BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 30 JULY – 6 AUGUST 2010 )
Sections/headline briefs:
MACROECONOMY:
· Bulgaria's export to China up by 240% in January-May 2010
· North Korea interested in buying Bulgarian goods
· Bulgarian fleet purchases 10 ships for $ 260 M
· Bulgarian government to go for expanding Kozloduy NPP if Belene fails
· Bulgarian economists forecast smaller GDP growth for 2011
· Future of Bulgarian mining industry looks bright
· Melrose Resources discovers more natural gas in Kavarna
· BGN 2 billion to be paid under EU operational programmes
INVESTMENTS:
· NEC plans EUR 18.2 M transmission network upgrade
COMPANIES:
· Some 30 000 passengers a year to fly Ryanair between Sofia and Plovdiv
MACROECONOMY:
Bulgaria's export to China up by 240% in January-May 2010
Bulgaria’s export for China grew by the staggering 238% in the first five months of 2010 year-on-year. According to data released recently by the Bulgarian National Statistical Institute, in January-May 2009, the Bulgarian export to the People’s Republic of China amounted to BGN 50.3 M, whereas in the same period of 2010 it is already BGN 170 M. Bulgaria exports to China some hi-tech equipment items as well as copper ores and concentrates, copper alloys, lead, wines, yogurt leavening agent, cigarettes. In the first five months of 2010, Bulgaria’s import from China declined by 18.2%. Its January-May 2009 export amounted to BGN 420 M, while it went down to BGN 343 M for the same period in 2010. Thus, Bulgaria still has a huge trade deficit in its trade with the People’s Republic – BGN 173 M in January-May 2010. There is, however, a notable improvement from the deficit of BGN 369 M registered in the same period of 2009.
North Korea interested in buying Bulgarian goods
North Korea has expressed interest in buying Bulgarian foods, pharmaceuticals and software, among other products.This has been announced by the Bulgarian Chamber of Commerce and Industry(BCCI), which is researching the opportunities for organizing a business delegation trip toNorth Korea or North Korea and China in the fall of 2010. According to the announcement of the International Organizations and International Cooperation Directorate of the BCCI, the North Korean side has shown interest in Bulgarian software products, pharmaceuticals, food products – including canned food, wines, juice, yellow cheese, and compotes; as well as metals – cesium, potassium, zinc, radium.
Bulgarian fleet purchases 10 ships for $ 260 M
Navigation Maritime Bulgare (NMB) has invested 115 million dollars in purchasing four new bulk cargo ships. The company plans to acquire another six new ships by the end of the year, which will be able to sail under Bulgarian flag after the passage of the revisions to the Commercial Navigation Code, Transport Minister Aleksandar Tsvetkov and NMB CEO Hristo Donev said at a joint news conference Thursday.Donev specified that with the purchase of the new ships the amount of the total annual investment in the fleet for 2010 will reach 260 million dollars. Thus the investment for the first five years agreed upon in the privatization contract concluded by NMB and the German-Bulgarian consortium KJ Maritime Shipping will become effective before schedule.Two of the newly acquired ships, which sail under Maltese flag, were christened "Rodina" and "Bulgaria", thus restoring a tradition dating from the end of the 19th and the beginning of the 20th century. The other two are named "Vitosha" and "Strandja", Donev explained, adding that the purchase of the first four ships also provides 168 new jobs.The ambitious investment programme will guarantee the stable development of NMB and the jobs in it. In turn, Tsvetkov explained that the revisions to the Commercial Navigation Code will create conditions for more ships to sail under Bulgarian flag. This will turn the negative trend under which the ships sailing under Bulgarian flag were reduced by 50 per cent. Tsvetkov commented that the amendments to the Commercial Navigation Code would regulate in detail ship mortgages, giving more rights to creditors. Now banks avoid lending for ship building or purchases and demand that the ship be registered under the flag of a country where their receivables will be guaranteed. It will also become possible to mortgage a ship under construction. This will help to increase the number of Bulgarian-flagged ships and will encourage shipbuilding in Bulgaria, said Tsvetkov. Registration will be simplified because just a registration certificate will be required. A simplified procedure will also be introduced for the recruitment of foreign crew members on Bulgarian ships. To guarantee the employment of Bulgarian sailors, it is required that at least 25 per cent of the crew must be Bulgarian. Navigation Maritime Bulgare (NAVIBULGAR) is the successor to a shipping company established in 1892. Until August 14, 2008 the company was the biggest State Ship Owning Company (BMF) with over a century-old tradition and experience in the shipping industry. Presently, being a private company with 70% German - Bulgarian capital, 116 years inheritance and adopting the principles of a private key market player, NAVIBULGARhas an even stronger position in Bulgaria and on the international scene. The investments must reach BGN 780 in 10 years and the company must purchase a total of 25 new ships.
