Bulgaria’s NEK to pay €550mn for cancelled Belene nuclear project, arbitration court rules

Bulgaria’s NEK to pay €550mn for cancelled Belene nuclear project, arbitration court rules
By Dimitar Koychev in Sofia June 16, 2016

An arbitration court in Geneva has ruled that Bulgaria’s state-owned National Electricity Company (NEK) has to pay €550mn to Russia’s Atomstroyexport, a unit of Rosatom, for equipment already produced for the cancelled Belene nuclear power plant project, the Bulgarian energy ministry announced on June 16.

The ruling was a “significant blow to Bulgaria, with a cost of well over 1% of GDP eventually likely to fall on public finances,” Timothy Ash of Nomura said in an analyst note. On the other hand, Ash pointed out that the Bulgarian budget is running a surplus of about 3% of GDP currently, and public sector debt is relatively low at about 29% of GDP.

In 2006, Atomstroyexport won a tender to complete the Belene project, located on the Danube River and planned to have two 1,000 MW reactors. However, the project was scrapped in March 2012 by the first government of the centre-right Citizens for European Development of Bulgaria (GERB). The party has been back in power since November 2014, this time as part of a coalition government.

The amount of €550mn was announced by Bulgarian Prime Minister Boyko Borissov, Dnevnik daily reported on June 16, while Rosatom has said the ruling is for €620mn. Nonetheless, both figures are well below the €1.2bn sought by Atomstroyexport.

Energy Minister Temenuzhka Petkova said that the court has rejected all other claims of the Russian company concerning price escalation, damages and lost profits, expenses incurred beyond the contract’s subject and demobilisation costs.

The minister said that the next step is a detailed analysis of the arbitration court ruling. A meeting with representatives of Atomstroyexport will be initiated in order to discuss the possibilities for an acceptable solution for both companies. One of these possibilities is selling back the produced equipment, which would lower the cost for NEK, Capital Daily commented.

Presently, Bulgaria has a single nuclear power plant – Kozloduy – that operates two Soviet-made VVER-1000 reactors, each of which has a capacity of 1,000 MW. Over the years, there has been lots of news flow about building new nuclear electricity generating capacities. It concerned either completing Belene or, more recently, building a new reactor at Kozloduy, which is also located on the Danube River.

In a related note, two projects that are being implemented concern extending the life span of Kozloduy’s two existing reactors by 30 years. In January, Kozloduy signed a contract with a consortium of Russia’s Rusatom Service (a unit of Rosatom) and Bulgaria’s Risk Engineering for extending the life span of one of its two reactors until 2049. In October 2014, a consortium comprising Rosenergoatom and Rusatom Service, both parts of Rosatom, and Electricite de France (EDF) won a deal to extend the lifespan of Kozloduy's other operating reactor to 2047 from 2017.