Bulgaria Love/불가리아 뉴스

불가리아 주요 경제 뉴스 ( 31 JULY – 7 AUGUST 2009 )

Mайка 2009. 8. 7. 18:59




Sections/headline briefs:




·        Foreign trade in 2008: statistics

·        Bulgaria currency board more stable than in Baltic states

·        Bulgaria`s foreign debt goes up to € 36.57 billion

·        Bulgarian National Bank sets lowest interest in Bulgaria’s history

·        S&P: Bulgaria banks face deterioration in asset quality

·        Bulgaria to Adopt the Euro in 2015-2020, Morgan Stanley Says

·        Bulgaria metal industry deepens slide to 40% in July 2009

·        Economy minister Traykov: Bulgaria to have new energy strategy

·        Trade area market awakes

·        Bulgaria tightens the belt

·        Bulgaria's second-hand cars market shattered by crisis




·        Bulgaria remains attractive investment option

·        Sofia heating co hunts for strategic investor

·        Bourgas Toplofykatsia poised to commence biomass production

·        3 highways wrapped up before 2013, four other planned




·        New fallout: more Bulgarian firms delay paychecks

·        Drogerie Markt opens 2 Sofia stores

·        Israeli Central Bottling company delays Bulgaria expansion

·        Monbat and Elchim's turnover down 50%




·        Port discord

·        Energy rethink

·        Good infrastructural vintage in for the new cabinet






Foreign trade in 2008: statistics

Bulgaria's foreign trade deficit in 2008 reached 16,815 million leva, 2,540 million leva more than in 2007, show final data of the National Statistical Institute, released on Thursday.The deficit in trade with EU countries in 2008 was 8,702 million leva, and in trade with third countries 8,112 million leva. (The data about the deficit are in FOB/FOB prices.)Bulgaria's exports in 2008 stood at 29,736 million leva (FOB), and imports stood at 46,551 million leva (FOB). Exports to EU countries totalled 17,833 million leva (FOB), and imports from such countries amounted to 26,536 million leva (FOB). Bulgarian exports to third countries in 2008 totalled 11,903 million leva (FOB), and imports from such countries stood at 20,015 million leva (FOB).

Bulgaria currency board more stable than in Baltic states

Bulgaria’s currency board mechanism pegging the lev to the euro is much more stable than the systems in the Baltic nations, according to an analysis of Greek bank EFG Eurobank, which owns local Postbank and DZI Bank. Unless the global economy is rattled by a new shock and it makes a major political blunder, Bulgaria should get away with devaluation of its national currency, the experts predicted. The country’s currency board is propped up by broad public and legislative support accompanied by strong fiscal positions and stable currency reserves. The Bulgarian economy is also better positioned to withstand cyclical developments compared with the economies of the Baltic countries and its banking system is well-capitalised. Another positive factor are expectations that Bulgaria will suffer a less severe economic slowdown. The International Monetary Fund (IMF) has forecast the country’s gross domestic product (GDP) will contract by 3.5% by the end of the year and the government is bracing up for a 6.3% decline. For comparison, the Latvian economy is expected to shrink by a formidable 18%. Devaluation of the lev before Bulgaria joins the eurozone is highly unlikely, given the high level of indebtedness of both businesses and households and the large share of euro-denominated loans. Such a scenario would deepen the ongoing recession and, at a later stage when the economy is back on the growth path, stoke inflation, preventing the country from satisfying the Maastricht criteria, according to the report. The more realistic scenario is maintaining the status quo until Bulgaria joins the pre-euro ERM-2 waiting room. Pursuing the current policy, however, the country could face having to line up for help at the door of the IMF or another international institution.




