Strategic disinformation? “Japanese consortium to build one of the world’s largest solar power stations in Bulgaria”

From January 22 through January 26, 2011, Bulgaria’s Prime Minister Boyko Borisov visited Japan as head of a delegation of Bulgarian government and business representatives that also included Miroslav Naydenov, the Minister of Agriculture and Food, as well as Traicho Traykov and Evgeny Angelov, respectively the Minister and Deputy Minister of Economy, Energy and Tourism. Among the highlights of the trip was the signing on Monday, 24 January, of a memorandum of understanding between the firm Bulgarian Energy Holding (BEH) and the Japanese firm Toshiba Corp. regarding collaboration in various energy fields.

One day before the Prime Minister’s arrival in Japan, on the morning of 21 January, the Japanese newspaper Nihon Keizai Shinbun (colloquially “Nikkei”) published a report to the effect that a consortium of Japanese firms, together with the Japanese government and the Czech energy giant CEZ Group, is planning to build a 250 MW solar plant in Bulgaria.  An initial article, based on the printed newspaper article, was posted to Nikkei’s web site:

東芝など官民連合、ブルガリアで最大級の太陽光発電所

This article reports (without indicating sources) that a consortium of Japanese firms, backed by an unspecified sort of support from or alliance with the Japanese government, will construct the largest photovoltaic solar park in the world in Bulgaria.  The four Japanese companies – Toshiba Corp., Tokyo Electric Power Co., ITOCHU Corp., and the public/private partnership Innovation Network Corporation of Japan (INCJ) – will form a joint venture in Bulgaria with the Czech power company CEZ.  The total cost of the project will be in excess of 100 billion yen (880 million euros), of which total the four Japanese companies will together provide 50 billion yen and CEZ 10-20 billion.  The output of the plant is expected to reach 250 MW after five years.  The two governments are expected to reach an agreement at the beginning of the following week.

This first web article was followed later in the morning by a longer online article taken from Nihon Keizai Shinbun’s morning edition:

東芝など官民連合、最大級の太陽光発電、２５万キロワット、ブルガリアで

 (Only the first part of this article is available to non-subscribers, but the entire article can be found at another site.)

This fuller article adds some details and strategic background not found in the earlier report.  The photovoltaic plant will be located in the city of Yambol in eastern Bulgaria.  Plans are to build an initial plant of 50 MW by the end of 2011, and gradually invest more money year by year through 2015 to expand the plant.  An accord is to be signed at the beginning of the following week between Japan’s minister of Economy, Trade and Industry and Bulgaria’s minister of Economy, Energy and Tourism.  The Japanese government will contribute funding via the Innovation Network Corporation of Japan (INCJ), and the Bulgarian government will assist the effort by establishing a fixed solar feed-in tariff and by implementing other improvements to the transparency of the system.

The article goes on to analyze the advantages of this deal for the various participants.  The advantage for Bulgaria will be in boosting its share of energy from renewable resources from the present 7% towards its target of 16% by 2020.  For Japan the advantage will be the comparatively high prices paid for renewable energy in Bulgaria, which are 60% higher than those in Romania.  Toshiba, for its part, is hoping that by 2015 its annual revenue from photovoltaic solar power will reach 150 billion yen, out of a target of 200 billion yen for total company revenue.  As for Tokyo Electric Power Co., that firm has been operating a photovoltaic solar park in Korea since 2008, and in the autumn of 2010 announced plans to contruct a photovoltaic solar park in California.

These two news reports from Nikkei have been picked up and echoed around the world, but no details have been forthcoming beyond those published by Nikkei on the morning of 21 January.  On Monday, 24 January, there was in fact a signing of an agreement in Tokyo regarding energy, but it was between Toshiba Corp. and Bulgaria’s publically owned energy holding company, Bulgarian Energy Holding EAD, for energy cooperation in a number of areas, and news reports of the signing did not mention any specific solar projects.

Likewise, on the day of the Nikkei articles – 21 January – a journalist for Yahoo contacted Toshiba about the story:

Toshiba to build 'huge solar plant' in Bulgaria

The Yahoo article reports the following:

"It is true that Toshiba is carrying out various activities for developing solar power in Bulgaria," a Toshiba spokesman said. "But we cannot comment on a specific project and nothing has been decided yet."

