Bulgaria’s financial inspection agency found 15 breaches of public tender legislation by state-owned electricity company NEK when the company signed a 250 million euro syndicated loan arranged by BNP Paribas, the agency said on April 10. The total damages to the state utility were estimated at 36.6 million leva.
The Public Financial Inspection Agency of the Finance Ministry concluded its investigation in January, but no announcement was made at the time. Instead, the results were included in the agency’s quarterly report of investigations concluded in the first quarter of 2013.
The agency gave no further details on its investigation, but public broadcaster Bulgarian National Television (BNT) reported that the agency’s inspectors described the five-year syndicated loan deal as unjustifiably risky. The investigation was ordered by then-economy minister Delyan Dobrev in the summer of 2012 and its findings were forwarded to the prosecutor’s office, BNT said.
NEK contracted the funds from eight international banks in July 2007 – ostensibly the money was to be used as bridge loan to start preparatory work on the Belene nuclear plant, but less than 100 million euro were spent on clearing old equipment from the Belene site.
As construction on the Belene was repeatedly postponed – because NEK and Russian contractor Atomstroyexport failed to agree cost escalation clauses – the bulk of the funding was spent on other projects, most notably the controversial (because of cost overruns) Tsankov Kamuk hydro-power station.
Meanwhile, two years into the loan, NEK posted a net loss for the first half of 2009. Rather than repay the loan early, which it could not do because it had no cash reserves, NEK ended up paying drastically higher interest rates on the loan.
Since then, NEK’s financial situation has only gone further downhill and the company was unable to secure funding to repay the loan when it was due, in May 2012. NEK secured a one-year extension with some of the lenders, but had to pay 55 million euro back to the banks that would not accept a delay.
The remaining 195 million euro are due in late-May, with NEK’s parent company, Bulgarian Energy Holding, trying to raise the necessary funds by either another syndicated loan or a bond issue.
(Belene nuclear plant site, screengrab from Bulgarian National Television)