BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 20 – 27 AUGUST 2010 )
Sections/headline briefs:
MACROECONOMY:
· IMF: Eastern Europe poised for economic recovery
· Sofia to lose above EUR 200 M under ISPA
· Sofia city to start construction of two water purification plants
· Construction in Bulgaria shows signs of recovery
· Eurostat: Bulgaria's June industrial output grows by 25% on an annual basis
INVESTMENTS:
· Toshiba to build 10 MW solar power plant in Bulgaria
· Local PV Systems to build EUR 30.3 M photovoltaic park
· Bulgaria to open EUR 103 M wind farm near Varna
· SRS Bulgaria to invest EUR 247.3 M in wind park
· Romania, Bulgaria discuss joint project for hydroelectric power plant
· Bulgarian company plans to open EUR 50 M Varna office complex in Fall 2010
· Bulgaria ups renewable energy production
COMPANIES:
· BTC sells 50 per cent in radio, TV transmission unit for EUR 57 million
· EBRD considers EUR 200 M loan to Schwarz Group for regional expansion
MACROECONOMY:
IMF: Eastern Europe poised for economic recovery
The IMF stated Eastern Europe is poised for economic recovery for the first time since the beginning of the financial crisis. Previous forecasts of the International Monetary Fund (IMF) were for slower and lesser rebounding in Eastern Europe compared to other developing economies in the world, the Bulgarian National Radio, BNR, reports, citing Deutshe Welle. IMF sees as a sign of recovery the increasing export and the stabilization of the internaldemand, and expects an economic growth of 3.3% in the region in 2010. The beginning rebounding, however, does not mean Eastern Europe can come back to the economy levels from before the crisis, according to the report. Further growth would depend on the business, not on internal demand, because the latter will remain low over indebted consumers and lack of new loans – a trend that will force economies in the region to restructure, recover from the crisis and achieve a stable growth in the future. IMF experts forecast the shrunken influx of foreign capital to Eastern Europe will remain at current levels permanently and, even if Western banks manage to rebalance their capital, the region would no longer be attractive over the risks that emerged during the crisis. IMF recommends balanced macro-economic policies and restrictions of wage increases in the public sector, redirecting efforts to the manufacturing of better quality goods, instead of maintaining competitiveness only through cheap labor. Recovery and growth ask for better education, better business climate, and in some countries, such as Bulgaria – fight against corruption, according to the report, cited by BNR.
Sofia to lose above EUR 200 M under ISPA
While the operational programmes will be functional until the end of 2013, the deadline of the ISPA financing memorandum expires in less than five months - on December 31 this year. What is already clear is that nearly EUR200 million from the budget of the pre-accession programme, which is for a total of EUR1.66 billion, has no chance of entering Bulgarian economy. And the reason is more than ridiculous - not enough contracts for implementation of projects, although the money under ISPA has been available since 2000. In fact, the contracted funds at the end of June were for EUR1,468,924 898.46. What is more annoying, however, is that Bulgaria is likely to lose much more than the EUR200 million it has failed to sign contracts for. Under EU rules, if a project is not completed until the final date for eligibility of expenses, money invested in it may not receive EU refunding. Which means that any payments made after the end of this year will come entirely from national resources. EU Commission did extend further 12 months for completion of all works before making the country pay back any EU financing. But if after this period the site is not put into operation, Bulgaria will be forced to repay all advance and interim payments received under ISPA. There are concerns in this respect and they have their grounds. According to data of the Finance Ministry as at - 30 June 2010 under all 40 projects of this programme activities for EUR796.9 million were carried out, which is 54 percent of the agreed amount. It should be abvious to everyone that in the few months by the end of the year there is no way the remaining work to be finished. For some of the sites there are doubts if this would be possible even before December 31, 2011, and Brussels will then have the right to ask for its money back. The truth is that so far there have been only six formally completed contracts under ISPA and two more are waiting for a decision by the European Commission to be officially closed. The Government's report for its first year in office announces that all projects under the programme approved by the Commission after 2004 have been granted an extened deadline by end-2011, while the construction of the country's second bridge over the Danube at Vidin-Calafat may continue until the end of 2012. The Cabinet, however, omits the fact that until today they have not sent the formal letters to request the extension. The absolute bottom in EU funds absorption was achieved in Kardzhali with its waste management centre. The agreed amount for it comes to EUR31 million, while nearly EUR11 million are contracted to be an EU grant. So far, however, only a modest 19 percent has been absorbed (in June 2009 this figure was 13 percent) and it will be a miracle if the centre is built over the next two to three years. The weirdest thing here is that the arrangement with ISPA was signed at the end of December 2003, but an agreement with the contractor (the Bulgarian-Italian consortium Uniland