In fact, back on 30 August 2010 it had been announced that Toshiba had obtained a permit for the construction of a solar plant in Yambol:

Слънчевата централа на "Тошиба" край Ямбол получи разрешение за строеж

Specifically, the permit was for a photovoltaic plant of 10 MW to be built on about 300 decares (30 hectares) of land in Bezmer Village, Tundzha Municipality, Yambol District, Bulgaria.  The investment was expected to be in excess of 30 million euros, and the August news report goes on to mention that “the Japanese” (presumably Toshiba) planned to build 8 solar parks in Europe by 2015, and that Toshiba expected to see its experience in solar energy and in smart grid serve to position the company well in the Italian and American markets, so that in the end “these investments” would come to generate about 1.8 billion dollars of revenue annually for Toshiba by 2016.

In addition to the Yahoo report, another piece of contrary evidence is an official press release published on 24 January by Bulgaria’s Ministry of Economy, Energy and Tourism:

"Тошиба" инвестира 37.6 млн. евро в соларен парк край Ямбол (24.01.2011 г.)

This press release makes no mention of any specific photovoltaic projects involving Toshiba except for the 10-MW project at Yambol for which Toshiba had already received a permit back in August.  The press release says that Toshiba will be investing about 4 billion yen (€ 35 mln) to develop this solar park, which will be operational in 2011.

The press release goes on to note that “[t]his is part of a major project of the Japanese corporation to build solar parks in Bulgaria, other European countries, and the USA”, and that Toshiba “is considering the implementation of other similar projects in Bulgaria as well as the acquisition of local firms with experience in building such facilities.”

Most significantly, however, the press release states the following: “Despite initial plans to attract other co-investors, Toshiba announced plans to carry out the investment alone.”

Another item worthy of attention is Toshiba’s official press release of 24 January, issued after the signing ceremony held at Toshiba headquarters in Tokyo earlier that day:

ブルガリア国営企業とのエネルギー協力に関する覚書の締結について

The press release makes no mention of any specific solar projects in Bulgaria, but merely notes that the MOU with the Bulgarian power company BEH represented an “opportunity” for Toshiba to carry out in Bulgaria, among other things, “the development of mega-solar projects”.  (The expression “mega-solar project” (メガソーラープロジェクト) is used in crowded Japan for anything over 1 MWp, and in fact Toshiba had used the term in May 2010 to refer to its 10 MWp project at Yambol, so the expression need not necessarily refer to a project on the order of 250 MWp.)

Finally, the website of Tokyo Electric Power Co. mentions no projects in Bulgaria except for a geothermal project at Sofia Pernik and a biomass project at Svilosa (see the 2007 file “今回日本政府の承認を受けた 23 事業”).

To sum up, there has been no corroboration from any source of the details leaked to Nikkei, neither from Toshiba itself, nor from Bulgarian authorities, nor from Japanese authorities, nor from local journalists on the ground in Yambol, Bulgaria.  The investment amounts given by Nikkei are vague: no specific amounts are provided for the four individual Japanese companies, and only a vague figure of 10-20 billion yen is given for the firm CEZ in Prague.  And not only do subsequent news reports and press releases fail to add any additional details to Nikkei’s information, they even fail to corroborate what had been leaked to Nikkei.  Thus we have Bulgaria’s energy ministry on Monday stating only that Toshiba has “confirmed” that it will go ahead with the 10-MW project at Yambol, and noting that the firm has decided not to include other investors even in that small project.  As for Toshiba itself, its press release of 24 January makes only one vague reference to “mega-solar projects”, and this term is merely repeated in passing in the joint statement between the Bulgarian and Japanese ministries issued on 25 January.  Likewise the websites of Tokyo Electric Power Co. and BEH EAD give us no indication that these two companies have any knowledge of a specific large solar project being contemplated for Bulgaria.

In conclusion, one gets the impression that someone close to Toshiba in Tokyo leaked to a Nikkei journalist some details of a very preliminary idea for a Japanese consortium for one or more photovoltaic parks somewhere in Bulgaria (perhaps at Yambol, but perhaps not).

What could have been the motivation for this leak?  If it had come from the Bulgarian side, we would have reason to suspect land speculation in the area around the announced project site, or else local elections.

