AES Says Bulgarian Open Market Power Prices Too Low to Offset Investments in TPP

US company AES, which operates the Maritza Iztok 1 coal-fired plant in Bulgaria, cannot sell electricity on the open market in the country because the selling price is too low to cover its investments, AES Bulgaria's managing director said on Friday.

The company's investments in the plant exceed 1.3 billion euro ($1.4 billion), Olivier Marquette said in an interview posted on the website of state-operated radio broadcaster BNR.

The 15-year power purchase agreement (PPA) AES signed in 2001 with Bulgarian electricity company NEK ensures a cash flow with which the company can repay its creditors, according to Marquette.

He also said that the project's return on investment is a lot less than 17%, as has been quoted in the media.

AES and ContourGlobal, another US-based company that owns Maritza Iztok 3 thermal power plant (TPP), signed last month a memorandum of understanding withstate-run electricity company NEK, under which the two US companies agreed to a lower price at which NEK buys electricity produced by their TPPs. For its part, NEK has pledged to pay back its liabilities to the two plant operators.

The deal with AES and ContourGlobal is part of the government's efforts to cut the deficit in the Bulgarian energy system. The country's energy minister has said the total deficit of NEK exceeds 3 billion levs.

According to AES's managing director, the company is not responsible for the deficit.

"It's clear that we are not the problem and we are a very small part of the total amount that NEK is paying, so we are just a small part of the picture here. We are about 8% of the electricity generation,” Marquette said.

The parliament approved, at the end of February, amendments to the energy legislation, which are expected to reduce NEK's deficit by some 100 million levs by the end of the year. The measures envisage that those TPPs whose operations are inefficient will be excluded from the country's energy mix, and curb power production from biomass, among others.

Last month, Bulgaria's energy minister said AES and ContourGlobal owe state-owned mining complex Mini Maritsa Iztok a combined 140 - 170 million levs in overdue payments because they are still owed a total of 600 million levs in overdue payments from NEK.

The two TPPs, owned by ContourGlobal and AES, are part of the country's largest energy complex Maritsa Iztok, located in the southeastern region of Stara Zagora. The complex hosts lignite coal mines and three coal-fired power plants. ContourGlobal acquired a majority stake in the Maritsa Iztok 3 TPP from Italy's Enel in June 2011. AES launched the Maritza Iztok 1 power plant in 2011.

NEK and Mini Maritsa Iztok are 100%-subsidiaries of state-operated Bulgarian Energy Holding.

Source: SeeNews