Bulgaria Is Losing EUR 68 Million over Oligarchic RES

The sanction of the European Commission for renewables built under the "rural program" could reach 100%
Dimitar Stoyanov

Bulgaria is on track to lose over 132 million levs due to sanctions of the European Commission. The sanctions involve the Commission’s refusal to repay funds that were invested in the construction of renewable energy power plants and should be funded under the Rural Development Programme /RDP/. The heavy measure is triggered by the failure of our State to comply with European directives. In this situation, the money for the construction of oligarchic RES will have to be borne by the budget, with another 40 million levs national co-financing, bringing the total amount of public detriment to over 170 million levs. The reason for the reaction of the European Commission is the preferential price that the renewable energy sector receives from the National Electric Company (NEC) that is also guaranteed by the regulator – the Commission for Energy and Water Regulation (KEVR). For the EU government this is inadmissible State aid with public resources. In addition, the said “pouring” of money into the extremely expensive electricity from renewable energy sources is causing a drastic increase of electricity prices for consumers and leads to explosive social tensions.

The grandiose scandal remains hidden from the Bulgarian public. The EC, however, has not turned a blind eye because European funds are actually used to make richer certain political circles that are producing and trading “green” energy. The scheme was uncovered by the Commission, but it is being stubbornly hidden from the citizens in Bulgaria before the local elections.

How а Russian-type oligarchy is powered with EU-millions?

When it comes to businessmen profiting from “green” energy, the first names that come to mind are those if Valentin Zlatev, Nikolay Valkanov, Tsvetelina Borislavova, Hristo Bisserov, Mehmet Dikme and of course Ivo Prokopiev. Some less popular names are among the “winners” as well – such as Todor Nachev, Vladimir Alichkov and Svetoslav Donev, who is connected with the unfortunate Bulgarian European Commissioner nominee Rumiana Jeleva. They are all “white” millionaires, earning huge sums by selling at super high prices photo voltaic and wind generator energy to the Bulgarian consumer. In fact, at the end of 2009, when the first term of the party Citizens for European Development of Bulgaria (GERB) began, Bulgaria’s capacity to produce electricity from renewable energy sources amounted to 200 megawatt hours. Four years later, this capacity increased to over 1,000 megawatts of renewable energy. The energy that they produce is purchased by NEC at preferential prices – naturally, at the expense of the Bulgarian consumer.

However, this massive increase in capacity from renewable energy sources did not happen spontaneously. According to many experts, it is primarily the result of poor management of the Rural Development Programme 2007-2013 which we will call the “rural program”. It is implemented and supervised by the Ministry of Agriculture and Food and the State Fund Agriculture (SFA). But all this did not remain hidden from the European Commission. In early 2015, the Ministry of Agriculture and Food and the SFA have received from the EC another letter on the subject. The letter, which Bivol has seen, has been filed in the secret registries of the agencies without any grounds of this being classified information. The European Commission confirmed after a formal request that the letter exists, but its contents cannot be disclosed, even partially, because it would interfere with the ongoing conformity clearance procedure.


The information that the letter contains is extremely unpleasant for the management of the Fund. It communicates concisely and clearly that payments under measures 311 and 312 of the Rural Development Programme for 2007-2013 have been suspended under Article 41, paragraph 1 of Regulation (EC) № 1306/2013. The said Article 41 states: Where the declarations of expenditure or the information referred to in Article 102 do not enable the Commission to establish that the expenditure has been effected in accordance with Union rules, the Commission shall ask the Member State concerned to supply further information and to submit comments within a period which shall not be less than 30 days.

The stopping of the payment of the funds is the result of the “consistent policy” of Porozhanov and Grudev as directors of the SFA. With a letter dated December 2, 2014, the Commission has informed the Bulgarian authorities (Ministry of Agriculture and the State Fund Agriculture) that following the inspection by the audit services of the Commission in 2012 with number RD /2012/806/ BG, the European Commission intends to apply a financial correction amounting to 28 million euro for projects related to renewable energy. The penalty is due to the fact that the Bulgarian authorities have not taken appropriate measures to resolve the problem.

This is not the end but rather the beginning of big trouble

On March 2, 2015, the Commission sent a follow-up letter, but again there was no reaction from Porozhanov and Grudev. This led to the humiliating outcome – freeze of the money for all renewable energy projects – the same that have been implemented under measures 311 and 312 of the “rural program”. Time certainly does not work in favor of Bulgaria. The deadline for submission of final applications for payment is September 15, 2015. On July 10, 2015, the European Commission refused extension for payment under the Rural Development Programme 2007-2013. Thus, it is expected that the Commission will impose 100% correction on payments for RES projects. These are 341 sites, financed with 68 million euro from the SFA.

Who is to blame for the lost money?