But since the leak apparently came from the Japanese side, one possible motive that comes to mind would be an attempt to temporarily boost the stock price of one or more of the Japanese companies involved.  Yet this seems rather doubtful, given the large size of the companies involved – Toshiba, Tokyo Electric Power Co., and ITOCHU.

Another possible motive might be a boost to the ruling party in nationwide elections, yet no such elections are coming up in the near future.

Perhaps the only remaining possibility would be a disaffected Toshiba staffer or Toshiba-related consultant who, seeing his pet project in danger of being sidetracked and forgotten due to the recession, tries to jump-start the process by using a leak to Nikkei in the hours before the Bulgarian delegation’s arrival as a way to generate media enthusiasm and present the Bulgarian and Japanese dignitaries with a fait accompli, forcing them to publically acknowledge the project as alive and realistic rather than risk embarassment by denying it.

If that was the motivation, then the attempt would seem to have failed.  All of the governmental and corporate press releases regarding the accords reached in Tokyo between the Bulgarian delegation and their Japanese counterparts steered clear of giving the slightest support to the Nikkei leaks published on Friday morning, and with no additional details forthcoming over the weekend and apparently no interactive press conferences at which the representatives of the two sides could be questioned, the news of the “biggest solar park in the world” had already vanished from the radar screens by the time the last comuniqués were being issued on Tuesday, 25 January.

Was the story simply invented out of nothing?  Probably not.  The sorts of details provided to Nikkei do seem to indicate some kind of plan for a real project, but their vagueness gives the impression that the project has not moved very far beyond the stage of daydreaming and wishful thinking.

Only time will tell, but the lack of any supporting news – not to mention permits, land purchases, or requests for grid connections – makes it seem unlikely that between now and the end of 2012 we will see anything from this beyond a Toshiba-only photovoltaic plant of 10 MW or perhaps 50 MW capacity.

(For corrections or additions, please contact me at

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Related articles:

東芝が「Bulgarian Energy Holding」とエネルギー分野で協力する方針、250MW級の太陽光発電所も建設？

(2011/01/25 (Tue))

В Ямбол ентусиазирани от меморандума с Тошиба

(25.01.2011 12:11)

Joint Statement between The Ministry of Economy, Trade and Industry of Japan and The Ministry of Economy, Energy and Tourism of Bulgaria

25 January, 2011

Тошиба строи слънчева електроцентрала в Ямбол

(21.01.2011, 08:19)

Bulgaria looks to Limit the Deluge of Green Energy Projects Fueled by Generous Subsidies

(25 Sep, 2010, by Abhishek Shah)

Why is Japanese Technology Giant Toshiba entering the Solar EPC business?

(25 Aug, 2010, by Abhishek Shah)

TOSHIBA: 2010年度経営方針説明会

On p. 20: “メガソーラー 国内3件受注、海外1件内定 …ブルガリアヤンボルに土地・ライセンス取得”

Greece Looking for Partner to Construct “the Largest Solar Park in the World”

This news appeared last Friday in Greek, French, Serbian, and English.  The plant will be a photovoltaic solar park of 200 MWp, built on 530 ha of land near the city of Kozani (Κοζάνη) in northern Greece, at a cost of € 600 mln.  The news report says that three firms have already expressed interest in the project: Yingli Solar (英利绿色能源控股有限公司, China), Q-Cells AG (Germany), and SunPower (USA).  (The FT report has “SunEdison” instead of “SunPower”.)

As for this being “the largest solar park in the world”, it goes without saying that once again we are dealing with the sorts of claims that journalists and politicians love to make.  Recall that already back in October it was announced that German investors would be building a solar park of 250 MWp for € 800 mln on 1,000 ha of land at Nova Crnja in northern Serbia (which they, more modestly, boasted as only the largest solar plant in Europe), while the proposed 966-MW Blythe thermal solar park in California already has its necessary permits, not to mention the proposed solar projects (technologies yet to be defined) of 2 GW at Ordos in China, and 8 MW near the Kalihari Desert in South Africa.

