OVERVIEW OF BULGARIA'S CIVIL NUCLEAR ENERGY PROGRAM

UNCLAS SECTION 01 OF 03 SOFIA 000815

SIPDIS

PASS TO COMMERCE SARAH LOPP
PASS TO MARC HUMPHREY

E.O. 12958: N/A
TAGS: ENRG TRGY BEXP BTIO BU
SUBJECT: OVERVIEW OF BULGARIA'S CIVIL NUCLEAR ENERGY PROGRAM

REF: A. STATE 127468

B. SOFIA 00641

C. SOFIA 00708

D. SOFIA 00033

E. SOFIA 00089


1. (U) This is Embassy Sofia's response to Ref A Department
of Commerce request for information on Bulgaria's civil
nuclear energy program.


OVERVIEW OF BULGARIA'S CIVIL NUCLEAR POWER PROGRAM
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2. (U) Bulgaria ratified the Statute of the International
Atomic Energy Agency (IAEA) in 1957, and, in 1961,
constructed its first nuclear research reactor, the IRT-2000.
In 1966, Bulgaria and the Soviet Union signed an agreement
for commercial nuclear units which provided the basis for the
country's nuclear power program. Construction on the
Kozluduy Nuclear Power Plant (KNPP) EAD -- the only nuclear
plant currently operating in Bulgaria -- began in 1970.
Kozluduy is located on the Danube border with Romania and
originally consisted of four VVER-440 V230 reactors (units
1-4) and two VVER 1000 reactors (units 5-6). Only units 5
and 6 operate now as Bulgaria shut down blocks 1-4 as part of
its EU accession agreement. Units 1 and 2 were shut down due
to safety concerns in 2003. Units 3 and 4 were taken
off-line at the end of 2006, on the eve of Bulgaria's EU
accession. As compensation, the EU created the 550 million
Euro Kozluduy International Decommission Support fund.
Managed by the European Bank for Reconstruction and
Development (EBRD),this fund supports Bulgarian energy
efficiency and renewable energy projects.


3. (SBU) Bulgaria plans to expand its nuclear power program
with the construction of two new units at Belene, also
located near the Danube border with Romania. Site works
started in 1980 and construction of a reactor began in 1987,
but building was aborted in the early 1990s due to lack of
funds. In 2005, the Bulgarian government approved the
construction of a new 2000 MWe plant at Belene. The
Bulgarian National Electric Company (NEC) hired WorleyParsons
as the Architect Engineer for the financing and construction
of the plant in 2005. In 2006, NEC chose Russia's
Atomstroyexport (ASE) over a Skoda-led consortium to build
two 1000-MWe AES-92 VVER units with third generation
reactors. Russia leads a consortium, including Siemens-Areva
NP and Bulgarian enterprises, in the EUR 4 billion project.
A construction permit was issued in July 2008 and ASE signed
a contract with Siemens-Areva consortium for the
instrumentation and control systems in November 2008.
Bulgaria is keeping majority ownership of the plant, and in
November 2008 selected a strategic investor -- Germany's RWE
-- via a tendering process for the other 49 percent. NEC and
RWE signed the contract for Belene in December 2008.
Belgium's Electrabel may also join the project. The first
reactor was originally scheduled to come into operation
between 2013-2015, but significant delays and cost over-runs
are likely.


4. (SBU) Current regional electricity shortages and the
desire to become a regional "energy hub" fuel Bulgaria's
desire to expand its civil nuclear power program. Before the
closure of Kozluduy units 3 and 4, Bulgaria was a net
electricity exporter in the Balkans, covering 50 percent of
the region's electricity deficit. In 2006, Bulgaria exported
7.8 billion kWh/year to Greece, Macedonia, Albania, Kosovo
and Serbia. This number fell 42 percent to 4.5 billion
kWH/yr in 2007. Although Bulgaria still has capacity to
cover between 10 and 20 percent of the region's electricity
deficit, the Bulgarian government was forced to stop all
electricity exports in order to cover Bulgarian energy needs
from January-March 2008. Citing the Balkan region's energy
deficit, the Bulgarians have lobbied hard for the re-opening
of Kozluduy reactors 3 and 4, which they believe could be
safe and operational with limited re-furbishing. The EU
disagrees. According to the EBRD, reactors 3 and 4 are
inherently unsafe, and the re-opening of the reactors is a
complete non-starter. The closure of Units 3 and 4 is part
of Bulgaria's EU accession acquis, and for this to be
changed, all 27 member states must agree to renegotiate
Bulgaria's accession agreement. Nevertheless, some Bulgarian
officials have cited Article 36 of Bulgaria's acquis -- which
states Bulgaria could ask for the reopening of the reactors

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should a critical situation in the region emerge -- to argue
for the re-opening of the units 3 and 4. The Kozluduy site
may also be an attractive site for the development of new
reactors (future units 7 and 8). The infrastructure is
already in place and the Bulgarian government is supportive,
although officials say it must be a commercial, rather than
Government-subsidized, project.