The adjustment of 28 million euro, to which Agriculture Minister Desislava Taneva officially admitted recently, refers to the period April 29, 2011 – October 15, 2013. It falls partly under the previous term in office of Rumen Porozhanov as Director of the SFA and in under the one of Vasil Grudev. Porozhanov was appointed Director of State Fund Agriculture on April 1, 2011, and released on August 30, 2013. He was succeeded briefly by Vasil Grudev – in the period September 1, 2013 – November 7, 2013. In this period, current Minister Desislava Taneva was Chair of the Committee on Agriculture in the 41st National Assembly (Parliament).

During Taneva’s current term as Agriculture Minister, Porozhanov is again at the helm of the SFA. Vasil Grudev, on his part, is Deputy Minister of Agriculture in charge of the program for rural development and the monitoring of the payment agency – the SFA. The feeling of personnel policy with connected parties is exacerbated by another fact. In 2014, Grudev and Porozhanov entered the management of the Association Center for Strategic Analysis, Financing and European Funds. Later, however, Grudev was invited to head the Agriculture Ministry in the cabinet of caretaker Prime Minister Georgi Bliznashki and Porozhanov – the Finance Ministry. After publications in the press, it became clear that Grudev has not left the NGO after his appointment in office. Bivol has an entry from the Trade Registry, showing that Grudev, Porozhanov and Ivan Ivanov Kapitanov are still in the management of the NGO. It was removed immediately after the scandal. According to the information system DAXI, Kapitanov is now on the Board of Directors of the Port of Burgas. It is strange that to date there is no trace neither in DAXI, nor in the Trade Registry that Grudev, Porozhanov and Kaitanov have been managers of Center for Strategic Analysis, Financing and European Funds .

The tandem Porozhanov – Grudev vs EC

Back in 2012, during the first audit of the EC under measure 311 and 312, the EU inspectors found a flaw in Bulgarian practice: “… The Court of Justice of the European Union confirmed (Case C – 379/98) that the preferential prices imposed by a public authority (KEVR – in this case regulatory authority) have an economic advantage to the public. The Main Directorate Agriculture and Rural Development considers the difference between regular energy price and the preferential price for green energy set by law, to be an additional source of funding provided by the State through its national legislation, since it implies guaranteed profits without any commercial risk. These additional revenues should be considered by the Bulgarian authorities in the verification of compliance with the ceilings for co-financing from the European Agricultural Fund for Rural Development (EAFRD). Although it is perfectly acceptable for beneficiaries to profit from the sale of electricity produced through financially supported investments (each co-financed investment in agriculture should have the same effect), this should be achieved by sales on the market, not by a preferential price…” In other words, the European Court has said directly that it was unacceptable for the State to benefit specific manufacturers because it is illegal, in contradiction with the free market and harms public resources by pouring government money into corporate structures. The latter strongly stinks of ugly State corruption with a cartel flare.

The profit just from the preferential price of green energy is as follows – for a plant launched in 2011 – 209%; in 2012 – 121%; in 2013 – 64%. In other words, EU funds have been used to make richer certain political circles producing and trading “green” energy, without them investing their money in this venture. Even in the early days of the program, the Commission has noticed the above flaw, but none of the officials in the Ministry of Agriculture and Food and in the SFA bothered to remove it. Or they simply did not want to do it. We are guessing the reasons!

For three years in a row, the leadership of the SFA under Porozhanov has been sending the following reply to the Commission: “The Bulgarian side does not accept the finding of the EC.” Accordingly, the requirements are being boycotted and no corrective action is undertaken. Ultimately, the Commission is suspending payments under measures 311 and 312 of the Rural Development Programme. The expected correction under measures 311 and 312 will, of course, be covered by the Bulgarian national budget – that is from taxpayer pockets. But how such a sanction would impede those interested to gain money from green energy?

According to experts, Porozhanov and Grudev should adjust the subsidy received by each renewable energy project and deduct it from the difference between the profit from the preferential price for green energy and the market price. Such a move would be very simple and clear, but disadvantageous to the beneficiaries of those energy projects. Even in this case, the amount needed for the construction of a similar facility would be an interest-free investment loan by the SFA, provided that there is a market niche for projects with 209% return. The European Commission’s audit report in 2012 concluded that the financing of renewable energy sources in such a form is illegal:

“… A business plan must be attached upon submission of the application for financing. The business plan describes revenues, including from sales at preferential prices. The application for payment must contain the contract signed between the beneficiary and the provider of electricity. As a result, when the payment agency chooses the beneficiaries and determines the amount of aid to be provided from the EAFRD, it shall be aware of the existence and the amount of additional economic advantage with public character. Therefore, without any doubt, namely the financial support provided from EAFRD (assistance under the RDP) should be reduced or revoked to take account of this additional source of financing…. “

It will become clear soon whether the Mafia State will respond adequately to this situation. The fact is that at this stage the amount of the looming sanction is being concealed from Bulgarian citizens. What is reported is 28 million euro, and not even a word that the “rural program” is completely frozen in its part of EC financing of renewable energy. Logically or not, just before each election, voters are kept in informational blackout.


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