Bulgaria may face electricity supply shortages in February

Traders fear potentially tight electricity supply on Bulgaria’s free market in February because of low sales from state-owned utility NEK.

NEK is one of the three main sellers on the market. It offers non-standard and peakload volumes, usually via monthly tenders.

The utility held a tender each month over 2014, except for December, according to documents available on NEK’s website.

Traders were counting on NEK offering January delivery volumes in December, but this did not happen, leaving the market short this month. In addition, consumption on the regulated market for which NEK is a public provider has increased because of the cold weather.

Now uncertainty looms over potential supply shortages and bullish prices in February.

NEK did not elaborate on whether it would sell any volumes for February. But the utility explained that last year it had sold volumes for calendar year 2015 delivery on the free market via direct negotiations with traders instead of a tender, leaving no spare volumes for monthly tenders.

“The company [NEK] analysed its production and techno-economical situation in the end of 2014 [after it sold the 2015 volumes]. It also took into account the priority supply of the regulated market,” a NEK spokeswoman said on Friday.

“Currently NEK does not have enough power to sell on the free market on a monthly basis, therefore there was no January tender,” she added.

Sources said Bulgaria’s electricity trader association had sent a letter to NEK, the energy regulator and the energy ministry, expressing concern over the non-transparent way NEK had sold an unknown amount of power with calendar year ’15 delivery.

One of them argued that an official tender would have guaranteed the best price for NEK.

The spokeswoman did not comment on why NEK chose to sell Cal ’15 without a tender.

Last August, the government vowed to make NEK’s trading practices more transparent (see EDEM 27 August 2014).

Potential shortages in February

Bulgarian traders polled by ICIS on Thursday and Friday said there was a lot of uncertainty on the market for next month.

“[The outlook for] February is completely unclear,” one Bulgarian trader remarked. “We don’t know how we would be covering our positions. None of the power plants is revealing how much they would be selling,” he added.

In addition, the companies who had secured volumes from NEK for 2015 could either export the electricity or post high offers for delivery inside Bulgaria, knowing that the buying interest would be high.

At the same time, grid operator ESO cut the available export cross-border capacity on the Greek and Serbian borders for February, offering 250MW less in total, compared with January. The cross-border auction will be held on Wednesday.

Traders said this was a sign that the operator expects a tight system next month too, indicating a potentially bullish picture for the whole Balkan region, since Bulgaria is a net exporter.

One was expecting prices in February to be above Bulgarian Lev 75.00/MWh (€38.33/MWh) inside Bulgaria. If exported, a €4.08/MWh export tariff applies. Irina Peltegova