Siconco Unieco) was reached as late as October 27, 2008. Less than half of the work has been done on the integrated water cycle projects in Sofia, Smolyan, Varna, Shumen, Sliven and Kyustendil. The total value of these facilities is over EUR254 million, while the ISPA grants come to EUR135.7 million. However, the actually absorbed funds stay at only BGN67.8 million. Regardless of the new schedules and recently signed additional agreements with the Turkish consortium Mapa Cengiz there are still many questions around the construction of Lyulin highway, which is funded by EUR111.3 million through ISPA. What has been absorbed by mid-year comes to 53 percent of the total project - which is for EUR148.4 million. The nice thing here is that at least in theory the country is less likely to lose the EU grant. According to the agreement, if the contractor fails to complete and certify the facility ofr EUR142 million by 31 December 2010, it will be obliged to pay to the Road Infrastructure Agency 75 percent of the contracted amount (which is the proportion of the EU funding). Basically the same is the situation with the project for the railway stretch between Plovdiv and Svilengrad. The modernization of the route to the Turkish border with a total length of 151 km has already been delayed by six months. The budget for the overhaul is EUR340 million, while EUR153 million of the sum is to be provided by ISPA. By the middle of this year, however, the actually paid amount came to a little more than EUR132 million (43 percent of the entire contract). Compared with June 2009, when the absorption rate was only 22 percent, the progress has been significant, but however faster the contractors Astaldi and Terni may work, the project cannot be completed over the next four months.
Sofia city to start construction of two water purification plants
The Bulgarian capital city will start the construction of two drinking water purification installations, the environment ministry announced. The construction works are estimated to cost EUR 2.8mn, 75% of which will be provided by EU funds under the ISPA pre-accession programme, 15% will come from a state loan from the EIB, and 10% will be budget financing. The project is part of the ISPA-financed water cycle upgrade of the capital city of Sofia. It should be completed by July 25, 2011.
Construction in Bulgaria shows signs of recovery
Construction permits issued in Bulgaria in the second quarter of 2010 are up compared to the first quarter, but down on annual basis. The data was published by the National Statistics Institute (NSI) Monday. 1 441 residential permits have been issued between April and June 2010 for a total of 3 933 apartments. Compared to January – March, 2010, this is an increase of 46% and 41% respectively. on annual basis, compared to the second quarter of 2009 there is a respective reduction of 21% and 13%. The most permits – 176, have been issued for the Varna Region, followed by the city of Sofia – 166, the Burgas Region – 135, the Plovdiv Region – 131, and the Sofia Region - 114. The most residential units will be built in Varna – 676, the southern city of Blagoevgrad – 460, the capital Sofia – 438 and Plovdiv – 413. 58 permits for office buildings have been issued in the second quarter of 2010, up 18% compared to the first quarter and down 27% on annual basis. There are also 1 171building permits for construction other than housing and offices – up 35% and 1% respectively. The second quarter of 2010 saw the start of the construction of 785 residential buildings with 1 811 apartments, 36 administrative buildings and 545 other buildings. The most of them were in the capital Sofia (127, 7 and 34 respectively, Plovdiv and Burgas.
Eurostat: Bulgaria's June industrial output grows by 25% on an annual basis
European Union industrial new orders increased by 2.4 per cent in June 2010 on the previous month, data from Eurostat revealed on August 25 2010. According to the report, new orders in the Eurozone increased by 2.5 per cent in June 2010 while in May the index rose by 4.1 per cent. In Bulgaria, total manufacturing output soared by 25 per cent in June on an annual basis while among other member states for which data are available, manufacturing output rose in 19 countries, falling only in Ireland by 5.1 per cent. The highest increases were registered in Denmark, 64.8 per cent, followed by Latvia with 61.2 per cent, Estonia with 49.2 per cent, Romania with 34.6 per cent and Germany and Finland both 32.8 per cent. On annual basis, in June 2010, compared to the same time the previous year, industrial output increased by 22.6 per cent in the Eurozone and by 22.5 per cent in the EU, the Eurostat report said. Meanwhile, total industry excluding ships, railway and aerospace equipment rose by 22.5 per cent and 23.7 per cent respectively. On a monthly basis, in June 2010 compared to the preceding month, new orders for capital goods rose by 5.3 per cent in the Eurozone and by 5.1 per cent in the EU, while intermediate goods increased by 0.1 per cent and 0.3 per cent respectively. Durable consumer goods declined by 1.1 per cent in the Eurozone and by 0.1 per cent in the EU. Non-durable consumer goods decreased by 1.8 per cent and 0.9 per cent respectively, the report said. Among member states for which statistics are provided, manufacturing output rose in 16 countries and fell in four. The highest increases were registered in Denmark with 23.0 per cent, the Netherlands with 8.9 per cent and Romania with 5.5 per cent. The largest drops were recorded in Ireland, with 4.7 per cent, and the Czech Republic with 2.7 per cent. Bulgaria registered an increase of about four per cent, Eurostat said.
