BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 25 JUNE – 2 JULY 2010 )
Sections/headline briefs:
MACROECONOMY:
· Chinese investors interested in operating Bulgarian airport under concession
· New Bulgarian-Japan funded container port terminal in question
· US oil companies said to eye Bulgarian share of Burgas-Alexandroupolis pipeline
· The ecological ministry dreams with open eyes
· Bulgarian farmers hope to export sheep milk to China and Saudi Arabia
· Bulgaria's electronics export to Germany bigger than import
· Spanish ambassador: "Bulgaria may be able to join euro area in 2013"
INVESTMENTS:
· Bulgaria seeks to lure key foreign majors as investors
- Strategic investor said to eye Bulgaria’s tobacco monopoly
- The ecocentrals heated the passions
- Bulgaria to set up new body for renewable project mapping
- Bulgaria, India to build joint hi-tech parks
· Melrose Resources to invest USD 65 М in local projects by year-end
COMPANIES:
· Hong Kong tycoon risks losing Bulgaria's telco
· Nadin launches electrical appliances recycling plant
· Regional Development Ministry to wire BGN 101 M to construction firms
· Three firms contest Sofia waste treatment plant tender
THE CRISIS:
· 30% of Bulgarian companies in dire condition
· Steel mill Stomana turns to EUR 27.1mn net loss in 2009
· UniCredit Group: Bulgaria is recovering from the crisis
· BMI: Bulgarian pharmaceutical market with poor perspectives
ANALYSIS:
· Is there any other solution for Burgas - Aleksandroupolis?
· Energetic flip-flop
MACROECONOMY:
Chinese investors interested in operating Bulgarian airport under concession
Companies from the People’s Republic of China have made clear their interest not only inbuilding and managing an industrial zone in Bulgaria, but also in leasing a Bulgarianairport.This was announced by Bulgaria’s Economy, Energy and Tourism Minister Traicho Traikovin Sofia Monday during a forum entitled “Government and Business: Common Efforts for Accelerated Investment 2010-2011”.Traikov was recently on a week-long visit to China where he met with a number of representatives of the Chinese authorities and large industrial companies including Jin Yonghui, the Director General of the Department of Commerce of Zhejiang Province;Zhao Hongzhu, the secretary of the CPC Zhejiang committee, and a member of the 17th Central Committee of the Communist Party of China, and PRC Commerce Minister Chen Deming.During his visit the Bulgarian Minister said he had generated interest with Chinese companies and authorities in setting up a joint industrial zone on 190 hectares of former army lands at Bozhurishte near Sofia.“In China, we signed an agreemend with the Zhejiang Province. This is a province of 50 million people, and we would like to commit its authorities to the future industrial zonenear Bozhurishte because they had expressed interest in an industrial zone near Sofia,” Traikov announced on Monday.He added that a delegation of the InvestBulgaria Agency, a government body in charge of relations with foreign investors, and of the National Company “Industrial Zones” will be visiting China in the fall for concrete talks with Chinese companies for the building of the future industrial park at Bozhurishte.“Our representatives will be talking with two types of companies. The one type are companies that specialize in the management of industrial zones. I met with PRC’sCommerce Minister Chen Deming, who is a great specialist on the management ofindustrial zones. He himself has managed such a zone and was very interested in this matter. So these will be Chinese companies that can partner with Bulgaria’s National Company “Industrial Zones” in order for both sides to generate a profit from Bozhurishte. The others are Chinese companies that are already keen to become “clients” of the zone by building greenfield plants and logistics building,” Traikov explained.He added that if a Chinese company is selected to partner with the Bulgarian state company “Industrial Zones” in the management of the Bozhurishte industrial part, it will probably provide some of the capital for the building of the new zone.Bulgaria’s Economy Minister also announced that Chinese investors are considering aconcession of a Bulgarian airport. He refused to specify which is the airport in question but said it could be used for importing Chinese goods into the EU.“One third of all goods produced in China are exported through air cargo, and Bulgaria can get a share of this one third,” he said.The Minister announced that the Bulgarian government was going to send 6 officials to the Shanghai Expo 2010 for three months at the cost of a total of BGN 50 000. They will be supposed to help out the representatives of the Plovdiv International Fair company running the Bulgarian pavilion at the Shanghai Expo.The Bulgarian stand at the expo became notorious as the BGN 1.3 M allocated from the state turned out to be insufficient; Bulgaria had no representatives speaking Chinese at the world-class business event. Minister Traikov did not specify whether any of the six new officials to be sent to Shanghai speaks Chinese.
New Bulgarian-Japan funded container port terminal in question
The fate of the project for the construction of a new container terminal in Bulgaria’s Black Sea Port of Varna will be clear in August, announced Transport Minister Alexander Tsvetkov.The project for the construction of the container terminal at Varna is funded through a loan of USD 226 M from the Japan Bank for International Cooperation. The loan has a seven-year grace period, and will go into repayment in 2015; its interest rate is 1.4%. In the first half of 2010, however, the Bulgarian government has started to indicated that because of the effects of the economic crisis it wanted to reconsider the terms of the agreement by either downsizing the loan or terminating it whatsoever. These statements by officials such as Deputy Transport Minister Ivaylo Mosovski have led to a visit to Bulgaria by experts from the Japan Bank for International Cooperation in early May. Speaking in Varna on Tuesday, Bulgaria’s Transport Minister Alexander Tsvetkov announced that a new mission of the JBIC is expected in July in order to study the present situation in Bulgaria about the application of the loan terms. Tsvetkov pointed out that the project for the new port container terminal in Varna has to be reconsidered because of the fate of a similar project in the other major Bulgarian Black Sea Port of Burgas. The brand new terminal there was constructed with an USD 188 M loan from the Japan Bank for International Cooperation, signed in 1998.The terminal, however, was completed only in 2009 at a time when the formerly largest Bulgarian steel-maker Kremikovtzi located near Sofia, which previously accounted for over 50% of the turnover of the Burgas port, went bankrupt and is now set for liquidation. This left the new Burgas terminal almost empty and unused, while the state and the port authority are paying off the loan, a situation that even led to protests on part of the port employees.“This is a very large and important infrastructure project which can be constructed with a loan. Its economic feasibility is to be discussed and either confirmed, or rejected,” Minister Tsvetkov said with respect to the planned Varna container terminal. In his words, the present Bulgarian government also approached the Japan Bank for International Cooperation with a request to consider funding with a loan the rehabilitation and the expansion of the railway line between the Black Sea Port of Varna and the Danube River Port of Ruse; the Japanese, however, were “lukewarm” to this idea.Tsvetkov did point out that the Bulgarian state budget could not afford to fund the improvement of the Varna-Ruse rail line, and it was also not eligible for funding from the EU funds under the current financial framework expiring in 2013.The Transport Minister said the government did not plan to sell the Varna ferry complex; he announced that the complex will be renovated by the end of the year, and its ownership will be transferred from the Bulgarian state railways BDZ to the Port Varna or to the Port Infrastructure Agency.Tsvetkov denied any claims that there is tension in the administration of Port Varna because of the fact that its Director, Danail Papazov, has submitted his resignation.“I have not asked Papazov for his resignation, he deposited it on his own. That is why I think there is no tension among the port employees,” the Minister stated.
