BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 28 MAY – 4 JUNE 2010 )
Sections/headline briefs:
MACROECONOMY:
· Renewables investors seek secure environment in Bulgaria
· Bulgaria could pay EUR 1 billion for missing renewables target
· Bulgarian Minister promises 1st completed highway by May 2011
· Government grants Vidin port concession to Bulgarian River Shipping
- Exports continue to rejuvenate Bulgaria producer prices
· Sofia to improve its separate waste collection
· Bulgarian pharmaceutical companies' profit up by 26% in Q1
· Finnish, Bulgarian ministers discuss economic situation, euro stability
· IMF forecasts modest economic growth for Bulgaria for years to come
INVESTMENTS:
· Germany's PNE Wind teams up with Bulgaria's 150 MW project
· Greece's Cosmote Bulgarian unit invests € 9.2 M in 3G network expansion
· State to close loopholes in tender procedures
COMPANIES:
· Bulgarian power utility CEZ takes up 69 new projects
· US company AES interested in Enel's stake in 908 MW CPP
· Bulyard may land big Russian order
· IBM to help Bulgarians and Britons to monitor energy use
· Bulgaria said to lobby for no-frills Ryanair
· IKEA eyes second Bulgarian store in Varna
THE CRISIS:
· Budget revisionism
· Chairman of EPP group in European parliament says Bulgarian PM doing everything necessary to cope with economic crisis
INTERVIEW:
· Bulgaria offered opportunity to take advantage of Dutch experience in waste, water management
MACROECONOMY:
Renewables investors seek secure environment in Bulgaria
Investors in renewable energy expect clear business conditions and energy security in order to develop projects in Bulgaria, participants told the 4th Annual Renewable Energy Conference 2010 hosted by Dnevnik.They argued that the stable business environment is more important than feed-in tariffs.Developers are seeking to build around 14 GW of wind and photovoltaic (PV) plants, according to the Ministry of Energy. However, only 2 GW of the proposals have signed grid-connection contracts.Meanwhile, the Bulgarian government is preparing to restrict clean energy development on cropland included in categories one through four.Sebastin Noethlichs, managing director of N-Vision Energy, said the company cannot invite its customers to put their money in Bulgaria as things can change any time.His opinion was echoed by Yordan Merakov of Global Wind Power, who called for transparent and predictable business conditions.Velizar Kiriakov, president of the Association of Producers of Ecological Energy, said the problems associated with state-run power company NEK and its electricity system operator ESO stem from the fact that the Bulgaria has still not made up its mind on what to do with the two companies.The Bulgarian government is drafting new renewable energy legislation that should be submitted with Parliament by December 5 at the latest.Kostadinka Todorova, head of the Ministry of Economy’s Energy Efficiency and Environment Protection department, said the changes are being negotiated at a political instead of expert level.Bulgaria should complete its National Action Plan on renewables by June 30.Noethlichs surprisingly said he has seen the renewables bill, revealing that the government plans to reduce the deadline for purchase of PV and wind projects, from 25 to 15 and from 15 to 12 years, respectively.Todorova explained that the action planned developed by a consortium between Portugal’s Ecosphera, the UK’s IT Power and the Black Sea Regional Energy Centre is unsatisfactory and will have to be rewritten.
Bulgaria could pay EUR 1 billion for missing renewables target
Bulgaria may have to pay EUR 1 billion if it comes short of its 2011 renewable energy target, warned Velizar Kiriakov, president of the Association of Producers of Ecological Energy (APEE).Speaking at the 4th Annual Renewable Energy Conference 2010 hosted by business daily Dnevnik, noted that Bulgaria uses a different mechanism from the European Union (EU) to count the share of clean energy in its total consumption.In March, Bulgaria’s Ministry of Energy announced that renewables accounted for 9.9% of the country’s energy consumption in 2009.However, according to APEE, the consumption of renewable energy used for heating, cooling and transportation should also be counted towards the target. Thus the share would be just 2.2-2.3% for 2009, Kiryakov explained.Bulgaria has committed to a EU-binding target to boost the share of renewable energy in its gross consumption to 10.72% by 2011-2012. APEE estimated that a further 10 TWh of green energy is needed to achieve this goal. Bulgaria will have to pay EUR 0.10 in origin guarantee for each kWh produced in another EU country, which means that it will have to set aside a total of EUR 10 billion, Kiryakov noted.Each percentage short of the target will cost Bulgaria between EUR 200 million and EUR 300 million per year, according to Kenet Lefkovic of New Europe Corporate Advisory. He estimated that Bulgaria should invest between EUR 4 billion and EUR 6 billion to hit its 16% renewables target by 2020.
