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From Bulgaria

Varna thermal station, owned by the Bulgarian branch of Czech energy company CEZ, is about to suspend its operation in the end of 2014 either for an upgrade with flue gas desulphurization systems (FGDs) or indefinitely, should CEZ not receive a warranty for this investment, Mincho Minchev, CEO of the power plant stated during a press conference yesterday. Varna TPP has three 210 MW operating anthracite-burning units which can only work in derogation for 700 hours per annum and are used as cold reserve.

Varna TPP to request higher cold reserve price

The power plant however has been awarded the lowest cold reserve price by Bulgaria’s State Energy and Water Regulatory Commission (SEWRC) for the current regulatory period – BGN 8,6/MWh (about EUR 4,3), while for comparison the state-owned Maritsa East 2 TPP received BGN 22/MWh, Minchev explained.

“This low price makes it impossible to have any sort of security that an investment in modernization will be returned within reasonable amount of time”, Minchev explained, further stating that the management of the company will request from the regulator a higher price of BGN 28/MWh. What is more, the power plant has not been operating lately due to lower energy consumption and tension between the private owner and the state-owned National Electricity Company, which is said to have debts of about BGN 35 m, have led to strike readiness among the workers.

“Varna TPP however is important for the security of Bulgaria’s energy system. Let’s not forget it secured electricity supply during the 2009 winter gas crisis”, the power plant’s CEO remarked.

CEZ has also been busy fighting allegations it failed to secure cheaper coal though the ARA coal market. The management of the company explained that the power plant needs anthracite coal with certain specifications which is not traded on the ARA market. Furthermore every coal procurement is being monitored by a representative of the energy regulator, so that transparency is secured, the CEO Varna TPP explained.

EUR 120 million modernization plan

Installing FGDs on the three units of Varna TPP will cost between EUR 68 and 120 million, with the first number referring only to the FGDs, while the entire amount will encompass also improvements of the adjacent ash pond and replacement of aged equipment. These updates would allow the TPP to work for at least 15 years more, its CEO explained.

“In February we opened the only offer in the tender for the modernization and we are currently in talks with the consortium of Bulgarian companies it came from”, Mincho Mimchev stated.

The modernization will take 29 months, so Varna TPP could restart operation in 2017, if a contract is signed this year. Earlier plans of CEZ included the replacement of the power plant’s units with entirely new gas-fired generation. The 2009 crisis however which caused gas price to soar, paired with the lack of secure long-term gas supplies for the planned units, led CEZ to scrap this project.

“Modernizing Bulgaria’s existing energy units is currently the most feasible option. Practically, investments in traditional power generation in Bulgaria is currently impossible without any kind of state warranty”, Minchev explained.

He explained that the modernization of Varna TPP’s three units would be cheaper than building one new unit at the state-owned Martisa East 2 TPP.

“Bulgaria’s energy minister Dragomir Stoinev talks about building new nuclear units and has also floated the idea of two new units at Maritsa East 2. These projects would be worth millions and billions of euros and would be accompanied by some kind of state warranty”, Minchev said, adding that earlier modernization projects carried out at the privately-owned by American companies AES Maritsa East 1 and ContourGlobal Maritsa East 3 TPPs were carried out after long-term contracts for their electricity were signed.