Prospects of Belene Nuclear Power Station arbitration

15.10.2013 Prospects of Belene Nuclear Power Station arbitration

Bulgaria will definitely lose the arbitration case for compensation sought by Russian Atomstroyexport for the cancellation of the Belene Nuclear Power Plant project.

The statement was made Sunday by Bulgarian energy consultant, Bogomil Manchev, CEO of Risk Engineering company.

He stressed the defeat was certain and the issue currently on the table was if Bulgaria will lose the BGN 1 B, asked by Russia, or a lower amount.

"If I was now the country's Energy Minister, I would be very, very nervous about this arbitration case and I would be doing everything possible to keep my competent consultant for the project to build the second NPP on the Danube. Bulgaria still needs someone who knows the contracts in detail, because this way the BGN 1 B can be reduced to BGN 150 M," explained the consultant.

On September 20, Risk Engineering's offices were searched in a special police operation against suspected fraud in the energy sector. Manchev's company is accused of having embezzled EUR millions in consultancy deals for the Belene project, despite the fact that its construction was stopped in March of 2012.

The operation took place in the capital Sofia, including in the offices of Risk Engineering, the western city of Pernik, and the Danube towns of Kozloduy and Belene.

Kozloduy is the site of Bulgaria's only Nuclear Power Plant, NPP, while there is a debated project to build a second, Russian-sponsored one in Belene.

The special police operation came on the heels of Sofia City Prosecutor's Office launching on August 9 a pre-trial procedure for large-scale embezzlement and mismanagement. The main lead in the investigation are payments from the National Electric Company, NEK, for consulting services for the Belene NPP project, made after the previous government of the Citizens for European Development of Bulgaria party, GERB, decided to freeze it in March 2012.

The prosecution, however, underscores that the moratorium on the project on the part of the government in essence means halting all activities related to it.

On Sunday, Manchev reiterated that Risk Engineering's contract with NEK for consultancy on Belene has not been terminated and was active and legal.

He added new information by stating that the raid of his offices has been conducted on a tipoff from current Economy and Energy Minister in the Socialist-endorsed government, Dragomir Stoynev, adding Stoynev has been misled by false information.

Manchev reiterated that after the freeze the Council of Ministers and Ministers in charge of the project from two governments failed to act to stop the contract.

"We are owed compensations under this contract; we have made serious investments and taken loans that we must repay," the energy consultant pointed out, but declined revealing the exact amount of his company's profits and losses from the work on Belene.

"The authorities have all invoices. I can say that since the project was frozen, I have incurred only losses. The signature of the Minister with which the contract will be annulled will rescue me from the charge labeled "mismanagement." As it is now, if we stop work and leave the Belene site, we will be guilty of breaching the law," Manchev explained.

In the middle of July 2011, Russia's state nuclear company Atomstroyexport took Bulgaria's NEK to an arbitration court for EUR 58 M over delayed payments for its work on two nuclear reactors.

The next day, the Bulgarian company said it was ready to strike back with a EUR 61 M counter claim against Atomstroyexport over delayed payments for purchases of old equipment for the plant, worth about EUR 300 M.

Three months later, in September 2011, Rosatom Corp., Russia's state-run nuclear company, increased a claim against Bulgaria's NEK from EUR 58 M to EUR 1 B.

Atomstroyexport, a subsidiary of Rosatom, said it had increased the claim to cover construction work and production costs of the two canceled nuclear reactors.

In 2005, Bulgaria selected Atomstroyexpor to build two 1000-MW reactors at Belene and signed a deal for the construction, allegedly for the price of EUR 3.997 B with the Russians during Vladimir Putin's visit to Sofia in January 2008.

In September 2008, former Prime Minister Stanishev gave a formal restart of the building of Belene. At the end of 2008, German energy giant RWE was selected as a strategic foreign investor for the plant.

The Belene NPP has been de facto frozen since the fall of 2009 when RWE, which was supposed to provide EUR 2 B in exchange for a 49% stake, pulled out.

Shortly afterwards, in February 2010, BNP Paribas SA, France's largest bank by market value, which was hired by the previous Socialist government to help fund the construction of Belene, ditched the project.

RWE's departure put extra pressure on GERB's center-right government to find fresh shareholders, which eventually led to the freeze.

Counsel to Atomstroyexport

· Sidley Austin

Counsel to NEK

· White & Case

Sofia News Agency


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