US oil companies said to eye Bulgarian share of Burgas-Alexandroupolis pipeline
US companies such as Chevron and Exxon Mobil are most likely going to acquire shares of the Burgas-Alexandroupolis oil pipeline, Plamen Rusev, Director of the Bulgarian branch of the Trans-Balkan Pipeline company, told Novinite.com (Sofia News Agency).In an exclusive interview for Novinite.com, Rusev has stated that American oil interests active in the Caspian and Black Sea region are watrching closely the situation with the construction of the Burgas-Alexandroupolis oil pipeline, a joint project of Bulgaria, Greece, and Russia to transit Caspian oil bypassing the Turkish Black Sea straits.The Trans-Balkan Pipeline company was set up in February 2008 by the governments of the three partner states in order to oversee the Burgas-Alexandroupolis pipelineconstruction and to operate the pipe once it is completed, and is registered in the Netherlands.In mid June 2010, the Bulgarian government and Prime Minister Boyko Borisov suggested strongly the country might not proceed with the project due to environmental concerns. The Bulgarian government's decision is formally pending on the environmental assessment of the pipeline expected in Ferbruary 2011.“Americans are rich people. Rich people only buy fully furnished homes. It is more expensive but this is what they prefer. Poor people buy greenfield apartments. So don’t be surprised – once the Burgas-Alexandroupolis oil pipeline starts running – when you see American companies acquire shares in it. They will buy shares – either from Bulgaria, or from Greece, or from Russia. They are carefully observing the project, and are awaiting its completion and start of operation. They will pay more but they won’t leave it outside of their control because it is their oil that will be running through it. This is the truth,” declared Rusev, the head of the Bulgarian branch of TBB.“As much as our Russian colleagues might not be happy with this, there will probably be participation on part of these American companies in the future,” he said while explaining that potential Russian “unhappiness” would result from the fact that there will be a larger number of partners to deal with if shares are sold.Rusev believes that the fact that the Burgas-Alexandroupolis pipeline project has been met with much negativity in Bulgaria precisely over concerns have to do with the fact that it might increase Russian influence. In his words, a potential construction of the competing but now dormant Burgas-Vlore (or AMBO) pipeline, which is basically the same in its start point, might not draw so much negative reaction in Bulgaria precisely because it has been put forth by American companies.“People in Bulgaria should be rational and should understand that in our case the term “Russian project” is not meaningful. This is a joint project of three countries, two of which are EU member states. About 70% of the oil to be transited through it will go to the EU, 20%-30% to the USA, and a very small percentage to other markets. There is just no logic in such criticism. Perhaps one of the reasons for that is that there is a lot of uproar over the fact that one of the projects is Russian, and the other is American but I think that people will see that the Burgas-Alexanroupolis pipeline is a good and feasible project and they will accept it much more easily once it is completed,” Rusev told Novinite.com.He is convinced that the progress in the increased dynamic in the recent months on the construction of the Samsun-Ceyhan oil pipeline, a competitor to Burgas-Alexandroupolis, has to do precisely with the fact that the Bulgarian authorities have been dragging their feel.The Bulgarian TBB manager has expressed his expectations for positive development of the project on part of Bulgaria thanks to the fact that in February 2010 the Borisov government decided to place the Burgas-Alexandroupolis project under the responsibilities of one single institution, the Finance Ministry.Rusev has sought to assuage all kinds of criticism of the pipe, including by explaining that the technology selected for the constructed of the project, i.e. unloading the Russian andKazakhstan oil at a so called monobuoy terminal located 18 km into the sea and away from the Bulgarian Black Sea city of Burgas, is the safest possible.Much of the fierce criticism of Burgas-Alexandroupolis – including on part of the Mayor ofBurgas Dimitar Nikolov and local NGOs – has had to do with fears that a potential oil spill in the Gulf of Burgas could destroy the local environment and tourism industry.With respective to the third line of criticism of the pipe – the fact that it is economically unfeasible – the TBB Bulgarian manager has declared that there is plenty of Russian and Kazak oil to be transited through Burgas. He made it clear the final total amount of the annual transit fee for Bulgaria – informally set at at least USD 35 M – is yet to be decided upon – but pointed out that this direct fee to be paid to the Bulgarian government roughly equaled the BGN 80 M that Bulgaria got as combined taxes paid by its banks in 2009.Rusev says that if Bulgaria decides to pull out of the Burgas-Alexandroupolis pipeline, thus practically killing the project, it might suffer not just an image detriment for renouncing an international agreement but will probably have to pay at least EUR 70 M spent so far on surveys for the construction, and perhaps as much as EUR 200 M as compensation to the other parties.“But all this is just a conjecture, I hope that this won’t happen in the very least because there are no good reason for Bulgaria to give up the Burgas-Alexandroupolis oil pipeline,” he concluded.According to latest information announced end of last week, the internationally sanctioned environmental assessment of the Burgas-Alexandroupolis project will be completed in February 2011. This is when the Bulgarian government is expected to make its final decision on whether to go ahead with the project of not.The Burgas-Alexandroupolis oil pipeline has been cricitized on environmental, economic, and geopolitical grounds. In June 2010, the TBB launched a special website presenting visually the plans for its construction in order to fend off criticism on environmental grounds.