Bulgarian Minister promises 1st completed highway by May 2011
The Lyulin Highway will be ready by May 15, 2011, making it Bulgaria’s first completed highway, promised Regional Development Minister Rosen Plevneliev.Plevneliev announced Monday that the government had reached an agreement with the Turkish company Mapa Cengiz, which is building the Lyulin Highway, and that if the firm fails to meet the deadline, it will face a huge penalty.The 19-km Lyulin Highway is supposed to connect the Bulgarian capital Sofia with the Daskalovo road intersection near Pernik to the west, which will be starting point of the future Struma Highway connecting Sofia with Kulata on the Greek border.The minister said the government was in contact with Serbia over the construction of a highway connecting Sofia and Nis. In his words, the project is tough to realize because of the rough terrain.“We are a country in isolation. You know what our roads to the Serbian border are like. The completion of the section between Sofia and Kalotina on the Serbian border will allow Bulgarians to drive to Vienna in 6 hours. We will try to prepare our project by the end of 2011, and to start building in 2012. We are in contact with the Serbian authorities and are doing everything possible in order to build the highway between Nis and Sofia,” explained Plevneliev.The regional development minister further said that the construction of the final section of the Trakiya Highway connecting Sofia and Burgas will start by end of the current week as the legal claim by one of the bidders in the tender has been withdrawn, which has unblocked the project.Plevneliev promised 24/7 supervision of the construction of the remaining section of the Trakiya Highway contrasting it to the situation with the Lyulin Highway, which should have been completed by now after its construction was started in 2007, but the poor supervision allowed the Mapa Cengiz company to delay the work.
Government grants Vidin port concession to Bulgarian River Shipping Jsc
Bulgaria’s major Danube shipping operator, Bulgarian River Shipping Jsc, has been given the concession of the Port of Vidin.The decision was made by the Bulgarian Cabinet at its regular meeting Wednesday. The Ruse-based Bulgarian River Shipping Jsc becomes the concessionaire of Port Terminal Vidin-North and Port Terminal Ferry Boat Complex Vidin for 30 years. According to the government decision, the offer submitted by the BRS Jsc company, including large-scale investments in construction and technical equipment, meets all necessary legal requirements.Under the contract, the Bulgarian River Shipping Company is supposed to invest BGN 16 M in the first 4 years in order to develop and modernize further one of Bulgaria’s major Danube River ports.“The concession of the Port of Vidin will provide a large amount of funds for its reconstruction and modernization, and at the same time will bring revenues for the state budget,” says the government statement. The Bulgarian River Shipping Jsc was privatized in 2006. A majority share, 77%, of it is owned by the Bulgarian Shipping Company, a subsidiary of the Varna-based group Chimimport. In March 2010, Bulgarian River Shipping also won the tender for operating the Vidin-Kalafat ferry boat connecting Bulgaria and Romania.
Exports continue to rejuvenate Bulgaria producer prices
Bulgaria's producer prices continued to increase mostly on the back of exporting sectors.While this is a sign that the economic picture is perking up, the conditions for doing business in Bulgaria remain negative, according to figures published on Friday.Inflation in producer prices hit a record 8.1% on an annual basis in April, show data by the National Statistical Institute (NSI). For the month, it sped up to 2.1%.The main driver behind the inflation again was the processing industry, which saw a 12.2% rise, including 42.3% for base metals and 20.7% for tobacco products.On the other hand, there was a decline in the prices of making wood materials and non-metal mineral raw products.On the domestic market, prices were up by 6%, which means exporting producers of intermediate goods sell more expensive on the foreign market than at home. Economists say this could confirm the anticipation that has been ignored that the improvement in exports recorded in recent months boils down to the increase in nominal terms in the price of the produce and not because of a rise in physical volume.A banking analyst speaking on condition of anonymity said that at their current level exports are not enough to offset diminishing domestic demand.Under the negative scenario, a possible decrease in the price of raw materials, metals in particular, could slow down exporters, eroding overall exports of which metals account for nearly 15%.
Sofia to improve its separate waste collection
Sofia municipality intends to change the system for separate waste collection, so as to increase its effectiveness. According to local administration it is practically not functioning now and the four recycling organizations that have entered into contracts with Sofia Municipality (Ecopack, Ecobulpack, Repack and Bulecopak) must submit plans for improvement oft their separate waste collection process. According to information provided by sector companies over 90 percent of all people know what the function of the different-coloured containers is, but only 10 percent use them as intended. "We need to change the locations of separate waste collection containers, to identify them better so that they can significantly differ from the domestic waste and garbage containers, and the collected litter should be transported more frequently than twice a week as it is envisaged by the present contracts," says Vice-Mayor of Sofia on Environmental issues, Maria Boyadzhijska. In her words, the authorities have to find ways to encourage citizens to dispose of their waste separately at special points where people can return their packaging and get back the money they have paid for them when purchasing the goods. Furthermore Ms. Boyadzhijska asked organizations to provide information on spending funds in their information campaigns, since, according to their contracts, they must invest BGN1 per capita for awareness campaigns each year. Meanwhile, Deputy Environment Minister Evdokia Maneva announced that the problem with points for the purchase of scrap materials will be resolved by the end of the year. She said they were not illegal but are not well-targeted and function in an inappropriate way.