Bulgaria`s foreign debt goes up to € 36.57 billion

Sceptics and critics are more and more shedding tears for the Bulgarian economy which is losing power. However, they do not base their worries on real facts as much as on… analogies. Most often on analogies with the Baltic and the Central European countries. Or they simply carry away the effects of some processes in the big economies to the situation in Bulgaria. But this is not always realistic. The liquidity problems of banks in Western Europe and USA brought the attention of the analysts towards the manner in which these banks have invested their assets. And this is quite logical as it turned out that banks investments in corporate securities - bonds, shares and derivative instruments, made these banks lose hundreds of billions of dollars and euros. And as an increasing number of corporations is delaying the payment of its credits, it is normal to also scrutinize the large number of credit lines launched to financial institutions in the so called developing countries. As a whole, the embarrassment of the analysts is justified at least because of the problems in the banking sector of the Baltic states. But, as usual, western analysts put all countries in Eastern and Central Europe, including Bulgaria, into one basket and started to make apocalyptic forecasts about their ability to serve their foreign debts. This is exactly why it would be useful to have a look at the condition of Bulgaria's foreign debt. In late May 2009 the total amount of the foreign debts of both the state and the private sector - companies and banks, was shockingly big indeed - EUR36.57BN. It is bigger than the GDP forecast for the year of BGN66.75BN. Short-term liabilities alone amount to EUR13.3BN - it's the money that should be paid off within a year. At first sight the numbers are quite startling. But before making general conclusions, one should rather look at the structure of that enormous gross foreign debt. First of all, a very large part of it - EUR13.26BN, accounts for internal corporate loans. This is financing that western companies have launched to their subsidiaries in Bulgaria. These western owners would hardly make their Bulgarian subsidiaries face a liquidity crisis by asking them to pay off their debts immediately. That would only cause them losses. Not to mention that should a Bulgarian subsidiary become insolvent, its foreign owners will not be able to get back the full amount of money they have paid it. Statistical numbers indicate that western investors are not only unwilling to request back the financing from their subsidiaries in Bulgaria, but are also increasing its amount. At the end of September 2008 when the world crisis started to gather speed, the total amount of internal corporate loans from abroad was EUR12.68BN. For the past eight months of 2009 it has grown by EUR580MN. The second component of the gross foreign debt are the state liabilities to foreign creditors. They are not troublesome at least at the moment, either, since their total amount was EUR2.63BN as of May 31, 2009 and this is not a short-term debt. In fact, the big payments of the government to foreign creditors will become due in 2012 and 2013 when the Bulgarian global bonds worth EUR1.43BN will have to be paid off. But there is no reason to doubt the solvency of the country, as it has BGN7.4BN on deposits in the Bulgarian National Bank (BNB) (or more than EUR3.7BN). In other words, the government has provided full coverage of the payments to foreign creditors. That is why, when the liquidity of the country is commented, no surprises may emerge in the coming two or three years even in theory. More questions arise about the private debt but things are not unambiguous there, either. Bulgarian crediting institutions have foreign liabilities, but a number of companies have received loans from abroad, too. The total amount of the financing is EUR 20.68BN of which EUR13.29BN short-term liabilities. As far as banks are concerned, the situations is as following: they owe EUR8.53BN to foreign creditors, with the bulk of that amount, EUR5.92BN, staying in the country under the form of deposits, and the rest - under the form of credit lines. According to managers of Bulgarian banks, over 90% of this amount is launched to the banks by their foreign owners. This is why it is considered sustainable financing launched to support the banks stability in the country and there is no risk that it may be withdrawn in case the market situation gets worse. It is true that from the end of September 2008 till the end of May 2009 foreign financing of the banks has fallen by EUR420MN because of the redemption of matured credit lines. There are almost no changes in the amount of short-term deposits launched from abroad. Besides, all foreign shareholders of the Bulgarian banks stuck to the BNB recommendation to leave their 2008 profits in the capital of their subsidiaries. In practice, this is money reinvested in the country amounting to BGN1.38BN, or approximately EUR706MN. on the other hand, the owners of Bulgarian banks have increased by EUR250MN the additional financing for their capital made in the form of hybrid debt instruments or subordinate time debt. This is lent money which cannot be withdrawn before at least 10 years have passed and since it is a long-term investment it is registered in the capital of the banks. In the end, the balance of the banks for the period September 2008 - May 2009 is as following: foreign crediting is down by EUR420MN, but their capital is up by a total of EUR956MN. In other words, the balance is positive. The situation with companies is slightly more complicated. The total amount of their foreign debts is EUR12.11BN, of which EUR6.47BN are short-term ones. Unpleasantly, a large part of these debts is due to payment on demand. Some of the foreign credits have been signed by enterprises with stable revenues and a good rate of profitability. For example, companies in the energy sector have EUR2BN foreign debts. However, there are problematic industries which have accumulated large debts to foreign partners and institutions, too. For example, companies operating in the real estate sector owe EUR1.83BN to foreign creditors, construction companies owe EUR754MN, and car dealers - EUR880MN. And these are sectors that have been constantly complaining of a drastic fall in orders and contracts. In fact, there is hardly any industry that has not complained of suffering from the negative effects of the world financial crisis. But as a whole, Bulgarian companies are now demonstrating solvency as far as their foreign debts are concerned. From the end of September 2008 till the end of May 2009 they have paid off more than EUR460MN of principals and interests on loans from foreign creditors. Moreover, for the same period of eight months the liquidity of the production sector has not worsened. In September 2008 the bank accounts of commercial companies held EUR3.68BN and USD986MN. In the end of May they held EUR4.14BN and USD659MN. It turns out that regardless of the payment of their foreign debts the total amount of foreign currency that companies have at their disposal has even gone up. Of course, these are general numbers. There is no doubt there are many companies facing liquidity problems. But it is exaggerated to make general conclusions that the solvency of the Bulgarian private sector regarding its foreign debts is in danger. It is also that unsound to claim that foreign investors are drawing their money from the country in panic.

Bulgarian National Bank sets lowest interest in Bulgaria’s history

The Bulgarian National Bank announced a 1.71 percent basic interest rate as of August 1, 2009. This is the lowest since 1991 when BNB began setting the basic interest rate in Bulgaria as required in the conditions of a market economy and its functions. In the past 18 years (or ever since Bulgaria switched to market economy) the most dramatic increase in BNB’s basic interest rate was in 1996-1997, when the Bulgaria was suffering hyperinflation. on September 24, 1996, BNB set its highest basic interest rate - 300 percent.   

S&P: Bulgaria banks face deterioration in asset quality

The creditworthiness of Bulgaria's banking system faces a major risk from deteriorating asset quality, Standard & Poor's rating agency said in a report.Standard & Poor's classifies the Bulgarian banking sector in group seven in its Banking Industry Country Risk Assessment ranking out of 10; one representing the strongest.
The Republic of Bulgaria (BBB/Negative/A-3) has entered the global credit crisis with all the symptoms of an overheating economy, raising the risk of a sharp slowdown in external financing flows, the agency said.According to it external liquidity is a key weakness of Bulgaria's creditworthiness, with the current account deficit increasing to about 25% of GDP in 2008, but declining sharply in 2009."We see asset quality as the current major risk to the creditworthiness of Bulgarian banks," said Standard & Poor's credit analyst Annette Ess.Rapid loan growth over the last decade, high exposure to the slowing construction and real estate sectors, high single-name lending concentrations, growing consumer indebtedness, still-weak enforcement of credit rights, and competitive pressures for looser loan procedures are expected to lead to asset quality deterioration as loans season in a sharply deteriorated macroeconomic environment.on a positive note, the creditworthiness of the Bulgarian banking system benefits from high foreign ownership by Western European strategic investors and closer integration with parent institutions, which share their know-how and have strengthened risk management, improved infrastructure, and diversified the product lines of their Eastern European subsidiaries," added Ess.

