The current moment in Bulgaria is exceedingly inappropriate for the sale of electricity distribution companies (EDCs) to private entities, said David Bowles, director of the British research centre of the Private Finance Initiative (PFI), quoted by Pari daily.

"Most of the players, considered large and serious, already failed in other countries and withdrew from the private energy sector. The impact on consumers is strongly negative. The World Bank (WB) is reconsidering its entire concept and advises the governments to terminate energy privatisation," Bowles said.

The latest global study conducted by the WB shows that the privatisation of EDCs has a negative outcome for both investors and consumers, Pari said. The study, conducted by Deloitte & Touche, showed that the private owners of EDCs cannot ensure the expected return, which in turn does not allow them to re-invest the proceeds from electricity charges in the electricity system reliability. As a result, consumer prices grow, accompanied by a drastic aggravation of service quality.

The Energy Ministry is preparing to announce the tenders for selling EDCs, grouped in three "pools". The rules for the privatisation of EDCs have been changed at the request of Deputy Prime Minister and Economy Minister Lydia Shuleva.

The change was approved by the ruling National Movement Simeon II (NMSII), BGnes Agency reported.

According to the NMSII decision, made on October 7, candidates for the EDCs will take part in the tenders only directly and independently without intermediaries and partners.

The new rules completely contradict the companies' privatisation strategy, Pari daily commented.

According to the strategy, which was drafted by the consultants from BNP Paribas, strategic investors could participate in four different ways: independently; through a joint venture in which they hold 51 per cent; through a consortium in which they hold 51 per cent; or in partnership with international financial institutions of which Bulgaria is a member. The change of the rules drastically narrows the scope of eligible buyers.

The Privatisation Agency, the Energy Ministry and BNP Paribas said they would wait for the tender documents and the announcement of the sales procedures to see what changes have been made. A possible political decision would play a positive role because it would be an additional guarantee for the reliability of investors, the Energy Ministry said. Announcements for the tenders had to be published at the end of September.

Energy Minister Milko Kovachev said last weekend that the privatisation of the EDCs would be launched in a few days.

The change of the terms limits the access of Bulgarian companies and traditional foreign partners like Russia and France to the tender, only strategic investors from the Czech Republic, Germany and Italy meet the conditions, Pari daily commented. According to them, strategic investors must have a long-term credit rating, more than five years of experience in the sector, more than 7000 kWh of electricity sold last year, and at least 700 million euro equity capital. They must hold five per cent or more of a liberalised electricity market (where liberalisation is at least 26.5 per cent).

Russia's RAO United Energy Systems has been assigned to select a company of the holding to bid in the tenders for the Bulgarian EDCs under the previous conditions. The interest is prompted by Bulgaria's likely accession to the EU in 2007. RAO had already obtained consulting offers by Societe Generale, ABN AMRO and the Bulgarian FOREM Consulting. Russian daily Vedomosti quoted what is described as an informed source as saying that RAO planned to persuade the Bulgarian Government to alter the set of eligibility terms by removing the requirement for experience on a liberalised market.

Among the other potential candidates are the Italian Enel and E.ON, which RAO has been trying to attract to Russia. Last month interest was indicated by the Czech CEZ.