AES Bulgaria wants to be part of the solution – Interview with Olivier Marquette, Managing Director of AES Bulgaria

Март 21, 2015

Mr. Marquette, you have been the new Managing Director of AES Bulgaria since mid-January this year. What will be your main priorities during your mandate?

Our first priority is to contribute to the resolution of the structural problems of the energy sector, and we believe that we can be part of the solution. We are convinced that the energy sector is one of the most important pillars of the economy of the country as a whole. We are currently renegotiating the Power Purchase Agreement (PPA) of our coal-fired power plant AES Galabovo. This will contribute to the solution of NEK’s financial situation, but this will not resolve all the issues of the sector since our plant supplies less than 8% of the total electricity consumed in Bulgaria. This is why we fully support the initiative of the government to address the issues of the energy sector as a whole, and welcome the measures implemented in the amended energy law.

Our second priority is to develop AES Bulgaria as a brand, by proactively communicating with key stakeholders about the positive attributes of our company here in Bulgaria. I think that for the moment, people generally do not perceive the benefits that AES Bulgaria brings to the country, both in terms of its contribution to the security of supply of the energy sector, and to the development of the local communities through its Corporate Social Responsibility (CSR) program. One of the key values of our company worldwide is to be actively involved in the improvement of lives within the communities where our businesses are located.

Last but not the least, our third priority is to position AES Bulgaria for growth, with a specific focus on innovative energy solutions. I believe that the energy sector of the future will include new components such as distributed generation and energy storage. These innovative solutions should also be offered to the Bulgarian market.

One of the first challenges for you maybe has been the process of negotiations with the Bulgarian government on the PPAs. What is the best possible outcome of these negotiations for both parties?

AES Bulgaria wants to be part of the solution to the difficulties of the energy sector. Therefore, PPA renegotiation needs to end up in a win-win situation in which PPA amendments offer material improvement to NEK’s deficit, hereby contributing to NEK’s sustainability and ability to meet its obligation. With the successful renegotiation, AES can collect the outstanding arrears, and receive timely payments from NEK going forward. We are in a very active dialogue with our partners, and I think that by the end of March, as mentioned by the Minister of Energy Ms. Temenuzhka Petkova, an agreement will be reached.

What could be the best solution (outcome) for the current situation in the Bulgarian power sector? Do you have suggestions to the regulatory commission and the government, on how to overcome the deficits in the regulated market?

First, AES would like to recognize the substantial and timely actions taken by the current government to address the structural issues of the energy sector. The energy package enacted on March 6 represents a significant step forward, and once implemented, will reduce NEK’s deficit. AES believes that further measures are needed to completely resolve NEK’s structural deficit, either by implementing additional reforms, or by raising electricity tariffs, or a combination of both.

We consider ourselves a Bulgarian company, and for us the stability of the sector, in which we are working, is essential. AES will continue working, as it has done it till now, for the stability and the sustainability of the sector.

What would be the position of TPP AES Galabovo in a liberalized Bulgarian market? What are the main advantages of your facility in terms of ecology and macroeconomic effects?

AES Galabovo can operate in a liberalized market, provided that a mechanism is implemented to compensate the economic impact of an operation in the free market. Such mechanisms, as the implementation of contracts for differences (CFD), exist and have been implemented in other liberalized European energy markets. AES Galabovo provides very important benefits to the Bulgarian electricity system, such as contribution to energy independence, contribution to grid stability, due to its operating flexibility, and environmental benefits by already meeting more stringent environmental requirements of the EU to be applied in 2016. AES is one of the main customers of Mini Maritza Iztok mine, buying one-fourth of their production, and this way we contribute to the energy independence of Bulgaria.

Regarding environmental standards, AES Galabovo uses the world’s best technologies to ensure minimal emissions, optimal waste and water management, and soil and groundwater preservation, in full compliance with the Directives of the European Union, the World Bank and the national legislation.

The Bulgarian energy sector is frequently quoted as one of the most polluting in Europe. How can the government encourage more environmentally-friendly investments like the one in TPP AES Galabovo and the wind-power project in Kavarna?

In the past, the government took decisive steps to develop renewable energy in Bulgaria, such that Bulgaria has already achieved its 2020 renewable energy target as of 2013. We proudly contribute to the development of renewable energy in Bulgaria with our St. Nikola wind farm located in Kavarna. Since entering into commercial operation, St. Nikola has produced a total of 1,541,438 MWh of safe, clean and reliable electricity. Thanks to the operation of the wind farm 1,2 million tons of CO2 emissions have been avoided.

However, such development of renewable energy, and other environmentally-friendly facilities, needs to be accompanied with structural reforms ensuring the financial viability of the energy sector. Concrete steps include the regional integration of the electricity market, the adjustment of electricity tariff to properly reflect generation costs and at the same time the implementation of social pricing of electricity to ensure availability of electricity to all and to meet their fundamental needs.

What are the plans of AES for the Bulgarian market? Do you see Bulgaria as a good investment destination for future energy projects of your company?

AES is here to stay. The AES Corporation has recently sold a number of businesses and refocused on a smaller set of key markets. Bulgaria is one of these key markets. Therefore, once NEK collection issue is resolved, AES is open to grow its business in Bulgaria, by leveraging its existing platform in the country and the skills of the Corporation. A specific focus will be innovative energy solutions. AES has developed expertise and track record in innovative sectors such as energy storage and distributed generation, which may be applied in Bulgaria.

Your company has been very active in terms of Corporate Social Responsibility in Bulgaria and especially in the Galabovo region. Can you tell us about some recent initiatives of the company and about future projects to be implemented there?

As a long term investor in Bulgaria, and consistent with AES Corporation’s mission to improve people’s lives in the market we serve, AES has developed a comprehensive Corporate Social Responsibility (CSR) program in Bulgaria. So far, AES has invested EUR 3.3 million in CSR activities for the AES Galabovo project, In terms of infrastructure improvement, we have financed the renovation of Galabovo’s main road for a total of EUR 1.5 million. We support local schools by securing heating, food and transportation. AES has supplied X-ray equipment to Galabovo’s hospital. We work very closely with the Fire Fighting Department in Galabovo. Till now, we have supplied 2 fire trucks to Galabovo fire station and we are paying the salaries of 19 firemen. Last but not least, AES supports the local traditions through the organization of events or contribution for different local festivals.

The next major CSR initiative, to be implemented shortly, is the re-construction of a youth center in Galabovo, for a total estimated budget of EUR 2.2m. It consists of a two-story building dedicated to cultural and sports activities.

In Kavarna, together with our partner Geo Power, we have concluded an agreement with the Municipality for annual donations focusing in areas such as healthcare, culture, education, etc. AES has invested more than EUR350k for different projects in the municipality. Among them, I would like to mention a donation of a digital X-ray machine and a digital echography for Medical Center I -Kavarna, different donations for the local schools, and programs for low-income retirees. We have also contributed to the opening of 3-D cinema in Kavarna.