Bulgaria to Adopt the Euro in 2015-2020, Morgan Stanley Says

Poland may adopt the euro in 2014- 2015, while Hungary, Bulgaria and Romania are a story for the second half of the next decade, Morgan Stanley said in a report.The fiscal deficit limit of 3% of gross domestic product "looks like a distant prospect" for all the eastern European Union members, Pasquale Diana, an economist at Morgan Stanley in London, wrote in the report, as cited by Bloomberg agency.Deficits in Poland, the Czech Republic and Romania are "heading to around 6% of GDP this year, maybe even wider in 2010 and are unlikely to shrink to the euro limit until 2013- 2014," according to the report, which also forecasts debt ratios "heading dangerously" to 60% of GDP in Poland and to 80% in Hungary.Bulgaria's entry in the eurozone, initially scheduled for 2010, has been set back for some time around 2012-2013. Experts say it is conditional on continued fiscal prudence and lower inflation.In fact, Bulgaria has yet to join the Exchange Rate Mechanism, the "waiting room" for euro membership, amid concerns about its inflation rates and external trade imbalances. Stricter application of membership criteria has also been a factor in the delay.Bulgaria plans to apply in November to join the exchange-rate mechanism, the European Union's two-year currency stability test before the country can drop the lev and adopt the euro.







Bulgaria metal industry deepens slide to 40% in July 2009

Metallurgical products sales in Bulgaria have crumbled by an average of 40% by the end of July from the same month of last year, said Anton Petrov, board chairman of the Bulgarian Association of the Metallurgical Industry (BAMI). “The situation in the different sectors across the metallurgical industry is different and its changing very dynamically,” he added. Some have seen their sales contract by between 4% and 6%, while elsewhere it tops out at a precipitous 40%. Imports and manufacture of base metals for the shipbuilding industry have been struck the hardest blow. Imports of metals and semi-manufactured products have seen a sharp decline in a sign that domestic producers are filling in the niche freed up by Turkey, Ukraine and Macedonia. “In a time of crisis, it is logical that domestic production should gain a competitive edge over foreign production,” Petrov explained. on a brighter note, manufacturers managed to preserve in the second quarter the positions they held in the first quarter. From April to June, the output of rolled products totalled 21.7 million tonnes, dropping by 40.8 million in the first three months of the year. Sales of steel and ferrous metals shrank by 19.2 million tonnes to 263.3 million, according to estimates by BAMI. Pernik-based steel mill Stomana Industry is currently operating at two-thirds of its full capacity, having shed around 400 jobs so far but planning no more cuts. Other companies, including Helios Metalurg and Promet Steel, have lowered production by around 30%. “Unfortunately, Bulgaria makes no more cast iron any more after the blast furnaces at steelmaker Kremikovtzi went idle and are not expected to be powered up,” BAMI explained. At the same time, Bulgaria’s newly-appointed minister of economy, energy and tourism, Traycho Traykov, said the country should distance itself from the Kremikovtzi issue as much as possible, saying it is a privately-owned company and the government should not meddle in its management.The distribution of gas emissions, power rates for industrial consumers and transport infrastructure are among the key issues that need to be addressed in order to boost the competitiveness of the sector, the minister said, adding that a modest recovery could be expected next spring.

Economy minister Traykov: Bulgaria to have new energy strategy

Bulgaria is in an urgent need of a new energy strategy, which will be prepared by October 2009, and will be tabled to the Parliament.This was announced Monday by Bulgaria's new Minister of Economy, Energy, and Tourism, Traycho Traykov.Traykov made public the names of his deputies: the Deputy Minister in charge of energy will be Maya Hristova, the Deputy Minister in charge of economy matters - Evgeni Angelov, and the Deputy Minister in charge of tourism - Ivo Marinov.The new Economy Minister also said that the construction of Bulgaria's second nuclear power plant at Belene might end up costing up to EUR 10 B, which might make it economically unsound.Traykov made it clear that the decision about the Belene NPP would be made after a very thorough and detailed analysis of its situation and potential markets. Next week Prime Minister Borisov and he are going to meet with representatives of the German energy company RWE, which holds 49% of the future plant, in order to hear their position. According to Minister Traykov, the EUR 400 M that had been spent by previous government on the Belene construction so far was a pretty significant sum that has produced no results.Traykov announced that he had been informed by the European Commission that Bulgaria had had great issues absorbing the EU funds under Operational Program "Competitiveness". Of the EUR 1 B envisaged for Bulgaria for the period 2007-2013, only 3% have been absorbed so far.The Minister said the previous governments had missed the right time to privatize the Bulgarian tobacco monopoly Bulgartabac but that the new cabinet could speed up the process, and even sell the company by the end of the year through a public tender, and under the condition that the new owner would buy out the existing tobacco yield.Traykov explained that in the remaining months of 2009 his Ministry was going to try to save up to BGN 8 M from its administrative expenses. As part of these measures, the staff of the Minister's political cabinet will reduced from 24 to 11 employees.

