site.btaCaretaker Government to Propose Renegotiating Contracts with Two US-owned TPPs

Caretaker Government to Propose Renegotiating Contracts with Two US-owned TPPs

Sofia, September 26 (BTA) - The two US-owned AES Maritza East 1
and ContourGlobal Maritza East 3 thermal power plants have
signed 15-year contracts with the State (from 2011 until 2026)
for the purchase of all the electricity they produce. The TPPs
have a life of 50 years and these contracts can be renegotiated,
so that the financial burden for the State could be reduced in
the coming years, Economy and Energy Minister Vassil Shtonov
told journalists here on Friday. He outlined the measures the
caretaker Government will propose for dealing with the deficit
in the electricity system.

Shtonov said that talks with the two TPPs have started, however
it is doubtful that an investor with a 15-year contract for the
purchase of electricity will change it while a caretaker
government is in power. The Minister voiced hope that there will
be continuity between the current caretaker and the next
government, because there is no way the profile for purchasing
electricity from the two TPPs will not be changed or the terms
renegotiated.

Another measure for lowering the deficit in the electricity
system, which is being discussed, is to make industrial plants
and heating utility companies use the electricity they
co-generate first for their own needs, before selling it at a
higher price. Shtonov explained that the current practice is for
them to sell the co-generated electricity at a higher price,
while buying electricity for their needs on the free market at
lower prices.

The National Electricity Company's (NEK) deficit is currently
2.9 billion leva, 1.5 billion of which are from the Tsankov
Kamak and Belene projects, with the remaining 1.4 billion
resulting from the imbalances in the sector over the past two
years, Shtonov recalled. The new deficit accumulated in the
first six months of this year amounts to 360 million leva, while
another 900 million leva are expected to accumulate in the
following 12 months (starting July 1, 2014), if no measures are
taken, Shtonov described the situation. This is so, because NEK
purchases the energy mix from different producers at a price of
166 MWh, which it then resells to end suppliers at a price of
114 leva per MWh. This means that NEK loses 52 leva per MWh,
while that the regulated market is in the vicinity of 17.3 TWh,
the Minister explained.

NEK accumulates a deficit of 500 million leva from the purchase
of electricity from photovoltaic plants at a price of 500 leva
for MWh. The company's deficit increased by another 80 million
leva from the purchase of electricity generated by wind
turbines. The purchase of co-generated electricity from heating
utility companies makes up for another 200 million leva of the
deficit. AES Maritza East 1 adds 200 million leva to NEK's
deficit and ContourGlobal Maritza East 3 - another 70 million.
These sums add up to one billion leva, he said. Thanks to the
low prices of electricity produced by the Kozloduy N-plant and
the Maritza East 2 TPP, these deficits could be reduced by 350
million leva. Combined with the October 1 electricity price
increase by around 10 per cent, the remaining deficit will be
around 700 million leva, the Minister explained.

Shtonov said high hopes were placed on collecting revenue from
green certificates and green house gas emissions, but in reality
this revenue turned out to be in the tens of millions, instead
of the initially expected hundreds. This is insufficient to
cover the deficit, he said, adding that contracts with producers
of renewable energy can not be changed unilaterally by the
State, as they are legally guaranteed.

The Energy Minister said that lowering the deficit should be
addressed gradually by renegotiating the long-term contracts,
which distort the market, and by progressively raising prices,
which in his words does not mean they will go up every three
months. Shtonov said he does not expect that the "hole" in NEK
will be filled in the next 12 months, but it will gradually be
reduced over time and reach a level when NEK will stop
accumulating deficit. The repayment of all of NEK's debts,
however, will take years, which in turn requires political will,
the Minister noted.