Rob Whitford in Sofia -

"It's a step forward towards a great dream," enthused Rumen Ovcharov, Bulgaria's economy and energy minister, last week. Unsurprisingly, for Ovcharov is a veteran of the country's nuclear industry and the dream in question the long-stalled construction of the Belene nuclear power plant.

And the step: the signing of a preliminary agreement between Bulgaria's national power company NEK and a consortium led by Russia's Atomstroyexport, which a month before had emerged victorious from a tender to act as contractor for the project.

Allied with France's Areva and Germany's Siemens, Atomstroyexport had bested the rival Skoda Alliance consortium, led by the Czech Republic's Skoda JS. The Russian-led consortium is proposing to build and equip the NPP, which will comprise two 1,000 megawatt (MW) reactors, for a maximum of almost €4.0bn.

The dream is a long-standing one. Sited on Belene island in the Danube — erstwhile home to a fairly nasty communist-era prison camp — the NPP was started back in the 1980s. Around $1bn was sunk into construction work and equipment procurement. But come 1991, post-communist ecological concerns and, far more important, post-communist shortage of money, led to the freezing of the project. And frozen it remained till the new century, when new conditions put it back on the agenda.

Nuclear gains momentum

Bulgaria is facing the loss of a good deal of its existing nuclear capacity, no small matter since the country's sole plant at Kozlodui has been producing well over 40% of the country's electricity in the last few years.

Kozlodui

Due to reach the end of their normal service life within a decade anyway, the four oldest reactors at Kozlodui — Soviet-vintage VVER-440 models accounting for 1760 MW of Kozlodui's total of 3760 MW — were doomed to premature closure by long-term EU concerns about their safety.

The oldest two were shut down at end-2002, while pressure from Brussels on the more recent Units 3 and 4 proved irresistible to a country aspiring to join the EU. They are due for closure at end-2006, an unpopular deadline that will nevertheless be met — despite last-minutes hopes the European Parliament might recommend an eight-month stay of execution.

To this add an energy elite dominated by nuclear engineers, and a curious nationalistic pride in nuclear power and in being a centre of electricity exports, and it's no wonder the Belene project gained an irresistible momentum.

Seriously on the cards again from 2002, it was officially unfrozen in April 2005, and has been progressing, albeit in slow motion and with all the glitches that normally attend such a project, through a tender process since. Offers were submitted by the two consortia in February, but a decision was delayed by the authorities' insistence on improved offers in terms of price and construction periods.

The winning consortium of Atomstroyexport made the grade price-wise, with a low price for the project partly underlying a low anticipated price for the electricity produced — 3.6-3.7 eurocents per kWh versus the Czechs' 4.0-4.3. It's promising to build the first reactor within six and a half years, implying commissioning in mid-2013, with the second coming online the following year.

Choosing a contractor was only part of the problem. It remains to find finance and investors. Under NEK for the moment, the project is now set — after some consideration of other possibilities — to become a joint venture between NEK with 51% and a strategic investor with 49%. There seems to be no lack of possible takers for the latter role. Italy's Enel, Germany's E.ON Energie, the Czech Republic's CEZ, and even Russian giant Gazprom have expressed interest. Whether the eventual fine print is acceptable, of course, remains to be seen.

So does the precise method of financing NEK's part of the investment. Some of it will be contribution in kind, in the form of the site and of construction work done before the project was frozen. But the authorities are currently negotiating a €300m loan with the EU's Euratom. And other possibilities, according to Ovcharov, include foreign bank loans and corporate bonds issued by NEK. Whatever the combination, say NEK management, it should be finalised next year, though the contractor will be making a start on preliminary work as soon as weather permits.

Good news, all in all? Well, on the face of it, yes.

Lingering doubts

Bulgaria could do with cheap electricity and, in terms of production price at least, nukes certainly produce that. It could also do with keeping its greenhouse gas emissions down, and nukes help in that respect too.

The region could certainly do with the capacity. Thanks to an economic upturn and, in some countries, the proliferation of air conditioners, demand is growing fast. In recent years, Bulgaria has been covering as much as 90% of its neighbour's power deficit. With the Kozlodui closures at the end of this year, Bulgarian exports are forecast to plummet from a record 7.6 TWh to a mere 1.5 TWh, which could create problems — one reason why some Euro MPs were advising flexibility.

In terms of safety, too, Belene is looking pretty good.

One of many reasons why the Russian-led consortium won out was that it proposed the use of AES-92s, "third-generation" VVER reactors looked on with some favour in the EU. The V-230s proposed by Skoda Alliance, by contrast, are basically "second-generation", Soviet-era technology.

Another respect in which the Russians had the edge was apparently that they were prepared to make a good offer for kit of various sorts that was delivered before the project was frozen and has been stored onsite ever since. Atomstroyexport can find takers for this back home in Russia.

And yet, and yet…. Doubts linger in some minds, for various reasons.

The region is indeed short of power now. But the Belene reactors won't be on stream for another six or seven years. And that's assuming that things go without glitch - a very big assumption in matters nuclear. What will the situation be by then, given that the Romania and Turkey are planning nuclear plants too. Oversupply doesn't seem very likely, but the possibility of stiffer competition should be borne in mind. And NEK is already looking for offers of long-term power-sales contracts with traders for when Belene comes on stream.

Nukes may be light on greenhouse gases, but they aren't green enough for some people: vigorous arguments have been put forward — though to little effect — by a group called "AETs BeleNE" ("AETs" and "ne" being the Bulgarian for "NPP" and "no" respectively).

The Romanians aren't terribly keen either on having another nuclear plant on the Danube, with some suggesting the Bulgarians might do better to join them in building more units to their own nuclear power plant at Cernavoda, which uses Canadian technology and, to Bucharest at least, is a lot more acceptable than Russian-made reactors.

This raises another point. Some argue the choice of contractor seems a little inconsistent with emerging EU goals of energy independence.

Gazprom is currently involved in a war of nerves with Bulgaria over questions of gas transit and pricing, it's casting lustful eyes on the financially troubled and mainly gas-fired heating utility of Bulgaria's capital, and it's well positioned in municipal gas-distribution via its local friend Overgas.

So it's maybe a little unnerving when Gazprom also declares itself a potential strategic investor at Belene and, via Gazprombank, is the biggest shareholder in Atomstroyexport. Especially as choosing Skoda Alliance wouldn't have helped much in this respect either: Skoda has its Gazprom links too.

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