Trade area market awakes


The Bulgarian trade area market is awakening and the prognoses on its development are rosy, Ozgur Yavuz, member of the International Council of Shopping Centers (ICSC) and the council's representative for Bulgaria, surprisingly said during the week. "An increase of between 2 and 15% in demand for trade areas in Germany, France and Central Europe has been registered since the beginning of 2009. As for Bulgaria, we expect the market to grow by 10 to 15% over the second half of the year. This is significantly lower compared to previous years, indeed, but it is nevertheless a positive sign showing that the situation is getting step by step back to normal", Yavuz added. No doubt, despite the crisis the number of malls in Bulgaria will keep on increasing over the years to come. There are 30 sq m of trade area per 1,000 people in Bulgaria, which is 10 times lower of the Europe's average. The situation, however, is going to change soon. For the time being, there are 660,000 sq m of trade areas under construction, to be completed until the end of 2010. This is five times more than the currently existing total area and 40% of them are in the capital Sofia. "Exactly now we have to take off the dark glasses and take a realistic look at the opportunities for investment and business development. Surveys carried out by ICSC show that the Bulgarian economy will register a minimal or, at the worst, a negative growth in 2009. But the market for lease areas will nevertheless keep on developing in a positive direction thanks to the stable demand and offering of high-quality premises with the infrastructure needed", Ozgur Yavuz said. Of course, we don't have to forget that the most difficult task for the malls is to secure enough tenants for the premises they put out to lease. "The number of clients is decreasing because of the restrictions set by the banks", Varna Towers manager Marin Sugarev said. "It is not such a considerable problem for the big chains, but it is very difficult for the small-size companies which sell foreign brands on franchise to get operating credits and bank guarantees. There are three key problems. First, tenants are concerned whether they will manage to pay their rental fees because of the decreased sales. The initial investment on finishing works, as well as fears whether the mall's management will be able to provide good enough marketing also trouble the tenants". According to Sugarev, the key factors to success are the approach for leading a dialogue and establishing good partnership with the tenants.






Bulgaria tightens the belt

By end-2009 Bulgaria will save 1.156 billion leva, said Finance Minister Simeon Djankov. This step is necessitated by the global financial crisis and lower budget revenues. However, the budget money allotted in Budget?2009 for public sector salaries, pensions, education, judicial system, Ministry of Interior and the National Radio and TV will not be cut down. We have to make this step because the revenues to the budget have melted down by 6 billion leva, the current account deficit is running at 2.5 billion, the Minister explained. Apart from outlays reduction the other 2.5-billion share of the prognosticated deficit will be compensated with an increased revenue inflow. This is Bulgaria?s top agenda now, Djankov added. He expects the situation in Bulgaria to deteriorate. Eastern Europe will hit the rock bottom in the beginning of 2010, while for Bulgaria the next year will be the hardest because the country will start it without a budget surplus we had in 2009. According to Djankov, if these urgent measures don?t yield budget-balancing results, the government will have to apply for a loan abroad.

Bulgaria's second-hand cars market shattered by crisis

The economic crisis has led to the drastic fall of prices of second-hand cars in Bulgaria.The prices of some model have dropped 4 times, and the average profit per car has declined from EUR 2 000 to EUR 500, according to a report of the BTA.Second-hand car traders have complained that they were forced to make all sorts of discounts, and that customers had even suggested leasing agreements.A trader importing second-hand cars from Germany is quoted as saying that the prices of second-hand cars would continue to fall since the number of the likely buyers was actually smaller than the number of the cars being imported. Most of the second-hand cars in Bulgaria come from Germany and Italy. The ones from Germany are the object of the highest demand since they are known for their good maintenance. The Italian-imported second-hand cars are about EUR 200-300 cheaper.




















Bulgaria remains attractive investment option

Bulgaria still ranks high among the countries offering good international investment opportunities in the conditions of a global economic crisis, representatives of US, German and Greek companies in Bulgaria said. American Chamber of Commerce in Bulgaria (AmCham) Vice President Stefan Ivanov emphasized that the Bulgarian Government should adopt a proactive approach, encourage and facilitate the first steps of foreign investors in Bulgaria and their subsequent activities. Ivanov said that his Chamber is receiving enquiries from potential investors, who assess the country as an investment destination.Regular surveys carried out by the Bulgarian-German Chamber of Industry and Commerce (DBIHK) of its members found that Bulgaria is an attractive investment option, DBIHK CEO Mitko Vassilev said."Most Greek companies in Bulgaria have invested and continue to invest in Bulgaria, following their long-term strategic plans. They have come here to stay," Ioannis Polykandriotis, Chairman of the 150-company Hellenic Business Council in Bulgaria (HBCB) and CEO of EKO Bulgaria said.Greek investments in Bulgaria exceed 2,000 million euro, Polykandriotis said. He recalled that the largest Greek companies, most of which are HBCB members (for example all Greek banks), have established themselves on the Bulgarian market and implement long-term investment programmes.


Vassilev said that his Chamber does not know of any investor withdrawals, but there are already some German business projects which are frozen or postponed. He recalled, however, that a number of other German companies announced their entry in the Bulgarian market in 2008: Lidl, PENNY, Plus, and the Deichmann shoe company, which has already opened its first stores in Bulgaria.About 450 leading German and Bulgarian companies are members of the DBIHK. In 2008 Germany accounted for 10.8 per cent of Bulgaria's total trade and German investments exceeded 300 million euro. Vassilev expects a new surge in the bilateral economic relations due to some until now inadequately used potentials, such as power generation and especially renewable energy sources.Vassilev pointed out that Germany's Enertrang plans to invest over 1,000 million euro in the construction of three wind farms near Dobrich (Northeastern Bulgaria). Another German company, N-Vision Energy, will build two wind farms, in Kyustendil (Southwestern Bulgaria) and Karnobat (Southeastern Bulgaria), at the total cost of about 300 million euro.According to Vassilev, German investments in Bulgaria have dropped by 100 million euro since the beginning of 2009, and the volume of bilateral trade has declined 21.6 per cent.AmCham has more than 300 member companies, which collectively generate more than one-third of Bulgaria's GDP and create more than 100,000 jobs, Ivanov said. Just few investors have withdrawn from Bulgaria, including Alcoa, the second largest aluminum producer in the world, and Genmark Automation, a leading manufacturer of automation equipment for semiconductor production."Yet, despite the economic slowdown the number of our members is increasing, " Ivanov said. The US companies continue to invest in a wide range of industries in Bulgaria, including power generation, telecommunications, IT, foods and beverages, media, banks and real estate. Although the economic crisis has impacted all industries, some of them are still expanding, while the rest remain profitable, despite the lower turnover.