5. (SBU) The Ministry of Economy and Energy is responsible
for the country's nuclear power industry. The two main
controlling entities are the Nuclear Regulatory Agency (NRA),
established under the Safe Uses of Nuclear Energy Act of
2002, and the Kozluduy Nuclear Power Plant (KNPP) EAD. The
NRA assumed the functions of its predecessor, the Committee
on the Safe Use of Atomic Energy for Peaceful Purposes
(CUAEPP),created in 1985. The NRA regulates nuclear
installations in relation to safety and radiation protection,
as well as the management of radioactive waste. The NRA has
been a member of the Western European Nuclear Regulator's
Association (WENRA) since 2003.


6. (U) NEC, Kozluduy NPP EAD, Mini Maritsa Iztok, EAD,
Maritsa East 2 TTP EAD, Electricity System Operator EAD,
Bulgargaz EAD, Bulgartransgaz ED, and Bulgartel EAD were
incorporated into the Bulgarian Energy Holding (BEH) EAD in
September 2008. BEH EAD is a shareholder company with 100
percent state-owned participation. All companies brought
together in the holding structure preserve their operational
independence and licenses even as they are all owned and
directly subordinated to the corporate center BEH EAD. BEH
functions include the acquisition, management, assessment and
sale of participation in trading companies and the day-to-day
operational business activities in the field of generation,
production, transmission, transit, storage, management,
distribution, sale and/or purchase of natural gas,
electricity, thermal power, coal, and any other type of
energy and raw materials for production.


INTERNATIONAL AGREEMENTS
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7. (SBU) Bulgaria is a signatory to the following
conventions: Convention on Nuclear Safety; Convention on
Assistance in the Case of Nuclear Accident or Radiological
Emergency; Convention on Early Notification of a Nuclear
Accident; Convention for the Physical Protection of Nuclear
Material; Vienna Convention on Civil Liability for Nuclear
Damage and the Joint Convention on the Safety of Spent Fuel
Management and on the Safety of Radioactive Waste Management.
Bulgaria is also party to the Nuclear Non-Proliferation
Treaty (NPT) as a non-nuclear weapons state, and its
safeguards agreement under the NPT came into force in 1973.
It is a member of the Nuclear Suppliers' Group (NSG),but not
yet of Euroatom. In 2000, Bulgaria signed the Additional
Protocol in relation to its safeguards agreements with the
IAEA.


8. (SBU) In March/April 2008, the U. S. government and
Bulgaria signed a Fuel Return Agreement that allows U. S. and
Bulgarian experts to remove spent nuclear fuel (HEU) from the
ITR-2000 reactor in Sofia and transport it to Russia, its
original source. The agreement also lays the foundation for
increased scientific research and cooperation at the reactor
between both countries. All together, over 50 million
dollars of U.S., Bulgarian, and IAEA funds will transform the
existing outdated reactor into a safe, state-of-the-art 200KW
research and training reactor -- the most advanced kind in
the Balkans.


OPPORTUNITIES FOR U. S. INDUSTRY
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10. (SBU) At this time, there are no anticipated
nuclear-related tenders. There will be opportunities for U.

S. industry in consulting services, plant construction
management and reactor sales, should the Bulgarian government
decide to build new units 7 and 8 at Kozluduy or, in the very
remote possibility that the EU allows the reopening of units
3 and 4. In addition, there may be opportunities for U. S.
industry to support the conversion and operation of the
IRT-Sofia reactor with low enriched uranium (LEU). The
primary companies involved in Bulgaria's civil nuclear sector

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are Bulgaria's Energy Holding, Russia's ASE, WorleyParsons,
Westinghouse, RWE, Siemens-Areva, Bulgarian companies such as
Risk Engineering and other smaller Bulgarian companies (SEE
REFTEL B). Russia's TVEL, through Technabexport (Tenex),
provides fuel cycle services, and Bulgaria's State Enterprise
for Radioactive Wastes (SE-RAW) is responsible for waste
management.


9. (SBU) Although there is a manufacturing base in Bulgaria
(which includes high-tech components and heavy industry) much
of the nuclear-related products and services will need to be
outsourced. Bulgaria does have a highly qualified and well
trained nuclear workforce. However, an expansion of civil
nuclear power will likely require a significant number of
foreign workers.


FOREIGN COMPETITORS
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11. (SBU) Russia, Germany, Canada, and other EU nations have
expressed interest in Bulgaria's civil nuclear power program.
In 2006, three foreign companies, the Canadian firms Cameco
and Resources House, along with the Russian-owned TVEL,
expressed interest in the research and exploration of
Bulgarian uranium deposits. Since Bulgaria is an EU member,

U. S. companies will likely experience tough competition from
other EU member state companies. In addition, Russia
dominates the Bulgarian energy sector (SEE REFTELS B-E).
With few hydrocarbons of its own, Bulgaria relies on Russia
for more than half of its energy needs. In addition,
Bulgaria is party to several other strategic
energy partnerships with Russia -- the South Stream and
Burgas-Alexandroupolis pipelines -- along with the Belene
nuclear power plant. These partnerships, combined with a
lack of a common European Energy policy, are harming the
ability of Europe and the United States to realize their own
priority projects for the region.
McEldowney