Bulgaria 2008 Review: Business

Business | Author: Ivan Dikov |January 2, 2009, Friday // 00:00

Bulgaria Registers Record GDP Growth in 2008

In the first nine months of 2008, Bulgaria's GDP grew by a total of 7% compared to the same period of 2007. It amounted to BGN 48,037 B (BGN 6 271 per capita), or USD 37,3339 B (USD 4 874 per capita) at an average exchange rate of BGN 1,286697 for USD 1; or EUR 24,561 B (EUR 3 207 per capita). Bulgaria's imports of goods and services in the third quarter of 2008 was BGN 2,278 B more than its exports. The amount of the country's total foreign trade grew by 5,4%.

Bulgaria's GDP grew by 6,8% in the third quarter, and by 7,1% in the second quarter of 2008 compared to the same periods of 2007. The country's GDP growth in all of 2008 is estimated between 6,8% and 7% but final data are not available yet.


Bulgaria Sets up Development Bank

In April, the Bulgarian Parliament approved the law for the creation of a Bulgarian Development Bank. The act transformed the state-owned Encouragement Bank, which was created in 1999, into a Development Bank. It also created a National Guarantee Fund and a Capital Investment Fund. The purpose of the Development Bank is to improve, stimulate, and develop the total exports and technological potential of the small and medium-sized businesses, to assist them in their activity, and to enhance their access to funding.

In November, Bulgaria's cabinet voted to increase the capital of the BDB by BGN 100 M as a measure to counter the effects of the global financial crisis on the real sector. In December, the government approved another increase of BDB's capital by pouring another BGN 330 M into it.


Bulgaria's Government Sets up Energy Giant

In September, the Bulgarian government finalized the long-prepared setting up of the Bulgarian Energy Holding. The BEH was set up with the merger of five state-owned companies - the National Electric Company NEK, the gas monopoly Bulgargaz, the Maritza Iztok Mines, the Maritza Iztok 2 Thermal Plant, and the Kozloduy Nuclear Power Plant into a EUR 4 B energy giant.

The Sofia Heating Utility "Toplofikatsiya", the largest public heating utility in Bulgaria, will be the sixth Bulgarian energy giant to join the holding only after the expected approval by Bulgaria's Competition Protection Commission and the State Agency for Energy and Water Regulation, which are expected in the first weeks of 2009.


Construction of Bulgaria's Second Nuclear Plant at Belene Restarted

In September, the Bulgarian Prime Minister Sergey Stanishev turned the first sod of the renewed construction of Bulgaria's second nuclear power plant in the Danube town of Belene. The ceremony was attended by a number of Bulgarian government officials and representatives of Atomexportstroy, the Russian company, which is building the plant. Stanishev and the Energy and Economy Minister Petar Dimitrov defined the start of the construction of the plant as "a Renaissance for Bulgaria's nuclear energy". The actual construction works are to start in May 2009 the Nuclear Regulation Committee issued a construction permit.

In December, Representatives of the German energy company RWE and of Bulgaria's state owned national electricity company NEK signed Friday the formal agreement, with which RWE joins the project for the construction of Belene Nuclear Power Plant. Under the contract, RWE will receive a share of 49% of the Belene plant in exchange for a capital payment of EUR 1,275 B, a premium of EUR 550 for NEK, and a loan of EUR 300 M for the purchase of equipment and other expenditures. Thus, RWE will be providing more than EUR 2 B, which is more than half of the cost of the project, which is estimated at EUR 4 B.

The first 1000 MW reactor of the Belene NPP is supposed to be launched at the end of 2013, and the second 1000 MW unit is supposed to start working a year later. The project was frozen in 1990 after local people and environmentalists protested against it, and because the government did not have sufficient funds to continue the construction.


Kremikovtzi: The Crisis Saga Continues

2008 saw a severe crisis at Bulgaria's largest steel-maker Kremikovtzi, which was marked by intermittent workers' protests, the continuing search for investors, and even a raw materials shortage. In the first half of 2008, ArcelorMittal of the Indian tycoon Lakshmi Mittal, who is the older brother of the present owner of 71% of the plant Pramod Mittal, was considered the mostly likely bidder for its purchase.

In July, however, after insistence by the trade unionists, Kremkovtzi canceled a production deal with ArcelorMittal, and sealed a deal for production with materials supplied by the client with the Ukrainian company Vorskla Steel, which is owned by the Ukrainian tycoon Konstantin Zhevago.

In August, the factory was declared insolvent after its debt rose to BGN 1,7 B.

After workers' protests in September over delayed salaries, in October, Vorskla Steel Bulgaria decided to terminate unilaterally its contract with the plant justifying its decision by stating that the trade unions had been manipulating the Kremikovtzi workers for political reasons urging them to continue with their non-stop strikes.

This resulted in the declaration of an emergency situation in Bulgaria's biggest steel mill at the end of October, as deliveries of coal for the troubled plant were suspended, thus putting it in risk of industrial accidents, and leading to the shutting down of one of its blast furnaces. This situation culminated in large-scale protests with dozens of buses with Kremikovtzi workers pouring in downtown Sofia, and demanding that they receive their delayed payments, and that the government take measures to secure the future of the factory.

The delayed salaries crisis was temporarily alleviated as the Bulgarian state bought out thousands of tons of ready Kremikovtzi produce at market prices to provide the plant with cash. However, the fate of the factory is still unclear.

