“NEK” and power plants “AES Maritsa East 1” and “Contour Global Maritsa East 3” reached an agreement
New contractual arrangements govern a decrease of power purchase agreements prices (PPAs). The latter are signed between “Natsionalna Elektricheska Kompania” (“NEK”) and power plants “Contour Global Maritsa East 3” and “AES Maritsa East 1”. Availability prices will be reduced by 17% for “Contour Global Maritsa East 3” TPP and by 14% for “AES Maritsa East 1” TPP.
“NEK” will save nearly 100 million BGN annually
According to official estimations, with the new contractual arrangements “NEK” will save nearly 100 million BGN annually or about 1 billion BGN by the end date of the PPAs. According to the agreements, the plants sell electricity to “NEK” at a two component fixed price (BGN/MWh). The contracted fixed prices cover the variable production costs, main of which are those for fuel, and the availability prices cover the fixed costs of the plant plus the contracted return of capital.
Those power plants, with total installed capacity of 1580 MW, provide availability (production possibility) to “NEK” of about 10 million MWh annually. The announced savings of nearly 100 million BGN lead to the conclusion that it has been negotiated a decrease of the availability prices by 10 BGN/MWh.
“NEK” has to pay 700 million BGN overdue liabilities beforehand
Lower prices will become effective after “NEK” pays off entirely its overdue liabilities to the two plants, which amount at 700 million BGN in total. According to the Energy Minister, this is expected to happen by the end of June, after Bulgarian Energy Holding provide “NEK” with the required credit resource.
EWRC’s decisions are the reason for the overdue liabilities
In 2013, in a desperate attempt to reduce the costs to NEK, combined with an artificial retention, preferably reduction of the house hold prices, the members back then of SEWRC “renegotiated” in advance the two plants PPAs fixed prices, in the following way:
- decrease of the price of the agreement with “Contour Global Maritsa East 3” PPA by 20% and that of the agreement with “AES Maritsa East 1” TPP – by 30%
- the energy from half of the capacity of the two plants to be sold on the free market.
As a result of this “renegotiation” it was expected for “NEK” to save 424 million BGN in total for the next one-year price period. Reasonably, “NEK” objected the decision, pointing out its obligations to comply with existing contracts, but not the wishful suggestions of SEWRC. The outcome of this situation was an accumulation of overdue liabilities of “NEK” to the producers, amounting at more than 500 billion BGN, instead of the hypothetical savings, calculated by the regulator.
SEWRC’s decision is not a surprising one – the search for additional revenue for “NEK”, combined with artificial retention, preferably reduction of the electricity prices, became major concern of SEWRC for a year now. It is not a new approach – the revenue of “NEK” is increased, but at the expense of the reduction of the revenue of other electricity companies. The choice of the “punished” companies is also predetermined – they all are private. The process began with the RES producers, then the electricity distribution and supply companies followed, and now the front line was extended to the “American” lignite plants.
Reforms are coming
Thus ends the last battle for saving of “NEK”. Everything started with repeated reductions on behalf of the regulator of the production and network costs. Legislative actions followed, reducing the obligations of “NEK” to purchase energy at preferential prices and to connect RES installations.
So far, those who contributed to the mitigation of the financial crisis were the energy companies. All implemented measures probably will half reduce the current deficit of “NEK”. From about 600 million BGN – to 300 million BGN annually.
This is less than sufficient though, in order the energy sector to be stabilized. The energy reforms should be continued, or they are rather coming
