Against the background of pandemic tariff hike requests coming from direct rivals, as well as water and electricity utilities, now that inflation and prices of raw materials are climbing on the vertical, a pledge from a heating utility to keep heating and hot water prices unchanged seems an idiosyncratic decision.

Not to the Varna-based heating utility, which, at a June 17 ceremony and a year after privatisation, changed its name from Toplofikatsia Varna to Dalkia Varna. The decision, the maiden step in a strategy to boost customer numbers and achieve a 50 per cent rise in consumption by 2010, was taken with the clear knowledge that the company would be a loss-maker for at least another couple of years, a host of Dalkia managers told reporters.

The strategy mirrors the path Dalkia, the energy company owned by France’s Veolia Environement and Electricite de France, has taken elsewhere in Central Europe, said Jean-Michel Mazalerat, Dalkia vice president in charge of Central European operations.

From a business enterprise focusing solely on delivery of heating energy and hot water, it will be transformed into a full-blown energy services provider, he added.

Underpinning the strategy are several new mechanisms – embracing the facility and energy management concepts, a new hot water metering approach alongside a new 4.8MW co-generation facility and a biomass-fueled plant. While the first and second are the client-oriented measures aimed at cutting retail and corporate customers’ energy bills, investments into new facilities seek to lessen production costs and dependence on gas as the input material, since its price has soared 30 per cent over the past year alone.

Facility and energy management has already been set on the go. Dalkia Varna struck its first holistic technical maintenance contract with Mall Varna, the retail complex opened on June 12 2008.

The company has also held similar talks with a score of developers of residential, office and administrative space, operational director of Dalkia Varna, Herve Vincendon, said, yet declined to name any of the courted prospective clients.

Business clients being an essential target, so are public ones. Dalkia Varna has already performed energy surveys of 30 municipal buildings – hospitals, schools, kindergartens – under a contract with Varna municipality. Dalkia management believes the number of surveyed public buildings will reach 50 and hopes its hopes are that the business services provided would ultimately augment into Dalkia’s full scope of services on offer.

In regard to retail heating energy users, the company has launched cost-cutting initiatives. Hot water consumption is now measured in cubic meters of water rather than kW/h spent, a novel approach both for the company and for Bulgaria as well, Ilia Nikolaev, Dalkia Varna director, said. Such metering slashes customers’ hot water bills by 20 per cent on average, he added. As for heating energy, the company has begun calculating it in MWh units, each unit costing 87 leva, VAT included. This means that an owner of a 80 sq m flat, which on average spends 5-6MWh a year, should prepare for a 600 leva bill at most for the full heating season.

Investments to serve more clients and at a lower cost have also been underway. Over the past year, Dalkia has renovated two km of the heating utility’s 32km network and 32 of 350 subscriber stations in what was a 1.5 million leva investment. Plans for next year are to revamp another three km and 35 subscriber stations.

Preliminary studies have shown that expansion of the network would only be cost-effective if building localised – not inter-connected – heating utilities, Nikolaev said.

This conclusion from a preliminary study, still to be supplanted with action, evnisions concrete plans for the construction of a 4.8MW co-generation plant worth 4.3 million leva that should be online in 2009.

Dalkia is also busy finalising plans to build a biomass-fueled plant. While the management is still considering whether to rely on straw or energy crops or install universal cauldrons burning any kind of biomass, it has set the year 2010 as the launch deadline for the plant. Its construction is part of Dalkia’s plans to have 20 per cent its energy output to be derived from biomass.

Although organic growth has underpinned Dalkia’s existing strategy, expansion through acquisition is also on the company’s agenda. Mazalerat confirmed Dalkia’s interest in the Sofia heating utility, provided that conditions in the new privatisation round change. To recall, the French firm was among the rejected bidders in the first attempt to sell Sofia heating utility three years ago.