The jump in metal prices on world exchanges, combined with unfair competition from companies outside the EU, calls into question the support of Bulgarian thermal power plants, hydroelectric power plants and electrical networks. The Bulgarian Electrical and Electronics Association (BASEL) is sounding the alarm and insisting on an urgent change in public procurement rules.
According to NSI data, producer prices in the “Production of basic metals“ sector recorded a double-digit growth compared to last year – by 19.8% in April and 21.5% in May. The main driver is copper, whose price on the London Stock Exchange (LME) has exceeded 12,000 - 13,000 US dollars per ton. Since copper forms up to 60% of the cost of materials in each repair of a generator or transformer, the price increase makes previously planned budgets unfeasible.
The problem, according to BASEL, is that the prices in Bulgarian tenders are “hard“ – fixed in advance and without a mechanism for adjustment in case of changes in stock market quotations. Thus, the risk of price increase is transferred entirely to the contractor companies.
“There is no way a Bulgarian company can win a tender at one price, and 6 months later buy the copper 30% more expensive and fulfill the contract without the risk of bankruptcy“, commented on the situation the Chairman of BASEL, Dr. Eng. Dimitar Beleliev. Neighboring countries such as Greece, Serbia and Montenegro already apply formulas for indexation of basic materials to stock exchange prices, while in Bulgaria there is no such mechanism.
In addition to the stock exchange shock, competition from companies outside the EU is also being added - mainly from China, India and Turkey. According to BASEL data, over 60% of the tenders in electrical engineering in our country are won by companies outside the European Union, which have state subsidies in their own countries, can absorb the increase in the price of raw materials and offer lower prices than Bulgarian competitors. “The requirement for over 50% European participation is not a new practice for Bulgaria and simply needs to be restored“, explains Beleliev.
BASEL insists on two specific changes in public procurement in the energy sector:
1. Mandatory price indexation - ending the practice of “fixed prices“ and introducing a formula for adjustment to the exchange prices of copper (LME) and other base metals in all contracts.
2. Minimum 50% European and Bulgarian participation – in projects financed with public funds.
“The issue cannot be postponed. Without a change in the rules, we risk the maintenance of important energy facilities in the country being left without contractors, and the security of the energy system being threatened“, concludes Beleliev.
BASEL was established in 1994 and unites 130 organizations – manufacturers of electrical and electronic products, companies for the repair and construction of electrical installations, suppliers of components, etc., with a total annual turnover of about 2 billion euros. The electrical industry is the sector with the largest contribution to Bulgaria's exports for the 10th consecutive year.