INVESTMENTS:
Toshiba to build 10 MW solar power plant in Bulgaria
The Japanese company Toshiba is planning to invest in construction of solar power plants in the USA and countries in Europe, including Bulgaria. The company has annouocned it is expecting an income of USD 1,8 B from these investments by March 2016. Toshiba will begin implementing its investment plan with the construction of a 10 MW solar power plant in Bulgaria, which is expected to begin working in the next financial year. The plant will be located near the Bulgarian city of Yambol and it will cost about EUR 3,7 M. It will be sufficient to supply electricity to about 2000 households. Toshiba will not retain the ownership of the plant but would sell it to local financial funds and investors instead. The Japanese company is planning to build 8 large solar power plants in Europe by 2015. “We will consider the acquisition of local companies with experience in the construction of such plants,” the company's spokesperson said. The experience in the field of solar energy and “smart grids” can provide Toshiba's good positions on the US and Italian market.
Local PV Systems to build EUR 30.3 M photovoltaic park
Local PV Systems plans to build a 10 MW photovoltaic plant in the village of Sredina in the northeast part of the country. The investment in the installation is expected to total BGN 59.2mn (EUR 30.3mn). The construction is to be completed in three years. The project, which holds a first-class investment certificate, will create 25 new jobs.
Bulgaria to open EUR 103 M wind farm near Varna
Bulgarian-Spanish joint stock company Eolica Bulgaria EAD began the next stage of the wind park Suvorovo, which is located just 20 km out of Varna, the company announced on Wednesday (August 18). Eolica has already started the construction of the steel structures as well as the installation of wind turbines. Each of the 30 pillars will be 80 meters high and the diameter of the propeller will reach 90 metres. The company plans to construct two steel structures and to install two wind turbines GAMESA a week. Each of them has a capacity of 2 megawatts and the total capacity of the wind energy park from its putting into service will be 60 megawatts. In this way Suvorovo will annually save the burning of 266 tonnes of black coal and prevent the emission of approximately 56 thousand tonnes of carbon dioxide. Energy produced by it will provide electricity to around 30,000 inhabitants, or nearly 7,000 households. Along with the environmental impact, the project leads to many economic benefits for the region of Suvorovo. Because of construction of the wind farm, Eolica Bulgaria EAD has improved the infrastructure in the area, reconstructed the local road of Suvorovo and a number of other roads within the region. So far the company has opened over 100 jobs. The construction of a wind energy park began in 2009, while the start of this project was given in 2004 and then went through coordination with all relevant Bulgarian institutions. The overall investment in Suvorovo wind energy park is approximately EUR103 million and the project is certified as a first class investment by the Bulgarian Investment Agency.
SRS Bulgaria to invest EUR 247.3 M in wind park
German-Bulgarian firm SRS Bulgaria plans to invest BGN 483.7mn (EUR 247.3mn) in a wind power park near General Toshevo, in the northeast part of the country. The company will install 60 power generators with a total production capacity of 150-180 MW. The project, which has been awarded a first-class investment certificate, should be completed in 2011 and will create 20 jobs.
Romania, Bulgaria discuss joint project for hydroelectric power plant
Romania and Bulgaria are holding technical negotiations over the construction of a hydropower plant on the Danube, which represents a highly important project, Minister of Economy, Trade and Business Environment Adriean Videanu declared on Friday [ 20 August]. He mentioned that the project will be carried out under a partnership among the Romanian and Bulgarian governments and private investors.Romania currently has only one hydropower plant on the Danube, at the Iron Gates, with a capacity of about 1,450 MW. In February, Secretary of State with the Ministry of Economy, Trade and Business Environment Tudor Serban said that new Danube power plant to be jointly built by Romania and Bulgaria could get European financing.