Bulgarian pharmaceutical companies' profit up by 26% in Q1
The combined profit of the major Bulgarian pharmaceutical companies has seen a strong increase of 26% in the first quarter of 2010.Thus, the combined profit of the six Bulgarian pharmaceutical producers listed on the Sofia Stock Exchange – Sopharma AD, Medica AD, Bulgarian Rose – Sevtopolis AD, Momina Krepost AD, Unifarm AD, and Septona – has reached BGN 14.3 M for January-March 2010, according to data cited by the Pari Daily.The combined Q1 turnover of the six companies went up by 14% reaching BGN 154.2 M. According company managers cited by the Pari Daily, the strong performance comes mostly from exports to other Balkan countries, Russia, and Ukraine.The Bulgarian pharmaceutical giant Sopharma is responsible for the overwhelming share of the combined turnover. Its sales in the first quarter amounted to BGN 138.6 M, a 22% increase compared to the same period of 2009. Its profit increased by 31% year-on-year, reaching BGN 12.7 M, with the revenue from exports to Ukraine growing 2.5 times, and to Turkey – twofold. Its export to Central Asia and the Caucasus grew by 9%, to the USA – by 23%, and to Singapore – by 5%.Sopharma’s total exports amounted to BGN 31.8 M, and its turnover from the Bulgarian market was BGN 104.25 M.The other larger Bulgarian pharmaceutical producer, Bulgarian Rose – Sevtopolis – saw its sales income go up by 34% in the first quarter reaching BGN 4 M.Medica AD has seen its income from sales decline by 13% down to BGN 3.16 M in the same period, while the sales of Momina Krepost AD are down by 9%, and amount to BGN 1 M.Company reports have attributed the worse results to pressure on part of the clients to delay payments for pharmaceutical deliveries for the second quarter of the year.According to analysts, the Bulgarian pharmaceutical sector offers good returns, which makes the shares of the pharmaceutical companies attractive for investors on the Bulgarian Stock Exchange.
Finnish, Bulgarian ministers discuss economic situation, euro stability
Bulgarian Finance Minister Simeon Dyankov met Tuesday [1 June] with his Finnish counterpart Jyrki Katainen, Dyankov's ministry said in a press release.The two discussed the economic situation in Bulgaria and Finland, and the ways for faster coping with the impacts of the economic downturn and achieving economic growth. The two ministers also discussed the measures for the stability of the euro.Finland is one of the countries with the most stable public finances in Europe in the context of the serious crisis which hit the continent.Katainen congratulated Dyankov on the low external debt of Bulgaria, which is 15 per cent of the gross domestic product, while the figure for Finland is 50 per cent of the GDP.Dyankov's visit to Finland is part of his working tour to three of the countries with the best fiscal discipline in Europe. on Monday Dyankov conferred with his Estonian counterpart Juergen Ligi. on Wednesday Dyankov meets Sweden's Finance Minister Anders Borg.
IMF forecasts modest economic growth for Bulgaria for years to come
Bulgaria will register an economic growth of 0.2% in 2010, forecasts the International Monetary Fund in its annual review of the Bulgarian economy.In a statement released late Wednesday, the IMF states that in the years to come, Bulgaria will be recovering from the sharp contraction it economy suffered in 2009 but that its growth levels will be much lower than they were between 2001 and 2008.The Fund states that export-oriented industries and trade could contribute to a more substantial growth but that investments in the financial sector and construction are expected to be negligible compared to their pre-crisis levels.“In the years that preceded the global economic and financial crisis, large capital inflows into Bulgaria generated a domestic demand boom. This brought strong GDP and employment growth, but also widened the current account deficit to very high levels, and led to an overheating of the economy, with high wage growth and double-digit inflation.The boom came to an end in the fourth quarter of 2008... A sharp reduction in capital inflows led to a contraction of domestic demand, while the recession in Bulgaria’s trading partners caused a drop in exports. As a result, GDP contracted by 5.0% in 2009,“ says the IMF.Bulgaria’s 2010 inflation is projected to remain moderate at 2.2%, while the current account deficit is expected to drop from 9.5% in 2009 to 6.25% of GDP in 2010. Private sector external debt stood at 102.7% of GDP at end-2009, while gross foreign currency debt of the non-financial private sector amounts to 80% of GDP.Its analysis projects that Bulgaria will see a further decline of investment, tightened credit, and weak private consumption as a result of unemployment.“While capital inflows will, over time, recover somewhat from the low levels during the crisis, they will mostly likely remain well below the unsustainable levels experienced before 2009, and both the private sector and public sector will need to adjust to lower capital inflows. The private sector will need to shift resources from the non-tradable to the tradable sector,” the Fund forecasts, while also stressing that it will be of key importance for the Bulgarian government to sustain built-up public buffer because the private sector will continue to be very vulnerable.The Executive Directors of the Fund have praised the Bulgarian government for sticking to “prudent macroeconomic policies” that helped alleviate the effects of the economic crisis.“Directors noted that while the economy is poised to recover this year after a sharp contraction, large private external debt and the potential spillover from regional uncertainties pose considerable downside risks. Capital inflows are likely to remain low and domestic demand is expected to decline further,” states the IMF assessment of the Bulgarian economy.Its Directors have pointed out that Bulgaria needed to modify its public policies in order to prepare for the future adoption of the euro. It has commended the effects of the currency board for maintaining the country’s financial stability. In their view, “the most viable exit strategy” from the currency peg for Bulgaria is the adoption of the euro.Potential risks for the country’s fiscal stability are seen as stemming from smaller than expected state revenues and higher than expected arrears. Multi-year budgetary frameworks, and pension and health care reforms have been recommended to Bulgaria for the period after 2010.The IMF analysis recognizes Bulgaria’s continued financial stability thanks to regulation and adequate capital buffers but warns that because of the rising non-performing loans and reversal of funding by parent companies to their subsidiaries in Bulgaria, the government must be on the lookout and to monitor liquidity.The annual IMF review of the Bulgarian economy is in accordance with an Article IV consultation, a mechanism under which a staff team visits the respective country, and prepares a report discussed by the members of the Fund’s Executive Board. The views of the Board are summarized in the statement.