Sources:

Τρεις «μνηστήρες» για το φωτοβολταικό της Κοζάνης, και σχέδιο της ΔΕΗ για εξαγωγές στην Ευρώπη…

Το φωτοβολταϊκό πάρκο στην Κοζάνη εξαγγέλλει ο Πρωθυπουργός

Greece announces €600m solar project

La Grèce cherche un partenaire pour le "plus grand parc solaire du monde"

Grčka gradi najveći solarni park na svetu

What Will 2011 Bring to Energy in Southeastern Europe? (cont'd)

In response to what I posted earlier to that online group, someone from the Croatian power company HEP responded as follows:

Some comment! I like it. We will see this time next year how it all fared. You shed light at one important aspect of whole electricity story in the region - sensitivity. Shut down a block in Kozloduy and prices rise, start a new block of 1000 MW band and prices fall. All in all, electricity is very shallow market. In that name every prediction has a lot of uncertainty instilled - e.g. you RES predictions might be right for first 6 months of the year, but with some cash boost it can implode during the three months later. Thanks for sharing your thoughts.

The following is a modified version of what I replied:

Thank you for your kind response.  Indeed many things are possible, and predicting the future is very difficult, so I avoided any overly precise predictions such as “the Dow Jones will hit ____ this year”, “gold will pass ____”, “___ GW of new generating capacity will come online”, “construction will be completed on the ___ power plant”, or “renewable energy will produce __% of ___’s energy by the end of 2011.”

Nevertheless, some things are constant.  Recently I read an excellent article on the Asian Crisis of 1997 – “The Three Stages of Delusion”, by Dylan Grice – and the author shows how at each point the authorities in the various countries claimed that everything was under control, that the worst was already past, that a general collapse would be impossible.  And yet in one country after another the unthinkable did happen, wiping out (or transferring) hundreds of billions of dollars of wealth.  As the author points out, the same sorts of responses, and the same sort of continual widening and deepening of the problem, have been seen in Western countries since 2006.  And just as most of the largest rallies in the history of the Dow Jones Industrial Average took place during the Great Depression of the 1930’s, to be followed in each case by a new decline, so too we can expect during the present depression that again and again markets will respond gullibly to words of encouragement or biased statistics from official sources.  (They say that back in the early 1930’s the rallies were influenced by Pres. Herbert Hoover getting on the radio and reassuring people that everything was all right in the markets.  Ben Bernanke’s infamous “green shoots” remark will be two years old this March, and Hank Paulson’s “bazooka in your pocket” remark was 2-1/2 years old last week.)

Another situation that nobody is paying attention to – due to the rotating problems with the PIIGS – is the dire situation in Japan.  As Mike Shedlock wrote in a recent article,

The Prime Minister's statement "Japan is approaching the edge of a cliff" is a sure sign Japan has already fallen off a cliff. Politicians do not admit problems until it is too late to fix them. Thus, we have official admission that Japan's demographic time bomb has just gone off. The only question now is how quickly the problem escalates.

One might think that economists would learn something from this, but they would be wrong.

Keynesian clowns think Japan failed to defeat deflation because government did not spend enough fast enough. In other words, Keynesian clowns think the way to get out of a hole is to dig deeper, faster.

Meanwhile, Monetarist clowns feel the central bank did not ease enough fast enough. They think if you just print enough money someone will spend it. In Japan, all printing money did was artificially suppress interest rates as the money went into government bonds.

Question of the Day: Do economists (in general) somewhere along the line acquire an inability to reason, or does an innate inability to reason lead one to a career as an economist?

As Mike Shedlock, John Mauldin, and one or more others have noted, there is ample evidence that China has overheated, and there is a growing possibility of a “hard landing” and hyperinflation for China in 2011.  And as economist Michael Hudson and others have pointed out, for two or more centuries the Western world has been using the marginal reserve system to gradually increase the indebtedness of states and individuals.  Yet total indebtedness has long since surpassed the ability to repay, and debts that cannot be paid will not be paid.  So trillions of dollars/euros of assets will now have to be cancelled, simply crossed off the books, and everyone is fighting to make sure it is not his own assets that end up being eliminated.  In Japan economic growth has been on hold for 20 years as people quarreled behind the scenes about who would pay for these bad debts, and I see no signs that the Westerners will be any quicker than the Japanese.

