General Information
The Republic of Bulgaria, with an approximate population of 8.6 million people, is slightly larger than Tennessee. Located in southeastern Europe, Bulgaria borders the Black Sea to the east, Greece and Turkey to the south, the (Former Yugoslav Republic of) Macedonia and Yugoslavia (Serbia) to the west, and Romania to the north. The capital city, Sofia, is located in the west-central part of the country and has a population of about 1.1 million. The Bulgarian currency, the lev (Lv), is divided into 100 stotinki; the exchange rate is approximately 2.19 Lv per U.S. dollar ($1) as of January 2002. In 1997, Bulgaria made major economic reforms and controlled inflation by adopting a currency board system. The lev is now pegged to the Euro. The gross domestic product (GDP) (based on purchasing power parity) was $48 billion in 2000. GDP growth in 2000 was 5% and the annual rate of inflation in 2000 was 11.4%. Bulgaria is a member of the International Atomic Energy Agency (IAEA), the United Nations (UN), the World Trade Organization (WTO), the International Bank for Reconstruction and Development (IBRD), and the International Monetary Fund. Full membership with the European Union (EU) and NATO remains a goal. In 1992, Bulgaria signed a full Association Agreement with the EU.

Bulgarian Energy Policy
The Bulgarian State Energy Agency is charged with developing a national energy policy. The Bulgarian government's latest energy strategy was outlined in the 1998 document, "National Strategy for Development of Energy and Energy Efficiency Till 2010." It called for eventually shutting down Units 1 through 4 at the Kozloduy nuclear power plant and modernizing Units 5 and 6. Bulgaria plans to build the 600 megawatt (MWe) Belene nuclear power plant in the 2002 to 2010 time frame. The plan also calls for construction of 1,500 MWe of coal-fired generating capacity, 430 MWe of hydro-electric power with a pumped storage plant, and the restructuring of the Bulgarian state-owned electricity company, Nationalna Elektricheska Kompania (NEK), to improve the economy of its operations.

As called for in the Energy and Energy Efficiency Act of July 1999, the Bulgarian energy sector was reorganized in 2000. Six Independent Power Generators (thermal power plants including Kozloduy nuclear power plant), a transformed NEK, and seven distribution companies were established from the former NEK. the new NEK is now the grid operator, the single buyer of electricity from the Independent Power Generators, and the only supplier of electricity to the distribution companies.

The Energy and Energy Efficiency Act of July 1999, which was modeled after European Union requirements and oriented toward achieving competitive markets, had an objective of improving efficiency, unbundling monopoly structures, promoting privatization, and attracting foreign investors. The Act set up an independent State Energy Regulatory Commission, which was given the authority for issuing licenses and setting prices for electricity, natural gas, and district heating. Recently, the State Energy Agency has suggested amendments to strengthen the Act for implementing structural reforms. It is expected that the Bulgarian government will also be considering actions suggested by the "Updated National Strategy for Energy Sector Development by 2010 with a Forecast Till 2015," which has recently been prepared. The new strategy update contains forecasts that have been agreed to by the International Financial Institutions.

Historically, Bulgaria had followed a very energy-intensive development policy. The emphasis had been on development of heavy industries with the energy for these industries largely imported at favorable prices from the former Soviet Union. This policy had three results which increased energy intensity. First, the share of industry in GDP in Bulgaria is higher then in most western countries, and industry tends to consume more energy per unit of output than other components of the GDP such as services. Second, Bulgaria has a higher share of energy intensive industries such as organic and inorganic chemical industries in total industrial output. Third, the technology used in Bulgaria industry is generally much less energy efficient than the technology now used in western countries. As a result, energy use in support of the Bulgarian GDP is significantly higher than for a comparable market economy. More specifically, electricity is the energy form most heavily relied upon for both industrial applications and heating.

In June 2001, the Bulgarian government partially deregulated natural gas pricing. A draft amendment to the energy law was approved which will allow large industrial gas consumers and gas distributors to negotiate directly with suppliers of imported gas. This action is effective as of January 2002. The net effect of the new law is to circumvent Bulgargas, creating a market that complies with EU directives.