The ecological ministry dreams with open eyes
Publication: Banker Weekly English
Provider: Financial Information Agency Ltd.
Talking about the European sanctions, it's easy to suppose, that the main reason for them, are the ecological problems, which the government hasn't succeeded in resolving. We have to admit that lately Bulgaria encounters many problems with European partners also in other spheres , but the true is , that the unique real penal measures, undertaken by the European Commission against Bulgaria, are in the domain of the ecology. Something more, the sanctions in this domain will increase from now on. At the same time the presented recently programme for the activity of the Ministry of Environment and Water until the end of 2010 doesn't show any signs that the big delay in the accomplishing of the engagements in connection with the European Union, will be compensated. In the programme are presented the same priorities and tasks from the past years, the realization of which, if the tradition will be respected, will be postponed for 2011. on leading place in the program, is defined, that the Ministry of Environment and Water, will be working hardly for "the effective administration of the financial recourses from the structure funds of the European Union". From this formulation, we could make the conclusion that until now the Ministry of Environment and Water didn't work on this subject and they have scarcely now understood , that only as concerns the operative programme "Environment" for Bulgaria are put aside EUR 1.8 billions. The achieved until this moment results only confirmed this concern - for three years and half of full membership in the European Union, we have adopted below 5 percent of the money for ecology. It concerns the drainage in Primorsko, which have been spent around BGN 21 billions to. Its official opening was at June 15 and at the ceremony attended also the representative of the European Commission from Directorate General for Regional policy Karsten Rasmussen. Another prove how able we are to adopt the European financial resources, taking into consideration all the rules! Irony aside , but the situation isn't colored in pink. Until the end of the year, as regards the Chapter "Environment" will be paid only BGN 102 millions. Two procedures (unique until this moment) will be announced for the integrated water cycles of Vratza and Gabrovo, but there are not good perspectives for signing contracts. The future six months will be worked out only on the first stage of the water cycle of Troyan, the reconstruction of the water supply chain in Blagoevgrad and the drainage of Pernik, Beloslav and Kavarna. From the Ecological Ministry claim in categorical manner, that they will concentrate on the construction of purifying stations for waste waters into agglomerations with up to 10 000 habitants. A statement, which have to be applauded, but the in accordance with the requirements of the European union, these outfits have to be ready until the end of 2010. If this term will not be respected, a new sanctions will be proceeded. The absurd in this case is that these facts are known even during the negotiation process for annexation of Bulgaria to the Community. Then was elaborated a strategy for the purifying stations, because of which we have closed revision chapter "Environment" . But until today a lot of cities, prestigious sea and mountain resorts are continuing to throw their waste water directly into the rivers and the sea. For all 124 towns with more than 10 000 inhabitants, only 54 dispose of working purifying stations (some of them need to be reconstructed). In accordance with the evaluation of the Ministry of Environment and the Water in order to be constructed the other 70 outfits, will be necessary EUR 1 billion. Even in case , that financing is not a problem, it's impossible to respect the terms. For the half of these sites , there are not ready projects and the building itself takes around two years. Until December 31 2014 have to be built another 380 outfits for purifying of the waste water for the towns and villages with between 2 .000 and 10 000 habitants. If the government will not take in charge this task, obviously it will not be strange if our country have to pay again millions of Euro sanctions.
Bulgarian farmers hope to export sheep milk to China and Saudi Arabia
The Bulgarian Milk Producers’ Association is working on a project to secure markets for Bulgarian sheep milk in China, Saudi Arabia and Australia.The news was announced Monday by Mihail Velkov, Executive Director of the Association, during a round table on the economic crisis and business stimulus measures in Sofia.Velkov cited data of the Milk Producers’ Association showing that 70% of the Bulgarian-produced sheep milk is exported. It is well received in countries such as Russia and Ukraine.“In the future, the milk production sector can have a positive influence on Bulgaria’s trade balance if the state undertakes measures to improve the quality of the milk and to increase the export, especially to non-EU countries,” Velkov declared.In his words, a number of the Bulgarian tobacco farmers, whose employment is problematic as the state is planning to cut their subsidies, could turn to sheep breeding for a living because of the great potential of this sector.
Bulgaria's electronics export to Germany bigger than import
For the first time, Bulgaria registered a surplus in its electronics trade with Germany, reported the German technology news website evertiq.de. Bulgaria s electronics export to Germany amounted to EUR 71 M in the first three months of 2010, while its import of German-made electronics was worth EUR 69.7 M. The site evertiq.de points out that while Germany s electronics export as a whole dropped by 0.6% in the first quarter of 2010, Bulgaria s almost doubled with an increase of 98.5%. The report says that this is a continuation of a trend as the Bulgarian electronics export was one of the few that did not decline but actually grew by 3.8% in 2009.
Spanish ambassador: "Bulgaria may be able to join euro area in 2013"
Bulgaria may be able to join the euro area in 2013, but it is doubtful that the country will make progress towards this goal unless it comes out of the economic crisis before 2011, Spanish Ambassador to Bulgaria Jorge Fuentes said on Tuesday. He took part in a discussion on the Spanish EU Presidency, which will expire on Wednesday, and the Bulgarian media.The Ambassador said the six-month Spanish EU Presidency will be remembered for the economic crisis which has affected all countries and is far from being overcome. The issue, still very hot, will be carried over to the Belgian EU Presidency which comes next, he said. The Ambassador expressed hope that the crisis will be overcome in the following few months.The outgoing Presidency will also be remembered for its attempt at fair implementation of the principles of the Lisbon Treaty as regards the operation of EU institutions, he said.At the discussion, attended by Bulgarian Spanish-speaking journalists, Ambassador Fuentes made a symbolic handover of the EU Presidency to Belgian Ambassador to Bulgaria Mark Michielsen.Journalist Momchil Indjov of the "24 Chassa" daily said he would assess Bulgarian media coverage of the Spanish EU Presidency as good, though not fully competent. Grigori Nedyalkov of Bulgarian National Television said that the presence of the subject in Bulgarian media, particularly in television broadcasts, has been insufficient. He sees a deficit of Bulgarian debates on EU problems.Union of Bulgarian Journalists (UBJ) Chief Secretary Snezhana Todorova highlighted some problems facing Bulgarian journalism. She said that media policies are determined by political and corporate interests, and professional standards in the media have worsened, as in other fields. The UBJ will push for a law on the protection of journalists, she said. Such a law will immediately degenerate into a law on the protection of censorship, journalist Velislava Dureva warned. She noted that it is important who will write the law and who will approve it.
