Bulgaria's Pernik: Abandoned by the State

Novinite Insider | Author: Dimitar Sabev |January 17, 2017, Tuesday // 10:25
Bulgaria: Bulgaria's Pernik: Abandoned by the State Photos by Dimitar Sabev

Novinite is publishing the English-language version of an investigation into the impact of ill-regulated coal mining on the life in Pernik in southwestern Bulgaria. The text by Bulgarian journalist Dimitar Sabev originally appeared on the independent Bulgarian website Bodil.bg

The city, just 30 km from the capital, suffocates in smoke while ghostly concessionaires trample the law and pocket millions, writes Sabev.

Pernik is abundant with Coal for Sale signs. A cell phone number is included, and the price is around BGN 10 – no dumping where the “angle iron plays” (TN: Locals are said to settle their disputes with the help of angle irons. The city is famous for its metallurgy). Locals say that there are at least 300 colliery holes in the abandoned mines in the outskirts of the city. 10-20 sacks of coal can be extracted daily. There is no holiday for this dirty business: despite the fact that the holes may be inaccessible for six months during the year due to inspections, rain or frost, the "excavation" value still amounts up to several million BGN per year. Does anyone believe that all this money, dug up illegally a few miles from the city centre, end up in the pockets of these diggers?

For years Pernik has topped the charts for the city with the highest air pollution in the EU. People suffer diseases and complain about the high levels of particulate matter in the atmosphere, but still continue to burn the cheap local “kyumyur” (TN: dial. for ‘coal’) in winter. So there is enough work for the "moles" – that is how these illegal diggers are called. Dozens of immigrants from Kyustendil, Dupnitsa and other surrounding towns jointheir forces into the local swarthy (TN: colloq. adjective for ‘Gypsy’) labour army. Coal digging is done by the most primitive means, often using small children's bodies and hands. There are doubts about 14 deaths in the holes.

One of the places where the Pernik moles dig, used to be until recently an official mine under the concession of Recoal AD. The company is controlled by a group of Belgian investors, managed by Philippe Wautelet. In 2005, the state signed a concession agreement with Recoal for the brown coal field in the Gladno Pole area for 10 years. In 2015, the Belgians did not renew the agreement, arguing that the costs of the facility were too high. They left without the compulsory land rehabilitation.

 They left Gladno Pole but not Bulgaria. They continue to pursue their business interests in the country, including businesses under the label "green". And it must be said that local and state authorities assist them. As for the abandoned coal mine – it passed over to the “moles” and their patrons.

Moles in focus

The van bypasses the residential area, leaves the asphalt and takes a dirt road along the railway. Suddenly the van stops and the driver waves his hand, "There they are, we can come closer, but you can see them from here." There are broken brownish-black screes about 200 meters off the road and several small human figures crawl on them. We see them well, they also see us and freeze – as I reach for the camera, they hood themselves and run up the slope.

Despite their quick reaction, the faces of the illegal diggers could be seen on several of the photos. There are exactly ten of them, a woman and a youth under 15 amongst them. It is a little before noon and there are already around fifty bulging sacks on the worksite. At least it is clear that the direct perpetrators can easily be recognized and sanctioned, should the local police desire to intervene.

The Paris Commune Street passes a few hundred meters away. Firewood has arrived today and is being sawed on the street, men are out in front of the houses and willingly answer questions. All attribute the subsidence of earth layers to the excavated galleries. "Here, my house was fine after the earthquake, and now – take a look at the cracks!" People are convinced that the gypsies do not cause as much damage as the abandonment of the mine. "The Belgians left stockpiles and in the evening when the wind blows our way – you can’t breathe." The forest that separates the neighborhood from the mine is almost cleared.

In many places in Bulgaria, because of environmental damage from past and present mining activities, anger has accumulated among local people. On this background, the residents of Pernik stand out with their desperate self-organization. Led by the endurant engineer Galia Gerginova, hundreds of Recoal “neighbours" are trying to attract the attention of state authorities to their problems. Support letters are sent to the Prosecutor's Office, local MPs, Speaker of the National Assembly, Ministry of Environment and Water, regional governor, the City Council, etc.