In 2001, the Bulgarian government raised the prices for electricity and heating to compensate for rising energy prices globally and for an artificial price freeze that had been in existence since 1999.

Energy Summary
Bulgaria is dependent on imports for 70% of its energy supplies. With virtually no supplies of oil and small reserves of gas, Bulgaria has had to pay for energy in hard currency at world market prices, resulting in less reliable supplies.

An historical summary of Bulgaria's Total Primary Energy Production (TPEP) and Consumption (TPEC) is shown in Table 1.

* (M)toe - (million) tonnes oil equivalent; 1 Quad = 25.198 Mtoe (by International Energy Agency [IEA] definition)

Source: DOE/EIA

Oil
Bulgaria has virtually no indigenous supply of oil. In 2000, oil production was 1,000 barrels per day (b/d), while crude oil imports were 110,500 b/d, and the total import of refined petroleum products was 13,300 b/d. Petroleum consumption in Bulgaria in 2000, was 117,000 b/d. Neftochim is the refining company which operates the large 134,000 b/d oil refinery near Burgas and has an 85% of the market for refined products in Bulgaria. Since October 1999, the Neftochim refinery at Burgas has been 58% owned by Lukoil, the Russian oil company, which paid $101 million for its share. As part of the deal, Lukoil committed to invest an additional $408.3 million by 2005 to upgrade the refinery and meet environmental standards. Although oil production remains low, there has been considerable domestic investment over the years toward expanding production. However, Bulgaria still lacks the modern exploration and production technologies, including those in the areas of seismic interpretation and offshore drilling. The post communist government has recently brought in foreign companies to help. At least eight agreements have been signed to explore for oil in the Black Sea and on the Black Sea coast. These joint venture arrangements or concessions, which could be extended to cover other parts of the country, include those with British gas to explore in the Kamchia and Burgas blocks. Oil exploration is expected to continue for five years. Texaco Exploration Offshore Bulgaria Limited has an exploration and production license with Enterprise Oil (UK) and OMV, the dominant oil operator in Austria.

An historical summary of petroleum production and consumption in Bulgaria is shown in Table 2.

* includes crude oil, natural gas plant liquids, other liquids, and refinery processing gain

Source: DOE/EIA

Natural Gas
In 1999, Bulgaria produced 0.7 billion cubic feet (Bcf) of dry gas, and reserves totaled 0.2 trillion cubic feet (Tcf). Gas demand in 1999 was approximately 119 BCF, which provided approximately 15% of the total demand for energy. Imports of 134 BCF from Russia provide the majority of the natural gas supply. Bulgargas is the state-owned gas company whose responsibilities include: transportation, production, marketing, engineering, investment, production, and service activities. For the future, development for gas production on the Black Sea Shelf may have significant potential for Bulgaria. Overgas, a private company and joint venture between Bulgaria's largest private corporation, Multigroup, and Gasprom of Russia, is the largest gas operator in Bulgaria.

In May 2001, Bulgaria signed a 25-year concession agreement with Patreco of the United Kingdom for exploration and extraction of natural gas. The area covered by the agreement is Bulgaria's sector of the Black Sea, including the Galata deposit which has estimated reserves of 53 Bcf. Beginning with 2002, Patreco plans to extract 14 Bcf of gas per year.

In 2000, Bulgaria transported 423 Bcf of Russian natural gas to Greece, Macedonia, and Turkey. Most of this (388 Bcf) went to Turkey. Under Bulgaria's 1998 agreement with Gazprom, the transit volumes to Greece, Macedonia, and Turkey are slated to increase to 494 Bcf in 2002 and 670 Bcf by 2010.

An historical summary of natural gas production and consumption in Bulgaria is shown in Table 3.

Source: DOE/EIA

Coal
There are large deposits of low quality brown coal in Bulgaria. There is a reserve of 2.7 billion metric tons of lignite and 200 million metric tons of sub-bituminous coal. In 1998, Bulgarian coal production consisted of 30 million short tons of lignite, approximately 4.1 million short tons of bituminous, and 29,000 short tons of anthracite. Total Bulgarian coal production was 31.1 million short tons in 1998, while 4 million short tons of coal was imported. Apparent consumption totaled 37.8 million short tons. Bulgaria is highly dependent on imports of coal from world markets including the Ukraine. The coal-fired capacity in Bulgaria is 16,210 MWe including combined heat power. The Maritsa coal field, found in southern Bulgaria, produces low quality coal with high ash and coal sulfur content. The coal is produced by the Maritsa East Mines Company and is used to fire Maritsa 1 and Maritsa East 1, 2, and 3 units.

