Partners of GP Group Inflate Cost of TurkStream 2 by EUR 1.7 Billion

Nikolay Marchenko

The site for the construction of the compressor station Rassovo for the needs of TurkStream 2 gas pipeline uses construction equipment purchased under European projects, an inspection by the Civil Association BOETS (Fighter), the BulFoto agency and Bivol established. At the same time, the construction companies, which are subcontractors of Glavbolgarstroy at this site, are among the record holders in the country in terms of funds absorbed under public tenders for BGN hundreds of millions in various partnerships with GP Group. Bulgartransgaz, itself, included the TurkStream 2 project in its ten-year plan under the names Balkan Stream and Expansion of the Gas Transmission Network within the Balkan Gas Hub, without mentioning a key subsidiary of Gazprom among the subcontractors, the Russian company IDC, operating in Serbia. Until the US sanctions take effect, a US company supplies the turbines for the compressor station through its Belgian subsidiary. In addition, due to delays as of March 2020, the value of the project with VAT will increase to BGN 3.32 billion or by about EUR 1.7 billion.

For years, the Russian edition of Forbes magazine has been publishing its “Kings of Government Procurement” ranking, in which Vladimir Putin’s close acquaintances and regular Gazprom subcontractors occupy the leading positions. It is time for similar rankings in Bulgaria, where the record holders in government procurement and European infrastructure projects now bring their equipment to TurkStream 2 as subcontractors of Bulgartransgaz and as subsidiaries of Gazprom.

Therefore, it is not surprising that the cost of the Bulgarian section of TurkStream 2 gas has already surged to a record high, BGN 3.32 billion with VAT, according to official data for March 2020 included in Bulgartransgaz’ “Ten-year plan for the development of BTG’s networks for the period 2020 – 2029″. And since the pandemic has been raging since March and there is information about accidents at the site, about at least 15 Ukrainians infected with Covid-19 at construction sites and about a car accident with three dead, the value of the project has likely reached higher figures.

As the Capital newspaper recently wrote, Bulgartransgaz had paid this fall at least EUR 517 million ahead of schedule to the Saudi company Arkad, which plays the formal role of a contractor of the project. Where these funds had come from, given that the Bulgarian Energy Holding (BEH) and its state-owned subsidiaries have been facing financial hardships for years, remains to be established.

Companies absorb millions through public procurement

BOETS and BulFoto filmed and took pictures at the site in Rassovo of the equipment of the Bulgarian company Nova Stroy Team, whose owner and manager is Kaloyan Lucien Teodosiev. The equipment was purchased under a European project, whose number was photographed by BOETS. The equipment is worth BGN 2.126 million.

Teodosiev is also the owner of Energogroup and the well-known in the construction industry Interprom. Interprom has absorbed at least BGN 270.4 million through 49 registered public procurements, making it one of the record holders in the construction sector. But why has the company applied for European Union (EU) funds when it has, together with its subsidiaries, enough money to invest?

Capital wrote in 2016 that Interprom had recorded a surge in the absorption of government contracts. Teodosiev’s name, according to the media, was mentioned as one of the candidate sponsors of the bankrupt Football Club CSKA Sofia.

According to the publication, Teodosiev’s construction company has climbed from 25th to 12th place, its revenues have doubled and its profit jumped from BGN 920,000 to BGN 12 million. The company won water supply and sewerage contracts in the towns of Pirdop, Panagyurishte, Dushantsi and the city of Kardzhali, among others. At the end of 2015, Interprom also received a concession from the government for the extraction of metals in the southern resort town of Sandanski.

Capital focused again on Interprom in 2018, when the company temporarily suspended the tender for the four-year maintenance of the street network in the capital Sofia for BGN 140 million by protesting before the Commission for Protection of Competition (CPC) one of the requirements of the contractor, the Sofia Municipality, related to availability or rental of an asphalt base.

The Banker newspaper also mentioned Interprom as one of the record holders in government procurement in the water and sewerage sector. In 2012, Pirdop’s integrated water project brought BGN 32,386,136 to a consortium with the participation of the company. It shared another BGN 8.4 million for the water supply network in the town of Kostinbrod with the infamous GP Group. The wastewater treatment plant in Kostinbrod was built for BGN 10.2 million and a station for wastewater treatment in the town of Knezha brought the company another BGN 8 million. The water cycle of Panagyurishte built by Interprom and GP Group generated BGN 12.8 million.

