Costly Turkish Deal Pushes Bulgarian Giant Toward Bankruptcy

"The only reason we are not immediately shutting down the company and establishing a new Bulgargaz, or carrying out some other type of restructuring, is that it is the signatory to the gas supply contract with Azerbaijan, which is currently quite profitable for Bulgaria. That is why we must utilize the maximum capacity", explained newly appointed Energy Minister Traycho Traykov, just three days after taking office in the caretaker government.

Just four years ago, Bulgargaz was among the most profitable state-owned enterprises after Gazprom unilaterally halted gas deliveries to Bulgaria. The company quickly responded by securing liquefied natural gas (LNG) supplies for the domestic market, while a long-term pipeline contract with Azerbaijan came into force.

Traykov confirmed that Bulgaria is not making payments under the contract with BOTAS but is instead accumulating liabilities.

"That is a risk I cannot assess at this moment", he said, adding that he plans to meet with his Turkish counterparts to "put everything on the table".

In early 2023, a caretaker government appointed by then-President Rumen Radev signed an agreement between Bulgargaz and BOTAS granting long-term access to Turkish LNG terminals and the gas transmission network through the end of 2035. The agreement reserved a capacity of about 1.3 billion cubic meters annually.

Under the terms of the deal, Bulgaria pays approximately €500,000 per day for the reserved capacity, regardless of whether it is used.

This amounts to around €180 million in fixed annual costs. So far, Bulgargaz has not utilized that capacity, accumulating debt under a "take-or-pay" principle.

During 2024, the company recorded a loss of €130 million, despite other profitable contracts and its near-monopoly position in Bulgaria’s gas market.

"Everyone is wondering how this contract with BOTAS, which is entirely unfavorable for Bulgaria, can be reshaped into a more acceptable arrangement", Traykov told Bulgarian National Radio. "I have certain ideas, but I need facts, discussions, and input from more people".

Radev, who is widely considered a potential winner of the parliamentary elections scheduled for April 19, stated that the agreement with Turkey could still become operational and profitable for Bulgaria, although he has not publicly explained how.

Meanwhile, the contract has been under investigation by prosecutors for two years, with no visible results. Bulgargaz exemplifies the structural weaknesses of Bulgaria’s energy sector, which is dominated by state enterprises.

Toplofikatsiya Sofia, the capital’s main district heating utility, which supplies thermal energy to the city and is technically insolvent, owes the gas supplier nearly €760 million.

The heating company’s total liabilities amount to €1.26 billion, more than 1% of Bulgaria’s GDP. The most recently considered option was to allocate €800 million from the state budget to purchase Toplofikatsiya Sofia’s debt to Bulgargaz, effectively shifting the burden onto public finances.