Bulgarian power traders remain unconvinced that a management change at state-owned power utility NEK will lead to meaningful and positive developments in the market.
Bulgarian Energy Holdings (BEH), the parent company of NEK, announced a selection procedure for a new chief executive two months ago. But the transparent selection process was cancelled and some market observers fear that the installation of Krum Anastasov, who is understood to be close to BEH chief executive Mihail Andonov, is another political appointment. Anastasov will be NEK's fifth chief executive in the past three years. He replaces Ivo Lefterov, who was a temporary appointment after Andonov was made head of BEH. Andonov's promotion came after the Bulgarian government dismissed former energy and economy minister Traicho Traikov in March.
“It's nothing more than hiring the 'right' guys for the government, I don't expect any changes,” one Bulgarian power trader said. Another said: “It's too early to say if this management change will make things better or worse.”
Anastasov previously worked for Czech utility Cez, but was most recently employed by NEK as head of Bulgaria's so-called organised market, which handles the acquisition of power from generators and its sale to distribution companies at regulated tariffs.
NEK is dominant in the Bulgarian power market thanks to the organised market, which restricts competition. Traders would like to see the government and management at NEK open up the market to more competition, but most view this as unlikely given recent developments.
Despite being dominant, NEK is struggling with rising debt. Last month, NEK wrote to some power plant producers within the organised market saying it was unable meet obligations to buy all the power they generated. “It is sad how a company with huge potential like NEK is pushed deliberately towards insolvency,” one power market participant commented.
The new appointment comes as BEH plans to restructure NEK and its 100pc-owned subsidiary ESO, in line with EU unbundling rules on transmission and generation and sales business. NEK is due to transfer ownership of the transmission grid to ESO and subsequently transfer 100pc ownership of ESO to BEH. Bulgaria delayed on the implementation of the EU's third energy package, only amending its energy law in July after repeated EU warnings.
The EU is also understood to be looking into effective export fees that Bulgaria levies on domestic generation destined for international markets. These fees, which reduced the competitiveness of Bulgarian power in international markets, were increased beyond expectations in July.
Measures such as the export fees are part of a highly uncertain and unpredictable financial, political and regulatory environment in Bulgaria, which is harming investment. While Bulgaria currently remains a net exporter of power, the retirement of old plants in the next few years is expected to tighten the country's electricity balance and could see it become an importer. No new power plants are currently planned to replace retiring capacity. The construction of the Belene nuclear power plant
was halted and the project cancelled. US diplomatic cable leaks expressed concerns over corruption and safety and dismissed the project as “a lemon”.