The reaction of the authorities, besides the endless chain of transferred from office to office files, amounts to zero. At least the journalists are not indifferent and the troubles of the Pernik’s population are regularly reflected in the national media. But regarding the particular problem, state institutions, unfortunately, cannot brag about visible results.

Liberating bankruptcy

On 26 September 2016, without raising unnecessary noise, the Recoal company filed a bankruptcy court petition. The formal cause was disagreements between the investors: the Belgian group held 66% of the capital, and 34% of the shares were owned by Bulgarians. Among them were Alexi Alexiev and Ivan Markov, former directors of the huge state coal mines in Pernikand Maritsa East.

In order to pay pending trade obligations to a Greek partner, in the beginning of 2016 the Belgians proposed a capital increase from BGN 50 000 to BGN 2 M. The Bulgarians disagreed and did not provide the necessary 2/3 of the votes for such a decision. The company had no way to pay out and most conscientiously declared bankruptcy.

In fact Recoal began to sink much earlier. Reports submitted to the National Concessions Register suggest that the company has not been paying concession fees to the state since the second half of 2013. The accumulated unpaid taxes amounted to BGN 76 288, not counting the interest on arrears. In practice, since the middle of 2011 the company began to delay the payments to the state with 3-4 months.

The company is not a role model as a taxpayer as well. For the period 2007-2014 the tax paid on profits was minus BGN 52 000. That is, Recoal not only did not submit corporate tax to the Treasury, but also reported income from taxes (this is possible because of Corporate Income Taxation Law, which allows losses from past periods to be deducted from the tax base). During its first year, the mine made good profit, but after that minuses began to pile up and the accounting loss for the period came up to BGN 5 M.

There is nothing strange about the failure of a mining concession at the dawn of the renewable energy era, but a careful analysis of annual accounts raises questions. More than a half, 56% of Recoal costs for the period were for external services (a total of BGN 14.5 M). Instead of buying heavy equipment,the concessionaires from Belgium paid other companies from the city to carry out the mining in their area. One of them, Novi Minni Tehnologii EOOD (TN: ‘New Mining Technologies’), is solely managed by a lady, born in 1990.

As a physical person, one of the Belgians grants loans to the company, where he is a shareholder and collects from Recoal interest of around 10% per annum (BGN 1.27 M interest expenses for the period). The production cost of coal in the first year of the concession was under BGN 25 per ton, two years later, the cost on paper jumped up to BGN 79.

So why should we be surprised that the manager of Recoal Philippe Wautelet paid good money to Sova Security (TN: ‘Owl Security’) to guard the mine, the company’s manager being... Philippe Wautelet? In the annual report, since 2007 – apparently while the competences of Bulgarian and Belgian investors were still not clear, we can read the following pearls of corporate wisdom: "The company reported undocumented expenses amounting to BGN 16 649.80... The company has transferred to Philippe Wautelet’s bank account EUR 3,200, a translation without any justification and contrary to Bulgarian laws..."

Probably going through the dirty underwear of a Belgian – Pernik company is not the most amusing read, but the disclosureof the above facts, screened from the Commercial Register is still useful. After yet another signal by affected locals to the Prosecutor's Office, vice district prosecutor Biser Mihaylov recommended to turn to the Territorial Directorate of the National Revenue Agency. Imagine NRA forwarding the data to the Ministry of Culture, where they figure theyhave lack of trained cadres to deal with it and things are again hushed up. Let us help the state in case of a possible interest in Pernik.

