site.btaNEK CEO on Chaira Power Plant Problems, Hydroelectricity, Company's Financial Standing, Market Liberalization

In a BTA interview, NEK EAD Board of Directors member and Executive Director Martin Georgiev discussed the condition of the Chaira Pumped-Storage Power Plant after a March 22 malfunction of its Unit 4, Bulgaria's hydroelectricity sector, the company's financial status, and the liberalization of Bulgaria's electricity market. 

Georgiev said that NEK sets the recommissioning of the Chaira Power Plant as its top priority. The interviewee said that the plant is in a "severe condition" after suffering an "unprecedented accident".

AF-Consult Switzerland AG has been selected as an independent third-party expert to carry out a root cause analysis. In its final report, released on November 29, it concluded that the accident was due mainly to material fatigue in some sections of the turbine, leading to a considerable depreciation of key equipment and exhaustion of its useful life, the NEK CEO said.

He explained that Toshiba, which is the original equipment manufacturer, recommended an overhaul of the facilities once every 12 years but, contrary to these instructions, the current renovation of the control systems and part of the essential turbine components began in 2019, as long as 24 years after the commissioning of the power plant's Unit 1 in 1995.

Notably, the stator of Hydraulic Power Pack 4 was badly damaged in 2019, and Hydraulic Power Pack 2 malfunctioned similarly in 2021, while Hydraulic Power Packs 1 and 3 sustained turbine component accidents. All these are indications of Chaira's serious depreciation even before the start of the present rehabilitation.

In addition to the root cause analysis, Austrian, German, Bulgarian, Danish and Austrian experts tested the Unit 2 metal, the operability of Unit 3, the vibrations of Unit 4 during the incident and the risk, and carried out a visual inspection of Unit 1. They arrived at identical conclusions with the Swiss firm.

Based on the information from all analyses, a roadmap for the recommission of the power plant has been drawn up. The repairs of Hydraulic Power Packs 2 and 3 are planned to take 12 months each. Unit 2 will go under repair in early 2024. If the innovative engineering solution that will be applied there proves successful, it will be used for Unit 3 as well. The two units are therefore supposed to be operational by the end of next year. Unit 1 has been shut down preventively after detecting failures of its turbine equipment, and vigorous negotiations on its recovery are underway with Toshiba. The entire turbine of Unit 4 will have to be replaced, and its recovery will require approximately 36 months once a supplier is contracted. An auction procedure for its selection will be announced at the beginning of next year, Georgiev specified. Replying to a question, he said that the recovery of the hydraulic power packs will cost an estimated BGN 80 million.

NEK's Crucial Role

The CEO pointed out that NEK plays a crucial role in ensuring the security of supplies and the energy system. Thus, in 2023 the company provided 75% of the upstream regulation and 83% of the downstream regulation of the country's electricity system vis-à-vis the Electricity System Operator's total active balancing electricity. NEK prioritizes addressing consumption on the regulated market with its huge diurnal and seasonal fluctuations. 

NEK operates 31 hydropower plants and is responsible for the operation and maintenance of a comprehensive infrastructure consisting of 40 dam walls, 670 km of tunnels and canals and over 500 water intakes, Georgiev said.

The average service life of a NEK-owned hydropower plant is 62 years. Some of the key plants are aged between 50 and 70, and the Boyana Hydroelectric Power Station was built 100 years ago. The 90-year-old Vacha 1 Hydropower Plant and the 50-year-old Momina Klisura Hydropower Plant underwent essential equipment rehabilitation in 2023, the interviewee said. Four units at the Belmeken Pumped-Storage Power Plant were rehabilitated, and the last Unit 5 will be brought back on stream by the end of the year. The last stage of the rehabilitation of the Sestrimo Hydropower Plant is also due for completion until the end of 2023. 

NEK is chronically short of financial resources for maintenance and rehabilitation, the CEO pointed out. He insists that the reliability of the facilities is essential to ensure the security of electricity supply, provide balancing electricity and contribute to the successful achievement of decarbonization objectives.

The company is working hard on a design for the Yadenitsa Dam and for two new pumped-storage power plants, Batak and Dospat, which Georgiev described as "highly promising". These two projects are at the feasibility study stage, and their implementation is expected to take between eight and ten years. The installed power of each of them is planned at 800-1,000 MW at generator mode and 700-900 MW at pump mode. The advantage is that these plants will use existing dams, which will reduce the cost of investments. They will provide 30-50 GWh storage capacity, which is considerable by both European and European standards.

The CEO told BTA that thanks to the improved market situation and the sustained efforts of its teams, NEK's financial standing has been better and better over the last two years. This was appreciated by Standard&Poor's, which raised the company's long-term credit rating. Nevertheless, the company has negative working capital and is thus experiencing difficulties, especially when cash inflows are delayed or unscheduled payments arise.

Market Liberalization

With the planned full liberalization of the wholesale electricity market, NEK will no longer function as a public provider. This function currently requires substantial technical and financial resources and once it is eliminated, the company will be able to focus on the production of hydroelectricity and its effective commercial management in the various electricity market segments.

Asked whether Bulgaria is ready for a full liberalization of its electricity market, Georgiev said that liberalization creates conditions for competition between electricity producers and suppliers, which is essential for consumers as it leads to improved effectiveness and the offering of products, services and conditions geared to customers' needs. The conditions for liberalization and effective trade have improved substantially after the Bulgarian electricity market joined the European one. The scale of the single European market curbs the possibility of market manipulation and ensures consumer protection, which is exceedingly important, the interviewee said. Liberalization moreover is an incentive for investment in the most effective and competitive production technologies, which is key for the global energy transition at the lowest cost.

Under the Energy Act, the last stage of Bulgaria's electricity market liberalization is to be carried out in two steps: full liberalization of the wholesale market as from July 1, 2024 and liberalization of supplies to household users in 2026. The regulatory framework will be amended shortly to define the comprehensive conditions and rules for the successful implementation of these steps. A detailed awareness campaign for consjmers is especially important so that they would be informed and avoid stress when having to switch suppliers.