AmCham has already collaborated with some of the new ministers. "Our personal experience gives us hope that Bulgaria will have a professional, transparent and responsible government over the next four years, " Ivanov said.The Chamber's leadership recommends that the new government should keep the currency board arrangement with the same euro/lev peg and speed up Bulgaria's entry in the Eurozone. The Cabinet should minimize the budget deficit, reduce taxes and stimulate foreign direct investment. Ivanov insisted on zero tolerance of corruption, transparent public procurement procedures and cutting red tape.The representatives of German business in Bulgaria appreciate the low tax burden, Bulgaria's EU membership, as well as the moderate labour costs, Vassilev said. The inadequate public infrastructure, along with corruption and crime, remains a problem for investors.Polykandriotis pointed out that Greek companies expect clear steps towards improvement of economic stability, effective absorption of EU funds, as well as promotion of direct foreign investment.


AmCham has repeatedly called for enhancement of energy security and for diversification of energy resources, including electricity and gas, as well as large-scale utilization of renewable energy sources, Ivanov recalled. He hopes that the government will thoroughly assess the energy projects before financing them."The fact that we are in a crisis does not mean that we should postpone or cancel infrastructure projects. Quite the contrary, their implementation will help us to overcome it," Ivanov argued.According to Polykandriotis, Bulgarian infrastructure projects should be clearly evaluated and prioritized in terms of their long-term benefits. Greek business representatives in the country think that all large energy projects are essential and will guarantee stability, stressing Bulgaria's strategic role and creating jobs, he noted.

















Sofia heating co hunts for strategic investor

A strategic investor could be invited to rescue Sofia’s debt-saddled heating utility, said energy minister Traycho Traykov, adding that the company has attracted suitors despite the crisis. Toplofikatsia Sofia has piled up a loss of BGN 60 million after in January former energy minister Petar Dimitrov chopped heating rates in the Bulgarian capital by 19% ahead general elections. Traykov did not rule out the possibility for tossing the company back to municipal ownership. Following drawn-out disputes over refuse collection, last year the municipal authorities transfer the majority share to the state. The new minister said legislative amendments are needed to enable the heating utility to collect its dues from delinquent customers.

Bourgas Toplofykatsia poised to commence biomass production

The Bourgas heating utility company is contemplating on investing in a biomass installation aimed at reducing the consumption of natural gas by as much as 15 per cent in the region and providing a reliable and diversified source of heating and energy, Investor.bg reported on August 3 2009."The biomass facility will be fed with wooden chips, its operational process is based entirely on renewable energy production and consumption, it will release zero C02 emissions in the atmosphere, will cover 15 per cent of the total energy and heating needs of Bourgas, and will subsequently provide the company with a substantially greater economic independence," the company report has said, quoted by Investor.bg The new installation is a joint-venture project with the Turkish company Mimsan from Antalia, and it will be worth in excess of three million euro.If and when the project is approved and completed, Toplofykatsia Bourgas will be the first heating utility company in the country to be equipped with such a powerful installation reaching 40 megawatts. A spokesperson for the heating utility has said that the idea is for production to commence by Q1 of 2010.Similar scheme was contemplated in Toplofykatsia Varna, where the installation was poised to be operating by the end of 2009, but a company statement revealed that due to delays with the ongoing process, the facility is earmarked to commence operation in 2010.


3 highways wrapped up before 2013, four other planned


Bulgaria will select contractors for the incomplete section of Trakiya highway by the end of the year, as announced by the Minister of Regional Development and Public Works Rosen Plevneliev. A couple of years later, we’ll be travelling all the way from Sofia to Burgas on a stretch of a motorway. Minister Plevneliev explained there were ongoing debates over the number of lots for the public procurement and the way to make things as transparent as possible. He was adamant the tender procedure for Trakiya would be coordinated with both EU consultants and Transparency International, though it had been long prepared. ‘This was supposed to happen before the making, but the previous government never did it’, Plevneliev said. ‘This will be a fair tender, because this is not a Bulgarian highway, but a European one, paid with their taxpayers’ money’, he added. Minister Plevneliev said his commitment was to wrap up two more motorways during his time in office – Luylin and Maritsa, but his administration would be working on further 4 similar projects, too.






New fallout: more Bulgarian firms delay paychecks

A soaring number of Bulgarian companies are late with workers’ salaries, refuse to pay compensations for unused leaves or extra work during the night or on bank holidays. These are the findings of the first-half report of the General Labour Inspectorate (GLI). Labour minister Totyu Mladenov said the ongoing processes are a sign that the economic crisis is going uglier, having up until now prompted mostly pay cuts and corporate slimming down. Lachezar Bogdanov, analyst with local think-tank Industry Watch, commented that cutting down on salary costs is companies’ first cushion as they scramble for operating cash against the backdrop of the credit squeeze and mounting intercompany debts. The GLI reported a 50% rise in delayed salaries and unpaid compensation from January to June, up to 8,555 from 5,745 for the same period of last year. It attributed the increase to a 63% in inspections carried out in the first six months of the year compared with a year earlier. Complaints against delayed paychecks and compensations have surged by 20% in the past two or three months, said GLI chief Galab Donev. “Salaries are being held up mostly in the light, textile and machine building industries,” labour minister Totyu Mladenov told Dnevnik. Retail trade and the restaurant industry were also riddled with payment-related violations. Donev pinned the bulk of the blame for the increase in complaints on the fact that employers are falling behind with loan repayments. Loans with delays of more than 30 days more than trebled to 6.63% of all at the end of June from a year-ago 2.17%. The latest stress test on the banking system conducted by the Bulgarian National Bank (BNB) show the share might grow to a whopping 16.5% by the end of the year. Donev noted that complaints are usually lodged at the second month of a delayed pay, mirroring data by trade unions, which, however, have no precise account of the number of workers waiting for their wages longer than normal. The minister said law-abiding employers should be incentivised while those “trampling on labour rights” should be penalized. Over the past months, some businesses have slipped back into the shadow economy, but “control is not enough to offer a 100% remedy to these issues,” according to the minister. Lachezar Bogdanov of Industry Watch reckons the pay delay is “part and parcel of the higher indebtedness in the economy spawned by the clogged access to external and banking capital. This is affecting consumer spending as seen by the retail and sales figures of the past months.” He dubbed the process a one-off phenomenon taking place in the early stages of a crisis all around the world. In these circumstances, entrepreneurs have two options – either come up with an alternative access to financing, or go bust as debts cannot simply pile up forever. “On a normal competitive market, such a period takes from a couple of months to one year at the maximum,” he explained, adding that from now one workers’ fears of a delay in wages will be compounded by the fear of losing their job. Ivo Prokopiev, chairman of the Confederation of Employers and Industrialists in Bulgaria (CEIB), recently cautioned that the first six months of 2010 will be the toughest time yet. Despite the massive number of violation, the labour inspectorate has served out only 422 fines.