Bulgaria: Selected Economic Indicators
|
|
2005 |
2006 |
2007 |
2008 |
2009 1/ |
2010 2/ |
|
|
|
Output, prices, and labor market |
(Annual percentage change) |
|
Real GDP |
6.2 |
6.3 |
6.2 |
6.0 |
-5.0 |
0.2 |
|
Consumer price index (average) |
6.0 |
7.4 |
7.6 |
12.0 |
2.5 |
2.2 |
|
Consumer price index (end of period) |
7.4 |
6.1 |
11.6 |
7.2 |
1.6 |
2.7 |
|
Employment |
1.9 |
4.3 |
3.5 |
2.8 |
-4.0 |
-2.2 |
|
Public Finance |
(In percent of GDP) |
|
General government overall balance |
2.4 |
3.5 |
3.5 |
3.0 |
-0.9 |
-2.5 |
|
Gross public debt |
31.3 |
24.6 |
19.8 |
16.1 |
16.1 |
16.2 |
|
Financial net worth |
6.0 |
9.9 |
10.2 |
11.5 |
10.8 |
8.9 |
|
Money and credit |
(Annual percentage change) |
|
Broad money (M3) |
23.9 |
26.9 |
31.2 |
8.8 |
4.3 |
0.3 |
|
Credit claims on non-government sector |
32.4 |
24.6 |
62.5 |
31.6 |
3.8 |
1.6 |
|
Balance of payments |
(In percent of GDP) |
|
Merchandise trade balance |
-20.2 |
-22.0 |
-25.1 |
-25.2 |
-12.1 |
-9.9 |
|
Current account balance |
-12.4 |
-18.4 |
-26.8 |
-24.0 |
-9.4 |
-6.2 |
|
Gross international reserves |
33.7 |
35.4 |
41.3 |
37.3 |
37.8 |
37.8 |
|
Exchange rates |
|
|
|
|
|
|
|
Exchange rate regime |
Currency board arrangement |
|
|
|
Leva per euro |
Lev 1.95583 per Euro |
|
|
|
|
|
Sources: Bulgarian authorities; and IMF staff estimates.
1/ Preliminary.
2/ Projections. |
INVESTMENTS:
Germany's PNE Wind teams up with Bulgaria's Windpark Dobrudzha on 150 MW project
German wind farm developer PNE Wind said it will considerably expand its activities in Bulgaria by setting up a 51/49 joint venture with local company Windpark Dobrudzha.With the Windpark Dobrudzha OOD, the foundation of a joint venture was agreed, in which a Bulgarian wind farm project with a rated output totalling 150 megawatts (MW) is being included, PNE Wind said in a statement on Tuesday.Under the joint venture agreement, PNE Wind will be in charge of the selection and purchase of wind turbines, the financing of the project, distribution and commercial and technical management in the operating stage of the wind farm, to be located in the windy northeastern Bulgarian region of Dobrudzha."With this additional collaboration, we are focussing on continuing our international expansion strategy. Our growing commitment in Bulgaria is another building block for this. We are ensuring that our future has a continually growing project portfolio," PNE Wind CEO, Martin Billhardt, said in the statement.PNE Wind (www.pnewind.com), based in Cuxhaven, on the North Sea, develops and implements onshore and offshore wind farm projects. So far, the company has successfully completed 94 wind farms with a total nominal output of 782 MW.Alongside its business activities in its home market, PNE Wind is also increasingly investing in dynamic growth markets and has subsidiaries and representations via joint ventures in Hungary, Bulgaria, Turkey, the UK, Romania, USA and Canada, the company said.PNE Wind has been active in Bulgaria since 2007 and has developed several wind farm projects jointly with local partners.
Greece's Cosmote Bulgarian unit invests € 9.2 M in 3G network expansion
Bulgarian wireless operator Globul it has acquired an additional spectrum for its its third-generation (3G) high speed network for 18 million levs ($11.3 million/9.2 million euro), it said on Wednesday.For the acquisition of the spectrum, allotted by the Bulgarian telecoms regulator CRC, Globul paid a one-off fee of 17 million levs and an additional year's fee of one million levs."The spectrum will be employed to further expand and upgrade Globul's 3G network, with the aim to meet the growing demand for mobile broadband services, with increasing numbers of broadband users and higher volumes of traffic," Globul , a unit of Greek wireless operator Cosmote, said in a statement."Acquiring extra frequencies, Globul can further boost the excellent quality of its existing services as well as offer higher data transfer speeds," the company's Chief Technical Director, Apostolos Pagkoutsos, said in the statement.Globul's 3G network covers 82.5% of Bulgaria's population of 7.6 million. The company's customer base at the end of the first quarter of 2010 was approximately 3.8 million.In Bulgaria, Globul competes with Mobiltel, a unit of Telekom Austria, and the wireless arm of local operator Vivacom.
State to close loopholes in tender procedures
Publication: Banker Weekly English
Provider: Financial Information Agency Ltd.
