Wikileaks: Cables Raise Questions about Bulgaria's Belene

Monday, December 20, 2010

While RWE insisted that its withdrawal from the project, which has yet to get off the ground, was due entirely to financial concerns, the February 2009 secret US embassy cable indicates that safety concerns and shady business practices by other partners were a factor in the German firm's decision to leave in October 2009.

The cable describes the power plant as a "lemon", and adds: "When Bulgarians talk about the Belene nuclear power plant, they increasingly do so in hushed tones. Issues of delays, financing woes, non-transparent horse-trading and side deals, Russian influence, middle-man rent seeking, and the interests of well-connected politicians and energy oligarchs inevitably come up."

The diplomatic dispatch was leaked by the whistleblowers' Web site Wikileaks, and was published by British daily The Guardian newspaper, which wrote that the cable could "hurt [RWE's] reputation over safety" and raise questions about the safety at the Belene project.

Describing the history of the project, the cable said that the decision in 2006 to award the contract to Atomstroyexport, the exports subsidiary of Russia's nuclear corporation Rosatom, "lacked transparency and reeked of side deals", including the proposed South Stream gas pipeline and the long-term gas transit contract then-economy minister Roumen Ovcharov was negotiating with Gazprom at the same time.

"Despite its due diligence, our contacts tell us Belene's strategic investor, RWE, is now experiencing regret about its purchase," the cable said.

RWE's main concern was the project's lack of transparency and the need to work with AtomStroyExport. The German company even asked for a review of all Belene-related accords as it sought to enforce European business practices.

"RWE realizes that working with Russian and Bulgarian companies in the energy sector is a 'poisonous combination' for European investment. Transparency is affecting financing," the cable said.

At the time it was sent, RWE was in talks with Belgium's Electrabel, the other finalist on the Bulgarian government's shortlist of strategic investors for Belene, to join the project as a subcontractor or even to take on part of RWE's agreed 49 per cent stake in the Belene project company. Only two days later, on February 19, 2009, Electrabel officially ended its interest in Belene.

RWE was not alone in experiencing buyer's remorse, however, the cable said. The company's requests were "causing Bulgaria heartburn", while "the Bulgarians at Belene are chafing at RWE's close scrutiny of all decisions and complain that this approach is needlessly slowing the project."

"Our contacts say that some Bulgarian officials are beginning to admit privately that in Belene, they have bought 'a lemon'."

But the socialist-led government of then prime minister Sergei Stanishev could not just walk away: "With elections on the horizon and 700 million euros in sunk costs, in addition to priceless political capital already invested, the government is unlikely to abandon the project any time soon. But it may be on a very slow track," the cable said.

Bulgaria's contract with Atomstroyexport, which is to build two 1000MW third-generation pressurised water reactors for a fixed price of four billion euro, was signed to much fanfare in Sofia in January 2008, during then Russian president Vladimir Putin's last official visit abroad before leaving office.

Bulgarian President Georgi Purvanov has repeatedly hailed Belene, along with the plans to build South Stream gas pipeline and Bourgas-Alexandroupolis oil pipeline, as an "energy Grand Slam" and sees the successful completion of the projects as an important part of his legacy. Purvanov's second term expires in November 2011.

In recent months, negotiations between the current Bulgarian Cabinet of Prime Minister Boiko Borissov and Russian officials on revising the price stalled repeatedly.

Bulgaria acquiesced to Russia's request to increase the price to 6.3 billion euro during a visit by Putin in November, but construction remains suspended while the Government in Sofia continues to seek a European investors to take a majority stake in Belene.

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