An historical summary of coal production and consumption in Bulgaria is shown in Table 4.

Source: DOE/EIA

Bulgaria's coal mines with the largest production are the Maritsa East Mines which feed 2,490 MWe of minemouth power plants. Presently, 22 million metric tons per year of lignite come from these mines. The lignite has an average heating value of 2,840 Btu per pound (Btu/lb), and its heating value ranges from 2,410 Btu/lb to 5,510 Btu/lb. At expected production rates, the reserves at Maritsa East are projected to last 50 years. Besides lignite for the power plants, the Maritsa East Mines provide about 3 million metric tons per year that is used for production of 1 million metric tons per year of briquettes. Bulgaria's 1998 energy strategy plans that briquette production will continue in a refurbished factory with improved briquette quality.

Bulgaria's energy strategy includes increasing coal output. The goal is to increase the output of the Maritsa East mines to pre-1989 levels in the 2005-2010 time frame. This includes developing the Troyanova-1, Troyanova-2, and Troyanova-3 mines at the Maritsa East basin. This would also include rehabilitation of two nearby power plants and building a new power plant to replace one soon to be decommissioned.

The Bobov Dol Mines produce 2 million metric tons per year of brown coal which is used at the 630 MWe Bobov Dol power plant. Bulgaria's 1998 energy strategy plans for the Bobov Dol Mines to continue producing at the same rate. The Stanyantsi, Beli Breg, and Chukurovo Mines produce about 1.5 million metric tons of coal per year. Most of this coal is also used at the Bobov Dol power plant. The Pernik Mines are depleting their deposits and will eventually be phased out. In 1998, they supplied 1.6 million metric tons of coal per year, mainly for the Republica power plant.

The Maritsa East Mines, Bobov Dol Mines, Stanyantsi Mines, Beli Breg Mines, Chukurovo Mines, and Pernik Mines discussed above are all state-owned mines. They sell coal at state-regulated prices to consumers. Similarly the briquette factory at Maritsa East sells briquettes to consumers at state-regulated prices. Coal and briquette prices are still subsidized but the Bulgarian energy strategy calls for phasing out the subsidies. By letting the prices of coal and briquettes rise to market levels the strategy expects competition to prevail and encouragement of investment in coal mining.

Besides the state-owned mines discussed above there are some coal mines that sell their products at contracted prices. The largest of these are the Pirin Mine, the Maritsa Basin Mine, the Balkan Mine, the Cherno More Mine, the Vitren Mine, and the Anthra Mine. The Pirin Mine provides about 0.3 million metric tons of coal per year for the Bobov Dol power plant. The costs at this mine will need to be reduced to attain profitability. The Maritsa Basin Mine is unprofitable. The 1998 Bulgarian energy strategy suggests changes to the Mine operation and refurbishment of the Maritsa-3 power plant served by the Mine. The strategy also suggests building a district heating system for the town of Dimitrovgrad. The strategy indicates that at an annual output of 1 million metric tons per year the Mine could be profitable. The Balkan and Cherno More Mines produce 100,000 tonnes and 200,000 tonnes respectively. The coal is used at the Sliven and Gabrovo power plants. The Vitren Mine produces 100,000 tonnes of coal per year. The Anthra Mine produces 15,000 tonnes per year of anthracite. These mines are expected to continue at these rates.

In August 1998, the Bulgarian government issued its Action Plan for Coal Mining Companies for the Period 1998-2001. This plan indicated that inefficient mines would be closed over this period and then there would be free market pricing of coal and privatization. In 2000, Bulgaria had 26 operating mines, of which 13 were deemed to be viable. Privatization procedures have begun for 11 coal mining companies.

