The Revival of Russian Energy Projects in Bulgaria

On June 6, the Bulgarian parliament approved a proposal by the ruling coalition to explore possibilities of restarting the Belene nuclear plant project (NPP), a project that, five years ago, was widely recognized as unprofitable and beset by corruption. However, the legislative body rejected the Socialist Party’s demand to fully overturn the parliamentary decision that had suspended the project following an unsuccessful referendum in January 2013 (see EDM, February 5, 2013; Vindobona.org, March 1, 2013). The cabinet will have to present viable options for reopening the Belene NPP, including securing a “strategic” investor and a financing scheme, but without involving any state guarantees, such as long-term electricity purchase contracts or preferential pricing (Nucnet.org, June 7, 2018).

Sofia first announced it was abandoning plans to build a second (after the plant in Kozloduy), 2,000-megawatt (MW) nuclear power plant, near Belene, on the Danube River, in March 2012. The project was a joint Bulgarian-Russian undertaking. But the high construction costs, the government’s inability to attract a big Western investor to reduce energy dependence on Russia, and Moscow’s unwillingness to share the financial risks of the joint venture inevitably led to canceling the project. Now, the same prime minister who stopped Belene in 2012, Boyko Borisov, suddenly decided to seek a potential new investor—just a week after meeting with Russia’s President Vladimir Putin, in Moscow, on May 30 (Novinite.com, May 30).

Borisov seems to be entertaining the idea of restarting the Belene NPP with the aim of obtaining Russian support for his pet project, a natural gas hub in Bulgaria—the “Balkan hub,” as he promotes it. His public statements, focused mostly on potential natural gas deliveries to Bulgaria via the TurkStream natural gas pipeline rather than the possible reopening of the Belene NPP project, suggest that Borisov may have caved under pressure from Putin (Mediapool.bg, May 31). In fact, he stressed during his May 30 meeting with Putin that the Belene nuclear plant would only be built if it attracts a strategic investor and if it abides by market principles—a prospect that was not viable five years ago and is equally unlikely today (Balkan Insight, June 5).

Bulgarian Energy Minister Temenuzhka Petkova told the parliamentary energy committee that the Belene NPP would cost 10 billion euros ($11.6 billion). Reportedly, the Chinese National Nuclear Corporation (CNNC), Russian Rosatom, French Framatome and the United States’ General Electric have all expressed interest in the project; but the French and US companies are only offering to serve as suppliers, not investors (Mediapool.bg, June 7).  This leaves the Chinese and the Russians with the prospect of investing billions in the project. However, both companies require state guarantees, such as preferential contracts and other non-market schemes, and these would constitute a violation of the European Union’s competition rules. Minister Petkova also said that the Belene NPP could be constructed with an inter-state loan from Russia, similar to the arrangement for the Paks NPP in Hungary. In this case, Bulgaria would have to keep a 34 percent stake in the project, which would increase state borrowing (Balkan Insight, June 5). Bulgaria has already paid for two Russian reactors for the Belene plant, which means that the revived project would be impossible without Russian participation.

The Belene nuclear power plant remains financially unsustainable by any market assessment. According to BP, energy consumption in Europe is not expected to increase; on the contrary, it is projected to decrease by 11 percent by 2040. Energy production will also decrease by 5 percent. In addition, the share of renewable energy sources will increase from 20 percent now to 37 percent of the European energy mix 22 years from now (BP Energy Outlook, 2018).

Such a prognosis leaves no prospect for a profitable future for enormous and expensive mega projects like the Belene NPP. The plant will generate losses for the first three decades of its existence, according to the Sofia-based Center of the Study of Democracy (CSD). The CSD estimates that, based on the Belene NPP’s current cost structure, the power plant would break even only at electricity prices of more than 80 euros per megawatt-hour (MWh), compared to the current regional levels of 35–40 euros/MWh. Additionally, the CSD found that, with the expected growth of renewable energy driven by the EU’s de-carbonization policies, even the existing nuclear power plant in Bulgaria, Kozloduy, might become underutilized by 2040 (Balkan Insight, June 2).

The Bulgarian government is probably well aware of the dire economic prospects of the Belene NPP, but Sofia’s desire to improve relations with Moscow, combined with the Kremlin’s goal to increase its leverage in the Balkans, have put the failed project back on the agenda. Bulgarian President Rumen Radev also visited Russia last month, just a week before Prime Minister Borisov traveled to Moscow. Radev won the 2016 election with the promise to restore Bulgaria’s good relations with Russia, which took a hit after the cancelation of three major Russian energy projects in Bulgaria between 2012 and 2014. He started the talks with his Russian counterpart about reopening the Belene project and potentially creating a “Bulgarian Stream” as a branch extending from TurkStream, the 31.5-billion-cubic-meter (bcm) gas pipeline (currently under construction) that will link Russia and Turkey under the Black Sea (EurActiv, May 21). According to current plans, 15.75 bcm passing through this double-string pipeline will be delivered to Turkey, with the other 15.75 bcm destined for Europe.

Putin responded that Russia is “ready for the new route” and that he had discussed this issue with Turkish President Recep Tayyip Erdoğan. Borisov, while apologizing to Putin for the scuttling of South Stream under EU pressure in 2014, praised the Kremlin leader’s talks with Erdoğan. Putin and Erdoğan had apparently agreed to direct Russian gas from TurkStream to Bulgaria instead of Greece (Mediapool, June 2).

Bulgaria’s prospective “Balkan” natural gas hub, however, would likely hit hurdles in the European Commission, if Sofia does not secure gas supplies from at least three sources. In addition, Sofia may come into conflict with Washington for helping Moscow sell its gas via TurkStream (Mediapool, June 2). A. Wess Mitchell, the US Assistant Secretary for Europe and Eurasia, recently said in Bucharest that the United States opposes the multi-line TurkStream pipeline on the grounds that it “would give Russia the means to continue its virtual monopoly on gas imports to South Eastern Europe” (US Embassy in Romania, June 18). Bulgaria thus faces an uphill diplomatic battle in pursuing closer energy links to Russia.