After his confirmation as Prime Minister, Boiko Borissov refused to issue a blanket dismissal of all top officials appointed under the previous cabinet, saying instead that the work of each one would be carefully appraised.

A month into the term of Borissov’s Cabinet, the "big broom" sweeping the public administation has reached the energy sector, with the executive directors of power grid operator NEK and the Kozloduy nuclear power station replaced.

The change at the top of Kozloduy’s management is already in effect, with Economy and Energy Minister Traicho Traikov appointing Dimitar Angelov as the new executive director, just one day after Ivan Genov resigned. Genov stepped down after Traikov alleged that he had been responsible for electricity sale contracts that were not in the interests of Kozloduy.

The sale of electricity without tender was the main problem of the outgoing management of Kozloduy, because it was unclear how the sale prices were agreed, Traikov said.
Bulgarian National Radio (BNR) said that Genov rejected the allegations and said that the power plant posted a profit of 54 million leva in the first half of the year. He was quickly defended by Traikov’s predecessor as economy minister, Petar Dimitrov, who said that maximising Kozloduy’s profits was never paramount.

"If the nuclear station was a tomato farm, then profit is the only criterion – the more profit, the better. But the nuclear station is an instrument, a very important instrument and a social instrument, an instrument to attract investors," Dimitrov told BNR on August 26.

Bulgarian Energy Holding (BEH), the holding company set up in 2008 to manage the bulk of state-owned energy assets, sacked Kozloduy’s four-member board of directors, cutting the body by one to appoint a board of three replacements. It was part of an initiative to cut back the number of board directors in state-owned companies, BEH said in a statement.

Pointing fingers
At NEK, chief executive director Lyubomir Velkov and executive director Mardik Papazyan were expected to be fired by August 28. The reason was that they failed to take adequate measures to prevent the company from posting a net loss of 42.2 million leva in the first half of the year, BEH board of directors chairperson Boris Pekov said, as quoted by Dnevnik daily.

NEK blamed the loss on the utilities regulator, the State Energy and Water Regulatory Commission (SEWRC), for not allowing the power grid operator to raise the price at which it sells electricity to end-users, while at the same time requiring NEK to pay more for electricity generated by heating utilities. NEK forecast a net loss of 76 million leva for the full year.

SEWRC chairperson Konstantin Shoushoulov, quoted by Dnevnik, said the institution was not responsible for NEK’s unreasonable spending.
Dimitrov, repeatedly accused in the past of heavy-handed intervention in SEWRC’s price regulation activities, was the other target of criticism from Velkov and Papazyan, who said that NEK’s requests were denied because Dimitrov’s Socialist party did not want to anger voters before the July general elections. Dimitrov rejected the allegations, saying that SEWRC’s price-fixing process was transparent and impossible to meddle with.

More nuclear worries
The immediate impact of NEK’s poor financial results was that a 250 million euro bridge loan arranged by BNP Paribas in 2007 became callable. NEK would have to either renegotiate the terms of the loan or have to pay it back in full, Traikov said on August 25.

Refinancing talks held by NEK, which would have raised the loan’s servicing costs by between eight and 20 million leva, were put on hold by SEWRC, Dnevnik reported. According to Shoushoulov, the issue was now being handled by Traikov and Finance Minister Simeon Dyankov.

One solution would be to pay the loan in full using funds from the Government’s fiscal reserve, an option that Dimitrov said he fully supported. "That will not change the Budget situation for this year. The fiscal reserve is money put away for a rainy day, which we have been collecting for 10 years now, and they could be now used in this situation," he said. Any such move, however, would need Dyankov’s approval and could clash with the Finance Minister’s vow to cut down on unnecessary Government spending.

NEK took the loan to start preparatory work on Bulgaria’s planned second nuclear station at Belene. The funds have already been contracted, but the bulk of the financing is yet to be agreed. Bulgaria picked Russia’s Atomstroyexport to build the two 1000MW reactors for a fixed price of four billion euro, but analysts have warned that the total construction costs could end up being twice as much.

Borissov has said that the Government would only back Belene if it could find a private investor for NEK’s 51 per cent stake. By September, the Cabinet is expected to decide whether to continue its support for the project or abandon it altogether, Traikov said.