SEE Energy Situation

1. Republic of BulgariaMinistry of Economy and Energy SEE Energy Situation The EPdebate on“Growing demand for energy and increasing energy prices in SEE - integrated solutions”Brussels, April 11th 2007

2. EU Energy Policy - Strategic goals • Increasing security of supply; • Predictable and affordable energy prices to ensure the competitiveness of the European economy; • Environmental sustainability and resolute measures to tackle the climate change; Full respectfor member states' choice of energy mix and sovereignty over primary energy sources

3. Bulgarian and regional energy market after January 1st 2007  • Decreasing security of supply; • Higher electricity prices in the regional energy market; • Increasing share of carbon energy sources for electricity production;

4. Serious breach of… • Solidarity between member states • Security of supply • Price affordability • Regional energy market effectiveness Energy Community  Contracting Parties: EC andAlbania, Bosnia & Herzegovina, Bulgaria, Croatia, FYR Macedonia, Romania, Serbia, Montenegro, UNMIKosovo; Turkey – still to ratify Participants: Austria, Greece, Hungary, Italy, Slovenia Observers: Moldova

5. SEE region ‘2006 • Gross Power Consumption – 230.5 TWh, 2.5% annual growth • Gross Export – 13 TWh, 60% of which is covered by Bulgaria, 28% by Romania, 12% by Bosnia and Herzegovina • High level of hydro in electricity generation – 24.2% SEE 2007’ Energy Situation 2007 2006 BG Electricity export 1996-2006 SEE region ‘2007 • 2.5% (236.3 TWh) consumption growth is forecasted • 20% decrease of hydro power generation is forecasted • Price increase between 80-100% • 6 TWh decrease of available generation capacities because of Kozloduy case • 27% increase in regional deficit is forecasted=21 TWh = 9% of gross consumption

6. Strategic goal 1 Security of supply • …In 2006 Bulgaria ranges fourth among biggest EU power exporters, covering 45÷ 100% of the SEE regional deficit for the last years, • …In 2007 Bulgaria is no longer able to secure power except for the internal market

7. Strategic goal 2 Affordable energy prices • ….But Bulgaria was obliged to shutdown its most effective economically and cheapest generation capacities…

8. Strategic goal 3 Reducing CO2 emissions • ….But Bulgaria was obliged to shutdown part of its carbon-free generation capacities and to increase the power generation from coal-fired thermal power plants…

9. What the Bulgarian Government Aims? • To provoke objective, straightforward debate on the present situation in the SEE energy market • To outline concrete, pragmatic solutions

10. Kozloduy Case Is there a nuclear safety issue? • IAEA 2002 IRRT mission: • “Bulgaria has now established an effective • regulatory framework” • IAEA 2002 SRM mission: • “Operational, seismic and design safety at Units • 3&4 corresponds to the level of improvements • seen at plants of similar vintage elsewhere”. • AQG/WPNS 2003 Expert mission: • “All recommendations were adequately addressed and implemented, progress in many areas well above AQG/WPNS requirements, no further monitoring is required”.

11. Kozloduy Case Is there a nuclear safety issue? Bulgaria is the first country that has an official confirmation by AQG for implementation of recommendations made under assumption “what is necessary to achieve and maintain a high level of nuclear safety”

12. Kozloduy’ Units 3 & 4 shutdown is a serious compromise with EU energy policy goals and principles… Kozloduy’ Units 3 & 4 shutdown is a serious compromise with the Bulgarian nationalinterests … … and for a truly bureaucratic reasons

13. The matter • Is there a difficulties in power supplies in South-Eastern Europe and Bulgaria? • Is Art. 36 applicable?  • ...Article 36, Act on Accession of Bulgaria and Romania • In case of difficulties in any economical area • In case of extremely difficulties in any economical area

14. Generation Mix (2005), Total 167 TWh Capacity Mix (2005), total 42,817 MW Energy situation in Energy Community Main features • High share of “carbon” energy – environmental constraints • High share of hydro – vulnerabilitytowards climate changes • Not enough investments in generation and interconnection capacities due to economic, social and political reasons • High and constantly growing energy deficit • Significant increase in export potential in mid-term – Bulgaria and Romania only after strong modernization and new builds introduction

15. What the Bulgarian Government Aims? • Bulgaria is in a better position to achieve the goals of the EU energy policy with, than without Kozloduy Units 3 & 4 • Bulgaria is suffering from acute economical and environmental losses after Kozloduy Units 3 & 4 shutdown

16. Significant Projects Under Implementation Large investment projects in BG Energy System

17. These projects will help to increase security of supply tomorrow but they can not answer to a power deficit today

18. Thank you for the attention! Ministry of Economy and Energy Republic of Bulgaria www.mee.government.bg

19. Croatia • In spite of the fact that Croatia has own production of oil and gas during the last decade the energy self-supply dropped, from approximately 65 per cent to less than 50 per cent today. The decreasing trend in self-supply is expected to continue in the future so that in year 2030 it might just exceed 25 percent • It could be assumed that in the period by 2025, the consumption of electric energy will increase by an average rate of approx. 3-4 % per annum • In this moment almost in whole region is deficit of electricity: Italy 40 TWh, which is the largest importer for many years, SEE also has not enough generation capacity: Greece (- 4 TWh), Albania (-2 TWh), Macedonia (-1.5 TWh), Montenegro (-1.5 TWh), Slovenia (- 3TWh), Hungary (-7.5 TWh) and Croatia (-3 TWh), in total deficit in region is 23 TWh. • This year we can expect price of electricity on level of 550 EUP per MWh qand further increasing of 10-20% after that.

20. FYR Macedonia • Electricity consumption in the Republic of Macedonia in the past five years marks significant growth of 37%. • only 65% of the necessary quantities for import were provided, as a result of electricity shortage on the regional market.

21. Montenegro • The Republic of Montenegro recognize the difficult energy situation in SEE, which resulted in both endangered security of supply and high electricity supply prices. • This is the outcome of the growing electricity demands and insufficiency of the electricity generation capacities in the region. • We agree that the current situation got additionally complicated by decommission of the Kozloduy NPP capacities at the end of 2006.

22. Serbia • We are well aware of the increasing energy deficit in the region especially with regard to the electricity. • This deficit is presented in Generation Investment Study and UCTE forecasts and based on the increasing regional electricity demand and the closure of the Bulgarian units of 3 and 4 of Kozloduy Nuclear Power Plant. • This deficit could highly affect regional economic grow and political stability and drastically increase the electricity prices in the region. On the other hand, it is very hard to expect in the mid term new generating facilities to be commissioned in the region and enhancement of present weak power lines connecting the region with the EU.