If one continues to unravel the ties between the companies that make millions in the water sector, one will find out that in addition to Raicommerce, Kaloyan Teodosiev’s Interprom often partners with another major player in the industry – Ponsstroy Engineering. The company, based in the Black Sea city of Burgas, is owned by construction entrepreneur Milko Milkov, who until the end of 2012 was also behind the famous Pons Holding. One of the projects that Teodosiev and Milkov’s companies have worked on together several years ago is the reconstruction of the water supply and sewerage network of the town of Krichim. It was for nearly BGN 24 million, again according to Banker.

Regional media Pirinsko and Fourth Estate mention that investor Kaloyan Teodosiev’s “career” in the village of Logodazh near the southwestern city of Blagoevgrad was “stopped in court by the mayors of Logodazh, Plamen Chervenkov, of Selishte, Blagoy Panayotov, and of Zelen Dol, Angel Mladenov. That is why he has decided to transfer his activity to the municipality of Bobov Dol, where he has initiated a procedure for obtaining a concession for the extraction of crushed rocks.

Against the backdrop of such gains, it is difficult to believe that only in 2008, a court had frozen Intercom’s accounts of less than BGN 100,000.

The company Lyunik, whose heavy trucks also service the pipeline construction in the village of Rassovo, has over BGN 6 million in public orders mainly from the Customs Agency and the municipality of the western town Dragoman, where it is based. The company lists on its website companies such as Energogroup and Caro Trading as its long-term partners. Both are actively involved in the sites of TurkiStream 2 in Bulgaria.

GP Group, which became infamous thanks to a series of investigations by Bivol known as #GPGate, is also among its partners as are PST Holding, Engineering Group 04, Ponsstroy Engineering, Energoremont Stroy and Inzhstroy. Another company, whose teams of workers were filmed by BulFoto, is Strimona Stroy. This company currently has only one registered public procurement order for BGN 200,000.

In 2012, Football Club CSKA Sofia published on its website the list of investors that have expressed a desire to be sponsors of the team. The interesting coincidence is that most of them are partners of GP Group and currently almost all of them are deployed on sites of TurkStream 2, including Caro Trading, Interprom, Pons Holding and others.

US companies against Donald Trump’s orders?

As early as October 3, 2019, the BEH’s State-owned company Bulgartransgaz, which is under the Ministry of Energy, signed a contract with the consortium Ferrostaal Balkangaz for the construction of two compressor stations, Rassovo and Nova Provadiya for TurkStream 2. Bulgartransgaz claims that an “open procedure under the Public Procurement Act” has been conducted.

The consortium includes Ferrostaal Industrial Projects GmbH, Germany, and Glavbolgarstroy and Glavbolgarstroy International, Bulgaria. The two compressor stations are Nova Provadiya in the village of Vetrino, Varna region and Rassovo in the area of the village of Rassovo, Medkovets municipality, Montana region. Nova Provadia is equipped with four gas turbochargers with a capacity of 10 MW each.

The plan for Rassovo is to be equipped with three gas turbocharger units with a capacity of 12 MW each. The contract worth BGN 350 million includes the investment design, supply of necessary materials and equipment, construction and commissioning of compressor stations.

The declared subcontractors are Solar Turbines Europe SA – Belgium, Turbo Machine Bulgaria and Himkomplekt Engineering (Bulgaria).

Russian companies manufacturing gas turbines for compressor stations have been sanctioned by the EU and the United States since the Kremlin’s annexation of the Crimean peninsula in 2017, Kommersant reported. But despite the risk of new sanctions from the US State Department, Bulgartransgaz obviously has no problem fulfilling its contract with the European branch of Solar Turbines (San Diego, California, United States). The US company claims to be a subsidiary of Caterpillar, whose equipment also abounds at TurkStream 2 sites.

“The participation of international companies guarantees that the project for expansion of the gas transmission network will be completed within the deadline,” said the Executive Director of Bulgartransgaz, Vladimir Malinov, at the time of the signing of the contract.

“With today’s signing we are approaching the implementation of the updated Energy Strategy of the Republic of Bulgaria,” said Energy Minister Temenuzhka Petkova.

After some delays, Solar Turbines Europe SA has already delivered in the village of Rassovo three compressors for the Rassovo for TurkStream 2’s compressor station. Three containers with American flags on their tops were filmed with a drone by the BulFoto agency during the joint action with BOETS.

