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Two decades of one Russian nuclear project in Bulgaria (NPS “ Belene ”). Krassen Stanchev, CEO KC2 LTD, Board Chairman of the Institute for Market Economics ( www.ime.bg ). The site. Personal remark. Monitoring economic efficiency of the project since 1986.

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Two decades of one russian nuclear project in bulgaria nps belene

Two decades of one Russian nuclear project in Bulgaria (NPS “Belene”)

Krassen Stanchev, CEO KC2 LTD, Board Chairman of the Institute for Market Economics (www.ime.bg)

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


The site
The site

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Personal remark
Personal remark

  • Monitoring economic efficiency of the project since 1986.

  • Member of the Academy of Sciences team (sociologist and economist sub-team) to assess NPS “Belene” in 1989-1990.

  • Involvement in the decision on “Belene” as chairman of the Environment Committee of the Constitutional Assembly (1990-1990).

  • Assessment of the economic impacts of the project in 2002-2004.

  • Leader of “Belene” cost-benefit analysis team in January-May 2011.

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


The history in the making since early 1970 s
The history (in the making since early 1970’s “)

  • 1981 - dropped for seismic risks;

  • restarted in 1985, 4 VVER/1000, 1st reactor bought and site completed - 40% of the costs by 1989;

  • 1990 reduced to 2VVER/1000, then found not justified for radiological, seismic and economic risks; frozen in August 1991;

  • In 2002 – revitalized w/t required justification.

  • 2005 – GOB decision, costs € 1 bln; tender specification VVER/1000; Russian SO ASE wins;

  • 2006 – tender to test international demand, no buyers showed up; contract is signed with Atomstroyexport (ASE) for € 4 bln, excl. costs of financing and systemic connections;

  • 2008-2009 BNP, RWE, EB, etc. resign from the project; ASE asks for €6.3 bln.

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Legality
Legality

  • Nuclear use laws of 1985 and 2001 require:

  • Technical impacts assessment;

  • EIA;

  • Nuclear safety and risk assessment;

  • Socio-economic assessment;

  • And public hearings,

  • To be undertaken prior to the decision to built a nuclear power station.

  • Due to irregularities in 3,4 and 5 took GOB to the court; in 2007 the Supreme Administrative Court found that the decision was taken without following the requirements of the law but concluded it is too late to reverse the process.

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Domestic demand
Domestic demand

  • GDP increased in 2001-2010 of 56%, the electricity consumption has not changed at all.

  • By 2025: without “Belene” 15-16% extra capacity, export is typically 7%;

  • In 2002 and 2010, the GOB massaged the energy balance – envisaging 40% more demand, and excluding some installed capacity from it.

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Domestic consumption 01 10
Domestic consumption (‘01-10)

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Foreign demand
Foreign demand

  • 8.5 thousand MW are being build in the region;

  • Marginal costs for new capacity in Ukraine and Romania are substantially more competitive than those of “Belene”;

  • The region (Balkans) will not likely t buy in the near future for more than 4 €-cents;

  • The closest market with a higher price is Italy, but there no grid to export (besides one via Geece with low capacity).

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Capex
CAPEX

  • The “nuclear island” of NPS “Belene” is €6.3 bln., ASE recently upgraded its calculations to € 8.2 bln.

  • Systemic connections and additional segments (waste depots, reserve and compensatory capacity) would costs at least € 4.2 bln.

  • Discounting ASE estimates, Fukushima- related price increases and assuming 0-profit and 0-kick-backs, the CAPEX is €11.5 bln.

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Victims of nps belene
“Victims” of NPS “ “Belene”

  • Domestic installed and planned capacity in coal, wind, solar and water;

  • The existing NPS “Kozloduy”;

  • The National Electric Co., partner of ASE for “Belene” (with €4 estimated value of assets, unable to borrow – details below);

  • Risks associated with unexpected events, nuclear waste depots and seismic (“Belene” will be the only NPS in a seismically unstable region) stay with the population of Bulgaria;

  • By 2010 the EU electricity market will be liberalized;

  • Energy efficiency.

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Electricity losses as of the net consumption
Electricity losses as % of the net consumption

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Energy independence
Energy “independence”

  • Bulgaria imports from Russia 100% of the nuclear fuel;

  • 98% of oil;

  • 96% of natural gas;

  • 42% of solid fuels;

  • The overall energy-dependency from Russia is 72-73%.

