After a three-month recess, the idea for a mega-energy holding, which sparked controversy right from the outset, continued flashing up with action. On May 6, Bulgaria’s Economy and Energy Ministry called a tender for a consultant to organise the creation of the holding.

The formal green light for the new holding, to be named the Bulgarian Energy Holding (BEH), was given in early February at the Hissarya summit of the tripartite Government coalition.

The ambitious project foresees the merger of all strategic energy assets of the state, namely gas company Bulgargaz holding and its four subsidiaries, the power grid operator National Electricity Company, Maritza Iztok 2 thermal power plant and mines, Kozloduy nuclear power plant (NPP) and Belene NPP, once built and operational.

The winner of the consultancy tender will be expected to complete the entire registration procedure for the holding. It will also be expected to draw up guidelines for converging the disparate structures of the individual companies. In addition, it is to draft measures aimed at amending the regulatory framework that would legally accommodate the new structure. Last but not least, the consultant will also be expected to prepare a staff optimisation plan.

The consultant will be awarded an eight-month contract and paid about 0.8 million leva, VAT excluded, the Economy and Energy Ministry said.

The procedure is open to both Bulgarian and foreign individuals and companies, either on their own or in partnerships.

Candidates have to attest eligibility through a portfolio of successful contracts, statements of financial health for the past three years, and a list of experts with experience and qualifications.

Deadline for offers’ submission is June 10. The contract is to be awarded to the candidate giving the lowest price.

The press office of the Ministry of Economy and Energy declined comment on the procedure, saying that it was still at an early stage, yet said several companies have already expressed interest in the tender.

The government gave birth to the idea for an energy holding in an attempt to restore Bulgaria’s position as leader on the Balkan energy market. The new conglomerate is hoped, on restructuring, to achieve vertical integration and as such to boost overall profitability through economies of scale and scope.

“The goal of the restructuring and consolidation is to create a set of economically sustainable and flexible units,” the Government press office said in a statement in February. The holding in this way is set to create conditions for growth, which would otherwise be unattainable for individual and financially weak companies.

The idea mirrors a similar initiative undertaken in the Czech Republic (through the energy giant CEZ) years ago. It is also at various stages of implementation in Poland and Romania.

In Bulgaria, the initiative got the immediate snub from both business and experts. Experts cited as con arguments its potential to skew competition on the electricity and gas generation and distribution markets as well as to obstruct the planned liberalisation of the market. Another criticism slammed as flawed the idea that an integrated energy holding could bring more profits than its parts, if operating individually. Furthermore, the country has no natural resources to loop the entire cycle in the gas or oil markets, as it is possible in Romania, for example. Hence, vertical integration is impossible to attain.

Despite lavish criticism, the BEH concept has already moved from starting blocks. As previously reported by The Sofia Echo, Deloitte & Touche, the consultancy which restructured CEZ, released in February 2008 a model for the restructuring of the energy holding. Prepared at the request of the Ministry of Economy and Energy, the concept sees the holding with a total revenue backlog of 1.78 billion leva and assets of four billion euro.

Under the model, the state is to remain full owner in all companies forming the holding. The government is to directly own between 51 and 75 per cent of all five companies, the remainder being in the hands of the parent company. At a February news conference, Economy and Energy Minister Petar Dimitrov did not make clear what the principle behind the percentage share-out would be.

The ministry did not rule out the possibility of floating the minority stakes of the holding at a later stage, however, it was not immediately clear under what time frame and conditions.

The concept also sees restructuring of the holding as a two-stage process. The first will see the financial integration of the holding, where all companies would operate as individual entities.

The next stage foresees the operational integration, where all companies would already be run by the parent company. The very process is set to take several years, the Ministry of Economy and Energy said.