Drogerie Markt opens 2 Sofia stores

DM Drogerie Markt, the Austrian retailer of household medicinal supplies, beauty, bath and baby care products, will grow its Bulgarian network by two new outlets in Sofia and one in the eastern town of Stara Zagora. Scheduled for inauguration tomorrow, the new stores will take the chain’s Bulgarian network to eight units. They will span 250 square metres. Drogerie Markt set foot on the market in January 2009, when it cut the ribbon on a store in the northwestern town of Vidin, pledging to pump almost EUR 3 million by the end of the year. Its outlets in Plovdvi, Bourgas, Yambol and Silistra give job to 68 people, who are expected to reach 100 by the year end. The Austrian company closed the financial 2007/2008 with a total turnover of EUR 4.7 billion, up 13% year-on-year.

Israeli Central Bottling company delays Bulgaria expansion

The Israeli company Central Bottling has delayed the launch of its partner Muller's products in Bulgaria over the global financial crisis.After spending years stepping up its activities outside Israel, the Central Bottling Company, is slowing the pace, haaretz.com reported.A company spokesman commented that the group received the franchise for the Muller brand in 2007, for Romania and Bulgaria. It had always been the plan to start operating in Romania first, and only later to enter Bulgaria, which simply hasn't happened yet.In 2007 the Israeli company received a license to work together with the European dairy company Muller in Romania and Bulgaria, and a year ago it began working in Romania. But Central Bottling has decided to suspend its launch in Bulgaria until further notice, mainly because of the impact of the global economic crisis on Eastern Europe.

Monbat and Elchim's turnover down 50%


Monbat AD and Elchim Iskra, the battery manufacturers traded on BSE, booked a slump in their financial indexes in the first half of 2009, the non-consolidated results show. The two companies realised some BGN 56 million joint turnover for the Jan-June period, a two-fold decline year-on-year. Sales also dropped twice on an annual basis to BGN 55.3 million. The profit of both companies fell 54.8% year-on-year.


















Port discord

Publication: The Sofia Echo



Even when Romania lagged behind Bulgaria in its European Union accession negotiations and the issue of decoupling the two countries was raised because of slow reform efforts by Bucharest, Romanian firms seldom lost contracts when in direct competition with their neighbours from south of the Danube.Chalk one up for Bulgaria then, after the Port of Bourgas landed a major deal to handle transit shipping for the four steelworks that global industry leader ArcelorMittal owns in Romania.Under the terms of the two-year deal, raw materials for the ArcelorMittal mills will be brought into Bourgas on heavy freight ships and moved to smaller vessels, which would then sail up the Bystroe channel in Ukraine to the Romanian port of Galati on the Danube River, Port of Bourgas chief executive Argir Boyadjiev told Bulgarian daily Dnevnik.The decision has riled port operators in Romania, who claimed that they offered competitive prices and better facilities than Bourgas, accusing ArcelorMittal of undermining the Romanian economy.Thierry le Gall, chief executive of ArcelorMittal Galati steel mill, the steel giant’s biggest asset in Romania, said in mid-July that ArcelorMittal had to look for an alternative after failing to agree a long-term deal with private port operator Comvex. Comvex owns the bulk handling terminal in the port of Constanta on the Black Sea."Our only problem with Comvex is security. If we could sign a long-term competitive contract with Comvex, there would be no problem," Le Gall said, as quoted by Romanian business weekly Capital. "Today, Comvex’ price is higher than the international average. We cannot ask the government for cheaper gas, cheaper energy and at the same time endanger this aid by buying expensive services from Comvex."ArcelorMittal is the second-largest shareholder in Comvex with 36 per cent, but its efforts to acquire full control have run into opposition from majority owner Solidmet, which disagreed over how a buy-out offer was to be carried out.Comvex, along with two state-owned companies, port operator CNAPM and a shipping canals operator CNACN, rejected Le Gall’s arguments that the decision was driven purely by price considerations. According to the three companies, costs in Constanta averaged about 5.77 euro a ton, while in Bourgas the price range was 16.13 to 19.13 euro a ton. At the same time, Constanta’s shipping terminal allowed to handle 45 000 tons an hour, compared to Bourgas’ capacity of 20 000 tons an hour."ArcelorMittal Galati has no economic argument in favour of shipping raw materials through Bourgas and Bystroe canal, to the detriment of the route through Constanta and the Danube-Black Sea canal," the three companies said in a joint statement, quoted by Capital.Boyadjiev declined to disclose how much the Port of Bourgas was paid by ArcelorMittal for handling the shipping. The new custom, however, is expected to help the Bulgarian port make up for the loss of business after Bulgarian debt-laden steel mill Kremikovtzi had to cut production to a bare minimum.Wringing hands. CNAPM stands to lose about three million euro unless the dispute between Comvex and ArcelorMittal is settled, CNAPM general manager Ioan Balan told Romanian daily Business Standard. Already the amount of iron ore handled by the port of Constanta in the first half of the year was down by 72 per cent compared to the same period of 2008, he said. Steel products shipping was down by almost 40 per cent.CNACN general manager Valentin Zeicu told the daily that in the first half of the year, shipping through the Danube-Black Sea system of canals was down to 40 per cent of the volume recorded in the same period of 2008, forcing the company to cut salaries by 20 per cent.Comvex itself has been the least affected, chief executive Viorel Panait told Business Standard. ArcelorMittal accounted for half of Comvex’ revenue in 2008, but the port operator has moved to diversify its business and reported a revenue increase of 60 per cent in the first quarter of the year.Romanian port operators fear that ArcelorMittal wants to acquire control over all operators along the shipping routes to Galati, daily Evenimentul Zilei said, quoting unnamed industry sources. ArcelorMittal already owns the Romportmet operator in the port of Galati, set up during the communist era with the express purpose of handling shipments for the steel mill in Galati.The steel giant has had to make hundreds redundant and the latest row has already prompted calls from labour unions for the state authorities to revoke the state aid given to ArcelorMittal. Dumitru Costin, leader of the BNS labour union, who said that the state aid reached $1 billion, suggested that the three Romanian operators should send a joint letter to the European Commission and Competition Commissioner Neelie Kroes and ask for a ruling.The companies have already lodged a complaint with the Romanian Competition Council. Under Romanian law, the regulator now has 30 days to issue a ruling and if it found ArcelorMittal guilty of unfair competition, it could impose a fine of up to 10 per cent of the company’s turnover for the previous year. Data for 2008 is not yet available, but in 2007, ArcelorMittal Galati posted a turnover of 2.1 billion euro.