The 1998, Bulgarian energy strategy calls for a $437 million investment program to improve the coal mining sector. This would include new mine technology, refurbishing facilities, and reclamation of mined land. The strategy envisions an improved investment environment as market pricing is phased in over the next two years.

In Bulgaria, there is heavy coal use for heating in the residential sector, although households are gradually switching to natural gas and electricity for heating. Much of the household coal heating is with briquettes, especially in the vicinity of the state-owned briquette factory, Stara Zagora. About 9% of Bulgaria's coal production is used for making briquettes.

There are 21 cities and towns in Bulgaria that have district heating. These include Sofia, Plovdiv, Republica, Traicho Kostov, Pleven, and Shumen. Of the combined heat and power plants, 30% are coal-fired. All the district heating systems in Bulgaria were built between 1970 and 1990. These systems provide 22% of the total public and residential heating.

Nuclear
Bulgaria has one nuclear power plant, Kozloduy, located 200 km to the north of Sofia on the Danube River. Kozloduy, the largest plant in the Balkan Peninsula, consists of six units using the Russian-designed VVER reactors. Units 1, 2, 3, and 4 (rated at 440 MWe each) were commissioned in the 1970s and early 1980s, while units 5 and 6 (rated at 1,000 MWe each) were commissioned in 1987 and 1991, respectively. The total capacity of Kozloduy is 3,538 MWe. Until the end of 1990, the oldest four units at Kozloduy had one of the best load factors in the world. International concern about the station's safety record, however, has led to calls for its complete closure. Although two of the six units at Kozloduy (Units 1 & 2) are slated for shutdown by 2003, it was accepted that the complete closure of Kozloduy now is impractical, given the country's dependence on nuclear power. In support of continued operation, government observers have noted a marked improvement in safety at Kozloduy due to training, new investment, and a marked increase in employee morale. In 2000, the Kozloduy nuclear power facility produced 18 billion kilowatt-hours (kWh), which constituted 44% of Bulgaria's total electricity generation.

In May 2001, the Working Party on Atomic Questions (AQG) of the European Union issued a report on nuclear safety in candidate countries, including Bulgaria. AQG noted that Kozloduy Units 1 & 2 were already slated for closure by 2003, and indicated it expected Units 3 & 4 to be closed by 2006; definitive closure dates might be announced by Bulgaria in 2002. AQG noted that Bulgaria had been doing safety upgrades since the early 1990s under the program now known as PRG 97-2000, which has been peer reviewed by international experts; most of the major improvements under this program are scheduled for 2002. AQG recommended that Units 1 & 2 be given only limited use in their remaining time before shutdown, and for Units 3 & 4, AQG recommended that the planned safety upgrades be done, including installation of a third leak detection system and implementation of confinement improvement measures. For Units 5 & 6, AQG recommended that safety protection against contingencies of high energy pipe breaks be reviewed for compliance with EU standards. AQG also recommended a reactor pressure vessel surveillance program for Units 5 & 6. In February 2001, the Bulgarian government signed a $76 million contract with Westinghouse to upgrade Units 5 & 6.

For the planned 600 MWe Belene nuclear power plant, the Bulgarian government will be assessing the condition of the equipment supplied and the construction already completed, and will determine what would be necessary to license the plant in conformity with current international standards. The final design would provide for safety, security, and load-following capability to meet international standards.

Hydroelectric Energy
Bulgaria has modest hydroelectric resources. Water accumulates in approximately 50 large reservoirs, with capacities ranging from 15 million to 2,132 million cubic feet. The uses range from drinking and industrial water supply to irrigation and electricity generation. Due to decreased rainfall in recent years, however, hydroelectric power generation is only operating at 50% of the design capacity.

There are 6 large complexes of cascading dams. Each one consists of at least three hydroelectric power plants, totaling 18 stations with an electric generating capacity of 4,571 million kWh. These hydroelectric stations are located in the highest mountain ranges. The Belmeken-Sestrimo-Chaira cascade, Batak cascade, and Arda cascade are in the Rodopi mountains; the Vacha cascade and Iskar cascade are in the Rila mountains; and the Sandanska Bistritsa cascade in the Pirin mountains.

