Ever since taking office in July, Bulgarian Prime Minister Boiko Borissov and his Cabinet have shown little enthusiasm for major energy projects with Russia, championed by President Purvanov and the Socialist party, the majority partner in the former ruling coalition.

Sticking to the promises made during the election campaign, Borissov and his ministers said that they would review the progress made on the Belene nuclear power plant, South Stream gas pipeline and Bourgas-Alexandroupolis oil pipeline before deciding how and whether to move forward. Just three months into his term, Borissov might not have to make unpopular decisions concerning the future of the projects.

After months of media speculation that German utility RWE was on the brink of withdrawing from the Belene nuke, each time denied by the company, the official confirmation came on October 28 from Galina Tosheva, the chief executive of state-owned Bulgarian Energy Holding (BEH).

BEH owns the majority 51 per cent stake in the project, with RWE set to buy 49 per cent, but the German utility refused to commit any money towards the project until the rest of financing was secured.

"We received a notification letter from RWE about its withdrawal from the project. The reasons given for the decision are the economic crisis, the failure to sign a final contract with the contractor and the failure to secure financing," Tosheva said.

Picked as a strategic investor in 2008, RWE agreed to pay 1.2 billion euro, potentially rising to two billion euro, for its stake. It was reported that the utility sought potential partners to split the risk and the costs. RWE’s decision came as Bulgaria also courted other investors to take on part of the Government’s 51 per cent stake.

The Cabinet was reluctant to commit to the project because it was poorly thought out, lacking a cohesive strategy and a cost-benefit analysis, Economy and Energy Minister Traicho Traikov has said. The Cabinet ordered an audit of the project, which has not been completed yet.

With RWE out of the picture, the Cabinet will have more latitude in reworking the existing plans. "The [Economy] Ministry will take the necessary measures to restructure the project so that it attains an European image," Deputy Economy Minister Maya Hristova said after RWE’s decision was announced. It could take as long as a year-and-a-half to restructure the project, she said.

The choice of a new investor would require a tender for a new consultant to draw the paperwork for the competition to choose new investors, Hristova said. That did not necessarily imply that the project would be frozen out, as the time would be used to receive the required licences for the project from Bulgaria’s Nuclear Regulatory Agency.

Pipeline dramas
RWE’s decision hurts the one Russian-Bulgarian project where a binding contract has been signed – the four-billion euro contract with Russia’s AtomStroyExport to build the twin 1000MW reactors.

The fate of the two Russian-backed pipelines is nowhere clearer, with one report in Russia suggesting that Bulgaria could be bypassed altogether on both accounts. On October 20, business daily Kommersant said that Russia’s agreement to use Turkish continental shelf waters for South Stream in exchange for providing oil for the Samsun-Ceyhan pipeline meant that Bulgaria’s participation was no longer needed.

Samsun-Ceyhan offered an alternative to Bourgas-Alexandroupolis in bypassing the crowded Bosphorus, while South Stream could now go around Bulgaria, the newspaper said.
The report, coming just days before Traikov travelled to Moscow to discuss progress on the three energy projects, was met with calm in Sofia. After returning, Traikov said that Russia was not pressuring Bulgaria into making a decision, but pointed out that the two sides still had their disagreements.

On South Stream, Bulgaria wants the negotiations separate from the talks on signing a new gas supplies agreement with Gazprom, Traikov said. On Bourgas-Alexandroupolis, the Government wants the project reviewed to examine the option of unloading oil tankers in the port of Bourgas, rather than on floating buoys in the Bay of Bourgas, as suggested by the project consultants. Both projects now face new delays until Bulgaria’s concerns are addressed.

But with time running out on Russian prime minister Vladimir Putin’s deadline for Bulgaria to firmly commit to the projects, their future looks less than certain.