At the end of the December, Bulgaria's Economy Ministry stated there had been seven bidders for the purchase or the operation of Kremikovtzi. These include the Ukrainian company Smart Group, the Bulgarian Intertrust Holding BG of Kremikovtzi's former owner Valentin Zahariev, the Bulgarian company Ekometanengineering Single Member Ltd, the Czech LM Moran, the German AT Kearney, the Italian Lavfer S.f.A., and the Russian Prominvest.

The Brazilian company CSN (Companhia Siderurgica Nacional) is the potential eight bidder but it has not submitted a formal offer for Kremikovtzi yet, despite some recent reports that it was ready to invest almost USD 400 M in the plant.


Bulgaria Committed to Russian-Sponsored South Stream Gas Pipeline

In July, the Bulgarian Parliament ratified the country's agreement with Russia for the construction of the South Stream gas transit pipeline with the overwhelming support of the governing three-way coalition parties. According to the terms of the contract, the two state monopolies Gazprom and Bulgargaz will set up a company for the construction and management of the pipeline on Bulgarian territory. Each of the two players will have a share of 50% in the joint venture. The pipeline will have a transit capacity of 31 billion cubic meters of natural gas per year, with the Russian side guaranteeing it would be filling the pipe to the maximum. The territorial exploration will start up to 18 months after the founding of the joint company, and the construction will be launched up to 2 years after its completion. The agreement is for thirty years. After this term expires, it will be renewed automatically every five years unless one of the sides decides to terminate it.

In June, Bulgaria's Prime Minister Stanishev stated the government's aim with participating in both South Stream and Nabucco was to have 10-12% of EU's total natural gas be transited through Bulgarian territory. In January the Gazprom Director Aleksei Miller stated the first gas would be delivered through South Stream in 2013. Recent reports in Russian media, however, cited Gazprom's confidential "General Plan for the Development of the Gas Sector by 2030" as saying the gas deliveries through South Stream would start in 2015-2024.


Bulgaria Active in Launching EU's Nabucco Gas Pipeline

In February, Germany became the sixth partner in the Nabucco gas pipeline project through the participation of the company RWE under an agreement that was sealed in Vienna. Nabucco's shareholders with equal shares include also Austria's OMV, Hungary's MOL, Romania's Transgaz, Bulgaria's Bulgargaz, and Turkey's BOTAS. In the spring of 2008, the joining of the French energy company Gas de France to the Nabucco consortium was blocked by Turkey over political issues.

Nabucco's is EU's key initiative to reduce its energy dependence on Russia by diversifying its gas suppliers. The construction works in Austria are expected to start in the first half of 2009. The first deliveries of Azerbaijani gas are supposed to be transported through the pipeline in 2013. Its total capacity will be between 26 and 32 billion cubic meters of natural gas per year. An international conference on the progress of the Nabucco Pipeline is planned to take place in Hungary's capital Budapest in January 2009. In August, the project's operator Nabucco Gas Pipeline International GmbH (NGPI) announced the capacities of Nabucco were more than 100% overbooked by potential shippers on a non-binding basis.


Construction of Burgas-Alexandroupolis Oil Pipeline to Start in 2009

In June, Bulgaria's Regional Development Ministry announced the construction of the Burgas
Alexandroupolis Oil Pipeline was expected to start in a year, i.e. in June, 2009, and was expected to
last for one year. The planned pipeline is supposed to transport Russian oil from the Bulgarian Black Sea port of Burgas to the Greek Mediterranean port of Alexandroupolis. The 280-km pipeline, with 166 km passing through Bulgaria, would have an initial annual capacity
of 35 million tons of oil, which could be later expanded to 50 million tonnes. The construction is
estimated to cost up to USD 900 M.

However, the plans for its construction have alarmed the citizens in the cities and towns along its projected route because of the potential environmental destruction, and the effects on local tourism. Thus, the residents of the Bulgarian Black Sea resorts of Burgas and Sozopol have voted against the pipeline in local referendums in the spring of 2008.


Bulgaria's 2009 State Budget

Bulgaria's approved 2009 State Budget envisages total state revenue of BGN 20,955 B, and total state expenditures of BGN 11,276 B.

The expected total tax revenue is BGN 18,916 B. Of these, BGN 2,460 B are to come from corporate taxes, BGN 9,320 B from value-added tax, BGN 4,260 B from excise taxes, and BGN 2,860 from income taxes.

Bulgaria's 2009 installment to the EU will be BGN 931,795 M. Bulgaria's municipal administrations are to receive BGN 2,450 B.

BGN 3,267 B are allocated for social security, BGN 773 M are envisaged for the National Health Insurance Fund, and BGN 337,390 M will go to the State Agriculture Fund.

BGN 400 M are provided from the emergency spending reserve for additional fiscal measures, which will include BGN 211 for subsidies and national programs in agriculture, and BGN 189 M for the modernization of the national railway transport network.

Of these, the passenger carrier BDZ will receive BGN 44,5 M, and the National Railway Infrastructure Company will get BGN 50 M. The remaining BGN 94,5 M will be spent on social projects in the field of railway transportation.

We need your support so Novinite.com can keep delivering news and information about Bulgaria! Thank you!

Business » Be a reporter: Write and send your article

Advertisement
Advertisement
Bulgaria news Novinite.com (Sofia News Agency - www.sofianewsagency.com) is unique with being a real time news provider in English that informs its readers about the latest Bulgarian news. The editorial staff also publishes a daily online newspaper "Sofia Morning News." Novinite.com (Sofia News Agency - www.sofianewsagency.com) and Sofia Morning News publish the latest economic, political and cultural news that take place in Bulgaria. Foreign media analysis on Bulgaria and World News in Brief are also part of the web site and the online newspaper. News Bulgaria