More than two months after an international court ruled Bulgaria must compensate Russia’s Atomstroyexport for work carried out on the Belene nuclear power plant, Prime Minister Boiko Borissov’s government is still struggling to find ways to minimise the financial damage from the project, which was cancelled back in 2013.
A Geneva-based court under the auspices of the International Chamber of Commerce ruled on June 16 that Bulgaria’s state National Electricity Company (NEK) must pay €550mn to Atomstroyexport, a unit of Rosatom, for the nuclear reactor the Russian company has already produced.
While the figure is lower than the €1.2bn sought by Atomstroyexport, it is a substantial sum for Sofia, when taken in combination with the €708mn Bulgaria has already sunk into the project. In addition, Bulgaria faces a bill of around €170,000 in penalty interest per week.
In an analyst note issued after the ruling, Timothy Ash of Nomura wrote that the order to pay compensation was a “significant blow to Bulgaria, with a cost of well over 1% of GDP eventually likely to fall on public finances”.
The options for the Bulgarian government are limited; far from finding the optimal solution for the country, it is a case of searching for the least costly and damaging outcome.
Initially the preferred option appeared to be the sale of the reactor to a third party; there was speculation that a buyer could be found in India, Iran or Jordan, all of which are looking to develop their nuclear energy sectors.
“If we find where to sell [the reactor], together with the Russian party, and recoup the funds we would pay, that would be the best solution ... Every other option is way more complicated,” Borissov told journalists four days after the court ruling, Reuters reported. However, there was apparently no progress on plans to sell the reactor during Borissov’s visit to Teheran in July, and Borissov later acknowledged that it would be almost impossible to sell.
Shortly after the visit, Borissov broached the idea of reviving the project saying that it should be revived if this was economically viable, daily Dnevnik reported. This was a volte face given that it was cancelled by his previous government shortly before it went into opposition after the May 2013 elections.
On August 5, Borissov had a telephone conversation with Russian President Vladimir Putin, announcing after the call that he was “very optimistic” about various major energy projects including Belene. According to the Kremlin, the call took place on Borissov’s request and the two politicians agreed to step up cooperation.
However, there are obstacles to continuing the project with Atomstroyexport, given the continuing EU sanctions against Russia over the conflict in Ukraine. Bulgaria has already fallen foul of Brussels on this issue, when it continued work on the Moscow-backed South Stream pipeline back in 2014.
Borissov has previously acknowledged this would be a problem, telling journalists on June 20 that, “To decide now to build a Russian reactor when Russia is under sanctions. You can imagine what access every engineer or mechanic who comes here would have and what additional problems Bulgaria would face,” according to Reuters.
The third option put forward by Sofia is instructing the country’s privatisation agency to sell the project to private investors, who would then complete it with the help of the state. Again, it is questionable how realistic this is - there have long been doubts as to whether Bulgaria needs additional generation capacity. However, on August 24 Novinite reported that Energy Minister Temenuzhka Petkova had met with representatives of China General Nuclear power Group (CGN) to discuss Belene, reportedly at the request of the Chinese company.
Belene, which was to be located on the Danube river with two 1,000 MW reactors, was partly seen as a replacement for the aging Kozloduy nuclear power plant. However, in January Kozloduy signed a contract with a consortium comprising Rosatom Service and local Risk Engineering, to extend the lifespan of its two remaining reactors until 2049. The power plant’s older reactors were shut down in 2007 as a condition for Bulgaria’s entry to the EU.
Before the project was cancelled, Sofia-based think tank Institute for Market Economics (IME) argued that the main problem of the Bulgarian energy sector was inefficiency rather than lack of capacity, and claimed that statistics had been manipulated to make it seem that Belene was necessary. IME forecasts that the country’s electricity surplus would rise to 15.3% by 2020 and continue to rise for the following five years. The think tank described the power plant as “unnecessary, expensive and risky”.
Reviving the project could therefore be a case of throwing good money after bad, as Sofia invests yet more money only to end up with a costly white elephant power plant. This is the argument put forward by Greenpeace Bulgaria, which campaigned against Belene together with several other environmental NGOs.
“The government is trying to find a pretty way out of the situation but in reality there is no accountability for the over €1bn spent on this project,” Greenpeace Bulgaria spokesperson Denitza Petrova told bne IntelliNews. She claims that Belene “has never been economically viable ... There will be no private investor in it as it is risky and useless, and will not pay off the investment.”
Critics of Belene also claim there has been corruption and mismanagement in the project. Belene “has been just a justification for stealing, corruption. The state gave millions and millions, and obviously this madness is not over yet,” said Petrova.
Surprisingly, given the money sunk into the now abandoned project, the accusations of corruption and the risks - Belene is located in an earthquake zone - this is not a particularly hot topic in Bulgaria.
This may be fatigue with the long-running saga; plans for a new nuclear power plant were first put forward more than 40 years ago. Revived after the fall of communism, it took over a decade for Sofia to award the contract to Atomstroyexpert. German utility RWE was also involved in the project but pulled out in 2009 blaming both the international economic crisis and the failure to progress on key areas of the project.
In the 2013 referendum on Belene, initiated by the BSP, only around 20% of the electorate bothered to vote, indicating this is not seen as a criticial issue by the majority of the population.
There is also the question of who to blame for the current situation - the Bulgarian Socialist Party and its allies who pushed forward with Belene in the first place, or Borissov’s GERB which cancelled the project. In the past GERB has sought to present itself as a party of pro-EU reformers, in contrast to the BSP’s enthusiasm to work with Russia on Belene and other energy projects. However, Borissov is at heart a pragmatist, who has switched positions in the past and is not now ruling out any option, including further cooperation with Russia.