Energy rethink

Publication: SofiaEcho


One of Boiko Borissov’s main campaign messages was change, but in the energy sector, the scope of change remains murky. The focus is on three major projects involving Russian companies and the billions of euro in costs that Bulgaria’s new Cabinet appears unwilling to spend.The contracts for Belene nuclear power plant, South Stream gas pipeline and Bourgas-Alexandroupolis oil pipeline, were signed by Bulgarian President Georgi Purvanov and Vladimir Putin in January 2008, during one of Putin’s last foreign trips as Russian president.Even before he was nominated to form the government, Borissov asked the outgoing cabinet for a moratorium on any new contracts for Belene and South Stream, but has left his Cabinet appointments to do the talking since taking office.Simeon Dyankov, the Finance Minister, said Bulgaria faced a Budget deficit and did not have the money for the projects. "In times of crisis things are done that otherwise wouldn’t be done.We don’t have the financial resources to complete these projects," he said, quoted by the Financial Times.Traicho Traikov, the Economy and Energy Minister, has criticised the Belene nuclear project, on which work progressed the furthest, but took a milder stance on the South Stream pipeline.Belene power station lacked a cohesive strategy, had no cost-benefit analysis – a charge that power grid operator NEK, which owns 51 per cent in the project, rejected – had no clear funding strategy and the money was spent non-transparently, Traikov said on August 3."Until now, there has been no dialogue with taxpayers on project costs, but [taxpayers] are expected to foot a bill of more than 10 billion euro," Traikov said, as quoted by Dnevnik daily.Belene costs already surpassed 430 million euro, money spent on preliminary construction works, consultancy fees and equipment orders, he said. Russia’s AtomStroyExport has been contracted to build two 1000MW nuclear reactors for a fixed cost of four billion euro, but additional expenses are expected to at least double the final price, analysts have said.The project will be reviewed together with NEK and its parent company, the Bulgarian Energy Holding, set up to manage the state-owned energy assets. Talks with German utility RWE, which owns the remaining 49 per cent in the company that will build and manage Belene, were scheduled for the first week of August.Nevertheless, Traikov declined to say whether the project would be binned, saying that it was not clear how much in contractual damages Bulgaria would have to pay, a situation caused by the vague wording of the contracts.Should the Cabinet decide to cancel the project or put it fully into private hands by selling its majority stake, it would have at least one ally in Parliament – the centre-right Blue Coalition. one of the coalition’s co-chairpersons, Martin Dimitrov, who was elected head of Parliament’s economic policies committee, said on July 30 that the Government should consider breaking off the deal after taking a look at the contractual clauses. Purvanov has been one of the biggest advocates of the joint energy projects with Russia, swiftly reacting to Dimitrov’s words a day later."I think it is important that when this Cabinet drafts a new energy strategy, there is an element of continuity and not just calculations of what will be done during the current term," Purvanov said during a trip to Veliko Turnovo, as quoted by Focus news agency."The big energy projects are an investment in the energy security of the country in the long term. If we wish to be the energy centre of the Balkans, as is our declared intention, we must be very careful what we do," he said.Purvanov rejected the criticism that the projects were too expensive and further deepened Bulgaria’s reliance on Russian energy sources. "I do not accept the view that big projects should be halted because they cost too much and that they should be given to private investors. World experience shows that it is the state that must build up the energy sector," he said.Despite the lobbying by Purvanov and the former cabinet of Socialist prime minister Sergei Stanishev, even some Russian analysts are not convinced by the reasoning behind them. With the straits of Bosphorus no longer as choked with traffic, the Bourgas Alexandroupolis pipeline was harder to justify, daily Nezavisimaya Gazeta quoted Mikhail Kroutikhin, a partner in consulting firm RusEnergy, as saying.South Stream, according to Kroutikhin, was so expensive that "it would be much easier to agree with Ukraine on guarantees for transit under oversight from European observers than build such an expensive pipeline."




