A summary of Bulgaria's major hydroelectric generating facilities is shown in Table 5.

n/a - not available or not applicable

note: Tsankov Kamak facility still in design/construction phase

* utilizes water from Belmeken reservoir; when operating in pumping mode, power input requirement is 540 MWe

Sources: NEK, Bulgarian Energy Agency

Energy Transmission Infrastructure
Oil Pipelines
As of 1992, crude oil pipelines totaled 120 miles and petroleum products pipelines totaled 326 miles. Bulgaria plans to build the Alexandropolous-Bourgas Pipeline, which will connect to Russia via the Bulgarian port of Bourgas and to the Greek port of Alexandropolous. The proposed 178-mile underground pipeline would let Russia export oil through the Bulgarian Black Sea port of Burgas, bypassing the Bosporous. It has been estimated that the project would cost $600 million. The pipeline capacity would be 600,000 to 800,000 b/d, and the Russian oil firm Yukos has indicated it would take at least half the capacity. Bulgaria, Russia, and Greece have agreed on a memorandum of cooperation on the project, which would set up the Trans-Balkan Oil Company. The three countries are conducting a $2.2 million feasibility study of the pipeline and its second stage report was completed in October 2001. Some Bulgarian and Greek companies have indicated interest in the project and negotiations are continuing.

Bulgaria is also considering another proposed pipeline, which would link Burgas to the Albanian port of Vlore on the Adriatic Sea. This 560-mile 750,000-b/d pipeline would pass through Macedonia, and the governments of Bulgaria, Macedonia, and Albania have all submitted letters of acceptance for the project. A $980,000 feasibility study, partially funded by the U.S. Trade Development Agency, has been completed and concluded that such a pipeline would be feasible, with an estimated cost of $850 million to $1 billion. A company was set up for the project, Albanian-Macedonian-Bulgarian Oil Pipeline Corporation (AMBO). AMBO had hoped to begin construction in 2001, but the insurrection in Macedonia has delayed the project.

Gas Pipelines and Underground Storage
Natural gas pipelines, as of 1992, reached 870 miles and, in 1995, reached 1,367 miles, with nine compressor stations, increasing capacity to 190 MW. The pipeline system runs from east to west with one branch through the Danube plain in northern Bulgaria and another through the Thracian plain in the central part of the country, both to the Sofia area. The diameter of this pipeline system varies from 28 to 40 inches. Several smaller connecting lines branch off from this ring structure to major industrial centers located throughout the country. Gas pipelines from Russia support industries such as chemical, cement, construction, and metallurgy. There are plans to increase the capacity of the pipelines to allow export to Greece, Turkey, Macedonia, and Serbia. There is an underground gas storage capacity of 18 BCF in Chiren. The French Company, Sofregas, plans to set up a joint venture to design and build gas distribution networks in medium-sized Bulgarian towns. Finance from the EU-Phare Program will help to launch the venture which will provide gas lines to approximately 100 population centers around the country.

Bulgargas owns and operates the 1,554-mile gas pipeline network in Bulgaria. Bulgargas has increased the capacity of this pipeline network by widening the network and building new compressor stations, rather than building entirely new pipelines. Bulgargas has estimated that the costs of pipeline network enlargement for 2001 would be $45 million.

Electricity Grid
Bulgaria's electric power transmission network consists of transmission lines of 750 kilovolt (kV), 400 kV, 220 kV, and 110 kV; step-down substations; medium and low voltage distribution networks that supply the industrial, public and residential customers; transformer stations and nodal substations, and installed medium voltage transformer capacity. The system of 400, 220 and 110 kV lines, which have a total length of about 12,269 kilometers, operates in a ring mode. The inter-system transmission line of 750 kV from Varna to Isakcha to Yujnoukrainskaya nuclear power plant and the inter-system transmission line of 400 kV from Dobrudja to Vulkanesht are presently in a reserve status.

In May 2001, Bulgaria moved to increase the linkage of its electric system to Turkey's by starting the construction of a second 400 kV cable to Turkey. It is estimated that the 42-mile link will cost $35 million.

A diagram of Bulgaria's high-voltage electricity grid system is shown in Figure 1.

