BULGARIA International presence revitalizes energy sector
THE COMMITMENT OF SEVERAL MULTI-NATIONAL COMPANIES TO BULGARIA'S ENERGY SECTOR HAS BROUGHT BOTH EMPLOYMENT OPPORTUNITIES AND SUBSTANTIAL FUNDS TO THE COUNTRY

LUKOIL By 2005, the company will build on its own 150 new filling stations in Bulgaria.

Bulgaria’s favorable geographical position as a strategic link between east and west and its proximity to the Black Sea has predestined the importance of its energy sector and facilities. Electricity is exported from Bulgaria throughout much of the Balkan Peninsula (Bulgaria covers 50% of the region’s power deficit), Russian natural gas is pumped through to Western Europe and Turkey, and the country is a potentially significant transit region for Caspian oil exports to Europe.

Although electricity exports contribute an annual net profit of $150 million to the state budget, Bulgaria imports about 70% of its energy resources. With the transition to a market economy and the end of favorable Eastern bloc prices for Soviet oil, Bulgarian oil consumption dropped steeply between 1989 and 1997. Since then, however, consumption is once again on the rise. Reform of the sector has been advised by the International Monetary Fund and is necessary for EU integration; liberalization of the sector formed one of the bases of the Saxe-Coburg campaign platform. Energy law amendments took effect on January 1, 2002 liberalizing prices and allowing end-users to make delivery contacts directly with independent producers. In February, the cabinet approved a new strategy for building an energy market in the country over the next four years and preserving the potential for exports of energy products through utilization and improved efficiency.

In July 2001, agreements were signed with two U.S. companies, Entergy and American Energy Systems, for the management of the Maritsa-East 1 and 3 thermal power stations, representing a total investment of $1.4 billion–the largest made in Bulgaria since the break-up of the eastern bloc. The $470 million contract with Entergy, a New Orleans-based global energy company with annual revenues of more than $10 billion, is for the modernization of Maritsa-East 3 thermal station. In February, Entergy received a 20-year license for electricity production in the power plant. The state-owned National Electricity Transmission Company holds a 49% share in the joint venture, leaving Entergy with the remainder. Tom Wray, Entergy’s Director of Business Development, points out that “this deal has set a precedent in Bulgaria of a successful model of how a country can raise large amounts of finance to invest in large industrial projects without the need for sovereign guarantees. This is one of Bulgaria’s key milestones.”

VALENTIN ZLATEV General Manager of Lukoil Bulgaria

Bulgaria also possesses small indigenous oil reserves. In 1999, Russian oil company Lukoil bought a 58% stake in Bulgaria’s largest refinery at Bourgas, pledging to invest a further $400 million above sale price ($101 million) to upgrade the refinery by 2005. The Bourgas refinery has an 85% share of the domestic market for refined products. Lukoil Bulgaria is now one of the major producers of fuels, petrochemicals, and polymers in the Balkan area, generating a turnover of $1.3 billion in 2000. General Manager Valentin Zlatev elaborates, “approximately 9% of Bulgaria’s GDP was generated by Lukoil’s operations here in 2000. In turn, we are the biggest generator and payer of taxes in the country. Also in 2000, we were named ‘Investor of the Year’. We are proud to say that we provide work for over 10,000 people in both the refinery and retail operations.” According to Mr. Zlatev, by 2003, Lukoil will have effectively switched over to the production of unleaded fuel, a requirement of both EU and Bulgarian legislation.