site.btaEnergy Minister Wants Bulgartransgaz Management Removed

July 5 (BTA) - Energy Minister Andrei Zhivkov asked the Bulgarian Energy Holding (BEH) to remove the management of Bulgartransgaz after a check by the Energy and Water Regulatory Commission (EWRC) confirmed Energy Ministry conclusions about ineffective management of the natural gas transmission company, the ministry reported on Monday.

On Friday, the EWRC unveiled a report saying that Bulgartransgaz had failed to obtain tentative approval for the agreements on building and financing an extension to the TurkStream natural gas pipeline via Bulgaria, known in this country as Balkan Stream.

The EWRC check, ordered a day after the April 4 parliamentary elections, shows that Bulgartransgaz never asked the regulator to approve the agreements with the Saudi consortium Arkad and the Bulgarian-German Ferrostaal Balkangaz on building the pipeline, and the agreements on the bank loans which were used to pay the dues to the two companies.

All this is contrary to the Ordinance on Licensing Energy Sector Activities, the EWRC said.

The agreements with Arkad (2.2 billion leva pre-VAT) for the linear part of the pipeline and with Ferrostaal Balkangaz (360 million leva pre-VAT) for two compressor stations were signed in the autumn of 2019. Bulgartransgaz borrowed 200 million euro (391 million leva) to pay Arkad and Ferrostaal in advance, although it was supposed to use its own money for the purpose. Then, the gas transmission company took out another package of loans worth 487 million euro (952.5 million leva) in 2020, and 156.5 million euro (306.09 million leva) this past spring.

Short-term loan procedures were opened in all three financing phases. Bulgartransgaz used the same scheme each time. To provide security for repayment of the loans, the company made fixed-term deposits denominated in US dollars in the respective banks, and the interest rate on the deposits was higher than that on the loans.

Bulgartransgaz argued that these operations would enable it to save on interest by making advance payments under the contracts with Arkad and Ferrostaal.

The loan agreements signed by Bulgartransgaz increased the company's debt from 4 million leva in early 2019 to over 2.6 billion leva at present, the Energy Ministry said. These agreements should have been approved by the EWRC but Bulgartransgaz did not notify the regulator about them.

The EWRC's conclusions confirmed the evidence provided by the Energy Ministry soon after the caretaker government's tenure started in May. A review of the financial condition of the state-owned energy companies back then found that Bulgartransgaz's liabilities had increased dramatically due to the company's large-scale investment programme. This would be warranted only if the monetary flows to the company increased - a forecast which was not supported by the financial review on the Balkan Stream. So the latest EWRC check confirms that the Balkan Stream project has had an adverse impact on Bulgartransgaz's overall financial position and has made the company sink deep into debt. This supports the Energy Ministry's conclusions that the management of the state-owned gas transmission operator is ineffective, the ministry said.

Later on Monday, the BEH said it is expecting a written confirmation to the Energy Minister's request to remove the Bulgartransgaz management. It will be considered by the BEH Board of Directors. The press release also points out that Bulgartransgaz opts for vertical integration and has a two-tier management system. It is an independent gas operator, as defined by the Energy Act. The BEH will announce its decision to the public. NV/RI/VE/MT
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