Figure 1: Bulgaria's High-Voltage Electricity Transmission System

Source: NEK

Electricity
Installed Capacity
The installed capacity of the Bulgarian power system in January 2001 was 13,189 MWe. An historical summary of installed electricity generating capacity in Bulgaria is shown in Table 6.

n/a - not applicable

Source: DOE/EIA

Generation and Consumption
During the year 2000, power stations of the Bulgarian power system generated 40,863 million kWh of electricity. A significant amount of this electricity, 4,620 million kWh, was exported. The contribution of the Kozloduy nuclear power plant in overall electricity generation is presently about 44%, while the share of power plants fueled by local coal exceeds 40%, and the hydroelectric power plants produce about 7% of Bulgaria's electricity. The total consumption of electricity in 2000 was 36,243 million kWh.

Bulgaria is a major exporter of electricity, supplying power to Turkey, Greece, Yugoslavia, Macedonia, and Albania. In 2000, Bulgaria exported 5.6 billion kilowatt-hours (BkWh), of which 3.4 BkWh went to Turkey. Bulgaria's electricity export earnings for 2000 were $105 million. Bulgaria and Turkey have agreed that exports to Turkey should be 5 billion kWh in 2002. An historical summary of electricity generation, consumption, and trade for Bulgaria is shown in Table 7.

n/a - not applicable

generation components may not add to total due to rounding

Source: DOE/EIA

Electric Industry Overview
All nuclear, hydro, and pumped hydro power plants are owned by NEK. There are a small number of independent producers, such as municipally owned district heating plants and thermal stations at industrial complexes. The independent producers have 1,606 MW of thermal capacity for combined heat and power (CHP),and they generate 14% of the electricity. NEK was established in January 1992, and is responsible for electricity generation, transmission, imports/exports of energy, construction, and maintenance. A summary of Bulgaria's fossil-fuel power plants is shown in Table 8.

Source: NEK

Utility Expansion Plans
As shown in Table 9, Bulgaria plans major power plant construction projects over the next 10 years. The largest project will be the replacement of 900 MWe of capacity at the Maritsa East minemouth power plant complex. Power generation at Maritsa East was estimated at 11.8 billion kWh in 1998, and is planned to increase to 12.8 billion kWh in 2001, 19.5 billion kWh in 2005, and 21.0 billion kWh in 2010. The output of the Maritsa East Mines will be increased to meet the expected load, from it current level of 23 million tonnes per year to a levels of 24 million tonnes in 2001, 36 million tonnes in 2005, and 38 million tonnes in 2010.

Source: Bulgarian Energy Agency

To obtain the power generation capacity shown above, considerable investment will be needed, as shown in Table 10. The investments shown in the table include foreign investment in BOT (Build-Own-Transfer) and BOOT (Build-Own-Operate-Transfer) plants.

Source: Bulgarian Energy Agency

Rehabilitating of the coal-fired power plants Maritsa East, Bobov Dol, and Varna is expected to be complete about 2004. This will involve at total of four 150 MWe units and 17 units in the 210-215 MWe range. In the rehabilitation at Maritsa East 1 and Maritsa East 2, plans include increasing plant efficiencies and improve availability to get 6,500 hours of operation per year. Flue gas desulfurization units are also planned at these plants. At Bobov Dol and Varna intentions are for the units to be used for intermediate load. Load-following capabilities of these units will be improved.

Besides the rehabilitations, there are 900 MWe of replacement capacity planned for Maritsa East 1, consisting of three 300 MWe units. These new units will have flue gas desulfurization units included in their installation.

In June 2001, Bulgarian state-owned companies signed $1.4 billion in contracts for developing the Maritza minemouth power plants with two American firms, AES and Entergy. The deals include coal supply to the plants and power purchase from the plants. NEK will buy the power from the projects. The Bulgarian cabinet had approved the deals on May 31, 2001. Construction is expected to start in 2002.

The $900 million Maritza East-I project is a 670 MWe power plant being developed by AES and two partners, Access International and Delphos International, as part of the newly-formed Consolidated Continental Commerce Ltd., which will run the project. The 15-year power purchase agreement calls for supplying electricity at 4.4 cents per kWh at the beginning of the period and later increasing it to 4.5 cents per kWh at a later date. The power plant is lignite-fired and it is expected to come online in 2005.