Bulgarian government to go for expanding Kozloduy NPP if Belene fails
Bulgaria is definitely going to expand its nuclear energy capacity even if the construction of the Belene NPP fails, Economy Minister Traicho Traikov said. Traikov spoke Monday on the occasion of his first year in office as Minister of Economy, Energy, and Tourism. He made clear the government’s position that the construction of a seventh nuclear reactor at the existing Kozloduy Nuclear Power Plant is “a much cheaper and much better option in many respects”. Traikov said there was no political decision for the construction of a seventh reactor at Kozloduy yet but that this project can be taken up regardless of the fate of the controversial second nuclear plant at Belene. “If we don’t build the Belene NPP, we are definitely going to speed up the construction of Unit 7 of the Kozloduy NPP,” he stated explicitly. Traikov pointed out that the fate of the project for a second nuclear plant at Belene will be clear by the end of the second year of his term in office – the government would have found a strategic investor for it, or it will be a closed chapter. The Economy Minister emphasized the fact that the Cabinet was conducting talks with neighboring countries to participate in the construction of the Belene nuclear power plant, and that Serbia has already expressed interest in participating and is considering investing a sum that will be about 1% of the total cost of the construction of the NPP. He also announced that the government was going to select a financial consultant for Belene by the end of August. HSBC, Societe Generale, KPMG in a consortium with McGuire, Rotschild, Arjil, and Ernst&Young have applied in the tender to become financial consultants of the Belene NPP. Traikov said only three of these companies have remained in the competition but refused to announce which ones. The role of the financial consultant will be to come up with suggestions about the restructuring of the Belene project and draft criteria for the selection of a strategic foreign investor. The Belene NPP construction was estimated by the former Bulgarian government to cost about EUR 4 B but the Borisov government forecasts it will cost about EUR 10 B. The previously selected strategic investor, the German company RWE, which was supposed to provide EUR 2 B for the construction in exchange for a 49% stake, pulled out of the project in the fall of 2009. The last two Bulgarian Cabinets have refused offers from Russian PM Vladimir Putin for a state loan. The Borisov Cabinet has declared that it will go ahead with the construction of the Belene plant only if it finds a “strategic European investor.” The plant is to be constructed by the Russian state company Atomstroyexport, and is planned to have two 1000 MW reactors. only Units 5 and 6 (1000 MW each) of the Kozloduy NPP are in operation as Bulgaria closed the 440 MW units 1-4 in accordance with its EU accession treaty over international safety concerns. Speaking on Monday, Economy Minister Traikov also announced that the government planned to build a storage facility for processed nuclear fuel at the Kozloduy NPP. In his words, the funding for the survey of the future construction of a nuclear waste site has almost been secured.
Bulgarian economists forecast smaller GDP growth for 2011
The Center for Economic Development has announced its forecast that Bulgaria will overcome the economic crisis at the end of 2010 or at the beginning of 2011 the earliest. According to the experts' report, announced Monday, the economy of the country has shrunk by 1% in the second trimester, in comparison to the first trimester, when the compression has been 3,6%. The Center has criticized the macro framework of the state budget, according to which Bulgaria's GDP will grow by 3,6% in the next year. The experts have been firm that this is a very optimistic forecast, which could be risky for the 2011 state budget. The report has also stated that during the second trimester Bulgaria has experienced a raise in the manufacturing and a slowdown of the drop in the services, trade and construction. “The domestic consumption has remained low due to the delayed salaries and pensions, as well as the still high unemployment. The lack of enough sectors, producing for export, as well as the drop of the foreign investments in the country, are the main reasons for forecasting the decline of the economy,” said Georgi Prohaski, head of the Center for Economic Development. Prohaski has explained that despite showing some separate signs for improving, the recovery of the Bulgarian economy is slowing down. He added that economic growth in the country could be experienced in the last trimester of the year, or rather the first trimester of 2011 the earliest. “The probability for having an economic growth of more than 1,5-2% for the next year is very low. This was the reason for our critics towards the 2011 state budget framework because it puts at risk the stability of the budget,” he said. According to the him, insurance fees should not go up before 2012, when the country will finally overcome the economic crisis. Prohaski has also called upon the government to not lose its goal for entering the euro zone because, in his words, this is the only tool for a permanent support for the businesses in Bulgaria.
