Bulgaria, Russia Get Tangled in Talks on Delayed Belene NPP Payments

Energy | August 10, 2011, Wednesday // 13:09|  views

A model of what should be the first 1000 MW reactor at the Belene plant. Back in 2009, the Stanishev Cabinet claimed it would be ready by 2014. File photo

Bulgaria and Russia have started negotiations on their claims for one another over delayed payments for equipment for the Belene nuclear power plant, parallel to the general talks on the fate of the troubled project.

Russia's Atomstroyexport, a subsidiary of the Russian state nuclear corporation Rosatom, and Bulgaria's National Electric Company NEK, started their talks on the new issue Wednesday, Atomstroyexport announced in a statement.

The two parties have resorted to the negotiation table after Atomstroyexport was first to say it would file an EUR 58 M suit for NEK in the International Arbitration Court in Paris, with NEK reacting by threatening a counter suit for EUR 61 M. The aim of the new talks is to settle the mutual claims without resorting to arbitration.

While the future of the 2000-MW Belene power plant remains hanging in the air, the bone of contention in this particular scenario is related with equipment for the NPP, whose construction was first started in 1980s.

Atomstroyexport, the company chosen to build the second Bulgarian NPP formally confirmed in late July 2011 that it had filed a lawsuit for EUR 58 M against Bulgaria's National Electric Company NEK at the International Court of Arbitration in Paris as a result of NEK's failure to pay on time for already completed works.

The lawsuit in question, however, and its potential Bulgarian counterstrike refer to a dispute over equipment delivery payments, and not to the final decision on the fate of the Belene project that the Bulgarian state has to make.

Atomstroyexport claims that it has been completing tasks on the Belene project on credit, on Bulgaria's request, and regardless of its dispute with the Bulgarian government over the price of the NPP, and the need to sign a final construction contract.

NEK has reacted with surprise, and with a threat that it will launch a counter lawsuit against Atomstroyexport worth EUR 61 M that the Russian company owes to it under a contract to buy back the old equipment at the Belene NPP construction site, which has been stored there since 1991. NEK explained that the delayed payments by Atomstroyexport over the contract in question is the reason it terminated its payments to the Russian company – apparently, thus generating the reason for Atomstroyexport's claims.

According to the Bulgarian state electricity company, Atomstroyexport has said in a letter that it deems the Bulgarian claims justified, and offered a new deal for settling the equipment payment questions. NEK has also stated that it is "open for dialogue" for the resolution of the existing problems.

Bulgaria's state-run power grid operator has threatened to sue in Geneva Russia's state nuclear company Atomstroyexport over delayed payments on planned Belene nuclear plant.

In its latest statements on the possible "counter-claim", the government in Sofia pointed out that its step should not be described as a counter-claim to Moscow's lawsuit at an arbitration court in Paris.

"The action was described as a "counter claim" just because the two sums in question are similar," a statement by the Economy and Energy Ministry said last week.

It was not immediately clear, however, why the Bulgarian authorities have picked the Swiss town for their lawsuit.

According to Minister Traikov negotiations will continue until August 12 at the latest.

Both the Bulgarian Economy Ministry and Atomstroyexport have said they are convinced the lawsuit in Paris "is not a new approach chosen by the Russian side for the Belene NPP negotiations."

The Russian company Atomstroyexport itself has underscored in a media statement that the lawsuit it filed with the International Arbitration Court "should in no way be viewed as a measure of exerting pressure" in order to force the Bulgarian government to make a final decision on the fate of the vastly troubled and controversial Belene nuclear project.

In the event that the talks between NEK and Atomstroyexport for the overall contract for the construction of Belene fail, the Russian state company will most likely file a EUR 1 B lawsuit against Bulgaria but such a development would not occur before October 2011, if it does at all, because the two governments have negotiated a 3-month extension on the final decision that Bulgaria has to make.

On July 1, NEK and Atomstroyexport signed an annex extending by 3 months their contract for the construction of the Belene NPP, the new "Annex No. 13" to the 2006 contract.

The newly-signed document effectively provides the two parties with a deadline until September 30, 2011, to hammer out answers to questions related with the technical project for the Belene NPP, the market analysis by the project consultant HSBC, and further progress on the contract for construction and supplies, which is to be made more flexible to meet requirements by potential international investors.

However, it does not contain a commitment to a certain deadline for reaching a final construction deal. The greatest issue over which Bulgaria and Russia have been haggling for the past two years under the Borisov Cabinet has been the price of the project, with Russia insisting it should be no less than EUR 6.3 B, while Bulgaria is demanding a price of no more than EUR 5 B.

A provision in the new annex to the Bulgaria-Russia Belene deal provides for the setting-up of a financial working group of the involved parties to clarify the conditions for funding offered by Russia.

Regardless of the mutual equipment payment claims, last week Bulgaria's state-run power grid operator NEK and Russia's state nuclear company Atomstroyexport set up a financial working group on the Balkan country's planned Belene nuclear plant providing a road map for the project.

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