site.btaMinister Highlights Proposed Energy Sector Changes under Recovery and Resilience Plan

During an extraordinary sitting of the National Assembly on Tuesday, caretaker Energy Minister Vladimir Malinov briefed the MPs on proposed changes to the national Recovery and Resilience Plan (RRP) resulting from negotiations with the European Commission (EC). The intended revisions include the creation of two new entities under the Energy Ministry and shifting projects under the RRP to a RePowerEU chapter. The proposed new chapter focuses on investments in critical electricity transmission infrastructure and improving energy efficiency in both public and private buildings.

Malinov announced plans for a BGN 500 million investment to ameliorate land in the coal regions of Stara Zagora, Kyustendil, and Pernik. The proposal, with which the European Commission is familiar, draws inspiration from Greece’s experience and its own RRP, he said. "In this way, we will supplement Deputy Prime Minister [Lyudmila] Petkova’s decision to allocate BGN 1 billion from the state budget over a four-year period," Malinov noted. "We propose the establishment of a specific legal entity for the purposes of this investment," the caretaker Minister added.

Another key change involves re-allocating financial resources from the main section of the RRP to the RePowerEU chapter. Malinov spoke of a planned dropping of investments under the RRP. One of the investments concerns a green hydrogen pilot project and amounts to some EUR 32 million. "Dropping it from the RRP doesn’t mean we are giving up on this priority project. We plan to have it funded through the Modernization Fund, which we believe is feasible," he added.

The Minister updated the MPs on the ongoing negotiations with the European Commission regarding two key reforms under the RRP: on the decarbonization of the energy sector and on improving the operational management of state-owned enterprises in the sector.

Malinov said that following a National Assembly decision dated January 12, 2023, his Ministry agreed to drop the 40% carbon reduction target by 2025 compared to 2019 levels. "This won’t be part of the RRP," he added. Malinov noted that an understanding had been reached with the European Commission about the ability of the market forces alone to ensure the achievement of the decarbonization goals. One of the most impactful measures for decarbonizing the energy sector will be effective market liberalization. The Minister said that agreement has been reached with the European Commission to drop emission caps for individual plants, while keeping the overall cap of 10.9 million tonnes of carbon dioxide by January 1, 2026.

The second key reform envisages the spin-off of the Electricity System Operator (ESO) and Bulgartransgaz from the Bulgarian Energy Holding EAD (BEH). The Energy Ministry proposes that a new holding company be created under its umbrella that will incorporate the ESO and Bulgartransgaz, deeming this an acceptable option for the EC.

National Assembly Deputy Chair Dragomir Stoynev of BSP for Bulgaria slammed the proposal, arguing that the caretaker government is trying to close BEH.

Malinov assured the MPs that the caretaker government has no plans to close or privatize the holding. He said that in view of the proposed spin-off, his Ministry has also prepared an analysis of the financial situation of BEH, which has BGN 1.2 billion in bond liabilities. Malinov added that the first of the bond loans amounts to BGN 600 million and matures on June 25, 2025. "Preliminary financial analysis suggests that financial assistance from the Bulgarian state will be needed to implement this measure," the Minister said.

The European Commission sees Bulgaria's commitment to take the ESO and Bulgartransgaz out of BEH as a pivotal reform aimed at preventing possible cross-subsidization of state-owned companies in the Bulgarian energy sector.

Among the proposed EUR 497 million investments under the RePowerEU chapter, Malinov singled out investments related to the development of critical electricity transmission infrastructure.

"The government has committed to submit the proposed amendments to the European Commission for an opinion by the end of September," said caretaker Deputy Prime Minister and Finance Minister Lyudmila Petkova, who also participated in the hearing.