Blow for Bulgaria as Russia’s UES withdraws from thermal plant sell-off

SOFIA – Russian power major Unified Energy System (UES) has withdrawn from the 579-million-euro sell-off of Bulgaria’s second-largest thermal power plant, Bulgaria’s privatization agency said yesterday. The deal’s collapse represents a blow to Bulgaria, which has struggled to put large parts of its energy sector into private hands to bring much needed investment ahead of its planned 2007 EU entry. UES won a tender to buy the plant in April, but then became locked in a standoff with Sofia over regulatory and other issues after signing a draft contract in October. Earlier yesterday, the privatization agency approved a sale contract and invited UES to sign, saying that if it refused, the deal would collapse. «Following our invitation to sign the deal, we have received a statement from Russia’s UES in which it has refused to sign and will withdraw from the sale,» said Veneta Nacheva, the agency’s spokeswoman. She said the Russian company told the agency it was not satisfied with regulatory and environmental issues outlined in the contract. «Now the privatization agency’s executive council has to meet and decide what to do with the sale of the Varna power plant.» Its refusal to buy the generator in the Black Sea port of Varna follows the collapse of two other power plant sales – for the Rousse and Bobov Dol plants – last year. Analysts said the failed Varna sale will at least delay the foreign direct investment Bulgaria needs to counterbalance a yawning current account deficit expected to have swollen to a record 14 percent of GDP last year. «They need fresh money, especially given the high current account deficit, and expectations are that these sort of deals would go through,» said Bank Austria/CAIB analyst Simon Quijano-Evans. «Given their size, they are very important.» The three plants, which had attracted winning bids of over 850 million euros in cash and investment last year, comprise around 20 percent of Bulgaria’s total installed capacity. UES won the right to buy the 1,260-megawatt Varna plant and a smaller one in the Danube River town of Rousse. But Bulgaria’s anti-monopoly body ruled it could buy only one of the plants and it chose Varna. UES said in October it had planned to sell a 49 percent stake in the coal-fired plant to Italy’s Enel if it concluded the deal. It had offered to pay Sofia 389.7 million euros for 100 percent in the plant in two stages up to 2007. The rest of the total offer was to go for an obligatory capital increase. Bulgaria has said that if UES did not agree to its terms, it could either start talks with Czech CEZ, which offered the second-highest bid, or scrap the sale. The government has still not made clear what it will do with the 400MW Rousse generator. It has put the sale of the 630-megawatt Bobov Dol plant on hold after judging Greece’s Public Power Corp’s highest bid of 105.3 euros as too low.

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