Belene plant profitable only with subsidies – think-tank

Bulgaria’s abandoned project to build a nuclear power plant at Belene on the Danube River can be profitable for a private investor, but only if the state subsidises construction, maintenance and decommissioning costs, the Institute for Market Economy (IME) think-tank in Sofia said.

In a statement on the topic – issued on June 1 in reply to claims that Belene can be a profitable private venture – IME analyst Krassen Stanchev said that the subsidies need not be direct financial transfers for Belene to make a profit.

Several measures, if undertaken by the Bulgarian state, would be indirect subsidies for Belene: covering the costs of connecting the plant to the country’s power grid, ensuring that the plant has electricity sales contracts with domestic and foreign customers, failing to require risk insurance as well as taking on all decommissioning costs.

The first two measures on the list – linking to the power grid and signing electricity delivery contracts – are traditionally services that the state provides for major projects (in certain cases, the state is legally obliged to do so).

Failure to require risk insurance has the double effect of artificially lowering the electricity price (by reducing annual maintenance-related costs), while at the same time absolving the plant’s owners of any future liability in case of unforeseen damages.

Finally, should the state assume decommissioning costs, which would include the costs of storing spent nuclear fuel in a secure environment, it would spare the plant’s private owners significant expenditures, while at the same time saddling the state with a bill that could run into hundreds of millions of euro.

“This list of potential benefits is not comprehensive and is valid both for private and public investors in nuclear stations. A careful look at nuclear energy management worldwide would reveal that the sector is indirectly subsidised everywhere,” Stanchev said.

“In this sense, the claim that Belene can be profitable may be true in the classical sense that anyone can profit from anything, provided someone else pays the costs,” he said. “The fact that someone would profit, under these circumstances, from Belene is not sufficient proof that the country’s electricity system needs Belene.”

IME has long been an opponent of Belene, arguing that it was an overly-costly and economically unsound project. Stanchev’s statement came as a reply to the claims by Bogomil Manchev, chairperson of Bulatom association and owner of Risk Engineering (one of the consultants hired to oversee Belene’s construction), at a nuclear energy forum on May 30, that while the state pulled the plug on Belene, the planned power plant was still viable as a privately-backed project.

In an interview with Bulgarian news agency BTA, published on June 4, Manchev said that one private investor had shown interest in buying out the state stake in Belene, taking on any payment of any damages demanded by Russian contractor Atomstroyexport for the delay of construction.

Later on June 4, Economy Minister Delyan Dobrev said, as quoted by local broadcaster Darik Radio, that the ministry had received no formal approach to buy the state’s stake in Belene.

Bulgaria picked Atomstroyexport to build two 1000MW nuclear reactors at Belene for a fixed cost of 3.97 billion euro, signing a preliminary contract in January 2008. The start of construction was later constantly delayed, in part because of lack of funding and over disagreements on the costs escalation ratio.

In March, the Cabinet decided to pull the plug on the project, using the half-built first reactor in the seventh unit of the existing Kozloduy nuclear power plant. The decision came even before a feasibility study by consultants HSBC put construction costs at 10.35 billion euro.



Alex Bivol

Alex Bivol is the Deputy Editor-in-Chief of The Sofia Globe.