Bulgaria Moves to Sue Russia as Belene NPP Ultimatum Expires

Energy | August 18, 2011, Thursday // 17:26|  views

The construction site of the future Belene NPP has been set for building the first of its two 1000-MW reactors, according to Atomstroyexport. Photo by BGNES

Russian state company Atomstroyexport has failed to comply with the ultimatum issued by Bulgaria's National Electric Company NEK, with the latter now moving to suit the former over unsettled equipment claims for the Belene NPP project.

The new development comes in spite of the fact that last week Bulgaria and Russia 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 last Wednesday.

The two parties 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.

NEK had given Atomstroyexport a deadline until August 16 to withdraw its suit from the International Arbitration Court in Paris. On Thursday, the subsidiary of the Bulgarian Energy Holding announced that the Russians had not complied with its ultimatum and that it is now in its final phase of preparation to file an EUR 61 M compensation suit against Russia at the Arbitration Court of the International Chamber of Commerce in Geneva.  

In addition to demanding that Atomstroyexport drop its claims against Bulgaria by August 16, NEK had also demanded that by the end of September 2011 the two parties drafted a schedule to settle their mutual financial claims, while the financial working group that is supposed to hammer out the fate of the project would continue its work unperturbed.

Under the new circumstances, however, NEK said it had now asked the Arbitration Court in Paris for detailed information on the Russian claims, and that it was going to present its legal representation the following week.

"The suit filed by Atomstroyexport can compromise both the relations between the two parties, and the Belene project as a whole. In this sense, the withdrawal of the suit based on our proposals would have been a proof that Atomstroyexport is indeed interested in the further realization of the project," NEK said with an insulted tone in its statement Thursday.

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.

NEK's sulky tone on Thursday is a departure from earlier demonstrations of hope as both the Bulgarian Economy Ministry and Atomstroyexport had said they were 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.

NEK's Thursday sulky statement comes a day after it responded to Russia's Atomstroyexport that the roadmap the Russians proposed for the troubled Belene nuclear plant project cannot be accepted as a legally binding document, and that the fate of the project will be decided by the continuing talks in the bilateral financial working group.

Meanwhile, at the end of last week, Atomstroexport offered Bulgaria a new, 14th Annex to the 2006 Belene NPP contract that would provide an extension of the contract for the construction of the Belene nuclear power plant by further 2 months, until December 1, 2011.

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