Hardly anyone believes that the vicious practices and corruption schemes in the conduct of public procurement in Bulgaria may be terminated. Although at tender procedures firms are expected to compete to win a contract, too often, companies agree to offer higher prices or lower quality goods and services or directly negotiate and distribute the contracts among themselves, thus preventing, restricting or distorting free competition. In an attempt to limit these activities during the week the Commission for Protection of Competition has adopted specific guidelines to discourage tender manipulation. The aim is to identify the main problems in carrying out public procurement procedures as well as the factors that determine the behaviour of firms. The guidelines are accompanied by a list of circumstances that are a prerequisite for manipulating tendering processes. Documents are developed in co-operation with the Competition Committee of the Organisation for Economic Cooperation and Development (OECD) and according to the Committee, it reflects the best practices of other countries in this field. "The guidelines and the list are mostly oriented towards contracting authorities, since they play the key role in selecting the tender proposals offering the most advantageous for the state price and quality," said a representative of the Antimonopoly Authority. According to the new Law on Protection of Competition, the cases of manipulation of public procurement procedures are now regarded as one of the possible forms of cartels between enterprises, which constitutes a violation of Art. 101 of the Treaty on the Functioning of the European Union, committee officials explained. Companies participating in the infringement can be punished with fines of up to 10 percent of their turnover from the previous financial year. Of course, in order to actually impose such fines, the assistance of the contracting authorities is needed, and according to the Commission for Protection of Competition these entities should signal about any violations. In addition, to prove the existence of such cartel agreements, the register of public procurement will be monitored. "Also, what can be used are the materials collected in the course of proceedings before the Commission for Protection of Competition, which can serve as grounds for initiating new checks," warn representatives of the antimonopoly watchdog. Otherwise, if one examines the list of circumstances that constitute prerequisites for tender manipulations, one can safely claim that almost every tender in Bulgaria has seen at least one of them taking place. For example, a case allowing for possible manipulation is when the opening of tender bids is only attend by one or few of the participants. Another case is when only a few companies from those that have purchased tender documentation from the contracting authority, finally submit bids, as happened during the procedure for the section of the Trakia motorway between Stara Zagora and Nova Zagora, when 66 companies purchased tender documentation, while only eight took part in the bidding process at the end. Another sign of possible preliminary agreement between companies, according to the Commission for Protection of Competition is an instance of unreasonably big difference between the bids of the winner and other candidates in the procedure. An example is again the tender for the same stretch of Trakia motorway where the bid of the winner, Trace Group, was nearly two times lower in price than what was offered by all other bidders. Similarly, the situation, when one of the participants makes a significantly lower or higher bid as compared to its previous bids for similar projects, is considered to be suspicious. For tender manipulation are considered also the cases when certain market players regularly win contracts before certain contracting authorities or when in certain geographic areas contracts are awarded to the same companies again and again, although there is real and potential competition. For example, this happened at almost all tenders for infrastructure projects in the region of Kardzhali during the mandate of the previous Government, that were repeatedly won by the firms of Mr. Errol Kasim and Mr. Alexander Elinov-Sadak (Savarona Ltd. and Ardastroy Ltd.) as the BANKER has consistently informed the broad public. Among other circumstances common in Bulgarian practice is the case when winning companies subcontract part of their projects to other tender participants or market players that did not participate in the tender at all. There are even cases when some competing bidders have asked the same consultants to prepare their price bids or their documentation packages have similar appearance, are printed on similar paper and have common parts, sections and subsections, as well as use similar forms or fonts.
COMPANIES:
Bulgarian power utility CEZ takes up 69 new projects
Czech-owned electricity distribution company CEZ has announced the investment of BGN 4 M in 69 new energy projects in Western Bulgaria.The investment is supposed to improve the quality of electricity supply in 30 cities and villages, including the capital Sofia.The projects include activities such as expansion and rehabilitation of the power grid, laying new electricity cables, replacing old cables, building connections to new buildings.The investment in each of the new projects is up to BGN 400 000. The BGN 4 M allotted for the 69 new projects are part of the BGN 71 M total investment budget of CEZ for 2010, which has been approved by Bulgaria’s Commission for Energy and Water Regulation (DKEVR).The company has pointed out that its aim is to improve the quality of the electricity provided to the consumers, to expand the power grid, and fix any technical problems.CEZ says that in order to achieve these goals it will need to invest BGN 130 M in each of the next three years.
US company AES interested in Enel's stake in 908 MW coal power plant
US energy company AES is interested to acquire the majority stake of Italy's energy company Enel in local coal-fired power plant Maritsa East III located in the Maritsa East complex in southern Bulgaria. Enel owns 73% of the plant's equity capital and the state controls the remaining stake through national power grid operator NEC. In March, Enel announced plans to sell its controlling stake in the power plant and only a few days later economy and energy minister Traycho Traykov unveiled that NEC may sell its interest as well. A year ago, Enel completed a EUR 700mn modernisation programme, which increased the plant's electricity production capacity by 8.1% to 908MW, reduced sulphur dioxide emissions by 94% and extended the operational period of the four generators by 15 years. Earlier in the month, Austrian utility EVN also said it was interested in taking over Enel's stake in the power plant. According to local media, UK utility International Power was also interested in the power plant. AES is to launch soon a 670 MW coal-fired power plant in Maritsa East mines complex (Maritsa East I), the investment in which is estimated at EUR 1.4bn. AES runs a EUR 270mn wind-power complex in the country (together with the Bulgarian-German company Geo Power) with a total production capacity of 156 MW and plans to build a 80 MW solar energy park near the Danube town of Silistra.
