CEZ: more decisive steps towards market liberalisation needed

By SeeNews team

 

Petr Dokadal

Petr Dokadal, Regional Manager for Bulgaria, CEZ

Q: How has the investment climate in Bulgaria changed since CEZ entered the country?

A: As a whole the last few years saw significant improvement of the investment climate, administrative and tax concessions, for example. Naturally, as a representative of the energy sector I can speak in any detail about the energy market situation, where the trends of the last seven years have not been very favourable. When in 2004 CEZ stepped on the Bulgarian market, we had great ambitions. A large part of our plans, however, stumbled into the over-regulation of the energy market and more specifically the low regulated prices, the lack of balancing groups and the numerous contracts and administrative hurdles. Also, the wholesale market has been monopolised due to the high export tax which every exporter owes the National Electricity and Transmission Company and the Electricity System Operator. The export tax is present in only two EU countries – Bulgaria and Romania, and the tax in Romania is almost half that in Bulgaria. You understand that this and similar factors affect competitiveness.

Q: What else should change in the business environment here so that foreign investors feel more secure?

A: The business environment in Bulgaria can benefit from some general recommendations for the EU and for the countries affected by the recession as a whole. At the moment, it is of the utmost importance to take steps towards the rapid neutralisation of the recessionary effects. Bulgaria should continue and expand its fight against some longstanding issues such as corruption, crime and the sluggish administrative system. True, some progress was made in these fields in the last few years but more needs to be done.

As regards the energy market, some legislative frameworks need rethinking because they are an obstacle for investors. It is very important that the steps towards the liberalisation of the market are more decisive. To date only 30% of the total volume of energy sold is traded on the liberalised market. In comparison, in Romania the share of the liberalised market is about 50%, which is the minimum for sufficient liquidity. In order to register significant improvement of the business environment, strong political will is necessary. I amconvinced that the Bulgarian leaders will continue to demonstrate such will.

Q: Where will CEZ direct the large part of its investments in Bulgaria in the future?

A: Our investment plans are divided into three major areas – power distribution,
power generation and renewable energy projects. With regard to power distribution, our policy is based on one single aim – to improve the quality and security of power supply for Bulgarian consumers and to upgrade our services to European standards as soon as possible. We will continue to invest as much as our resources allow us in raising the reliability of supplies.

Although we have already booked good results in this aspect, such as reducing technology costs in power distribution from 22% in 2005 to 14.2% at the end of 2010, we are ready to do much more. However, our capabilities depend on the volume of investments approved by the regulator and it is currently insufficient. In February we proposed to the regulator to expand investments from 71 million levs on average per year to 152 million levs, which, according to our calculations, is necessary to reach the European quality standards in the shortest possible time considering the state of the power network in the country. This year our proposal was declined but we hope next year to get approval for larger investments. If this happens we will be able to consider implementing modern technologies such as the so-called smart networks, as well as contributing to the development of electric transport in the country.

As regards power generation we are considering raising the energy efficiency of blocks 4, 5 and 6 of the Varna TPP. Renewable energy projects will be developed by CEZ’s subsidiary CEZ Bulgarian Investments.

Q: What is the role of environment protection in your development strategy for Bulgaria?

A: CEZ has a long-term commitment to projects related to the protection of theenvironment and raising consumer awareness of energy efficiency. We are investing in the reduction of technological costs which results in improvement of energy efficiency. Our company is also continuously conducting information campaigns for its clients. Since October 2010 all CEZ Bulgaria employees have been using electronic receipts. Since August this year the electronic receipt option has been available to household clients as well. It has already attracted considerable interest among consumers.