June 22 (Bloomberg) -- China Ming Yang Wind Power Group Ltd.’s Bulgarian wind project with W.Power Ltd. may be canceled should the country proceed with plans to cut state support for the technology by almost a quarter, their joint venture said.
“This is a critical mistake for a country that needs to be very careful with foreign investors,” said Jonathan Mann, chief executive officer of the companies’ MW Power OOD venture.
Government proposals to reduce its wind subsidy by about 22 percent to 148.71 lev ($95) a megawatt-hour may be a “killer” for the 124-megawatt wind farm development in Pleven, north Bulgaria, Mann said by telephone from Bucharest, Romania.
Bulgaria, the European Union’s poorest country by economic output per head, is seeking revenue to cut a budget deficit and weather the effect of the euro area’s economic crisis. At the same time, it’s promoting clean power to try to meet an EU goal of getting 16 percent of its energy from renewables by 2020. Most of the Balkan nation’s oil and gas is imported from Russia.
China Ming Yang, based in Guangdong, agreed to supply wind turbines to the project in February. The deal gave Sofia-based W.Power access to funds from state-backed China Development Bank Corp., which has told Mann it may withhold a loan of more than 100 million euros ($125 million) should that subsidy cut happen.
“The 22 percent cuts are horrible for the country,” said Bulgarian Wind Energy Association Chief Executive Officer Sebastian Noethlichs. “A lot of the western European developers and investors are either pulling out or relocating staff back to their home market and keeping a front office here.”
While others in Europe cut support as turbine prices fell, “Bulgaria does not fall in step with these cost reductions,” said Daniel Shurey, a Bloomberg New Energy Finance analyst. “The proposed tariff will likely result in wind project returns far below the hurdle rate required by foreign investors.”
Bulgaria proposed the cuts this month and they would take effect from July 2012 to June 2013. A final decision is expected June 28, Noethlichs said. While the government may reduce their severity, the proposals are “realistically what this is going to be,” he said. The Ministry of Economy, Energy and Tourism in Bulgaria didn’t respond today to requests for comments.
The proposals also include reductions in solar subsidies of as much 54 percent after panel prices declined by half in the past year, as well as less support for biomass and hydropower.
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