Bulyard may land big Russian order
Bulgaria’s Bulyard Shipbuilding Industry (BSI) could clinch a major order from Russia, Darik Radio quoted governor Dancho Simeonov as saying. Simeonov returned from a shipbuilding and ship repair conference in Saint Petersburg held on May 25-28. Russia plans to grow its national fleet by 1,400 units by 2020, of which 40 percent will be ordered from abroad. Svetlin Stoyanov, chair of the National Association of Shipbuilders and Ship Repairers, who also attended the forum, said Bulgaria could supply a major part of the imported ship as it could build larger vessels. A working group has been formed to negotiate with Russia on a possible order.
IBM to help Bulgarians and Britons to monitor energy use
Using IBM's software, the homeowners view online information that displays their electricity use, figures out the cost, and compares it with usage by other people in a 30-month research project geared specifically for the UK and Bulgaria. "Giving citizens more information and better control over their energy use will cut down on costs and consumption as well as reduce their overall impact on the environment," said in a statement Guido Bartels, General Manager of Energy and Utilities at IBM. Though the goal of the project is to help consumers make better decisions on how to manage their power needs, the study will also help researchers monitor the people themselves to measure their attitudes toward energy conservation. This latest project is part of IBM's Smarter Planet program and follows the Smarter Building initiative to track and conserve energy use in buildings and factories.
Bulgaria said to lobby for no-frills Ryanair
Irish low-cost air carrier Ryanair, which is due to launch flights to Bulgaria's Plovdiv airport in September this year, may be granted compensations for each empty seat aboard its planes thanks to lobbying by two ministries, a report says.The plan for assisting Ryanair will oblige the municipalities near the city of Plovdiv to make installments to a special fund, local Sega daily reported, citing Ivo Marinov, Deputy Economy Minister.According to the report the Economy and Transport Ministries are behind the initiative and the fund has already been established, risking a sanction by the European Commission for creating conditions for unloyal competition.Bulgaria, which attracted a number of low-cost carriers thanks to its accession to the European Union and fast economic growth, is expected to continue to see the expansion of their market share.Wizz Air, EasyJet, Germanwings, Easyfly, Sky Europe, My Air, Air Italy and Norwegian Air are the other low-fare airline companies conducting flights from the three Bulgarian airports.Ryanair representatives visited Bulgaria last month, conferred with Transport Minister Alexander Tsvetkov and visited Plovdiv airport to finalize an agreement for the launch of its flights.According to Plovdiv airport executive director Doychin Anguelov the attraction of low-fare air companies is part of the airport strategy to increase its passengers and revenues.Ryanair has been planning to launch flights to Plovdiv airport for several years.
IKEA eyes second Bulgarian store in Varna
Swedish furniture maker IKEA will break ground on June 3 on its flagship Bulgarian outlet, which will be located in the capital city of Sofia.The chain, which is the world’s largest home furnishing retailer spanning 37 countries, plans to build its second Bulgarian store in the coastal city of Varna, said Greek company Fourlis SA, which holds the franchise license in Greece, Cyprus and Bulgaria. IKEA had been rumoured to be eyeing the Bulgarian market for four or five years. Fourlis purchased a site on Sofia’s ring road back in 2008. The new IKEA store in Sofia will be sprawled on 30,000 sq m and will have a 1,200-car parking lot. It should open doors in the second half of 2011, expecting to welcome 1.6 million shoppers in the first year. The store will stomach EUR 50 million
THE CRISIS:
Budget revisionism
Bulgaria’s Cabinet was set to table its Budget revision bill in Parliament in the first week of June, with Finance Minister Simeon Dyankov estimating that Parliamentary floor debates could be held as early as June 10.The draft has not been made public, but according to media leaks, it envisioned a 3.2 billion leva Budget deficit this year, the equivalent of 4.8 to five per cent of estimated gross domestic product.The revision became inevitable when the Cabinet’s efforts to cut costs and balance the books without Parliamentary approval were rejected by the Constitutional Court in March. Despite being drafted as "balanced", the 2010 Budget will now have a large deficit caused by the revenue shortfall, as domestic consumption is expected to remain low and any economic recovery would be led by an increase in exports, which do not generate value-added tax, the Budget’s single largest source of revenue.Dyankov said on May 29 that the worst was over for Bulgaria: "The decline in industrial production stopped, exports are growing for the sixth month running, unemployment is falling to 9.7 per cent and the mortgage market is growing. There are signs that the country is climbing out of the crisis."Consumers would not feel the impact of the economic recovery for at least another quarter or two, he told broadcaster Darik Radio. More good news came on June 1, when the Finance Ministry reported a Budget surplus of 369.6 million leva for April, reducing the cumulative deficit for the year so far to 1.3 billion leva.However, the bulk of the surplus was due to the annual transfer that the central bank makes to the consolidated Budget in April. Budget revenues were down 1.6 billion leva compared to the first four months of 2009.