Seen only from space

The van returns to the living neighbourhoods. We stop at the road junction,several massive panel buildings stretch to the right, to the left - the already known brownish-black embankments. "They dig illegally there. Now they have been warned, otherwise you could have shot excavators and trucks," says Eng. Gerginova. While pointing out to the sorrowful landscape she says, "I could not find anything in the Ministry of Energy’s registerabout this mine. I asked the officials - whose is it? They answered there was no such mine in this place. But how come, I tell them,you can see it from your desk, go to "Google Earth", you can see it even from space... "

As far as the truth is concerned, the Deputy Minister of Energy, Zhecho Stankov performed an inspection on site and the illegal activity near the Stara Teva mine has finally been officially registered. 50 sacks of unknown origin were seized, but no physical persons werefound. After that inspections became frequent. Ten sudden sweeps were done in the Pernik region for one year and 60 tons of coal were confiscated, but this demonstrates rather the scale of the problem than effectiveness of control.

Pernik has grown into a city with current population of 80 thousand only due to coal. For the past 125 years, from the opening of the first mine, 330 million tons of coal have been extracted. The availability of cheap fuel explains the subsequent development of heavy industry and energetics. But today the Miners’ City has fallen victim to its underground resources: coal lies too close to the surface. In general, economic development is something desirable, but the price the locals pay for it in the form of air pollution and crumbling homes has become too high.

We live in a time of change: global agreements on climate protection are being negotiated, boding in tolerable costs for governments and businesses polluting the atmosphere. Where Europe is heading to, there will soon be no place for coal-fired power stations.But Bulgarian politicians turn their backs on the world energy trends and stand behind the maxim "If there is profit – it is good." Instead of taking measures to reduce pollution in the city with the worst air in the EU, in 2015 the Bulgarian government extended by 15 years the concession of open coal mines located in the very city of Pernik.

“Mr. Kovachki is a concessionaire of the entire city. Its concession area includes this neighborhood, the next one; the centre of Pernik is also his. This is madness: how can one take care of property, invest money?! Given that it is in the concession area of​​... Someone. We live in an absurd illusion!"exclaims Galia Gerginova.

The Concession Register confirms that without a tender, or new environmental assessment, the Government of Bulgaria has renewed the concession contract for the operation of  Pernik Coal Basin until 2029.The concessionaire is Mini Otkrit Vagledobiv EAD (TN: ‘Mines Open Coal’)- part of the "Seychelle coal empire", known from a previous investigation. The company, along with the whole group of more than 15 coal mines and thermal power plants across the country, is associated to the businessman Hristo Kovachki. In the Pernik region the concession has an area of ​​139 square kilometersand stretches from the village Kladnitsa in the Vitosha mountain, across the city centre, to the Yardjilovtsi village. 300 new work place sare expected and about BGN 5 M as a concession fee to the state.

With such offshore interests involved it is not strange that the Gypsy diggers, who often risk their lives,serve as a lightning rod in this human drama.

Audi and crumbling houses

"The Gypsies beat me, because we threw a firecracker into the bunker, they came with the police and arrested us, saying we were firing at them." recounts his exploits the 60-year-old native Lyubomir Paunov.

"One Gypsy here, hit me in front of the house. A small one, but very tough, stout – must have been a former miner, digging a hundred sacks a day. They came with children, shouting, "You frighten our children." Hit me with a brick. My son was bathing, got out, took a shovel, my wife began to scream – could have bludgeoned each other... "

This scene happened two or three years ago in the pleasant Rudnichar (TN: ‘Coal miner’) neighborhood, perched on a green hill behind the Dental Centre, right next to the city centre. The birth house of President Parvanov is a few hundred meters away, but on the other side of the hill, the asphalt road ends up here and we have to squish through the mud. And under the yellowish puddles, only 2 meters deep, a four-meter thick layer of quality brown coal lies. This all is known to the Gypsy brigades who enter the nearby abandoned old bunkers and dig long underground galleries under the houses, digging for coal.

