Bulgaria: Bulgartransgaz management removal

, SEE Energy News

The Supervisory Board of state-owned Bulgarian Energy Holding (BEH) has decided to dismiss the management of its subsidiary – natural gas transmission system operator Bulgartransgaz, at the request of the Ministry of Energy due to violations related to the implementation of the project for the construction of TurkStream gas pipeline expansion.

The company’s Management Board has three members with a five-year mandates: Vladimir Malinov (CEO), Delyan Dimitrov and Darina Koleva. The deadline for the dismissal is 9 July.

Last week, the Commission for Energy and Water Regulation (KEVR) presented a report which stated that Bulgartransgaz had failed to obtain tentative approval for the agreements on building and financing an extension to the TurkStream natural gas pipeline via Bulgaria, also known as the Balkan Stream pipeline. The KEVR investigation, ordered a day after the parliamentary elections on 4 April, shows that Bulgartransgaz never asked the regulator to approve the agreements with the Saudi consortium Arkad and the Bulgarian-German Ferrostaal Balkangaz on the construction of the pipeline, as well as the agreements on the bank loans which were used to pay the dues to the two companies. All this is contrary to the Ordinance on Licensing Energy Sector Activities. The agreements with Arkad (worth 1.1 billion euros) for the construction of the pipeline and with Ferrostaal Balkangaz (180 million euros) for two compressor stations were signed in the autumn of 2019. Bulgartransgaz borrowed 200 million euros to pay Arkad and Ferrostaal in advance, although it was supposed to use its own money for the purpose. Then, the company took out another package of loans worth 487 million euros in 2020 and 156.5 million euros this spring. Short-term loan procedures were opened in all three financing phases. Bulgartransgaz used the same scheme each time. To provide security for repayment of the loans, the company made fixed-term deposits denominated in dollars in the respective banks, and the interest rate on the deposits was higher than that on the loans. The loan agreements signed by Bulgartransgaz increased the company’s debt from 2 million euros in early 2019 to over 1.3 billion euros at the moment.