INVESTMENTS:
Bulgaria seeks to lure key foreign majors as investors
Bulgaria's government launches a series of meetings with businesses, that sets the beginning of what is hoped to be an active dialogue with investors in key sectors of the economy.The first discussion will be opened on Monday by Prime Minister Boyko Borissov and will be attended by Finance Minister Simeon Djankov, Economy Minister Traicho Traikov, Regional Development Minister Rosen Plevneliev and Environment Minister Nona Karadjova."The government's top priority is to ensure favorable investment climate, stable and predictable business environment,” says the statement by the Economy and Energy Minister.According to the statement Prime Minister Boyko Borisov and the ministers expect the businessmen to share with them the key problems they face, which prevent expansion.Bulgaria's economy contracted by 3.6% on an annual basis in the first quarter of 2010 from 5,9% in the previous quarter, but the center-right government hopes for a 1% economic growth for this year as recovering exports bolster the expansion.The cabinet, which came into power after sweeping the elections in July last year, has pinned its hopes on foreign investments as the main driver for the economy to rebound and start recording sustainable growth.Figures of the central bank bear out evidence that the the first signs of recovery are always here. Bulgaria did not have a net outflow of foreign direct investments in the first quarter of 2010, according to data of the Bulgarian National Bank (BNB).The country attracted a total of EUR 36.7 M in FDI in April, bringing the total for the first four months of the year to EUR 168.1 M (0.5% of GDP).
Strategic investor said to eye Bulgaria’s tobacco monopoly
Bulgaria’s economy minister has assured that a strategic investor is eyeing theprivatization of the state-owned cigarette monopoly Bulgartabac.“There is a strategic investor for Bulgartabac and the bidding will be opened by the end of the autumn,” Minister Traicho Traikov disclosed in an interview for Standard daily.Bulgaria’s Privatization Agency hopes to complete the sale of state-owned cigarette monopoly Bulgartabac in 2010. The privatization procedure has reached a phase in which the state is preparing its sale together with the consultant it picked in February, Citygroup Global Markets Ltd.Citigroup was picked winner after bidding EUR 1.018 million and 1.6% of Bulgartabac’s selling price in case of sale.Bulgartabac Holding currently operates two cigarette factories compared with nine in 2004 and its market share has shrank to some 40% from 60% a year earlier. The holding still owns a number of commercial brands.Two of the less profitable plants of Bulgartabac holding – in the cities of Plovdiv and Stara Zagora – were sold in 2009 on Sofia Stock Exchange.Bulgartabac sale is part of Bulgaria’s center-right government plans to angle for strategic investors for key majors, such as the tobacco monopoly and a few energy companies, in which the state owns higher than a 50% stake.The decision was taken earlier this year after the cabinet was urged to sell on the stock exchange shares in companies, which are part of the Bulgarian Energy Holding, in a bid to put the local capital market back on track.
The ecocentrals heated the passions
Publication: Banker Weekly English
Provider: Financial Information Agency Ltd.
The construction of Renewable Energy Sources makes nervous both the State and the investors. The reason for this are the contradictory texts into the Law for the protection of the agricultural lands, voted in first reading by the leading economy and agriculture parliamentary commissions At Roundtable discussion on the subject - to situate or not Renewable Energy Sources on the luxuriant lands from first to forth category, the nervous investors have accused the State experts of being non - competent and not understanding the problem. In accordance with the law changes, the investors have no right to build centrals on the luxuriant lands. The little issue in the normative is , that they could build ecoparks on these sites, but only if they are presented in a special card, which will be a part of the National Plan for setting up of Renewable Energy Sources. The experts from Ministry of Economy, Ministry of Agriculture and Ministry of Ecology are responsible for its creation. This fact complicates its realization, because the right coordination between the experts becomes more difficult and like a consequence - the sharing of the responsibility for the creation of the mentioned document also. In the future National Plan will be marked the zones under protection, which take part of Natura 2000 and sites, where is permitted the construction of Renewable Energy Sources. The creation of the card encounters every day new difficulties and the reason for this is the strong business lobby, claim the experts. In the words of the Chairman of the Bulgarian Photovoltaic Association Nikola Gazdov the changes in the law are discriminated as regards a priority for the European Union sector. In his words if the Law would be adopted like it is at the present moment, it will be with certainty sent back from Brussels because it is damaging the investors. "Such a restriction will provoke a real catastrophe into the business sector and from this point of view, the State is not our partner". on a statement the Agricultural Ministry declared that until this moment for the construction of Renewable Energy Sources are given less than 12.000 decares. At the same time uncultivated agricultural lands are at least 10 percent of the whole area under cultivation. Which is than the real problem of the Bulgarian agriculture?, ask Rumen Dimitrov from "Otto Group", a company, which invests in such projects. on the opinion if the Deputy Minister of Agriculture Svetlana Boyanova, the normative doesn't discriminate anyone. "The production of Renewable Energy Sources in Bulgaria is chaotic, we don't know what there is and where there is. We will respect the planning and in accordance with it, we will build centrals for green energy". The Vice - Chairman of the agricultural commission in the parliament Emil Dimitrov thinks, that all the projects, which are under procedure of agreement and construction of eco centrals , could be terminated without taking into consideration the land, which is planned to be constructed on. As regards the data of the Agricultural Ministry for two years had been submitted 1900 applications for construction of ecoparks. From the beginning of 2010 the submitted applications for construction of Renovated Energy Sources are 714 and more than half of them are namely for construction on lands from third and forth category.
