Economic Policy Review ISSN 1313 - 0544

The Lies About NPP “Belene”

Author: Veliko Dimitrov / 01.02.2007
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For months, as a result of ambiguous and unclear appearances of ministers and politicians in the media, there was no clarity regarding the construction of the nuclear power plant. The tremendous amount of contradictory statements and comments created, day by day, confusion in the minds of people, and important questions such as who will be building, for what period of time, at what price, and if there will be NPP “Belene” at all, were left without clear answers.

Speculations ranged from alleged construction of the plant entirely with the capital of only one company, through the formation of a consortium with or without the provision of state guarantees, to the creation of a joint venture company with the state. Besides, there was no clarity regarding the type of the nuclear reactors, the nuclear fuel, the price, the subcontractors, etc.

It was on another occasion, namely the announced, by the Public Procurement Agency (PPA), annual statistics regarding the value of the signed contracts for public procurements, that the answers to all the above-mentioned questions suddenly surfaced.

At a value of BGN 3,3 billion in 2005, the signed in 2006 contracts turned out to be to the amount of BGN 11,9 billion, or about three times more. Part of the increase, as one may assume, can easily be explained with the increasing state and municipal costs on the one side and the exposition of part of the agreements circumventing the PPA and the RASPP* up to this moment, on the other. Nevertheless, given the relatively continuous dynamics, this explains no more than 4 of the totally registered almost BGN 12 billion, or as it is evident, there is no source where about BGN 8 billion must have come from. Exactly those funds, however, constitute part of the money for the construction of the NPP “Belene”.

1. More than a year and a half ago it was very clear that a nuclear plant will be constructed

The decision for opening of a procedure for assignment of a PP for designing, constructing, and bringing into use of Units 1 and 2 in Belene has been made on May 10, 2005. That is to suggest that not only the present, but also the previous government, has supported the idea for a second nuclear power plant. This is something, which was not clearly stated by either of the two governments (I exclude is Mr. Ovcharov, who, as a former employee at NPP “Kozloduy” and an open supporter of a state monopoly in the energy sector, has always sought the creation of a megastructure, which is to include “Belene” and to be administered by his ministry).

2. The current government extends the term for submission of bids

The position is already definite – a nuclear power plant will be constructed despite the enormous costs, the bringing into use after 120 months (10 years), the much higher price for electric power, and the overall absence of any kind of argumentation to support economic advisability.

3. The nuclear power plant will be constructed with the use of funds, collected from the present and future tax payers

The claims that in some way the realization of the project will be financed with private capital turn out to be false. The implementation of public procurements is financed from the budget; this is how it will be paid to the Russian company, which has been assigned the construction of Units 1 and 2. If the project was justifiable from an investment point of view, it is sure that willing investors would have come forward to realize it. Since, however, ultimately taxpayers (who are obligated to pay their taxes, which the government, as it turns out, pretty much does not hesitate to spend hastily) will pay for the project, NPP “Belene” is apparently not a very good investment. And if it is not a good investment for a private company, it also cannot be a good investment for the citizens, when it is financed and administered by the government.

4. Employment of subcontractors – maximum 30% of the total value of the contract

The comments for the possibility for Bulgarian subcontractors to assume more than 1/3 of the activities relating to Belene are also incorrect. According to the information, found on PPA’s website, regarding the signed contract, it becomes clear that the maximum likely participation of subcontractors will be 30%, and it is stated nowhere that these will be Bulgarian companies.

5. The value of the contract** – 7 817 961 026 BGN (VAT excluded).

This is the price only for the design, the construction, and the bringing into use of Units 1 and 2. The total value of the project at its completion, however, will be much higher, first, because there is a large number of other activities connected to the construction, which are the subject of separate public procurements, and second, because, as it usually happens, (as the PPA allows this) a higher price will be re-negotiated.

At an expected total price BGN 12 billion and with about 3 million citizens in employment at the moment, it would mean, most generally speaking, that each tax payer should earn about BGN 4,000 to be spent on Belene, and then buy electric power at a price higher than today’s.

It is understandable why Belene is not going to be built by a private company – because no one is going to purchase what it will produce – however, it is not clear why the Bulgarian government is going to force the people, part of whom have voted for this very government, to do precisely that.

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* PPA – Public Procurements Act; RASPP - Regulation on the Assignment of Small Public Procurements

** The described information can be found in the register of public procurements, available on the website of the PPA at www.aop.bg. Unfortunately, however, a registration is required, which is free but does take some time to complete.