Because of all this darkness elsewhere, I see Southeast Europe, and especially the Western Balkans (former Yugoslavia), as a comparatively good place for investors in coming years.  Most of the countries in this area are already at the “bottom” – except perhaps for Slovenia, Croatia, and Greece, though Greece seems to be taking the elevator down quickly – and as things get worse and worse for the most developed economies, these countries will have several advantages: 1) being relatively poor and hence already “decoupled” from the hot spots of the world economy (and hence off the target screens of globalists who would encourage bubbles in real estate or other assets so as to create debts and then strip off assets), they will be relatively free of boom-bust cycles, and prices will have a greater tendency to reflect true economic value; 2) being outside of full EU integration, these countries will have less bureaucracy and also the option of having lower taxes; 3) those countries that are not using the euro will have the possibility of printing their own money to pay for public debts; 4) the mountains of the Western Balkans are rich in mineral resources, and the people are well educated; and 5) being less fully integrated into NATO than is Western Europe, the Balkans are less likely to become a major battlefield in the case of warfare between NATO and the SCO/CSTO/BRICS (except perhaps for Kosovo).

As for the BRICS (Brazil, Russia, India, China, and – since a few weeks ago – South Africa), they are the focus of everyone’s attention, so at a time when trillions of dollars/euros of capital is sloshing around the world looking for any meagre opportunity for profit, the BRICS will tend to attract damaging capital flows, i.e., speculative or predatory foreign capital that rushes in, creates bubbles, attacks the currency’s exchange rate, and rushes out again.  At a moment when there are no giant, billion-euro investments in the world that are both safe and profitable, the million-euro microinvestments available in Southeastern Europe may be among the best investments around for those who are willing to break their funds into smaller parcels (something the Chinese seem to be extremely adept at doing, more so than Westerners who tend to prefer mega-investments that they can boast about).

All in all, this might be a time when, just by holding its own, HEP can grow somewhat at the expense of large Western rivals like E.ON, RWE, GDF Suez (IP), REpower, Enel, and Edison.

What Will 2011 Bring to Energy in Southeastern Europe?

Yesterday on a public LinkedIn group someone asked me for my input on the subject “What does year 2011 bring to Energy in South Eastern Europe?”  What follows is a modified version of the response I posted there.

____________________________

Well, I was thinking that I would just keep quiet, because generally my prognostications are not liked by anyone.  I was already warning friends of mine in the US back in September 2004 that there was a real estate bubble in the US that would eventually burst and derail the American economy, if not the world economy.  They all considered me a madman, so I lost those friends.  About a year ago I began hinting to people that perhaps onshore wind energy was finished in developed countries – over for good – and that didn’t win me any friends either.  Six months ago I mentioned to someone that Chinese geostrategic analysts had been talking for months about the need for China to institute controls on its exports of rare earth metals, and gave the example of the PlayStation War as a harbinger of things to come for renewable energy, and all I got was sarcasm and the online equivalent of a blank stare.  (Two months later China embargoed the export of rare earths to Japan.)

Most recently, in August I got a derisive response when I told a company that is constructing a large power plant in the Balkans that they had better hurry with it, since electricity demand in Southeastern Europe over the next few years will probably grow at about 1% a year, and many people are presently constructing or preparing to construct new power plants or expansions (TPP Šoštanj Block 6, TPP Stanari, TPP Kostolac C, TPP Tuzla Block 7 (now delayed), TPP AES - 3C Maritsa East 1, HPP Vranduk, HPP Ulog, HPP Brodarevo 1 & 2, the Italian HPP on the Drina and Ibar, HPP Tsankov Kamak, TPP Ungheni, wind farms at Mesihovina, Podveležje, Možura, Štip, and elsewhere (Vlorë?), countless small plants, etc., not to mention the long-term mega-threat of NPP Belene).

I stated this because I experienced firsthand the buildup to, and the onset of, the present recession in Japan.  When the bubble economy (バブル景気) burst in 1990, everyone there was assuming it was something temporary, and that once the prices of speculative asset classes had reverted to normal levels the economy would continue to grow again.  It never happened.  First we had the “lost decade” (失われた十年), now we have the “lost 20 years” (失われた二十年).  And the same mistakes that have kept Japan down for 20 years are now being made by the US and Europe, and perhaps, beginning in 2011, by China as well (Mike Shedlock and others are predicting a “hard landing” for China in 2011)..  That is, the non-performing debts never get written off, and never get published, so investors never know which financial institutions are solvent and which are zombies.  That is presently the situation in the US, the UK, and the Eurozone, and there is no sign that the governments will ever bite the bullet and let their “too big to fail” banks simply fail (as Iceland did).  Instead we will get Ireland-style “bailouts” that transfer the banks’ bad bets to the backs of the citizenry and crush them under debt peonage, blotting out the possibility of economic growth for many years.