The planned Budget revision was once again missing the opportunity for far-reaching reforms, Sofia think-tank Institute for Market Economics (IME) said on May 28, presenting its "alternative Budget revision". The think-tank has long been an advocate for lower taxes and reducing the Government’s role in redistributing resources."The changes in the 2010 Budget are legalising the huge Budget deficit that is being accumulated. The revision clearly show where the problem is – the changes envision 1.4 billion leva less revenue and 1.4 billion leva more spending compared to 2009. From that vantage point, it is difficult to talk of any belt-tightening in the public sector," IME said.With the exception of interest paid on foreign debt and social benefits contributions made on behalf of state administration employees, which have remained mostly flat or decreased in the first quarter of 2010 compared to the same period of the previous two years, all other areas of Government spending – social benefits, maintenance costs, salaries, subsidies and capital spending – showed a marked increase, IME said.The figures showed that the rising deficit was not solely due to the hidden costs of deals signed by the previous socialist-led government in the last months of its term, the think-tank said. According to Prime Minister Boiko Borissov, such contracts, amounting to 2.1 billion leva in 2009, were the reason for Bulgaria’s revised 3.9 per cent Budget deficit for last year.Instead of real reforms, the Budget revision would increase spending, including from the fiscal reserves that Bulgaria is required to maintain in order to guarantee the stability of the Bulgarian lev’s peg to the euro, and still yield a higher deficit, IME said.The think-tank’s suggestions were to scrap all additional spending measures and cut all Budget allocations to individual ministries by at least 20 per cent, the only exception being the Defence Ministry, where costs should be cut by 30 per cent. The budgets of the judiciary and Parliament, as well as public broadcasters, should be cut by 20 per cent and Budget allocations to municipalities, the Bulgarian Academy of Sciences and universities – by 15 per cent. This would result in savings of 1.75 billion leva and would not require dipping into the fiscal reserves, IME said.Cutting costs should be accompanied by reforms, the brunt of which would be on reducing the role of the Government in education – fostering increased competition for funding among universities, as well as the pension and health care systems, where the state should offer taxpayers a choice whether to put at least some of their money in private hands."Growth cannot be generated through Government spending, especially in areas as social benefits, subsidies and support for bankrupt sectors and inefficient structures. The only way to exit the crisis early is a drastic cut in Government spending and focusing on economic growth," IME said.
The Cabinet’s revision draft was also criticised by Blue Coalition co-chairperson and head of Parliament’s economic policy committee Martin Dimitrov, who said on June 1 that increased spending and insufficient reforms could prompt a second revision before the end of the year.The right-wing Blue Coalition has mostly backed the minority Government of Borissov’s GERB party, but the Coalition’s support is not mandatory for the Budget revision to pass in Parliament, since ultra-nationalist Ataka party is seen as likely to back the Cabinet’s draft. The Blue Coalition would formally endorse or oppose the bill only once it is made public, Dimitrov said.Should the Cabinet fail to make a concerted effort to cut down the size of state administration and implement reforms, it could soon be forced to ask for the International Monetary Fund’s help, which is likely to demand the same measures now being postponed, Dimitrov said, as quoted by Dnevnik daily. According to Dyankov, the issue of IMF aid was not on the agenda and there were no talks being held to secure IMF funding.
Chairman of EPP group in European parliament Daul says Bulgarian PM Borissov doing everything necessary to cope with economic crisis
Chairman of the Group of the European People's Party (EPP) in the European Parliament Joseph Daul met Tuesday with Bulgarian journalists. Daul said that the Bulgarian Prime Minister, Boyko Borissov, is doing everything necessary to cope with the economic crisis. The EPP Group's Chairman gave as an example the low budget deficit in Bulgaria. He also sais that Borissov is fighting organized crime and corruption and pushing through the reform in the administration so that European funding reaches all that need it. Approached to comment where the border stands between fighting organized crime and creating a police state, Daul said it is difficult to find the "golden section" between protecting citizens' rights and countering organized crime but noted that it is important for the institutions, including the court, to work in harmony.Daul was asked to comment the criticism of the work of the Bulgarian GERB cabinet coming from the other representatives in EPP from Bulgaria, the Union of Democratic Forces and the Democrats for Strong Bulgaria. The EPP Group Chairman said that this is genuine democracy, adding that the right-of-centre parties should stand united which, however, does not mean that they should be identical.Daul took a stand in favour of taxation of capital transfers, receipts from which should go to the European budget and not to the budgets of the individual member states. In this way a fund can be set up to help out EU member states experiencing financial problems. Daul urged for a common European economic governance.
INTERVIEW:
Bulgaria offered opportunity to take advantage of Dutch experience in waste, water management
The Netherlands is the focus country at a three-day international conference and exhibition on waste and water recycling, Save Energy, Save Water, Save the Planet.Participating in the forum will be presenters from 12 countries, representing international and national governmental institutions, sectoral organizations and businesses. The participants will hear about innovative technologies and practical examples in the area of energy efficiency, water management and waste recycling. The conference is expected to offer specific solutions for solving non-compliance by Bulgaria with the EU standards, as well as opportunities for business contacts and private-public partnerships.The Dutch stand for the forum - to be opened June 2 by Dutch Ambassador Karel van Kesteren, presents 12 Dutch companies interested in doing business in Bulgaria.BTA talks about the Dutch experience in environmental protection, water and waste management, and the cooperation opportunities with Anita Wemmenhove, Head of Economic Department at the Dutch Embassy.
Q: What are the key points of the Dutch approach in waste management that make your country an European leader in this field with 80 percent recycled waste?
