Bulgaria's Cabinet decided on February 13 2008 to consolidate the state-owned energy firms under the umbrella of one holding company, preparing the ground for establishing the company by the end of the year, the Cabinet's press service said in a statement.

Bulgarian Energy Holding (BEH), as the company will be called, would receive the Government's stakes in five companies - power grid operator NEK, gas company Bulgargaz, Kozloduy nuclear power plant, the country's biggest thermal power plant Maritza Iztok 2 and the coal mines with the same name.

The Cabinet insists the consolidation would increase transparency and increase profit margins because of existing synergies, making it also easier for it to participate in large-scale energy projects, such as the construction of the nuclear power plant at Belene and the South Stream and Bourgas-Alexandroupolis pipelines. BEH would indirectly own stakes in all three projects through NEK and Bulgargaz.

Energy experts believe that the Government's argument that the holding structure would find it easier to borrow money for developing new projects does not stand up to scrutiny, because the companies that would become part of BEH have enough financial clout to secure funding if needed, Dnevnik daily reported.

The Government also claimed that the move is in line with sector trends in the EU, but that disregarded the efforts of the European Commission to break up integrated production and distribution businesses, which it calls unbundling. Energy Commissioner Andris Piebalgs also shut down the initiative of eight countries, Bulgaria among them, to against the unbundling, criticising it as an attempt to bar wider competition within the boundaries of EU member states, Dnevnik daily said.

Concerns have been voiced already that the creation of BEH was meant to cross-subsidise state companies in the energy sector, while the former chief executive of Bulgargaz, Vassil Filipov, quoted by Dnevnik even accused the Government of creating the cumbersome framework to cover up frauds and siphoning of funds at the companies.