So I foresee very little growth in Southeastern Europe over the next few years and, as in Japan, a growth in electricity demand of perhaps 1% annually.  But all of the international agencies are pushing the Balkans countries to increase their electricity generation capacity to meet future demand, and to modernize, clean up, and/or render more energy efficient their energy generation and transmission infrastructure.  So on top of a Japan-like endless recession which would normally reduce annual growth in electricity demand throughout the region to something like 1%, there will be quite a few countries that, yielding to international pressure and to irresponsibly rosy forecasts by economists and consultants, will build excess generating capacity.  Due to increasingly efficient energy transmission and energy trading in the region – another thing that the international organizations have been pushing for – this excess capacity will probably drive energy prices and profits down throughout the region.  (As I quipped to a friend some months ago, all it would take is for some idiot in Moldova to build a nuclear power plant, and then all of the energy firms in Southeastern Europe would suffer terribly for 10 years.)

So the addition of excess capacity anywhere in Southeastern Europe, during a Japan-style endless recession, would be conducive to falling electricity rates to end users throughout the region.  But those companies foolish enough to add the unneeded new capacity would have to pay for this construction somehow, presumably by raising rates to end users within their own country.  And in fact the international organizations have also been pushing for countries in the region to end the monopolies of their state-owned power companies that sell electricity at subsidized prices, so as to let power prices rise and thereby permit privately-owned generating firms to compete in a free market (this in a region where already many people survive only by operating on the black market, emigrating, or “dumpster diving”).  Any countries that permit or force their domestic electricity rates to rise, whether to pay for additional generation capacity added or to subsidize renewable energy or to create a free market, will probably see their electricity demand decline.

All in all, on the macro level I see difficult times for large power companies and trading firms, and increasingly tight government finances (with probably some sovereign defaults in coming months, in Europe and perhaps Japan, and eventually in the US either default or high inflation).  I am sure subsidies for renewable energy – whether through feed-in tariffs or green certificates – will be slashed in Southeastern Europe as they are already being cut back in France, Spain, Germany, Italy, Portugal, the Czech Republic, Ontario (Canada), New South Wales (Australia), Taiwan, etc.  Thus far most of the open “cuts” involve feed-in tariffs for photovoltaic solar, ostensibly to keep pace with the decline in PV panel prices and the progress of the technology, but at the same time there is a growing groundswell of less-obvious measures against the other renewable technologies: tighter deadlines, higher deposits required from developers to guarantee construction, taxes on RES plants, stricter permitting conditions, failure to guarantee power purchase agreements (PPAs) or feed-in tariffs until after construction is completed, failure to guarantee PPAs and FITs into the distant future, ceilings on maximum GW of RES capacity that will be eligible for FITs or green certificates, a lack of price floors on green certificates, delays in obtaining grid access, bans on building on certain types of land, moratoria on construction, and so on.  In some cases these measures are merely proceeding stealthily at the local level, with the national government doing nothing to oppose them.  (Here in Italy we also have a situation where the big money to be made in RES projects has attracted the local mafia in droves to large RES projects such as wind parks, leading to all sorts of crimes – including murders – and endless police investigations, which is turning the entire Italian public sour on renewable energy in general.)

So in Southeastern Europe I expect that the nascent photovoltaic solar industry and the onshore wind industry will die a violent death (less quickly in Bulgaria and Romania), since these technologies are the furthest from grid parity.  But the lesson of Japan teaches us that even amidst 20 years of very low economic growth people still continue to buy new things or upgrade what they already have, and infrastructure continues to be built and improved, so there will be niches for very modest profits in those energy technologies that are at the same time both closer to grid parity and smaller – agricultural biogas, municipal biogas, biomass, small hydro, maybe some rooftop photovoltaic solar in particularly sunny areas and some small wind (perhaps VAWT) in particularly windy areas.  And despite the danger of excess generation capacity, power companies that are at present overly reliant on one type of generation technology – such as EP HZHB, which at present has to rely on hydro for 100% of its generation – may want to add large plants of other technologies simply so as to lower their risk in the case of bad weather or international turmoil.

