Bulgaria's National Electric Company NEK has responded to Russia's Atomstroyexport that the roadmap the Russians proposed for the troubled Belene nuclear plant project cannot be accepted as a legally binding document.

"The reaching of a final agreement and the signing of a contract for the Belene NPP will depend on the results of the negotiations in the joint financial working group. The key developments on which the direction of the project depends are: completion of the market studies, the appraisal of the risk and cost of the project, and the final settlement on the funding and its parameters," Bulgaria's NEK said in a statement Wednesday night.

NEK further says it hopes that the "fruitful discussions" in the financial working group will be restored, as stipulated by Annex 13 of the 2006 Bulgarian-Russian contract for the plant extending it until September 1, 2011.

"In this sense, the initial deadline put forth by NEK – September 1, 2011 – for the settlement of detailed timetables and deadlines for the Belene project probably won't be kept. The reason for that is the more difficult work of the financial working group because of delays by Atomstroyexport," the Bulgarian state company said.

In early August 2011, Bulgaria's state-run power grid operator NEK and Russia's state nuclear company Atomstroyexport set up a financial working group on the Balkan country's planned Belene nuclear plant.

Representatives of Atomstroyexport have agreed with the Bulgarian side and formally submitted to the Minister of Economy and Energy Traicho Traikov a roadmap, which maps out the most important steps to implement the project for the construction of Belene plant, Moscow announced. No further details about the roadmap were immediately available.

Last week, Russia's Atomstroyexport, a subsidiary of state nuclear corporation Rosatom, offered Bulgaria a new extension of the contract for the construction of the Belene nuclear power plant, amidst continuing haggling over the project's price.

Atomstroyexport sent Bulgaria's National Electric Company NEK a draft of a new annex to the November 29, 2006, contract between the two state companies that provides for an extension until December 1, 2011.

If Atomstroyexport's proposal is welcomed by NEK, this will mean an extension of two more months of the existing agreement.

On July 1, 2011, NEK and Atomstroyexport signed an annex extending by 3 months their contract for the construction of the Belene NPP, the so called "Annex No. 13" to the 2006 contract, after the 12th annex expired on June 30.

The document effectively provided the two parties with a deadline until September 30, 2011, to hammer out answers to questions related with the technical project for the Belene NPP, the market analysis by the project consultant HSBC, and further progress on the contract for construction and supplies, which is to be made more flexible to meet requirements by potential international investors.

Atomstroyexport says that the new extension proposal has been drafted in accordance with the road map for the Belene project that was provided last week when NEK and Russia's state nuclear company set up a financial working group on the nuclear project.

The establishing of the financial working group was a provision in the 13th annex to the Bulgaria-Russia Belene deal; the group is supposed to clarify the conditions for funding offered by Russia.

NEK CEO Mihail Arnaudov's initial response to the new Russian offer was that the draft Annex 14 would be studied by the Bulgarian Economy Ministry, NEK's parent company – the Bulgarian Energy Holding, the international consultant picked by Bulgaria – the HSBC bank.

No deadline for the signing of the new annex has been set but Atomstroyexport has said in a statement it hoped the document will be signed in a timely manner that would not jeopardize the "structuring of funding for the project and the creation of a project company."

Last week Atomstroyexport also noted that it has completed work on the preparation of the construction of Unit 1 of the Belene NPP on its construction site, and has launched the on-site concrete factory and the construction and geo-technical labs.

The greatest issue over which Bulgaria and Russia have been haggling for the past two years under the Borisov Cabinet has been the price of the project, with Russia insisting it should be no less than EUR 6.3 B, while Bulgaria is demanding a price of no more than EUR 5 B.

The setting up of the Bulgarian-Russian financial working group on Belene could be taken to signal a shift in the Bulgarian position as in the past three years, Russia, including directly through its state leader Vladimir Putin, offered Bulgaria funding for the Belene NPP on numerous occasions but both current Prime Minister Boyko Borisov and his predecessor Sergey Stanishev have dismissed such an opportunity.

In the last months of the Stanishev government in early 2009, Russian Prime Minister Putin offered Bulgaria a Russian state loan of EUR 4 B for the Belene plant, which Bulgaria's then PM Stanishev refused.

In late 2009, after the Borisov government took over, Rosatom offered Bulgaria a loan of EUR 2 B so that the construction can continue, in exchange for a stake in the future plant that the Bulgarian government could then buy out by returning the money. The offer was refused by the Borisov Cabinet which also made it clear it would construct the Belene plant only if an European (apparently meaning EU or Western European) strategic investor can be found. Under the existing non-binding agreements, the Russian government, in addition to constructing the Belene plant, might end up with a stake of 25%-50%.

The 12th annex to the main contract between Bulgaria and Russia on the construction of two 1,000 megawatt nuclear reactors at Belene, expired on June 30, 2011.

As time ticks away, Bulgaria faces an ever greater risk of being taken to arbitration by Russia's Rosatom and forced to pay EUR 1 B in damages.

After selecting the Russian company Atomstroyexport, a subsidiary of Rosatom, to build a two 1000-MW reactors at Belene and signing a deal for the construction, allegedly for the price of EUR 3.997 B, with the Russians during Putin's visit to Sofia in January 2008, in September 2008, former Prime Minister Stanishev gave a formal restart of the building of Belene. At the end of 2008, German energy giant RWE was selected as a strategic foreign investor for the plant.

The Belene NPP was de facto frozen in the fall of 2009 when the previously selected strategic investor, the German company RWE, which was supposed to provide EUR 2 B in exchange for a 49% stake, pulled out.

In November 2010, shortly after a visit to Sofia by Russian PM Putin, Bulgaria's National Electric Company NEK and Russian state company Rosatom signed a memorandum providing for a final fixed price for the two reactors of EUR 6.298 B.

According to the non-binding memorandum expiring on March 31, 2011, Bulgaria's NEK will have a share of 51% in the Belene NPP, Rosatom – a share of 47%, Finnish company Fortum - a share of 1%, and French company Altran Technologies - a share of 1% with an option to increase it. Serbia has expressed interest in acquiring a share of 5%-10% but the talks for that have not been finalized yet.

In mid-March 2011, apparently acting on concerns caused by the situation in Japan's Fukushima NPP after the recent devastating earthquake there, the European Commission confirmed that it wants to reexamine the Belene NPP project - once Bulgaria finds an investor for it - even though it already approved it back in 2007.

In April 2011, the Bulgarian government formally signed a consulting contract with UK-based company HSBC (which won the tender in November 2010) for the financial analysis for the project for the construction of the Belene nuclear power plant. Bulgaria will be paying HSBC EUR 2 M for its services plus 0.95% of the end price of the Belene NPP if it is realized. This means that if HSBC declares the Belene NPP project to be economically feasible, and it is constructed, it will get a fee of EUR 47.5 M if the plant costs EUR 5 B.

Another important issue plaguing the Belene NPP project that surfaced in the recent week is the mutual financial claims of the two parties over sums allegedly owed for the delivery of new equipment and buyout of old equipment for the future plant, with Atomstroyexport recently filing an EUR 58 M suit against NEK with the International Arbitration Court in Paris, and NEK threatening to respond with an EUR 61 M suit in Geneva.

Also last week, NEK and Atomstroyexport started talks on their claims for one another, a day before the new main contract extension proposal came up.

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