Bulgaria to set up new body for renewable project mapping
Bulgaria will establish a new government agency in 2011 that will be in charge of sustainable energy development, according to the country’s new sector strategy by 2020. The document was presented on Thursday, just hours after it was submitted with the European Commission (EC). The new government body will succeed the existing Energy Efficiency Energy, which will be closed. The new sustainable development agency will develop and maintain a geographical information system encompassing maps of the areas eligible for renewable energy development. According to the original plan, the maps had to be drawn by the Ministry of Economy on the basis of data provided by the ministries of environment and agriculture. on Wednesday, the Bulgarian Parliament approved at first reading the new Agriculture Land Protection Act, which bans clean energy generation on cropland included in categories one through four. The only exception will be the sites included in the geographical information system. However, before it comes into being in 2011, no new applications for renewable energy projects will be accepted for these areas.Bulgaria’s National Action Plan on renewables was developed by the Ministry of Energy in cooperation with a consortium between Portugal’s Ecoshere, the UK’s IT Power and the Black Sea Regional Energy Center. Unsatisfied with the job done by the tie-up, the ministry rewrote parts of the strategy, with work continuing minutes before the document was emailed to Brussels late on Thursday. The plan centres on the administrative and regulatory measures the Bulgarian government will take to spur on sector growth but does not outline specific action. Bulgaria should produce 1,666 kilotonnes of oil equivalent (ktoe) to deliver on its 16% EU legally-binding renewable energy target by 2020. The country’s clean energy potential is estimated at 4,500 ktoe, with biomass and hydro energy tipped as the main contributors with 36% and 31%, respectively. Wind energy is projected at 7.5%.
Bulgaria, India to build joint hi-tech parks
The governments of Bulgaria and India are going to start working on an action plan for the setting up of joint hi-tech park projects. The decision was made at the fourth session of the Bulgarian-Indian Information and Communications Technology Forum which took place in the Bulgarian capital on June 14-15. Bulgarian and Indian IT companies are not competitors on the global market because they have different advantages that they should pool together, according to the deputy ministers responsible for the IT sectors of the two countries. They agreed that the establishment of hi-tech parks should be the priority of the bilateral IT cooperation. The action plan to be prepared by the two governments is going to explore projects of joint interest including the founding and management of IT incubators, and joint development of e-government applications, software, hardware, service, and long distance providing of server resources.
Melrose Resources to invest USD 65 М in local projects by year-end
UK oil and gas exploration, development and production company Melrose Resources plans to invest USD 65mn in natural gas projects in the country by the end of the year, operations director David Archer told Klasa Daily. Melrose has been supplying about 10% of the natural gas supplies of the country while the other part is delivered by Russia's gas major Gazprom. At the end of last year, Melrose announced plans to invest USD 78mn in the country in 2010, including USD 51mn in the development of its two major fields both located on the northern Black Sea coast - in Kaliakra and Kavarna, and USD 27mn in completing the first stage of the conversion of the depleted Galata field into a storage facility. Melrose Resources expects to start extraction from the two fields in Kaliakra and Kavarna in H2 and extracted volumes to account for 17% of the company's overall consumption next year.
COMPANIES:
Hong Kong tycoon risks losing Bulgaria's telco
The billionaire Richard Li risks losing control of indebted Bulgarian telecommunications operator Vivacom because lenders who provided the firm with high-interest loans are battling to seize it.Vivacom, Bulgaria's biggest fixed-line operator, was set to breach agreements on its 1.64 billion euros in loans by the end of the month, the South China Morning Post reported.Controlling shareholder PineBridge Investments, the buyout firm owned by PCCW Ltd Chairman Li, wanted to restructure the company's debt in a deal that would cause the so-called mezzanine lenders to lose all of the 325 million euros they are owed.The debt holders, including U.S. hedge fund Tennenbaum Capital Partners and French insurer AXA's private equity arm, wanted to take a majority stake in the company by swapping their loans for shares. Royal Bank of Scotland and Deutsche Bank, which lead a group of senior lenders owed 1 billion euros by Vivacom, would judge who wins the fight and make a decision by the end of this week, a person involved in the talks told the newspaper.Li inherited control of Vivacom in March as part of the acquisition of AIG Investments, a unit of the troubled US insurance group.
Nadin launches electrical appliances recycling plant
Bulgaria’s metal, paper and plastic collection and recycling company Nadin EAD will today snip the ribbon of the country’s maiden e-waste treatment plant. The new facility, which will recycling unused brown and white goods as well as computer hardware, toys and medical equipment, is located on a site in Novi Iskar, near Sofia, and has enough capacity to process Bulgaria’s entire e-waste and take on waste from neighbouring countries as well, according to the company. The investment in the new project will be revealed at the ribbon-cutting ceremony. The facility was designed and developed by German company Adelmann GmbH.
Regional Development Ministry to wire BGN 101 M to construction firms
Regional Development Minister Rossen Plevneliev has informed the new head of the Bulgarian Construction Chamber (BCC), Svetoslav Glossov, that 101 million leva remains to be wired to Bulgarian construction firms, the private Bulgarian television channel bTV reported on June 30 2010.According to Plevneliev, since the turn of the year about 147 million leva had already been paid to various construction firms through the BCC. Under a new payment mechanism, through the Bulgarian development bank, the minister said that out of a total debt of 139 million leva, 34 million leva had been paid. The paperwork for a further four million leva is being processed.Apart from these funds, however, the firms are awaiting another 150 million leva from different municipalities, Glossov told the bTV. Glossov said that most of those debts are predominantly owed to small and medium-sized construction firms, money "essential for their ultimate survival". Such small and medium-sized companies account for 90 per cent of Bulgaria's construction industry, Glossov said.About 1500 construction firms are expected to discontinue their registration in 2010 with the BCC. This is not solely attributed to bankruptcy, but due to the unstable and negative environment in the sector, which will force many companies to cease operations temporarily and stay out of the market, Glossov said.In 2009, about 1050 construction firms were scratched off the BCC registrar.