The company Turbo Machine Bulgaria is a subcontractor for the Rassovo compressor station and has the same owners as the company Bright Engineering Varna, which in 2007, 2010, 2012 and 2016 was a subcontractor of the two Thermal Power Plants (TPPs) owned by US companies, AES – 3C Maritsa East I EOOD and ContourGlobal Maritsa East 3.

Turbo Machine is also a subcontractor of the State-owned Maritsa East 2 for BGN 669,000. Bright Engineering has completed 52 government contracts for over BGN 34 million for Bulgartransgaz, Lukoil Bulgaria, Lukoil Romania, TPP Varna and TPP Maritza East 2, among others.

As BOETS and Bivol found out, there is construction equipment purchased under European projects on the site of the gas pipeline near the village of Makresh (Montana region). It was heavy equipment made by the US Caterpillar.

According to the Information System for Management and Monitoring of EU Funds in Bulgaria (EUMIS), Eltrak Bulgaria is a supplier under a European project of the company Verda-008, whose US-made equipment can be seen at the gas pipeline construction sites.

Balkan Stream in Bulgartransgaz’strategy

TurkStream 2 is referred to in Bulgartransgaz’ ten-year development plan as “expansion of the gas transmission network of Bulgartransgaz in the section from the Bulgarian-Turkish to the Bulgarian-Serbian border”.

Its implementation would achieve “security of natural gas supplies to Bulgaria; security of natural gas supply to neighboring Balkan countries and the region; creation of additional highly qualified jobs”.

Bulgartransgaz explains the necessity of the Gazprom project with decision 847 of the Bulgarian Council of Ministers from November 22, 2018 and a decision of the National Assembly from of November 28, 2018, on the adopted “Amendment and supplement to the Energy Strategy of the Republic of Bulgaria until 2020 for reliable, efficient and cleaner energy”.

“In order to fulfill its commitments included in the update of the Energy Strategy, as decided by the two institutions, Bulgartransgaz has taken the necessary actions for the implementation of the project for expansion of the transmission network of the Company in the section from the Bulgarian-Turkish border to the Bulgarian-Serbian border. The project is part of the concept for the Balkan gas hub, which aims to strengthen the role of the Republic of Bulgaria as a leading trade and distribution center in the region and the European Union as a whole.”

The Balkan Stream project is a “priority of the Bulgarian government and Bulgartransgaz”, the document also says. Its implementation aims to “increase the security of natural gas supplies from various sources, increase competition and transparency in the natural gas market, which in turn will have a positive effect on natural gas consumers”.

As a “key project for market integration”, Balkan Stream would “contribute to ensuring the supply of natural gas to the country and the region, while contributing to the creation of real conditions for diversification of sources and routes and the possibility of transferring additional quantities of natural gas to and through Bulgaria”.

In April 2019, Bulgartransgaz appointed the consortium Arkad, including Arkad Engineering and Construction (Saudi Arabia) and Arkad S.p.A (Milan, Italy), with which it signed a contract on September 18, 2019, as a contractor for the public procurement. In the fall of 2020, the control over the companies passed into the hands of companies with Gazprom (Russian Federation) as the ultimate owner, the publication of a document in English and Arabic by Bulgarian energy expert Stefan Gamizov reveals.

As for the company IDC (Infrastructure Development and Construction, Belgrade, Serbia), which is building the gas pipeline along with Arkad, the Russian news site EA Daily wrote back in 2019 that according to the database, Gazprom, which has long been under US and EU sanctions, is also Its ultimate owner through a chain of legal entities such.

The Belarusian State-owned company Beltruboprovodstroy is a long-term subcontractor of Gazprom and was removed by Lithuania in 2019 from the tender for an interconnector to Poland over “national security concerns” over its potential links with Belarusian and Russian special services.

The consortium Gas Development and Expansion in Bulgaria, comprising Italy’s Consorzio Varna 1 (established by Bonatti Group with headquarters in Parma, Emilia-Romagna Italy, Via “Alfredo Bernhard Nobel” 2/A 43122. and MAX STREICHER S.p.A.) also works at the pipeline’s sites. Bivol found in partnership with Investigative Reporting Project Italy (IRPI) that the Italian Bonatti is associated with Italian organized crime, namely the Sicilian Cosa Nostra and is a subcontractor in Italy and Greece in the construction of the US- and EU-supported Trans-Adriatic and Trans-Anatolian gas pipeline projects.


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