Entergy and NEK have signed a contract to modernize the 840 MWe Maritza East III lignite-fired power plant. It is expected that the construction work will take three and a half years and the project will cost $475 million. Power from the project would start below 3 cents per kWh. The U.S. Overseas Private Investment Corporation (OPIC) had provided $200 million in political risk insurance for the project in June 2000, and it is expected that the European Bank for Reconstruction and Development will provide part of the financing.

The European Bank for Reconstruction and Development (EBRD) is providing funding for the upgrade of the Varna power plant and two additional hydraulic turbine units at the Chaira Pump Storage Station. Bulgaria officials are negotiating with French, German, Russian, and American companies to help complete the first Belene unit by the year 2004. The Bulgarians are aiming to have the project financed by an international consortium, with Bulgarian participation.

Environmental Activities
Bulgaria's historical emphasis on heavy industry has caused substantial damage to its environment. In 1992, an Environmental Protection Act was established with a National Environmental Fund and a Municipal Environmental Protection Fund. Recent plant closures have helped alleviate many emissions but have cut the flow of funds for environmental efforts resulting from pollution fines. Political reforms in the country are underway to address these issues. But progress has been chaotic but includes such measures as tax reliefs for companies who use environmentally sound technologies. Still, efforts to bring Bulgaria's environmental assessments into harmony with European Community standards are promising.

Specific priority environmental problems include: water, air and soil pollution; nuclear waste from mines and the power plant; solid waste management; air and water pollution coming into Bulgaria from Romania and the former Yugoslav countries; and high levels of industrial contamination rendering certain cities uninhabitable. In some areas, metal working factories have so polluted the soil and water with lead, arsenic, and cadmium that the land is unusable for agriculture. Wastewater treatment facilities frequently are absent or do not operate properly. As a result, some rivers are considered dead or nearly dead. Lead from car exhaust threatens population centers. Certain mining areas have higher levels of radioactivity than some nuclear plants. Other environmental concerns have to do with how to deal with hazardous wastes, threats to the Black Sea Coastal regions, and industrial pollutants that damage the ozone layer.

In the 1990s, Bulgaria experienced a significant decrease in air pollution, mostly as a result of a slow economy with reduced production. Between 1990 and 1998, both sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions fell by more than 35%. Historical and projected anthropogenic sulfur dioxide (SO2), nitrogen oxide (NOx), and carbon monoxide (CO) emissions in Bulgaria are shown in Table 11.

Projections for 2010 from Gothenburg Protocol

Source: EMEP (Cooperative Program for the Monitoring and Evaluation of Long-Range

Transmission of Air Pollutants in Europe) - Oslo, Norway
As part of Bulgaria's energy strategy, flue gas desulfurization (FGD) is to be installed on existing power plants. At the Maritsa East power plant, two limestone FGD units are planned for installation by 2001. By 2010, another two FGD units are planned at Maritsa East and other FGDs at Bobov Dol and Varna.

Bulgaria is a party to many international environmental agreements including: Air Pollution, Air Pollution-Nitrogen Oxides, Air Pollution-Sulfur 85, Climate Change, Ozone Layer Protection. The country also signed, but has not ratified, the Air Pollution-Sulfur 94, and Air Pollution-Volatile Organic Compounds agreements. Additionally, Bulgaria has signed and ratified the United Nation's Framework Convention on Climate Change. An historical summary of carbon dioxide (CO2) emissions from fossil fuel use in Bulgaria is shown in Table 12.

note: components may not add to total due to rounding

Source: DOE/EIA

Privatization Status
A mass privatization program, patterned after the voucher system of the Czech Republic, has gotten under way, with the first auction held in October 1996. Overall, privatization of the state-owned industry has continued to move slowly, while privatization of small-scale industry has acclerated, particularly in the retail and service sectors. Nearly 90% of industrial enterprises are still state-owned. The government has been slow to move these companies towards privatization or to shut down nonviable enterprises. However, with recent economic improvements in Bulgaria, privatization appears closer to realization, especially in energy. The August 1998 Bulgarian energy strategy calls for restructuring and privatization in electric power, coal mining, district heating, and natural gas. The restructuring is planned for two phases. The first is planned through 2001; the second is from 2001 to 2010.