A: Until the second half of the 20th century waste was mostly just discarded. As a result the pollution of the urban environment increased, and recycling of waste was initiated under pressure from the emerging environmental movement and stricter legislation. A major impetus was that recycling became economically more attractive as prices of raw materials increased. It created a separate industry that focuses on reuse and recycling. By including all parties - government, business, scientific institutions, consumers' organisations - in developing policies a joint responsibility and interest is created. In the Netherlands we are aware of the fact that 'it is a waste to waste waste'. All materials that can be sorted out of waste have their value and serve as new products by recycling them. Glass is recycled infinitely for new bottles. Plastic is re-used easily in new applications. one example: our national soccer team and eight other countries will play in shirts of recycled materials during the World Cup in South Africa. For one shirt eight plastic bottles are used: for nine teams about 13 million bottles are needed which saves 254.000 kg waste (which is 29 soccer fields of plastic or 3.000 km of bottles which is the complete coast line of South Africa).Green waste and garden waste are processed into high quality compost, which is used for various purposes in agriculture, horticulture and construction of gardens. Approximately 99 per cent of the waste is consequently applied in useful ways.One of the speakers in the conference is ARN Auto Recycling that manages the recycling chain for end-of-life cars in the Netherlands and ensures that the statutory norm of recycling 85 per cent of the weight of a car is met.
Q: Which part of the Dutch experience in waste management could be relevant for Bulgaria and especially for the municipalities?
A: It is our experience that it is very difficult in practice to copy a system or a methodology from one country to another. Circumstances, economic and cultural aspects are different. Therefore, it is very important that the Bulgarian situation in both sectors is the baseline that will be developed with best practices, knowhow and technologies. Municipalities have to create their vision and strategy on a regional approach of waste management. Dutch concepts serve as an example in an ongoing project between our governments, where best practices are combined with the Bulgarian situation.During the conference two projects will be presented in specific workshops: one focusses on regional cooperation of municipalities in waste management and the other introduces practices on bio waste management.
Q: The Dutch government has financed many projects on waste management, including a project from January 2007 until December 2008, to develop a national waste management strategy. Now, the government is faced with a number of European Commission infringement procedures in waste management. What happened or did not happen? What should happen now? What are the problems and the main challenges?
A: The situation in the water and the waste sectors is as it is now, partly as a result of insufficient maintenance and being not well prepared for future developments. In order to improve both sectors national strategies and policies that are in compliance with EU regulations and ready for the future are being prepared. The main challenge is to develop a balanced structure with all parties and interests involved to create common support. As mentioned before, in the Netherlands the business community and social partners are essential in the interaction with the government while preparing new policies or legislation; they have experience at operational level and advise the government on joint targets and feasibility with their practical ideas, innovations and visions. This results in a common responsibility and accountability, efficient and effective policies, and legislation that is consistent, accepted and easier to enforce. All parties together take care of better standards in the Netherlands respectively in Bulgaria: we all have responsibility but we all benefit as well. Regulation in the environmental sector is important. It is equally important that the regulation is designed in such a way that it serves a clear purpose and that the administrative burden for the business sector and the citizens is kept to a minimum. It is a bit of a sideline, but the current regulatory framework for all kinds of issues puts a heavy burden on the business sector and thus on the economic development of Bulgaria. Not because issues should not be regulated. They should. But because the regulations do not serve their purpose and create an unnecessary burden. A reason for this can be that stakeholders have not been involved in the design of the regulations. The Netherlands has a regulatory reform group to come to better regulation processes which has very good expertise with this issues; on 24 June, we will hold a round table with Bulgarian counterparts and the Dutch regulatory reform group to share experiences on better regulation.
Q: The Netherlands is famous with its water management that make your country a European leader in this area as well. What could Bulgaria take from the Dutch water expertise?
A: The Netherlands is famous for dealing with water in all aspects. It's a telling and curious historic fact: the first-ever Dutch democratic institution was related to water. Water boards have been around since 1250 and still play a key role in regional water management and wastewater treatment. The sector is very well structured covering the whole water cycle, an integrated water management and multi-disciplinary approach that balances social, economic, environmental and engineering needs. Rather than operating in isolation, all key players work closely together to align interests and strategies. They have worked on, and operate from, a joint vision of the country's opportunities and threats related to water. For instance, water supply companies work closely with water purification technology suppliers, which provide them with the newest technologies and systems. These experiences and technologies are available for Bulgaria which is proven by a number of bilateral projects during the last two decades already. Bulgaria's needs like restructuring, project design, quality monitoring, wastewater treatment can be fulfilled by extending the existing cooperation.
Q: What could be the practical results of the three-day conference on waste, water and energy where the Netherlands is the focus country? Where do you see the possibilities for further Bulgarian-Dutch cooperation?
A: The twelve companies that will be present in our Holland stand can be divided in those that are represented by Bulgarian companies, those that are looking for Bulgarian distributors, some have experience in ongoing projects in the water and waste sector, and some are new and hope to find new business contacts. This exhibition, where many Bulgarian companies and municipalities will be represented, is an excellent opportunity for matchmaking. The combination with the conference is very useful to present the possibilities, approaches, knowledge and technologies. In general, however, cooperation and investments will also depend on the way the business environment in Bulgaria is developing. Although many opportunities for commercial cooperation are available, we still have to warn our companies for the problems they might find on their way. It is of utmost importance that companies have confidence that their business activities are protected and controlled by a solid judicial system and that they can make straight and transparent agreements with their partners.