Bulgarian company plans to open EUR 50 M Varna office complex in Fall 2010
Bulgarian real estate developer Varna Towers said on Tuesday it plans to open this fall its eponymous 50 million euro ($63.5 million) mixed-use office and retail complex in the Black Sea town of Varna. The 60,000 square metre (sq m) retail component of the Varna Towers scheme has reached an occupancy rate of 75% which should rise to 85% by the opening, the developer said in a statement. The occupancy rate at the 20,000 sq m office component is 70% with a further 20% in advanced negotiations with prospective tenants, the company said, adding that the local unit of Germany's E.ON will be the property's largest tenant with a 17,000 sq m lease. The complex, which will also offer parking for over 800 cars, is located in downtown Varna and has a total built-up area of over 83,000 sq m. Work on the development started in 2007. The Varna Towers company was set up by Densi M and City Centre solely for the purpose of implementing the mixed-use real estate project, according to data form its website (www.varnatowers.com).
Bulgaria ups renewable energy production
Bulgaria’s energy production from renewable sources by the end of 2010 will be 3 times more than the one in 2009, according to Plamen Dechev from the State Commission for Energy and Water Regulation (DKEVR). In 2009, Bulgaria produced 800 thousand MGWH from green sources while for the first six months of 2010, this production has already reached 1 million MGWH. According to the expert, in the next few years the share of renewable sources in energy production can reach 17% to 20%. Currently Bulgaria has 1 870 MGW in Water Power Plants and 771 MGW in facilities using other renewable sources. Denchev informs until now DKEVR had received requests for the construction of plants using renewable energy sources with a total power of 10 000 MGW, but the current network can sustain only half of them. The National Electric Company (NEK) had set aside BGN 30 M for the expansion and renovation of the network in the next 5 years in order to respond to the increased demand of green energy.
COMPANIES:
BTC sells 50 per cent in radio, TV transmission unit for EUR 57 million
The Bulgarian Telecommunications Company (BTC), operating on the market under the Vivacom brand, has closed the sale of 50 per cent in its National Unit Radio and TV Stations (NURTS) unit to Cyprus-registered international financial investor Mancelord Limited, the telecom said.Under the deal already entered into the Bulgarian trade registry, the former state-run monopoly will transfer NURTS in the special purpose vehicle NURTS Bulgaria, which is owned by Mancelord, at the price of 57 million euro.Mancelord Limited is represented in Bulgaria by Bromak, the majority owner of local Corporate Commercial Bank.The sale had been in the making since the end of March when it was announced that the BTC had signed a preliminary accord with Mancelord Limited for the sale of NURTS and the creation of a 50:50 joint venture for the control over the aerials.The capital of the joint entity NURTS Bulgaria has already been increased from 50 000 leva to 111.5 million leva."The aim of the deal is to turn NURTS into a competitive player on the digital broadcasting market in Bulgaria and a multiplex services provider on a national scale," the telecom said in a filing to the Bulgarian Stock Exchange (BSE).BTC had been trying to divest of NURTS since 2008 when it got an offer, but no deal was signed. The deal with Mancelord was signed in March and was approved by the Communications Regulation Commission and the Commission for Protection of Competition in June.
EBRD considers EUR 200 M loan to Schwarz Group for regional expansion
The European Bank for Reconstruction and Development is considering providing loans of up to EUR 200 M in aggregate to the Schwarz Group’s Kaufland operations in Poland and Bulgaria and Lidl operations in Bulgaria and Romania. The proceeds will be used to finance the expansion and entry, respectively, of the twodiscount formats in these countries, the bank announced. The project will primarily finance Lidl and Kaufland stores in the more remote / rural store locations of the countries. It is the fourth in regional co-operation to finance the SchwarzGroup’s strategic expansion and its cost has been estimated at EUR 440 M. The proposed project will bring new formats of modern retail and the convenience ofdiscounter shopping to large portions of the Polish, Romanian and Bulgarian population in the more remote and rural regions, EBRD said. The project is also expected to benefit the countries through advanced logistic systems and infrastructure as well as energy efficient construction techniques, that are closely correlated to the group’s store rollout plans. German retailer Tengelmann decided at the end of February to sell its discount retail chains in Romania and Bulgaria to its rival Lidl, which is part of Germany's Schwarz retail group. Tengelman, the parent company of Plus, owns 94 and 16 stores in Romania and Bulgaria respectively. Lidl plans to launch its business in Bulgaria by the end of this year. Kaufland is a part of the Swartz Group, which also owns Lidl. It is a soft discounter that entered the Bulgarian market in 2006 in Plovdiv. Now it is strongly positioned on the market with 31 hypermarkets across the country, five of which are located in the capital Sofia.