Belene's long goodbye

By bne IntelliNews June 1, 2012

Jacy Meyer in Prague -

For something that's been on the drawing board for almost 30 years, the Belene nuclear power plant project was never going to die quietly or quickly. This is a shame, say many analysts, because the country needs to talk about energy efficiency and diversification, rather than waste more time on a project that was never economically feasible.

Even though the centre-right government of Prime Minister Boyko Borisov cancelled the long overdue and overpriced project in March, Belene has hardly been out of the headlines since. The latest example came on May 30, when Valentin Nikolov, CEO of Bulgaria's sole nuclear power plant Kozloduy, told reporters on the sidelines of a nuclear energy conference that the option for a second nuclear power plant should be kept open. At the same conference, the chairman of the Bulgarian Atomic Forum went even further, saying the abandoned Belene project may yet find life as an all-private undertaking.

The opposition Bulgarian Socialist Party (BSP) also threw a fit when the project was cancelled, not least because they were the party that signed the construction contract with the Russian state corporation Atomstroyexport back in 2006. After failing in their motion to get a no-confidence vote in parliament over the issue, the BSP are now attempting to get enough signatures to hold a referendum.

On May 20, a rally under the title, "I Don't Give Up on the Belene NPP, Do You?" was held by opposition parties and unions in Sofia, which called for the government to reconsider its decision to scrap the project and that the report of the British bank HSBC about the advantages and disadvantages of the power plant should be put into the public arena.

The project's supporters say the two reactors planned for Belene would help Bulgaria restore its dominant position on the Balkan electricity export market, which it lost with the closure of four Soviet-made 440-megawatt (MW) reactors at the Kozloduy plant prior to its accession to the EU in 2007. Kozloduy currently has two operating reactors of 1,000 MW each. Without overhaul, their lifespan will expire by 2019. With the cancellation of Belene, however, the government has announced it wants to install the reactor that Russia has already built for Belene on the Kozloduy site. As for the Belene site, the government plans to build a gas-fired power plant.

While the BSP and its supporters probably believe the rhetoric that the party would revive the project if they go back into power, few pundits seriously think they could, and rather see the whole issue now as more a stick with which to beat the government. For most industry and economic experts, Belene was doomed from the start.

Nuclear cost inflation

Launched in the 1980s, the project was frozen in the 1990s due to a lack of funding. Bulgaria and Russia's Rosatom agreed in 2006 to restart it, but price disputes, a lack of strategic investors, the global economic crisis, and uncertainty surrounding the future plant's seismic safety have all combined to delay the project.

With initial costs estimated at €3.9bn, Russia had hiked the price tag to €6.3bn. Bulgaria, which hired banking group HSBC to advise it on the financial structure of the project and the set-up of a project company, said it would not accept a price in excess of €5bn. An HSBC report released in April reportedly estimated the cost at €10.5bn. "It was clear the project was not bankable at the end of 2009, which came on top of considerations of its size, geopolitical and economic entanglements," says Ruslan Stefanov, director of the Economic Program at the Centre for the Study of Democracy (CSD). "The project was based on false consumption data and electricity forecasts. Anyone who remotely looked at the numbers would say it was purely a political project."

In January, the CSD published a report, "Energy and Good Governance in Bulgaria", detailing a lot of the issues of what went wrong with Belene. "The project was severely mismanaged; it's bad governance in a nutshell. The Bulgarian government had gone ahead without structuring it properly and not having a private investor involved from day one," Stefanov claims. "The second tripping stone was money. In 2009, neither the government, after RWE withdrew, nor the electric company could support the project without more external funding."

In fact, the arguments of Belene's supporters don't stand up against any of the projections made by a host of independent organisations. The Institute for Market Economics (IME), for example, published a report in March 2011 estimating the cost of Belene would be €11bn. But reports doubting the project's usefulness go back even farther - in March 2007, the Economics Institute of the Bulgarian Academy of Science issued a statement saying that, "the completion of Belene is not necessary."

Much of this has to do with the export of electricity and Bulgaria's need for it. "In the current situation, until 2025, there will be an energy excess of 15-16% of local consumption; Bulgaria's current export is 7-8%; energy consumption has remained flat since about 2000," says Krassen Stanchev, chairman of the IME.

In the IME's assessment of the project's costs, electricity prices would be about €0.10 per kilowatt hour (kWh), which would make it virtually impossible to sell given the current export price is around €0.035-0.045 /kWh. "These are tricky things," says Stanchev. "There's no need for new capacity. Second, it's the same suppliers as for Belene, including Rosatom and the Bulgarian suppliers, who will have two toys to play with and neither are needed, there's no analysis of what's needed. Presumably, the cost of these two initiatives are comparable to the cost of Belene, so €4.5bn-5.0bn with these two plants and who will you sell all this electricity to?"

Ivan Kotev, a senior analyst with Candole Partners, believes installing the already built reactor at the Kozloduy nuclear plant is a mistake. "By the time all the permits and everything is ready, the accompanying infrastructure will be old, the reactor outdated, new standards will be in place and most likely it'll be prohibitively expensive to fit it to comply with the regulations," he says. "The best way is to sell it and forget about nuclear ambitions."

Thus, what is obviously needed is some serious discussion about the country's energy policy. Stefanov argues the "big strategic question" is Russia's South Stream gas pipeline or the EU's now-called Nabucco West gas pipeline, and whether Bulgaria is going to diversify its energy sources from the overwhelming reliance on Russia. "Belene is really on the side," he says.

Indeed, in discussions between Moscow and Sofia regarding Belene's cancellation, it seems a couple of deals were cut. Bulgaria agreed to the quick construction of South Stream in exchange for preferential prices for Russian gas supplies, as well as a promise from Russia not to pursue compensation for the cancellation of Belene. "The government should reconsider the entire energy balance and decide what is and what isn't needed," says Stanchev. "The public wants this and it's a face-saving move for the government and will be part of the electoral campaign for next year. We need reasonable arguments on Bulgarian energy."

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.