Recently it became clear that Czech energy company Energo-Pro, which supplies electricity to Northeastern Bulgaria, has filed an arbitration claim against Bulgaria at the World Bank’s International Center for Settlement of Investment Disputes. Energo-Pro seeks some EUR 54 million from Bulgaria to compensate the big deficit created at the regulated electricity market between 2013 and 2014. Austrian energy firm EVN also sues Bulgaria which, according to the company, failed to reimburse the money spend on investment projects. Its claim also regards the electricity price paid by the Bulgarian households and the obligation of the National Energy Company (NEC) to buy energy from renewable energy sources. The claims of the foreign power distribution companies in Bulgaria make the situation in the country’s energy field even more complicated.

The price of electricity for Bulgarian households will rise with an average of 2% as of July 1. The increase is very insignificant compared to the electricity tariffs in other European countries. However, bearing in mind the share of the electricity expenses in the total expenditures of the Bulgarian households, such increase can be regarded as substantial. According to official statistics, the Bulgarian and the Romanian citizens pay the highest electricity bills compared to their purchasing capacity. Meanwhile, the Bulgarian Energy Holding, which is a major shareholder of the National Electricity Company, has been accumulating more and more debts. Its total indebtedness is expected to reach at the end of 2015 EUR 1 billion.

The financial difficulties of the country’s power engineering sector are mainly due to the recent agreement between the state and two of the biggest thermal power plants - the US companies Contour Global and AES. According to the agreement, Bulgaria has to pay these companies old debts worth EUR 370 million by end June. In return, the American companies are to make a 30% reduction of the tax they receive for the energy facilities installed at the premises of the two power plants, no matter whether these facilities actually functioned, or not. At first sight this agreement looked favorable and according to Bulgaria’s Minister of Energy Temenuzhka Petkova, it would influence positively the end electricity prices in Bulgaria, all the more that local and export consumption of Bulgarian electricity dwindled and some power plants have already started to function with reduced capacity and some solar and wind power plants stopped functioning altogether. According to experts, the agreement between Bulgaria and the American thermal power plants will reduce the expenditures of the National Electric Company. However, it would be enforced, only if this country finds EUR 370 million by the end of this month. Unfortunately, NEC and the Bulgarian Energy Holding can not provide such big money due to their huge indebtedness, which has been constantly increasing. Despite the appeals of renowned energy experts that Bulgaria should cancel this agreement, BEH asked the Ministry of Finance to provide state warrantees for similar debt. Otherwise, no commercial bank, which is aware of the financial condition of the Bulgarian Energy Holding, would agree to grant even a single penny to this company.

It is not quite clear whether the Bulgarian cabinet would provide the necessary warrantees, because of the legislative requirements regarding the maximum threshold of the public debt, which includes state warranties, too. Practically, the maximum threshold of the state debt adopted by the National Assembly could be amended. However, it requires long procedures. Unfortunately, the Bulgarian Energy Holding has to find a solution in short terms.

Bulgarian energy experts and analysts have been repeatedly warning that the situation in the country’s power engineering has been worsening and this country has to undertake urgent and radical reforms in this sector. However, such reforms are extremely painful for consumers and the authorities would not dare making such big steps in the year of local elections. We would repeat Premier Borissov’s words to representatives of the International Monetary Fund and the World Bank who said that the authorities have been focusing their efforts on pressing problems, but they have already started to look towards a more distant perspective.

English version: Kostadin Atanasov