A secret 70-meter-long tunnel undermines the foundations of three houses. The walls and staircases have cracked and the properties were evacuated. The findings of Geozashtita Pernik (TN: ‘Geoprotection Pernik’) leave no room for doubt, "Within the reaches of the street and adjacent areas, visible sinking has been observed due to ongoing illegal coal mining." Lubomir Paunov reflects in this regard:

"They undermined us – they dug for five years. I have lived here for 60 years, the houses haven’t moved, notfrom earthquakes, not from anything. They made galleries like Swiss cheese. From there they come in, from the bunker,take it out, collect it, and get lost in the evening. They sell ​it and nobody bothers ​them – they dig for them, too. Clients come and buy it – BGN 10 a sack, - you know it’s a good business. All them drive "Audi" 4, 6, cabrio. Fill their bags in the supermarket, can’t get in line".

In this particular case in Rudnichar, the abeyance was so great that the government was forced to take measures. For the last two years – since non-stop police surveillance was introduced, Gypsies haven’t come in to dig in the old bunkers. There are, however, no grounds for optimism: the dereliction just took a different form. The huge molehill has become the occasion for a project worth over BGN 700 000, with which experts from the University of Mining and Geology try to fill the underground holes.

According to observations of neighbors, the fat investment has not stopped the subsidence of the soil. "Just gave their money, nothing happened. For the people – goose eggs."summarizes Paunov. The compensation for the damage to his house by the earthquake was BGN 335 M.

Green miners

Recoal may not be the biggest sinner in the Pernik coal field. But that does not make the lack of response from the government less outrageous. In addition to not paying taxes and owing at least BGN 76 000 from concession fees, the company has abandoned the open mine without carrying out land rehabilitation. The Departure Fund, which according to the concession agreement should have been supplied with BGN 40 000 annually, is empty – this was confirmed by a response to the parliamentary question by the Minister of Energy, Temenuzhka Petkova. At the commencement of the insolvency proceedings, the payment was postponed for future collection far ahead in time.

Fine, but people who have not complied with basic environmental standards in Pernik, keep climbing new green energy peaks elsewhere in Bulgaria. The manager of Recoal, Philippe Wautelet was a member of the jury which awarded the Bulgarian Green Awards for 2015. He sees himself as "clean energy supporter" and has shares in a large sheep farm in Vidin. But he abandoned a coal mine without ensuring its rehabilitation.

Mr. Wauteletis not a random person: he is vice president of the Bulgaria, Belgium, Luxembourg business club. In this capacity, he stood behind the famous letter in support of the judicial reform, signed by 10 foreign chambers of commerce in our country. Does prosecution of incorrect concessionaires also fall in the scope of the judicial reform? Moreover,Wautelet is at the head of a project for utilization of geothermal energy in Strelcha, launched in partnership with former mayor Ivan Evstatiev – who has been in custody for months.

Wautelet holds a European patent for the production of slag pellets after heating. His method may improve the economic performance of the mines, but how will it affect the air that Pernik breathes? And what about the waters right next to the source of the Struma river? Aside from the production near old Maxim Taban in Pernik, Wautelet also wants to make coal pellets near Belogradchik, which, according to him, would boost local ecotourism. If Recoal AD is declared insolvent, according to the Commerce Act, the manager will be deprived of the rights to manage a company for a period of two years. But this will not prevent the Belgian investors to continue to pursue their green interests in Bulgaria, accusing us en route, that we lack the habits to protect the environment, and our judicial system is not working.

There is no place for xenophobia: two Bulgarians are also involved in Recoal: old directors from the national coal production system of the communist regime. Prof. Dr., etc. Ivan Markov, former CEO of Mini Maritsa Iztok EAD was blamed in 2013 for damages to the state company he managed – and recently acquitted by the  Stara Zagora District Court. After removal of the sentence, he said: "My conscience remained clean throughout."

At night, when people in Pernik turn on heir TVs,the Power Engineers radiate clean conscience,the ministers - intolerance to abuse, the MPs are attuned to human problems and businessmen care about jobs and economic development. At the same time the wind blows dust to the houses from Gladno Pole, Stara Teva, and unknown old and new dumps. People look at the screen, swallow –and for some unknown reason, begin to cough.

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