Reform: ESO and Bulgartransgaz leave BEH and enter a new company under the umbrella of the Ministry of Energy

To create two new companies, one of which, under the umbrella of the Ministry of Energy, envisages part of the renegotiation of the National Recovery and Sustainability Plan (NRSP). The first concerns the creation of a company that will be directly responsible for the restoration of disturbed areas in the three coal regions - Stara Zagora, Kyustendil and Pernik. The second - the removal of the Electricity System Operator and Bulgartransgaz from the composition of the Bulgarian Energy Holding. This became clear during today's hearing in the National Assembly of Acting Deputy Prime Minister and Minister of Finance Lyudmila Petkova and Acting Minister of Energy Vladimir Malinov. The renegotiations related to investments in street lighting and the production of energy from renewable sources are purely technical. This also applies to the transfer of funds from previous geothermal energy intentions to heat pumps.

As Minister Malinov explained during the hearing, the proposal is for the creation of a direct legal entity that will oversee the management of the financial resource of BGN 1 billion for the restoration of the disturbed areas not only on the territory of Mini Maritsa East, but also on the territory of Kyustendil and Pernik, i. the three coal regions. The proposed model is based on the experience of Greece. At the same time, the European Commission will also provide funds for this activity.

It is also proposed to transfer 32 million Euros for green hydrogen from the RSP to the Modernization Fund. "We are not giving up on green hydrogen," the Minister of Energy was emphatic. He explained that this is because of the deadline for the utilization of the funds - according to the RSP it is 2026, and for the Modernization Fund - 2032.

One of the most important reforms in the decarbonisation part is the renegotiation of carbon emissions. In particular - there will be no CO2 ceiling for an individual installation. According to the words of Minister Malinov,

The European Commission has agreed that their reduction by 40% will not be included in the plan. In addition, there will be no financial penalty for exceeding the threshold.

During the hearing and as a result of the questions of most of the deputies about the removal of the electricity and gas operator (ESO and Bulgartransgaz) from the BEH structure, the minister explained that this was at the express insistence of the European Commission (EC). The main motive of the European commissioners was to avoid cross-subsidization.

As Minister Malinov explained, the proposal of the Bulgarian side was to drop this measure, which was rejected by the EC. The proposal, which guarantees that there will be no cross-subsidization, was also rejected. Thus, the only option is for the two operators (ESO and Bulgartransgaz) to be separated from the structure of BEH in a separate company under the Ministry of Energy. In this regard, the Minister of Energy stated that steps should be taken to place the two companies on the prohibition list for privatization and that such privatization can be carried out only and explicitly only with a decision of the National Assembly. Malinov added that what has been achieved is also important, namely that the EC has no requests and claims for the privatization of these two companies.

In the framework of the debate and in response to questions from the deputies, the energy minister explained that this process will be extremely difficult, as BEH has two loans for over BGN 1 billion, one of which matures next year in 2025.

"We will not close BEH", Minister Vladimir Malinov was categorical in response to findings by deputies that the removal of the two operators would lead BEH to bankruptcy. "We are making a new company to protect the two operators. I, as the executive director of Bulgartransgaz, was categorically against the separation of the company from the Bulgarian energy industry. We were put in a situation of losing BGN 900 million. We have two BEH loans for over BGN 1 billion, one of which matures next year," he reminded. In this regard, he explained that 300 million BGN has been earmarked by the state for the holding, so that it will be relieved of the bond loan. Later during the debate, it became clear that there was also an option to transfer part of the bond loan to the new company of the two operators, so that BEH would not be in trouble.

The Minister of Finance Ludmila Petkova noted at the beginning of the hearing that the negotiations with the European Commission on the National Recovery and Sustainability Plan (NRSP) and the RePowerEU chapter proposed changes in 32 investments and in 14 reforms, the Deputy Prime Minister and Acting Minister of Finance said in the National Assembly Lyudmila Petkova.

In August and September, there were active discussions and meetings at the technical and political level on component 4 – low carbon economy of the National Recovery and Sustainability Plan, as well as under the RePowerEU chapter, she explained. According to her, significant progress has been made in the negotiations.

The possibilities for changes to three decisions of the National Assembly should also be discussed. The first one is from January 12, 2023 for changes in the NRSP in the energy sector, the second one is from July 20, 2023 for certain actions of state bodies of "Mini Maritsa East" EAD, and the third decision is from April 25 this year for providing funds for "Mini Maritsa East" EAD for four years - from 2024 to 2028, to provide money for technical reclamation of land in the area, said the finance minister.

The proposals for changes in the NRSP and in the content of the RePowerEU chapter must be submitted to the Council of Ministers by September 30, and that is why they are being proposed to the parliament today, the finance minister announced.

In total, the proposed changes are in 32 investments and in 14 reforms. The changes are mainly related to updating the description of the implementation goals, in connection with their delay due to various factors, better alternatives for their implementation, or in accordance with actual contracts with recipients or contractors.

The changes also provide for the withdrawal to the third payment under the NRSP for certain purposes. Petkova reminded that Bulgaria is the only EU member state that has not officially submitted a RePowerEU chapter, and in order for Bulgaria to benefit from the free resource in the amount of 479 million euros, the amendment to the National Plan must be approved by the EC.

"I would like to draw your attention to the fact that the changes in component 4 - low-carbon economy of the National Recovery and Sustainability Plan include 6 investments and two key reforms," ​​said Lyudmila Petkova. In the RePowerEU chapter, it is necessary to include investments with project readiness, which could be realized by 2026, taking into account that the NRSP already include investments more than the allocation for the country", said the Minister of Finance.

In the minutes for expressing attitude, the MP from Vazrazhdane Yordan Todorov reminded that the funds under the National Plan for Recovery and Sustainability should be for the recovery of the consequences of COVID-19. However, it turns out that they set conditions for this, he said. The deputy admitted that the goal is the privatization of ESO and Bulgartransgaz, and mastering the infrastructure.

Borislav Gutsanov from the BSP expressed disappointment at the empty hall during the discussion of such an important sector for Bulgaria - energy. He also commented that the planned BGN 12 billion is compensation for the consequences of COVID-19 and questioned "whether the EC has set these requirements or whether they belong to our ministers". "I have the feeling that they were not so much of the European Commission, the kneeling of our ministers," Gutsanov said and drew an analogy with the closure of units 3 and 4 of the Kozloduy NPP.

Stanislav Anastasov from DPS gave a positive assessment of what was achieved, especially in terms of carbon emissions.

The hearing of the Minister of Finance and the Minister of Energy was scheduled in connection with the deadline expiring on September 11, 2024, according to Protocol No. 30 of the meeting of the Council of Ministers of July 24, 2024, a report on taking actions to amend the National Recovery and Sustainability Plan of the Republic of Bulgaria and to prepare a proposal on the content of the RePowerEU chapter.

The government's proposals, which must be previously approved by the National Assembly, must be submitted to the European Commission by September 30.

Now, as a matter of urgency, the MPs have to prepare and propose the legislative initiative agreed with the European Commission on the amendments to the NAP and RePower EU.