Future of Bulgarian mining industry looks bright
After an 11.2% contraction in 2009, the Bulgarian mining industry is expected to grow by 1.4% in 2010 to be worth BGN 1.18 B (USD 760 M).The New Materials market report from Business Monitor International (BMI): "Bulgaria Mining Report 2010," concluded that “positive indicators for the sector include an upward move in global prices for key commodities such as gold, copper, lead and zinc, while residential construction in Bulgaria is also beginning to pick up, according to the Bulgarian Chamber of Mining and Geology.”Furthermore, Bulgaria's Maritsa East Mines is aiming to produce 26 million tonnes of coal in 2010 and hopes to produce up to 30 million tonnes in 2011. Maritsa East has also invested in new mining equipment to help it reach its goals.Canadian mining firm, Dundee Precious Metals is also on the road to an expansion to 2 million tonnes of gold and copper per year.“The European Bank for Reconstruction and Development may provide Bulgaria's largest zinc smelter KCM a EUR 47 M (USD 63.86 M) loan for a project to reconstruct and modernise its lead production line and upgrade its zinc process ... The project will increase yields, reduce energy consumption, reduce the need for maintenance and decrease a number of production costs,” according to the report.“As the economy rebounds, however, BMI believes that growth in Bulgaria's miningindustry will accelerate to 6.5% in 2011 to be worth BGN 1.29 B (USD 820 M). Growth levels will be maintained at 6.7% in 2012 before edging down to just below 6% in the subsequent two years. By 2014, the sector will be growing by 5.8% and will be valued at BGN 1.66 B (USD 1.07 B).”
Melrose Resources discovers more natural gas in Kavarna
UK oil and gas exploration, development and production company Melrose Resources has drilled successfully the Kavrana East N1 natural gas well on the northern Black Sea shore, thus discovering reserves of 12bn cubic feet acoording to preliminary estimates, the company said on its website. The new field lies in between two other recent discoveries, Kavarna and Kaliakra, which contain combined reserves of 74bn cubic feet. The new deposit is to be developed using a low cost tie-back to the Kavarna sub-sea well location. 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 country's overall consumption next year. Melrose is expected to get concession contracts for the fields by end-September at the latest. About a month ago, the company announced plans to invest USD 65mn in natural gas projects in the country by the end of 2010.
BGN 2 billion to be paid under EU operational programmes
By the year's end, 2 bln leva will be paid out under EU programmes, Minister in charge of EU funds Tomislav Donchev told a news conference on Wednesday.He added that the new rules adopted by the government on Wednesday for the verification of expenses and extension of grants under the EU operational programmes are expected to make up for the delay in payments.The rules are part of a package of measures proposed by Donchev designed to improve and speed up the absorption of EU funds by bringing in line, simplifying and shortening procedures. Compliant beneficiaries are set to receive their payments within three months.The Minister specified that if some of the payments are delayed through a fault of the managing authority or the intermediate body an interest will be due. Currently, payments under some EU programmes are delayed by six to eight months, said the Minister.Under the new rules, beneficiaries will have to be informed of their rights and obligations throughout every step of the process. The new rules will facilitate the activities of the control bodies as well.
INVESTMENTS:
NEC plans EUR 18.2 M transmission network upgrade
National power system operator NEC announced plans to upgrade its transmission network by using financing from the fund which provides compensations for the closed four nuclear reactors of the Kozloduy plant and is administered by the EBRD, according to information posted on the financial institution's website. The total amount of the project is estimated at EUR 18.2mn, part of which will be financed through NEC's own resources. The project comprises the construction, replacement and extension of switchyards, procurement of other high voltage equipment, delivery and implementation of new substation automation systems. The contracts will be awarded in compliance with the procurement policies and rules of the EBRD.
COMPANIES:
Some 30 000 passengers a year to fly Ryanair between Sofia and Plovdiv
Plovdiv Airport and Ireland's Ryanair have signed a contract to launch the first regular two-way passenger service between London and Plovdiv, Plovdiv Airport Director Doichin Angelov and Ryanair's Marketing Manager Laszlo Tamas told a news conference on Wednesday.This round-the-year regular service will carry up to 30,000 passengers a year and will create 30 jobs, Tamas said. There will be two flights a week. The first London-Plovdiv flight is scheduled for November 2.The company has prepared a promotional price of 32.99 euro for a pre-booked ticket. If the destination develops successfully, the number of passengers may reach 200,000 a year in 2013, Tamas said. Deputy Transport Minister Kamen Kichev said the new service would place Plovdiv on the map of the aviation business in Europe and the airport would turn from a seasonal charter airport into a round-the-year destination. He added that the State had aided Plovdiv Airport by halving airport fees. Deputy Economy, Energy and Tourism Minister Ivo Marinov said regular flights between London and Plovdiv would help to improve Bulgaria's image and would boost the potential of Southern Bulgaria as a round-the-year tourist destination.