I think that almost all energy mega-projects – say, of € 200 mln or more – will remain stalled, and not move forward, with the possible exception of some projects with foreign financing where construction contracts have already been signed, such as TPP Stanari, TPP Kostolac, and TPP Ungheni.  So I don’t think we will see in 2011 any real progress toward construction of South Stream, Nabucco, TAP, the various LNG terminals or regasification plants (Trieste, Zaule, Omišalj, Fier, Astakos, etc.), the power cables to Italy (Tivat/Pescara, Babica/Brindisi), TPP Nikola Tesla B3, TPP Kolubara B, the various Italian HPP on the Ibar and Drina, TPP Tuzla Block 7, TPP Kakanj Block 8, TPP Burlăceni, much less the projects that are still at the daydreaming stage, such as NPP Belene, HPP Đerdap 3, TPP Štavalj, and TPP Kongora.  I believe HPP Brodarevo 1 & 2 will be constructed, and construction might begin on HPP Zhur I & II (though of late there has been no news regarding financing or construction of Zhur).  Of the wind parks already approved in Croatia, Bosnia and Hercegovina, Serbia, Montenegro, and Macedonia, I would not predict any significant construction in 2011 except maybe perhaps for WP La Piccolina (5 MW), in Serbia, and maybe WP Možura (46 MW, Montenegro) and WP Štip (100 MW, Macedonia).  I think there will continue to be some wind park and photovoltaic construction in Romania and Bulgaria, but in declining amounts, with a strong decline in Bulgaria if the proposed amendments to the law on protection of agricultural lands get approved by the parliament.

But outside of energy, I think some large infrastructure projects such as bridges may get built in 2011, particularly if they do not involve the purchase of lots of expensive foreign machinery.

Anyway, I am sure you can now see why I did not feel the urge to chime in right away with my thoughts.

Oh, some headlines from Balkans.com over the last 10 days:

“Solar stocks face another hard year in 2011”

“Romania's potential for higher food and energy prices could pose significant risks-IMF”

“Turkey plans to build 18 dams on its borders with Bulgaria, Greece, Iraq, Syria, Iran, and Georgia”

“Gamesa total wind farm projects in the pipeline exceed 1,700 MW in Eastern Europe”

“Bulgaria's economy ministry is weighing up options to make more companies purchase power on the free market”

“Romania’s electricity consumption is expected to increase by at least 1% in 2011”

“Bosnia & Herzegovina: Elektroprivreda BiH Plans to kick off $679 million worth hydro-power project”

“Bosnia & Herzegovina: Elektroprivreda BiH 2010 profit slumps on falling prices”

“Israel finds it hard to secure foreign buyers as European gas consumption is weakening”

The flip side of all this is that as economies stagnate, and as banking and government finances worsen in the richest countries, paper assets around the world will continue to decline in value and security.  Already corporations in the US have their coffers full of cash and are desperately looking around the world for investments that are at least safe, even if not highly profitable.  As we all saw, the Chinese in 2009 went on a worldwide buying spree for metals and tangible assets, driving prices up everywhere.  Now, with the Federal Reserve Board’s second round of quantitative easing, we see cheap American money flowing into non-Western securities and currencies, arousing the ire of governments everywhere (e.g., Brazil, Korea, Thailand, India, South Africa).  So at a moment when good investments in the most developed countries continue to be scarce, and governments are instituting controls on rapid movements of large amounts of capital, we could see a flow of capital from the developed countries into less-liquid projects and properties in less-developed areas, such as Southeastern Europe.  This will no doubt result in some bubbles and a lot of fraud, but it could be a good time to build some of those hundreds of small energy projects which have already been approved or received concessions, but which are not moving forward due to lack of funding.  (There are hundreds of small hydro projects in Bulgaria, Albania, and BiH that have been fully approved but which have never been built.  The same for some municipal landfill or wastewater biogas projects in Serbia and elsewhere.  It could also be a time to build more agricultural biogas in all countries, and even encourage household biogas digesters in rural areas for the production of cooking gas.  In addition, photovoltaic solar in the sunnier parts of Romania, Bulgaria, and Macedonia might be a good investment even without high subsidies.)

A wild card in this would be another shock to the system like Bear Stearns or Lehman Brothers, a large sovereign default (Japan), or a military attack on Iran, which could generate a panicked response that would cause people to overreact, cancelling contracts and withdrawing funds more than would really be necessary.

In any case, that’s my prognostication for the energy sector in Southeastern Europe in 2011.