February 17 (SeeNews) - World Bank experts believe that Bulgaria's energy sector needs to repay significant amount of debt in the coming years in order to achieve a sustainable financial recovery, the energy ministry said on Friday.
To meet that objective, Bulgaria should reduce the cost of repaying the accumulated debt by refinancing Bulgarian Energy Holding's bonds on better terms and increase the obligation to society fee for all consumers by about 5% per year until 2019, a World Bank team of experts said in a summary report entitled 'Bulgaria Power Sector: Making the Transition to Financial Recovery and Market Liberalization' published on the energy ministry's website.
The summary report presents the key findings of the technical assistance and advisory services provided to the Bulgarian Energy Holding (BEH) in the context of a World Bank Reimbursable Advisory project.
In 2013, BEH issued a 500 million euro ($532.3 million) Eurobond to cover its liabilities relating to the scrapped project for the construction of Belene nuclear power plant. On July 26, 2016 BEH successfully placed a second Eurobond issue worth 550 million euro on the Irish Stock Exchange.
Bulgaria also needs to address several challenges in order to form a fully competitive electricity market: the structure of the current single-buyer model for the regulated sector, which has reached its limit; the insufficient liquidity of the market; and the concentrated market structure, which leaves it open to potential abuse of market power.
"The process of market liberalization cannot be sustained within the existing market structure, consisting as it does of a regulated market covering about 40% of the net generation," with the National Electricity Company (NEK) acting as a de facto single buyer, according to the report.
Another challenge is that regulated tariffs are not based on market prices.
"The commodity component of regulated tariffs is determined by EWRC (The State Energy Regulatory Commission) based on the revenue required for NEK to cover its purchase costs. Such approach might distort the market for end-users," according to the authors of the report.
About 444,000 households in Bulgaria are highly vulnerable to increases in electricity prices, while another 149,000 households are income-poor and could quickly become energy-vulnerable should energy prices increase. The experts estimate that these are households that are both income-poor and energy-vulnerable, in the bottom 25% of income distribution and spending more than 10% of their budgets on energy. The existing social assistance programs are inadequate to cover households at risk, according to the report.
($= 0.9392 euro)