Bogomil Manchev, Executive Director of Risk Engineering and Chairman of Bulatom: Belene NPP can be financed by Russian money within 33 months

Georgi Velev


- Mr. Manchev, you're a technical consultant on the construction of the second Nuclear Power Plant (NPP), have you seen the letter published by Rosatom corporation on Belene NPP, which was released by the media?
- Yes, I saw it and I can say that there is not a single true number in it. This is just some general data, which raise a suspicion of some kind of speculation.

- According to you, what is the reason for the release of this letter right now?
- I cannot tell you, but now we are in a sensitive period because documents are being prepared. The new financial adviser HSBC has started working on the project and has to do very specific work in a very short time. We, the other participants, are expecting the advisor’s opinion. That critical moment, with the price escalation (adjustment) or the final price, which will be formed is still valid. The price was agreed to a maximum threshold, but whether it will be reached, or some other figure will be chosen, this is already within the competence of the so-called Project Company Belene. The decision can not be taken by Bulgaria alone because there are other project participants. Anyone who has invested even one BGN in the plant should know how expensive this BGN will become. Investors agreed to participate in the project under this condition.

Deputy Minister of Economy, Energy and Tourism, Marii Kossev has already started setting up the working groups that will be in charge of the establishment of the structure of the Project Company. We, as architect-engineers of the project, will participate. Another group is working in full (swing) speed on the completion of the technical design of the plant, which is already at the final stage. Currently, Atomenergoproekt – the Russian project designer - is considering the plans. This group involves experts from the Ministry of Energy, from the Nuclear Regulatory Agency and from the European consultant - Riskaudit. The groups are headed by experts from NEK (National Electricity Company). They are expected to resolve the last issues in the second version of the technical design of the plant.

- There were statements by former Prime Minister, Sergei Stanishev, that the indexation of the project by Eurostat formula was decided even during the term of office of the tripartite coalition. And on this base, the appreciation of the construction would have reached up to €1.6 bn. Is this true?
- This is not true. In his time and in our time, the appreciation table was the same because we participated in its drafting. And the appreciation is really in the range between €600 mln to €2.3 bn.
The inflation index, however, was never determined exactly. The tool by which the indexation will be made is determined, and it is called Eurostat formula. In this formula there are factors (ratios) and their value is actually the subject of dispute between us. Because when we had talked about appreciation by about €600 mln, then the whole project was drafted using the Eurostat 27 (formula taking into account the inflation in all countries of the community) by 2007. Then the escalation index for Western Europe and in particular for Germany was 2%. Now it is about 3%.

The Eurostat formula describes the methodology for choosing the coefficients. And generally speaking, it states the following: it is reasonable that the escalation of a specific production be linked to indices where the production takes place. We can not use the indexes of the European Community alone, because then we will hurt the Bulgarian companies that participate in the project. And for the Russian-made products their indices should be applied. The final result is that half of the production will be indexed with the Russian inflation, 20% with the inflation figures of the EU countries and the remaining about 30% - with the Bulgarian inflation figures.

The adjustment by the Eurostat 27 formula refers explicitly to the so-called expense of the owner - in the future this will be the Project Company Belene, but so far this is NEK. The account, under which will be paid for the nuclear fuel, the costs of the architect-engineer, for physical security, for construction of the infrastructure and for the distribution system, for the connection of the plant with the electrical grid must be dadjusted by Eurostat 27.

All the time the discussion was held on the issue how these €4 bin would be escalated (this was a price stated in the contract with Atomstroyexport, signed in 2006) - the so-called EPC contract (engineering, procurement and construction equipment contract). But no one talks about the additional resources that NEK has to spend in order to form the final price of the contract. Here come the funds which should be provided for the construction of the infrastructure for the site.

- Does the key for signing a new agreement for the construction of the plant lie in finding reasonable parameters for all participants?
- Broadly speaking, this is true. In addition to this, we should take into account that it is not possible that the biggest players - Bulgaria and Russia, will decide that question alone. Naturally, Moscow wants a maximum appreciation, and Bulgaria – a minimal one. Since Russia will also be an owner of the plant, it probably would not seek a maximal escalation, because they will have to pay that price.

- And what is the opinion of the Bulgarian and the Russian side on this issue?
- The Russian side agrees on this, and the Bulgarian experts are examining the documents. Later these will be examined by the consultant HSBC and if everything is in order, the agreement has to be signed. This will allow for the finanacing of 33 months of work and, in this period there will be enough time for the Project Company Belene to be established, because certain documents are being gathered for this purpose as well. They must be submitted to the Commission for Protection of Competition in Brussels which will rule that there is no a monopoly association. Then this company should be created and all costs has be transferred to it. This will reduce the indebtedness of NEK.

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