Bulgaria state utility NEK posts record loss in 2013 – report

Bulgaria state utility NEK posts record loss in 2013 – report


By Clive Leviev-Sawyer of the Sofia Globe

Bulgaria’s state electricity utility NEK posted a loss of 338 million leva (about 172.8 million euro) in 2013, mass circulation daily Trud reported on June 2, citing an economy ministry source familiar with the company’s financial results.

NEK is yet to announce its financial results and Bulgaria’s finance ministry has taken down the third-quarter financial report that showed the company had amassed losses of 113 million leva for the first nine months of 2013, the newspaper said.

The losses are blamed on the low electricity prices – the utilities regulator has cut prices twice in 2013, by more than 10 per cent cumulatively – and reduced power consumption in Bulgaria.

The loss is also the largest recorded by NEK in the past five years, much higher than the 99 million leva posted in 2012, the report said.

Trud quoted Delyan Dobrev, who was economy minister in the previous centre-right cabinet of Boiko Borissov, saying that the current administration has delayed publication of NEK’s results in order to minimise the losses using “accounting tricks.”

Borissov’s party GERB, now in opposition, had asked the government to make the NEK report public last month, before it tabled a motion of no confidence in the Plamen Oresharski cabinet based on, what the party said, the government’s “failure in the energy sector.” The motion was defeated in Parliament on May 30.

GERB and the government’s numerous critics claim that NEK is strapped for cash and facing bankruptcy as a result of the government’s energy policies, bearing the brunt of the costs of reducing energy prices.

Since taking office a year ago, the Oresharski administration and the ruling majority in Parliament have made several attempts to “re-balance the energy sector” – namely, shifting some of those costs onto private companies in the sector.

This included an attempt to effectively cut the state feed-in tariff for solar and wind power producers by 20 per cent (instituting a new fee that such companies will have to pay). President Rossen Plevneliev asked the Constitutional Court to strike down the fee, arguing that it breached the principles of free enterprise and rule of law, but the court is yet to rule on the issue.

Last week, the State Energy and Water Regulatory Commission (SEWRC) also asked the economy ministry to table amendments to the Renewable Energy Act that would allow the regulator to cap the amounts of electricity produced using renewable energy sources that NEK has to buy using the feed-in tariff. Currently, NEK has to buy all such electricity – or, rather, the privately-owned electricity distribution companies are required to do so, while NEK reimburses them at a later date.

(To ease the pressure on its cash flow, NEK has stopped making such reimbursements last year, but this has not improved the company’s financial health, as the electricity distribution companies began offsetting the sums owed by NEK, withholding payments for electricity deliveries. SEWRC has opened proceedings to withdraw the electricity distribution companies’ licences, hoping to pressure them into paying the amounts owed to NEK, but is yet to issue a ruling in the case.)

SEWRC also ordered NEK to negotiate reduced electricity purchase prices with two of Bulgaria’s largest coal-powered thermal plants, owned by private US investors, as well as cut in half the amounts of electricity bought from the two power plants. This would require the owners of the plants to forego revenues of 5.4 billion leva over the next 15 years and NEK may find it difficult to renegotiate the iron-clad contracts.

(Photo: greenhitma/sxc.hu)