Three firms contest Sofia waste treatment plant tender
The Commission for Protection of Competition (CPC), Bulgaria's antitrust watchdog, yesterday received three complaints against the selection of Hut-Stanilov to build Sofia's waste treatment facility.The appeals were lodged by consortia between Greece's Helector and Germany's Hochtief; Spain's CS and Bulgaria's Balkanstroy; and between Italy's Daneco and Bulgaria's Valmex.The appeals against Hut-Stanilov comprising Bulgarian construction company Stanilov and Germany's Heilit, part of Strabag Group, could delay the signing of the contract.Hut-Stanilov outbid Helector and Hochtief, that ranked second in the competition, after putting forward lower construction costs of BGN 208.8 million (USD 130.5m/EUR 107m), and lower operating annual costs of BGN 9.4 million. For comparison, the Greek-German tie-up bid BGN 240.8 million and BGN 9.8 million, respectively. The other seven candidates - including CS-Balkanstroy and Daneco-Valmex - dropped from the race.The grounds for the appeals were not released in the statement. CS-Balkanstroy declined to comment. The two other consortia could not be reached by Dnevnik for comment.Sofia deputy mayor in charge of environment, Maria Boyadjiiska, said that Helector and Hochtief were contesting the decision to rank them second at the tender, whereas the two other consortia were appealing against dropping from the race.Boyadjiiska told Dnevnik that the CPC should come up with a decision about whether or not the companies' claims are grounded within 14 days. The decision could be contested in court.The start of building works for Sofia's waste treatment plan is already around a year behind schedule. Construction is expected to span two years.
THE CRISIS:
30% of Bulgarian companies in dire condition
A large number of firms in Bulgaria's construction sector, transport, light industry, services and commerce are accumulating big losses.This is the conclusion of a poll of 580 businesses around the country conducted end May by the National Center for the Study of Public Opinion.The results from the poll show that one-third of all Bulgarian firms determine their financial situation as extremely bad.55% of the survey entrepreneurs believe that the Bulgarian business regulations and legislation defend the interests primarily of big business; only 5% think that all businesses are protected.The Trade Act, VAT laws, Corporate Tax Act, Investment Encouragement Act, and SMEs Act are widely viewed as good examples of measures supporting the business sector.At the same time, the public procurement legislation, the territorial organization laws, the Personal Income Tax, the excise tax laws, and the regulations for safe and healthy labor conditions are believed to have major issues.The two major problems resulting from the economic crisis for Bulgarian firms are the reduction of their output and increased levels of inter-company debts.The number of pessimistic entrepreneurs has increased six times compared to May 2009.
Steel mill Stomana turns to EUR 27.1mn net loss in 2009
The country's leading steel mill Stomana Industry posted a net loss of BGN 53mn (EUR 27.1mn) last year as compared to a net profit of BGN 95.7mn in 2008, business and financial newswire Investor.bg reported. Sales plunged by 56% to BGN 497mn respectively. The total liabilities of Stomana fell by BGN 60mn to BGN 364mn as of end-December. At the end of last year, Stomana Industry bought a port on the Danube River in Svishtov through its subsidiary Port Vidin North, renaming it to Port Svishtov West. The price of the deal and the initial capital expenditures amounted to a total of EUR 5-6mn and Stomana announced intentions to invest EUR 10mn in the development of the facility. Stomana is located in the western city of Pernik, some 30km from Sofia, and is a leading supplier of steel products for the domestic market with a share of more than 50%. It exports some 80% of its production. Stomana is controlled by steel products producer Sidenor, owned by Greek metallurgical group Viohalko.
UniCredit Group: Bulgaria is recovering from the crisis
According to UniCredit's analysts, the SE European region will see an economic growth of 2.8 or 3.1 per cent, the main contributors being Turkey (5.6%), Russia (3.4%) and Slovakia (3.5%). Unfortunately, Bulgaria's economy is expected to slump by one per cent by the end of 2010. In other words, the countries in the region are recovering in two different gears, with the main risks coming from the Eurozone amid financial market tensions and state debt worries. The fact that Bulgaria's economy sank by just 3.6% y/y against 5.9% in the last quarter of 2009, lends itself to the stronger external demand. However, the steady increase in the export rate is not strong enough to guarantee a sustainable recovery of the Bulgarian economy.
BMI: Bulgarian pharmaceutical market with poor perspectives
A stagnating private sector and inadequate government policies provide for poor perspectives of Bulgaria’s pharmaceutical market, according to a report of Business Monitor International.“BMI considers Bulgaria to be among the less attractive pharmaceutical markets in Emerging Europe, a view largely enforced by poor market dynamics and prolonged economic difficulties. In BMI's Pharmaceuticals & Healthcare Business Environment Ratings for Q310, Bulgaria ranks 16th of the 20 markets surveyed,“ the report states.BMI points out that even though it dedicates the third highest proportion of GDP topharmaceuticals in the region, Bulgaria's percapita spending remains below average, limiting opportunities for manufacturers of higher-priced products, and that Bulgaria's growth profile is also fairly limited in scope over the next five years.“As one of the last economies in emerging Europe to enter recession, Bulgaria will also be one of the last to exit the downturn, with a further year of decline on the way in 2010. Even though we expect a return to growth in 2011, we stress that private sector deleveraging, limited scope for fiscal expansion and weaker external demand will prevent economic growth returning to the 6% range seen at the peak of the previous cycle,“ reads the BMI report.It further points out the fact that Bulgaria’s retail sales fell by 12.9% year-on-year in January 2010. Worsened consumer spending factors are seen as combined with a “persistent effort by the government to reduce prices and its poor contribution to medicine costs compared with most EU countries.“The BMI actually raises alarm with respect to Bulgarian government’s policies on medicines.“Amendments to reimbursement levels for drugs included on the country's Positive List see the removal of lower limits for groups of medicines that treat serious diseases. The re-evaluation of reimbursement eligibility and copayment requirements will be increased from twice per annum to six times. BMI considers the proposed changes as a step away from improving patients' access to innovative treatments. Bulgaria currently has the lowest per-capita government spending on pharmaceuticals in the EU, and the highest proportion of out-of-pocket spending at around 56%,“ declares the report of the market analysis agency.The BMI sees the accumulation of debt in the National Health Insurance Fund (NHIF) as an additional problem in Bulgaria. In May 2010 it was revealed that the NHIF is required to pay more than BGN 60 M to pharmacies in Bulgaria for costs incurred over the previous two months. While BMI considers this fairly minimal at present, any escalation of these debts could cause concern for drugmakers, it says.
ANALYSIS:
Is there any other solution for Burgas - Aleksandroupolis?
Publication: Banker Weekly English
Provider: Financial Information Agency Ltd.
