Mathew Youkee
Editorial director for Bulgaria's Oxford Business Group

With bids for a stake in Bulgaria's new nuclear power plant (NPP) to be submitted this month, and the funding recently secured, eyes are now turning to the electricity sector's potential.

Binding bids for a 49% share in the new NPP at Belene on the Danube are to be submitted by June 23, officials announced recently. The shortlist has been narrowed down to two firms: Germany's RWE and Belgium's Electrabel, a subsidiary of France's Suez. The remaining stake will be held by the state National Electricity Company (NEK). On June 5, it was announced that French bank  billionP Paribas would be funding the project to the tune of $6.2 billion. The total cost is expected to be in the region of $10.8 billion.

Belene's two reactors - which will have an estimated output of 1000MW each - are to be constructed by Russia's Atomstroyexport, which is controlled by state energy giant Gazprom, with France's Areva and German technology firm Siemens as subcontractors.

The plant is intended to replace two decommissioned Soviet-built reactors at the Kozloduy NPP, which were taken offline in January 2007 on order by EU as a prerequisite to Bulgaria's accession to the bloc. While the Kozloduy NPP still has two 1000 MW reactors in operation, the closure of the two 440 MW units is deeply controversial in Bulgaria. Opposition and government-aligned politicians, as well as members of European Parliament from other countries have called for them to be reopened.

Kozloduy was at the heart of Bulgaria's electricity export industry, which was thought to be the country's largest foreign currency earner. In previous years, more than half of the Balkan region's electricity shortfall was covered by Bulgaria. This proportion dropped to a third in 2007 and will fall again to an estimated 13 per cent this year. Blackouts reported in Albania and Macedonia have been blamed on the cut in Kozloduy's capacity.

While many Bulgarians will therefore welcome the Belene NPP, the project is not without its critics. Belene, a campaigning organisation whose name is a play on the Bulgarian word for "no", is stepping up its protests against the plant this month. Its current line of argument focuses on a 1980s study of the Belene area by Soviet scientists, backed up by a Bulgarian report published in 1990, warning against the construction of an NPP in the region due to seismic instability. Other members of the organisation are more broadly opposed to nuclear power and the size of the investment being made. Recent reports have suggested that the official forecast of the project's budget does not take into account rising commodity prices, which it is said could push the cost as high as $14 billion.

Concerns have also been raised about Gazprom's involvement in the project, given the EU's wish to diversify energy sources away from Russian control.

Finally, a recent declaration by CEZ that it is running a thermal power plant (TPP) in the port city of Varna at minimum capacity - as artificially low domestic electricity prices have eroded profitability - may cause worries that Bulgaria's internal market is skewed against power station expansion. However, CEZ's own plans for a new TPP in the city belie this.

Given the huge potential of the Belene NPP as a contributor to Bulgaria's economy, and in the light of previous delays, the authorities are very unlikely to apply the brakes at this stage.

The NPP, with its large output, will be a huge boost to Bulgaria's power export capacity, and will be central to driving the sector forward for the foreseeable future. It will not be the only factor; other power station projects in the pipeline are expected to make Bulgaria region's leading power exporter once again in 2010, some time before the Danube-side plant is completed, according to NEK executive director Mardik Papazyan. For example, despite its recent complaints, CEZ is expecting to invest more than $1 billion in a new TPP in Varna; US energy firm AES is constructing a $1.4 billion, 670MW coal-fired plant in the Maritsa East basin, where a cluster of plants take advantage of the region's coal mines. Both are likely to look to export in addition to supplying the domestic market - a statement by AES asserts that the new station will help "maintain the country's position as an energy hub for southeast Europe".

NEK may wish to think even bigger than that. Stelian Gal, director general of Romania's state-owned power grid operator Transelectrica, told OBG that the firm is looking to construct an undersea cable to Turkey to facilitate electricity exports to that large market and potentially beyond. Their Bulgarian counterparts will be watching with interest.