Bulgaria: US AES-3C is a long term investor in power market says Olivier Marquette CEO AES Bulgaria

, SEE Energy News

There is a complete discrepancy between Martitsa TPP AES-Galabovo and AES wind farm Kavarna St. Nikola Wind Farm, public image of the company is quite strange.

AES is described as an American company, as the reason for the high prices for electricity and the problems in the energy sector. The reality is totally different. We are an innovative company, the biggest investor in the sector, having invested more than 1.6 billion euros in the Bulgarian economy. We invest in the development of our personnel. We apply entirely new standards in the production of electrical energy and exceptionally high standards regarding the ecological norms. The project was designed in such a way to meet the highest ecological requirements including those which the European Union will enforce in 2016 explains Olivier Marquette CEO of AES Bulgaria.

Bulgarian public raised certain accusations claiming that the long-term power purchase agreement with TPP AES Maritsa East 1 is a state aid and may be appealed before the European Commission.

AES Bulgaria CEO claims it is a state aid. AES long-term purchase agreement was signed in a competitive and transparent process. Agreements of this type exist all over the world. We cannot say that the long-term Power Purchase Agreement is a state aid claims Marquette.

Commenting on free market framework Marquette explains the government has the obligations to fulfill the requirements of the Third Energy Package of the European Union, which requires a complete liberalization of the energy market. As to us, we believe that measures for a free market will be taken. The practice in many countries in the world shows that long-term agreements can exist in liberalized market conditions. To do so, however, special compensation mechanisms must be implemented to balance the difference.

AES TPPs could sell electricity on the free market. AES business model is based on a fixed price, laid down in the long-term Power Purchase Agreement and there should be some mechanisms for compensations. Such mechanisms are implemented in several European countries. However, to do so, the difference between the market value and the agreed price should be compensated by the government.

AES in 2014 was a good year from operational point of view. The availability of TPP AES – Galabovo was very good – 96%, and the wind farm, too, achieved its targets. The biggest problem, from financial point of view, is the large volume of outstanding payments from NEK. We are talking about 400 million leva that should be in our bank accounts but are not, and that creates difficulties for payments along the chain stressed Marquette.

Thermal Power Plant AES Galabovo

The Maritza East 1 Project was conceived due to Bulgaria’s need of a new, modern generation power capacity to meet electricity demands of the country for the next 15 to 20 years. In 1998 the initial project developers, Consolidated Continental Commerce Limited of Ireland or 3C won an international tender procedure for the construction of a new 600 MW net lignite-fired power generating facility, announced by the Bulgarian state.

An AES affiliate company purchased the majority interest in the Maritza East 1 Project from 3C in September 1999 and completed the full acquisition by December 2005.  During the same period, in June 2001 thus formed venture AES-3C entered as a party to a medium-term power purchase agreement with Natsionalna Electricheska Kompania EAD and negotiated a separate 15-year long lignite supply agreement with Mini Maritsa Iztok EAD, effectively replacing this way 3C as initial project sponsor.  Since the acquisition of the entire interest in the Maritza East 1 Project, AES-3C company has led project’s development, financing and construction. In 2009, the project was renamed to TPP AES Galabovo to reconfirm company’s strong commitment to the local community, bringing back the town of Galabovo to the global modern energy map.

To date, AES-3C has invested in the AES Galabovo Project close to EUR 1.3 billion. The required financing was secured through a number of major international financial institutions. 32% of the amount was provided by AES-3C. The remaining 68% came in a form of bank loans provided by a syndicate of 20 financing institutions, such as the European Bank for Reconstruction and Development, BNP Paribas, Credit Agricole, ING, etc.  EUR 300 million of the bank loans had been guaranteed by the export credit agencies of Germany – HERMES and France – COFACE, and the World Bank’s Multilateral Investment Guarantee Agency – MIGA. For its complex structure and scale, the project financing of AES Galabovo won EMEA Power Deal of the year 2005 award of the Project Finance Magazine. The construction works started in 2006 and the plant was completed and entered into commercial service in 2011. It is the newest and most modern power generation facility built in Bulgaria for the last 20 years, using entirely local lignites from Martiza Basin.