An Overall Revision of the Agreement from 2007 is necessary. The time, given to the government in Sofia in order to formalize its decision concerning the big Russian energy projects, is bringing to an end. Moscow has declared in a very categorical manner not to dispose of time to waste and has run over to the tested method - pressure and threats, transforming also to ultimatum. The usual in these cases pointing out of a finger, hasn't yet become a fact, but it's quite sure that there is no way to run away from it. Before this in the game has entered Athens. At this moment only for the project Burgas - Aleksandroupolis , but there is no doubt that the attacks will also spread to "South Stream" - because Bulgaria is a key part for the Greek section of the gas conductor, instead it will evade the borders of our south neighbor. The position of Greece as concerns Burgas - Aleksandroupolis is well - known , the same about the motives of our south neighbor. A big part of the investment, valued at more than EUR 1 million, will rest on its territory, the Greek oil - tanker navy on its part will handle the gas water transport in the aquatory of Black Sea, after Aleksandroupolis also toward the European and International markets. That' s why Greece , which is initiator of the idea for the pipeline, will make everything possible to see the project realized as soon as possible because of the long - term investments, but also because of the possibility to add some fresh capitals into the Greek economy, which encounters big difficulties. The advantages for the Russia from Bulgarian - Greek project, also are well -known - excepting alternative of the Turkish straits, Russia obtained also 51 percent of control on the pipeline. And as though is not enough, but to operate with the outfit , will be the Russian monopolist "Transneft", which will define both the transit taxes and tariffs, and the origin of the raw material for the pipeline. In this manner, the pipeline practically becomes a part of the Russian system of pipelines, located on the territory of the.....European Union . That's why Moscow will use all the means in order to impose the construction of the gas conductor in accordance with the 2007 understandings. A curious detail in this scheme, is that the contradictory signals, coming from official Sofia, are advantageous for Russia at the moment. But the reason for this, is not the rest of the energy projects on our territory, but the controversies between Moscow and Athens on the value of the project. During the last year , the Greeks had laid down many new requirements for the starting infrastructure together with a large region around it, raising in this manner the cost of the whole outfit with EUR 300 - 400 millions, confirmed familiars with the theme. In difference of Russia and Greece, Bulgaria hardly could take some advantages from the gas project. The specified transit tax of one dollar for a passing tone, could bring a maximum of USD 35 millions per year in case of capacity complete filling. The real incomes will be in half, because Russia could provide enough gas for the pipeline (the discussed quantities are approximately 15 -17 millions per year). The big danger for Bulgaria is mainly ecological - the entrance to the construction will be a 15 km inside the sea and the pipeline passes trough territories of NATURA. The dangers for the environment probably will be described in details in the international ecological expertise, ordered by the Borisov government. In the expertise will be proposed also alternative variants, sparing both the sea and the land areas of the route, claimed familiars. The proposals will be consistent with the good world practice and will take into consideration the new challenges after the ecological catastrophe in the Mexican Gulf. Thus, it will be difficult to reject them both the government and the greens. As The Banker learnt , the forthcoming eco expertise will make the accent on the variant to dispose the entrance of the outfit at the oil port of Bourgas. The proposal, which takes into consideration the ecology concern, however, hides another dangers: The Burgas Oil Port is a property of a local oil refinery, possessed by Russian private concern "Lukoil". The biggest problem as concerns Burgas - Aleksandropoulis, is the lack of economical profits from the project for Bulgaria. The increase of the transit tax, could not compensate this lack. Even if such a "bonus" will be proposed , the possible increase will be insignificant, otherwise will not be guarantied the profitability of the oil transport through the pipeline. Our unique profit - making solution for Burgas - Aleksandroupoulis, is the inspection of the agreement from 2007. It will not be a precedential nor as regards our relationships with Moscow and Athens, neither as regards the project for the pipeline. From 1994 until now in connection with the project, are signed 5 intergovernmental agreements and dozens of protocols - every further of them changes basic points into the achieved understandings, some of them drastically. Now the government of the prime minister Boiko Borisov have to insist on complete inspection of the oil pipeline on our territory. The best variant for us is the following - the area of the oil pipeline, located on our territory, to be Bulgarian property (both the entrance and the pipeline). The Bulgarian company , which will build and operate on the outfit , have to contract an agreement with the proprietor of the raw material, with the clause "take or pay". In this manner suppliers could be not only Russian companies , but also Kazakhstan and American. Let remind us , that the Middle - Asiatic country many times has demonstrated to be interested in the project Burgas - Aleksandropoulis. The American oil giant "Chevron - Texaco" has already discussed with the Ministry of the Regional Development and Public Works about shares from the project. The described method will also facilitate the financing of the project. The presence of endorsed understandings type "take or pay" will facilitate the drawing of credit resource, although the present crisis. It's possible to find out also a firm crediting by the proprietors of the raw material - in exchange of future transit costs for example. The last argument is the value of the Bulgarian section of the land, which probably will not overpass EUR 250 -280 millions. Approximately the same amount , which we have to pay in accordance with the understandings from 2007, according to which Bulgaria is in possession of only 24.5 percent of the oil pipeline project. It's not to be sneezed one technical detail - the oil site at the entrance of the pipeline. It will not only handle the pipeline transit, but will be also the strategical oil reserves of Bulgaria. The reservoirs could provide additional profits - through taxes for conservation from the companies - producers of raw material. As regards the oil port and the relationships with "Lukoil - Neftochim", problems are not expected, claimed experts. The big repulse will come from Moscow and Athens.
