Russian Media: Bulgaria Plays Daredevil over Belene Delay

A postcard reading `Vladimir Putin, Live in Sofia 13 November 2010` in front of the Alexander Nevski Cathedral in Sofia, Bulgaria 11 November 2010. Photo by EPA/BGNES

Bulgaria does not seem scared by the prospect of being taken to arbitration by the Russian contractor Rosatom as it plans to miss the July 1 deadline for signing a final agreement for the construction of Belene nuclear plant, Russian media comments.

Bulgaria suspended negotiations with Rosatom over Belene nuclear project for three months and in this way breached its commitment to sign an engineering, procurement and construction (EPC) contract for building the plant by July 1, Russian Komersant newspaper reported on Monday.

If the contract is not signed by July 1, Bulgaria will be taken to court and obliged to pay EUR 1 B in damages, according to the report.

The risk however does not seem to worry Bulgaria's Energy and Economy Minister Traicho Traikov, who says the price of EUR 6.3 B offered by the Russian side is unacceptable, the newspaper says.

It cites the minister as saying that Bulgaria wants to extend the deadline to allow the consultants on the project HSBC, which the government contracted to help it decide whether the planned nuclear plant is economically feasible, do their job.

Experts are not worried either as they believe that Russia, for whom this project is very important from a political point of view, will agree to another delay, the article says.

"It is not in Rosatom's interests to sue Bulgaria as for Russia this is more of a political project, rather than economic. For Moscow, it is important to build its first nuclear power plant in the European Union, which it then can show to all its clients in Europe," Vladimir Karolev, founder of Balkan Advisory Company, which is a subcontractor of HSBC, told the newspaper.

The Bulgarian and Russian sides have frozen the project by mutual consent, according to Professor Atanas Tasev, member of the Bulgarian Energy Forum.

"Three months earlier or three months later, it makes no difference from a technical point of view. The Russian side will even be better off to wait for HSBC analysis as it will gain lots of benefits if the consultant's decision is in favor of the project," said the expert, who sets the cost of the project at EUR 5.5 B.

Bulgaria has demanded that Belene nuclear project is frozen for another three months as of July to catch up with the so-called back office work.

Minister Traikov said at the end of last week that the Bulgarian government needs additional information about the cost of the project, because what it has received so far from the Russian side has not been satisfactory.

He added that negotiations for a new contract with Moscow for the construction of Belene can continue even while the project, which has hit a snag over safety, financial and price concerns, is frozen between July and September.

Asked by journalists whether Bulgaria faces the risk of being taken to arbitration by the Russian contractor Rosatom as it is likely to miss the July 1 deadline for signing a final agreement for its construction, Minister Traikov said:

"The arbitration is not a risk, it is an option."

The 12th annex to the main contract between Bulgaria and Russia on the construction of two 1,000 megawatt nuclear reactors at Belene, in the north, will expire at the end of June.

The Bulgarian side apparently wants to steer clear of rushing for last-ditch effort in the negotiations with the Russian state nuclear corporation Rosatom for the fate of the Belene nuclear power project.

The annex triggered a huge scandal at the beginning of April after the head of the national utility company NEK Krasimir Parvanov signed an agreement with Rosatom's subsidiary Atomstroyexport that potentially threatens Bulgaria's national interests by obliging the Bulgarian government to reach a final agreement with the Russians on Belene by July 1, 2001.

Traikov slammed Parvanov and announced he is going to be fired, but the dismissal was later overturned by Prime Minister Boyko Borisov.

Borisov harshly criticized the Energy Minister's hasty and emotional reaction and threatened him with being kicked out of office.

It turned out that Parvanov has coordinated his actions with Deputy Prime Minister, Simeon Djankov, who oversees finance and economy.

The signed document stirred heated debates in Bulgaria as it came before the two sides agree on the price of the project and conduct safety checks.

Bulgaria and Russia are unable to agree on the major bone of contention - the price for the construction of the 2000-MW Belene NPP.

Russia says the project construction price should be EUR 6.3 B. The Borisov government wants to set the price at as little as EUR 5 B.

After it was first started in the 1980s, the construction of Bulgaria's second nuclear power plant at Belene on the Danube was stopped in the early 1990s over lack of money and environmental protests.

After selecting the Russian company Atomstroyexport, a subsidiary of Rosatom, to build a two 1000-MW reactors at Belene and signing a deal for the construction, allegedly for the price of EUR 3.997 B, with the Russians during Putin's visit to Sofia in January 2008, in September 2008, former Prime Minister Stanishev gave a formal restart of the building of Belene. At the end of 2008, German energy giant RWE was selected as a strategic foreign investor for the plant.

The Belene NPP was de facto frozen in the fall of 2009 when the previously selected strategic investor, the German company RWE, which was supposed to provide EUR 2 B in exchange for a 49% stake, pulled out.

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