Good infrastructural vintage in for the new cabinet


Publication: Banker Weekly English
Financial Information Agency Ltd.


Contrary to everybody's expectations that because of the financial crisis and the lack of resources the Borissov cabinet would face grave problems completing a number of infrastructural projects, several sites of key importance to the country will be inaugurated during its mandate. And they will be sites that will have significant impact on the economy. Then the new rulers will be able to hit the headlines at the expense of their predecessors who failed, for one reason or another, to do the work on lots of projects within the fixed deadlines. Undoubtedly, the most important among all is the completion of the Danube Bridge II. The land connection between Vidin and Kalafat has been subject to discussions ever since the early 1990s. However, it was only in the end of 2006 that a tender was organized to select a main executer of the designing and construction works. The tender was won by Spanish company FCC. The implementation agreement was signed on January 30, 2007 and the term announced in advance was 38 months. The total value of the agreement is EUR99,955, 948. By mid-2010 the Spaniards were expected to build a 1,971 m ferro-concrete suspension bridge which would have two lanes in each direction and an electrified railway line. However, the actual work on the facility did not start until the middle of last year. The now former transport minister Petar Mutafchiev admitted at the time that there had been a delay because of the expropriation of land due to the adjoining infrastructure. How long the delay will exactly last became known a little more than week ago. During its last session held on July 23, the Stanishev cabinet approved an amendment to the 2000 financial agreement signed by Bulgaria and the European Investment Bank (EIB) for the construction of Danube Bridge II. Thus the term for absorption of the EUR70MN loan is extended by 2011. The total value of the bridge between Vidin and Kalafat, along with the adjoining infrastructure, amounts to EUR232MN. Apart from the resources launched by the European financial institution, EUR70MN have been provided by the ISPA programme and another EUR60MN - from the state budget. The remaining funds have been provided by the German KfW bank and the French Development Agency. Construction works are now going on quite well, so further prolongation of the term is difficult to expect. The reconstruction and electrification of the Plovdiv-Svilengrad railway line will be completed next year. The modernization of the railway road to the Turkish and the Greek borders of a total length of 151 km was delayed by six months and it should be completed by the end of next year. The repair works cost EUR340MN, of which EUR153MN provided by ISPA. Actually, it is exactly the financing from the EU pre-accession programme serving as the strongest evidence that the executer, the Greek Terna company, will do its job in time. By December 2010, the money provided by Brussels should have been absorbed, otherwise it will be lost beyond retrieve. Another key project that the previous government failed to complete (despite its willingness) is the Lyulin highway. Back when the first sod was turned on January 30, 2007, it was generously promised that the highway would be ready before the end of 2009. Sergey Stanishev even declared that a few stages would be inaugurated earlier than planned. Well, but because of the corruption scandals about the roads financing the construction of Lyulin suffered an extreme delay. It is true that due to pressure from the European institutions the Turkish executing consortium, Mapa-Cengiz, accelerated the building of the highway - a 24-hour three-shift operating regime was introduced and the progress is now evident. In practice, the easier part of the 18-km highway has already been completed, while further 6 km of bridges, tunnels and other facilities are yet to be built. The first 5-km section is expected to be launched within days and it will relieve to some extent the traffic on the Sofia ring road. According to the plans, the entire highway is expected to be ready by this time next year. That will solve the problem caused by heavy-freight vehicles that are now crossing the Knyajevo residential district of the capital. Next week an end will be put to the repair of the Hainboaz pass that lasted more than three years. The site on which the consortium between the Binder company, owned by Vesselin Georgiev-Batko, and Road Constructions Veliko Tarnovo is working is worth some EUR26MN, of which 75% is provided by EIB and the rest is co-financing from the state budget. That money is used for the building of a 22-km modernized road with an additional third lane and for the complete reconstruction of four bridges. There is still some finishing work to be done - laying of the fatiguing layer of the asphalt covering in certain sections, fencing of the slopes with grids, laying of curbs and draining ditches, as well as shaping the level marking and the vertical signaling, Yanko Yankov, Executive Director of the Road Infrastructure National Agency (RINA) who inspected the construction works last week said. When the repair is completed, traveling between North Bulgaria and South Bulgaria will be shortened by some 20 minutes. Boyko Borissov and his team may also win laurels for the construction of the second section of the Sofia underground from Nadezhda quarter to Cherny Vrah Boulevard The work on it started last December and the term for implementation of the project is 45 months. In other words, the route should have been completed in 2012. Otherwise, considerable penalty payment will be owed. For each day of delay sanctions will vary between BGN70,000 and BGN80,000 and if there is a longer delay they may even go up to 20% of the agreement value. Obviously, this perspective has quite a mobilizing effect on the constructors as work is in full blast both near the Central Railway Station and Hemus hotel. The second metro diameter will "swallow" about BGN471MN, of which EUR185MN will be provided by the Transport Operational Programme and the rest - by the municipal budget and the state one. The GERB government will also have the honour to inaugurate the Tsankov Kamak hydro power plant whose construction started more than two years ago - during the ruling of Simeon Saxe-Coburg-Gotha. The facility is planned to be launched in 2010. The Austrian consortium between Alpine Bau and VA Tech Hydro is the executer of the project and Minstroy Holding is the major subcontractor representing Bulgaria. According to the initial plans, the construction of Tsankov Kamak would cost EUR219MN but because of the emerged need of deeper foundations construction works were considerably delayed and the cost grew by 10 to 12 percent. The inauguration of the 80 MW hydro power plant, which will be able to generate 188 mln KWh a year, will have a positive impact on the Bulgarian energy sector which has not had many occasions to celebrate in the recent years. Should we add the ambitious declaration for completion of two highways, Trakia and Maritsa, the new cabinet will be recorded as the most successful one, at least in terms of infrastructure. There will hardly be anyone to remember that most of these projects have been launched during the mandate of other rulers.