Energetic flip-flop
Author: Alex Bivol
One of the few certainties of the 11-month-old Bulgarian Government of Prime Minister Boiko Borissov is that any initial announcement on an issue of note would be swiftly followed by an official regress. Thus it was no surprise that Borissov's words to ambassadors of European Union countries to Bulgaria on June 11 – that Bulgaria was quitting the Bourgas-Alexandroupolis oil pipeline and shelving the Belene nuclear power plant – were followed by a clarification that the Cabinet had not yet made a final decision.One year removed from the final stages of the parliamentary elections campaign, Borissov's stance on Belene remains unchanged, namely that the nuclear station could be built, but only if private investors can be found to shoulder the bulk of the financial burden. However, the way that message has been communicated, ranging between what appeared as a strong commitment to the project and fierce denials that state funds would be used for construction, has resulted in a perception that Bulgaria's Government was vacillant and lacking resolve. Borissov's main argument for scrapping the BourgasAlexandroupolis pipeline, finally agreed with Russia and Greece in 2007 after 13 years of intermittent negotiations, was the environmental uncertainty of the project. In 2009, the Cabinet ordered an international environmental impact assessment of the project, which could be completed as late as mid-2011.The Prime Minister's unequivocal stance was reportedly met with disbelief just hours later by Economy Minister Traicho Traikov, who was quoted as saying that he was surprised by the words attributed to Borissov. But in defence of the Cabinet's stance, he cited the same arguments for delaying the construction of the one billion euro pipeline."It is clear that people are against Bourgas-Alexandroupolis and just as clear that we are doing everything to take that into account. The project is not being delayed through any fault of ours, but because an environmental impact assessment is under way," he was quoted as saying. Local referendums in resort towns on the Black Sea coast rejected the pipeline, with local residents repeatedly voicing concerns that any oil spill could endanger tourism, the region's most lucrative industry.Later in the day, Borissov clarified his earlier statement, saying that he expected the environmental impact assessment to be unfavourable for the project. "Since the pipeline would cross the Natura 2000 [EU-protected areas], I do not see how any expert would defend the claim that there is no threat of an environmental disaster or that the environmental balance would be unaffected," Borissov said. An unfavourable environmental impact assessment would allow the Cabinet to officially pull out of the project without having to pay damages for backing out, he said. Greece owns 24.5 per cent in the future pipeline, the same as Bulgaria, but had no plans to quit the project. A government spokesperson said on June 11 that "the Greek side remains committed to the completion of this project and continues its efforts towards this direction". on June 22, deputy energy minister Yannis Manyatis was quoted as saying by Greek daily Naftemporiki that Athens would launch a "diplomatic initiative" to salvage the pipeline in "coming weeks". The oil pipeline is by far the smallest of Bulgaria's joint energy projects with Russia, paling in contrast to the planned nuclear power plant at Belene on the Danube River. Russia's Atomstroyexport has been contracted to build the two 1000MW reactors for four billion euro, but the final costs of building the station, including infrastructure, processing depleted nuclear fuel and the costs of financing the construction, are forecast to range between seven billion and 12 billion euro, according to competing estimates.Despite Bulgaria's refusal to offer Budget guarantees after the withdrawal of Germany's RWE, picked to buy 51 per cent in the company that would build and operate Belene, the Russian contractor has put in orders for equipment. Should Bulgaria freeze construction, the Cabinet could be faced with a lawsuit for one billion euro in contract damages, Russian business daily Kommersant said on June 15, quoting sources familiar with the contract. on top of that, Bulgaria has already spent an estimated one billion leva to clear the site.Having spent so much already and because it stood to gain "10 times the amount spent", Bulgaria should not give up on Belene, President Georgi Purvanov, one of the biggest supporters of joint energy projects with Russia, told television channel bTV on June 18. He criticised Borissov's "lack of continuity" in pursuing energy policies and blamed the Cabinet for RWE's withdrawal from the project before suggesting that Belene's fate should be decided in a plebiscite.Borissov, who was being interviewed on rival Nova Televiziya at the same time, agreed to the notion of a referendum, but defended the Cabinet's stance that the current contracts had to be amended. "At this time and at this price, the project is pointless. I am confident that we can lower the price and be able to sell the electricity," he said.Taking a swipe at the previous socialist-led cabinet, Borissov said that he would not "enslave Bulgaria" by committing more funds to the project. Answering Purvanov's criticism that the Government was wasting the diplomatic efforts of its predecessors, Borissov said: "With all due respect to [Purvanov], why doesn't he produce seven billion for the project if he wants to be a good diplomat?"According to Borissov, the Russian contractor was aware of Bulgaria's cost-cutting intentions, which were met with understanding.The key test for the Cabinet's relationship with Atomstroyexport, a subsidiary of Russia's state-owned nuclear corporation Rosatom, would come at the end of September, when the company's contract with Bulgaria's power grid operator NEK for the preparation of the Belene site expires.Atomstroyexport officials, quoted by Kommersant, said that the company was prepared to start construction work on October 1, provided that funding was available. Bulgaria, however, was yet to pick the consultants that would advise the Cabinet on the search for new investors.South Stream detourBulgaria's third joint energy venture with Russia, the South Stream gas pipeline, was also increasingly in danger of falling short of expectations.The two sides have made no progress in recent months on settling the issues that have shaken Bulgaria's commitment to the project. The main sticking point between Gazprom and Bulgaria remains the Russian giant’s insistence on treating the gas contracts renewal process as part of the negotiations on the amounts that Bulgaria would receive through South Stream. Bulgaria wants the issues examined separately and fears that bundling the issues could result in reduced quantities being pumped through Bulgaria to Greece, Macedonia and Turkey, which would mean lower transit revenue for Sofia.Furthermore, Bulgaria has made no secret of its desire to eliminate the intermediaries through which Gazprom, which owns stakes in all three middleman companies, sells gas to Bulgaria. Gazprom, which traditionally prefers to do business through intermediaries, has rejected Sofia's pleas so far.Surprisingly, however, the Russian giant appeared willing to make that concession for Romania, whose economy minister Adriean Videanu visited Moscow on June 17. Upon his return, Videanu said that a direct contract was possible once the current arrangements expire in 2012. "It will depend on how the two sides will co-operate until then," Videanu was quoted as saying by Evenimentul Zilei daily.Gazprom chief executive Alexey Miller said in April that the underwater stretch of the pipeline would go ashore in Bulgaria, but the Russian company has launched a feasibility study to estimate the additional costs of beaching the pipeline on the Romanian coast, Kommersant said, quoting unnamed Gazprom sources. The study was expected to be completed by the autumn, when Miller would visit Bucharest to continue talks.On June 17, Miller was quoted as saying: "We have had a very open and factual conversation. We have opened the issue of Romania's participation in South Stream."Whether a ploy by Gazprom to soften Bulgaria's position or a legitimate alternative, Sofia's involvement in South Stream was its only leverage to negotiate better terms for its next gas deliveries contract, analysts have said.South Stream can bypass Bulgaria entirely to deliver gas to Greece, provided an agreement with Macedonia is inked, a prospect raised by Miller on June 17, although that was likely to increase the costs of both the underwater and overland stretches of the pipeline.