site.btaSouth Stream Bulgaria Increases Capital, Ministry of Economy and Energy Protests

Sofia, August 19 (BTA) - In spite of the measures undertaken by the caretaker government to suspend all activities in the South Stream gas pipeline project, a capital increase up to 397.6 million leva of the project company, South Stream Bulgaria AD, was entered in the Commercial Register on August 18, 2014, the Ministry of Economy and Energy said Tuesday.

This action on the part of the South Stream Bulgaria management is a violation of the August 11 protocol decision of Caretaker Minister of Economy and Energy, Vassil Shtonov, who ordered  suspension of all activities in the South Stream gas pipeline project until the project is brought in line with EU standards, the press release said.

On August 7 Shtonov sent a letter to the Bulgarian Energy Holding (BEH) ordering the suspension of activities on the project. On August 8 the Minister met with the CEOs of South Stream Bulgaria AD, underscoring the need of suspending further activities on the project and mapping out subsequent steps for bringing the project in line with EU standards.

On August 11 Shtonov issued a decision for termination of further actions on the project. On the same day, the CEO of BEH sent a special letter to Alexey Miller, Deputy Chairman of the Board of Directors and Chairman of the Management Committee of Russian energy company Gazprom, with a copy to the management of South Stream Bulgaria, explicitly ordering the management not to undertake steps to increase the company capital or any actions related to launching the agreement for engineering, implementation and construction of the pipeline. In spite of that, at 4:23 pm on August 12, the management of South Stream Bulgaria submitted an application for an increase of the company's capital, which was entered in the Commercial Register on August 18, the press release said further.

The project company South Stream Bulgaria is owned 50 per cent by BEH and 50 per cent by Gazprom. The board of directors has five members and all decisions are made unanimously. The company is represented by two executive directors together. The Ministry believes that the management of South Stream Bulgaria does not defend BEHÒs interest in the company and it intends to refer the case to the law-enforcement authorities.

According to information of the Ministry, the capital increase in itself does not mean launch of construction of the project but allows preparatory work on it. Construction of South Stream on Bulgarian territory will only begin after advance payments to the project contractors, which is possible only after the signature of both executive directors of South Stream Bulgaria, the press release said.