without clear obligations Russian and connected with Russian companies firms got preferences to build a nuclear power plant on Bulgarian soil at a riskier and more expensive place than the alternative places for construction of new nuclear capacity,

-          The old Soviet idea for Bulgarian-Soviet industrial undertakings, financed with loans from western banks, which the Bulgarian people have to pay, is now implemented by state companies of the Russian Federation, but without significant changes in the mechanism: the work of these companies is paid by the Bulgarian taxpayers;

-          This scheme was implemented with the efforts of two Governments, which intentionally manipulated public opinion and succeeded to put to sleep the vigilance of Bulgarian society with the aid of the President and his advisers, "brain trusts" such as Bulgarian academy of Sciences, one economic centre and others.

Deliberate fallacy

Was it possible to foresee these developments?

Categorically "YES". It is sufficient to see the publications referring to the subject of NPP "Belene" in this bulletin and the development of the arguments of IME in the press, as well as the publications of Georgi Kaschiev. Practically the general direction of what is happening was apparent since February 2002 when the Prime minister of Bulgaria undertook the obligations in front of the Greek Prime minister related to NPP "Kozloduy".

The deliberate fallacy of public opinion by the last two Governments, and primarily by the Ministers of energy passed through several stages:

-          First, an attempt was made to show that the project is profitable and would be financed by future sales of electric energy;

-          Second, when the above arguments were proven faulty a thesis was presented that under no circumstances the new nuclear power plant would be finance through state warranties and contracts for sale of the energy from it; apparently thanks to these arguments a green light was give to the procedure to start the negotiations;

-          Third, the list of companies and banks willing to participate became wider than only Russian and their subsidiaries (since their analysis indicated that in the end the government is going to pay);

-          Fourth, when now it became apparent that it is not true and there would be no warranties and contracts to purchase of electric energy, began a period of simple breakdown of the financing into fiscal years, which will be accompanied by planning of the claims by the construction companies of the "Belene" project by fiscal years.

In the bottom for the success of this tactics of changing the rules of the game during the game stands one conscious self-delusion that the Bulgarian Government could not be insolent and that in the basis of its activities are good intentions in the interest of the people.