Bulgaria's Ministry of Economy has announced that Bulgaria will reform its privatization methods by utilizing an auction system and a strict evaluation process in an effort to combat corruption. This will increase transparency by ensuring that all bidders participate under the same conditions. Bulgaria has also decided to stop privatizations that utilize preferential conditions such as payment extensions to companies which are bought out by employees.

In electric power, it is planned that NEK will privatize its electric generation facilities. In the time through 2001, they will privatize 22 large hydro plants and 41 small hydro plants. NEK will also sell the Maritsa-3, Bobov Dol, and Russe power plants, and plans to establish joint ventures with foreign investors to rehabilitate and operate the Maritsa-3 and Varna power plants.

Entergy of New Orleans has entered into an agreement with NEK to provide electric power to the grid for 15 years. Entergy owns 66% of a Bulgarian power plant and NEK owns the other 34%. Entergy will buy brown coal or lignite from NEK to fuel the plant and then sell the electricity back to NEK.

Plans currently call for privatization of the Maritsa East 2 thermal power plant in the 2001-2010 time frame, along with other generation and distribution facilities. This will leave NEK operating only the transmission lines, the central dispatcher control, the nuclear power plant, and the pumped hydro.

In the first phase of coal mining privatization, it is planned that unprofitable mines will be closed. The remaining mines will be improved to make them more attractive to investors. The mines will then be privatized in the second phase of privatization.

Concerning privatization of district heating systems, it is planned that the government will transfer the district heating facilities to the municipalities. There will also be introduction of a consumption-based billing system. Over the next few years it is planned that the joint stock municipal district heating companies will be gradually privatized in blocks. The second stage of privatization calls for ending of subsidies with the municipalities regulating local district heating companies.

The first phase of natural gas privatization will attempt to diversify gas supply and improve the gas transmission infrastructure. In the second phase, privatization of Bulgargas (the state-owned gas utility) will begin with the selling of shares but with the state retaining control. After 2010, privatization of Bulgargas is to be completed and Bulgarian gas markets with be fully integrated with the rest of Europe.

Economic Situation
Bulgaria has recently made considerable progress in the difficult process of moving from a command and control economy to one that is modern market-oriented. The economic situation in Bulgaria had previously been characterized by volatile rates of inflation, but Bulgaria was able to achieve a major turnaround of its economy in 1997 by adopting a currency board system. The Bulgarian lev was pegged at first to the German mark in 1997 and to the Euro at the beginning of 1999. This led to an amazing improvement in the inflation rate, going from triple digits in 1997 to 6.2% in 1999, though in 2000 the inflation rate was back up to over 11%. The effect on GDP growth was also dramatic, going from a negative GDP growth (-6.93%) in 1997 to a positive growth rate of 5% in 2000. An historical summary of Bulgarian GDP and inflation is shown in Table 13.

n/a - not available

Sources: National Statistics Institute of Bulgaria, Euromonitor, Eurostat, New Zealand Trade,

U.N. Common Country Assessment for Bulgaria
Trade and Investment
In the early 1990s, Bulgaria's trade suffered from an economic crisis, depreciation of the lev, U.N. sanctions against Serbia, the loss of former eastern markets, and restricted access to western (especially EU) markets. However, Bulgaria has successfully reorienting its trade to Western Europe and re-cultivated ties within Central & Eastern Europe, Russia, and the former Soviet Republics.

The export/import balance in 2000 was $4.8 billion/$5.9 billion. In 2000, Bulgaria was exporting mainly to Italy, Turkey, Germany, Greece, Yugoslavia, Belgium, France, and the United States. Minerals and fuels provided approximately 30% of the imports. The external debt of the country in 2000 was $10.4 billion.

To further strengthen its trade, Bulgaria became a member of the World Trade Organization (WTO) in December 1996. Bulgaria hopes that this accession to the WTO will open an opportunity to negotiate for accession to the Central European Free Trade Agreement. In 1996, the United States also granted permanent most-favored-nation status to Bulgaria.