  • IF NPS “BELENE IS BUILD THIS DEPENDENCY WILL BE APPROXIMATELY 90%.

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Atomstroy export and its bulgarian partner national electric company nek
Atomstroy “ export and its bulgarian partner, national electric company (NEK)

  • The costs of NPS “Belene” for NEK is €4.2 bln.

  • But NEK assets are worth €4.08 bln., DEBTS ARE ARROUND €2.5, WITH IMPLICIT DEBTS (COMMITMENTS) – €4 BLN.

  • IT IS RATHER PROBABLE THAT THE PROJECT WOULD LEAD TO A BANKRUPTCY OF NEK AND ACQUISITION OF ITS MAJOR ASSETS BY ASE.

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Other risks
Other risks

  • Seismic

  • Structural inefficiency

  • Nuclear safety

  • Technological reliablity

  • Quality and standards

  • Personnel and employment

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Bankability and end effects economic calculus at 8 rate of financing
Bankability and end-effects (economic calculus at 8% rate of financing)

  • The price per 1 KWh of electricity if accounting for all investment and costs of CAPEX and OPEX (50 years) shall be app. 40% higher than the current subsidized price per 1 KWh produced by wind farms.

  • The end-net-effect for the economy of Bulgaria at “Belene” price of 9.54 €-cents per 1 KWh is negative: i.e. the cash flow is below the current ASE rate of return of 8%.

  • The 50-year loss is €8 bln. at 6 €-cents per 1KWh (current clean TPP plants)and €1.2 bln at 9 €-cent (current wind power price).

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Profitability
Profitability financing)?

  • At 9.54 €-cents per 1KWh the net effect is 0, i.e. the cash flow is sufficient to recover the investment and operation costs at 8% cost of finacing.

  • At a price of over 9.54 €-cents there are net benefits – e.g. at 10 €-cents per 1 KWh the net benefits are at the level €1 bln. for 50-year operation period.

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Net effect for the economy as a whole at 8% rate of refinancing and respective price per 1 KWhof “Belene” electricity

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Net belene fiscal impacts at 6 refinancing rate and given price per 1 kwh in
Net ‘ refinancing and respective price per belene” fiscal impacts at 6% refinancing rate and given price per 1 KWhin €

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


Current developements
CURRENT DEVELOPEMENTS refinancing and respective price per

  • GOB hired a new consultant, HSBC, to be paid by a success fee (1% of the total costs);

  • PM’s personal advisor on “Belene” is the importer of 98% of Bulgaria oil;

  • The contact was extended to June 1, 2011;

  • Total taxpayers’ costs to date: €720 mln., 2% of 2011 GDP; 67% of the budget deficit; proven embezzlement - €135 (0.4% of GDP);

  • 1989 reactor was bought back by ASE and is allegedly being sold again to NEK at the “fair” price;

  • Worried by all a/m development independent groups delivered assessment of project themselves, dismissed by GOB as “biased”;

  • Since it impossible to prove that “Belene” electricity will be sufficiently inexpensive to recover the investment, all other prices are inflated;

  • The public responded by creation of civic groups against “Belene”;

  • GOB forced the legislature to adopt (before HSBC opinion) 2020 Energy Strategy that includes “Belene” and scheduled the final decision for mid-August. Justification: export.

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


What justification for current belene decisions
What justification for current “ refinancing and respective price per belene” decisions?

  • At current ASE rate of financing (8%), €1.7-8 bln will offset the losses.

  • If in the meantime ASE/RA acquires assets pledged by NEK to cover its role in the project, this will be a net benefit for RA shareholders.

  • If “Belene” is to be build, the export shall anyway be there: at below cost-recovery price but with respective commission for the exporters.

  • From the standpoint of the economy and state budget of Bulgaria the project does not make any sense but for the individual companies involved “the overall net outcome is nothing but the process is everything”.

  • If one traces these companies and individual background, it will be obvious that they have benefitted regularly from public procurement and at tax-payers expense in the last 20 years.

Two Decades of Post Communist Change in Europe and CIS, Kranj 23-24 Sept 2011


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