Kremikovtzi Steel Mill Saga – the End of Hopes

After a year of ongoing protests, staged by the workers of Kremikovtzi steel mill, key ministers announced at the end of 2009 that the bankrupt steel-making giant would most likely be liquidated. The decision came after 80% of Kremikovtzi’s creditors disapproved the action plan to save the steel-maker, presented by the administrator.

Meanwhile the government ruled out the workers' proposal for two of the biggest bondholders of indebted Kremikovtzi steel mill, state-owned gas provider Bulgargaz and the state power utility NEK, to acquire a majority stake in it to prevent an imminent shutdown.

According to the ministers if this scenario unfolds, the state-owned companies will have to pay Kremikovtzi debts while they have no permits for work and also have to pay back public takings to the Finance Ministry. Trade unionists however alarmed that shutting down the ailing state-run plant before winding up its businesses and offloading its assets will make more difficult the outstanding payments to the laid-off workers and their social securities.

The failure to revive the steel mill came after the collapse of the negotiations between the Brazilian metallurgy giant CSN and the management of the troubled Kremikovtzi steel mill and the suspension of gas supplies.

Kremikovtzi's debt to the state gas supplier Bulgargaz is estimated at over BGN 100 M and was the reason for halting the gas supply to the mill on May 15 and the closure of the major part of its production facilities, including the coke plant.

In a separate development the European Commission announced at the end of December that the Bulgarian steel producer Kremikovtzi did not implement the business plan established for its restructuring.

The business plan was agreed by the Commission in 2006 on the basis of a special steel protocol to the Europe Agreement applicable to EU/Bulgaria relations prior to the country's accession in 2007.

According to the European Commission the company received about EUR 222 M restructuring aid between 1998 and 2005, but failed to modernise its infrastructure and to reduce its production costs, which is the reason why the funding will have to be returned.

The sprawling communist-era behemoth near Sofia was declared insolvent in August last year and has suffered huge loss of production.

Workers have yet to receive BGN 56 M in unpaid salaries. Some 3 000 employees have been dismissed or have left the company, with some 3 170 staff still on the books.

Sofia Architect: Kremikovtzi Liquidated, Bulgarian Capital Expands North

The Bulgarian capital is set to expand to the north with the almost certain liquidation of the Kremikovtzi steel-maker, the Chief Architect of Sofia, Petar Dikov, in an interview for Novinite.com.

Dikov said he expected that the liquidation of the troubled steel-making giant Kremikovtzi would be confirmed by the court on Thursday as its bondholders had rejected the capitalization of its debts and the recovery plan.

“As far as I know, the state has also given up on that. So on November 12, two days after the historic date of November 10, the post-communist transition will be over for Kremikovtzi, this dear child of the Bulgarian-Soviet friendship,” Dikov told Novinite.com.

In his words, the Bulgarian capital is not going to lose anything from the liquidation of the factory but stands to gain clean air and a lot of new space for expansion and urban development.

“Since you have many foreign readers, I want to mention that after the insolvency procedure is completed, Kremikovtzi will be declared for sale in full, not as a plant in operation but as one in liquidation. I am convinced that the smart investors are going to consider whether to buy it even in today’s time of crisis. This is 15 000 decares of land with several hundred thousand tons of scrap worth about EUR 400 M. This will prove to be a very rare deal,” the Sofia Architect explained.

He predicted that whoever might acquire the assets of Kremikovtzi would preserve at least temporary its smelting furnaces in order to smelt the hundreds of thousands of tons of scrap remaining there – a process which could take about four years.

Dikov said much of the land where Kremikovtzi still stands could be turned into a high-tech park, office space, logistics or even residential space.

Bulgaria Starts Privatization of Cigarette Monopoly Bulgartabac

Bulgaria’s Privatization Agency announced December 18 an open tender for selecting a consultant for the privatization of the state-owned cigarette monopoly Bulgartabac.

The application forms costs BGN 2 000, and can be purchased within 35 days after the publication of the tender decision in the State Gazette. The deposit for participation in the tender is BGN 5 000, and must be transferred to the Privatization Agency account.

The deadline for submitting an application is 5:30 pm on the 40th day since the publication of the tender decision.

The requirements for the eligible candidates state that they should be international investment banks which are in the top 20 of the League Tables of Financial Advisers in 2007-2009 published by Merger Market or Thomson Reuters.

The candidates must be a leading a consultant of at least one privatization deal of a tobacco company in the last three years, and to have experience with privatization deals. In addition, they should be familiar with Bulgarian law, should have a team of proper legal and economics specialists, should not be in a legal dispute with the Bulgarian state, and should not be in liquidation.

Economic Crisis Brings Bulgarian Industry back to 1985 Levels

The effects of the economic crisis have brought the Bulgarian industry back to its levels from 1985, showed an analysis of the Bulgarian Industrial Association (BIA) and the Friedrich Ebert Foundation, issued on November 23.

The analysis shows that even though in 2008 the Bulgarian industrial sector managed to restore its best level from 1988 after struggling in the post-communist transition for some 20 years, in 2009 the global economic crisis has made equalized the country’s industry to the levels from 1985.

The BIA analysis shows that for the ten-year period between 1998 and 2008, the total amount of money for salaries in the Bulgarian industrial sector registered a real growth of only 14,6%.

And even though the labor productivity in Bulgaria’s industry was 4 times greater in 2008 compared to 1998, the nominal amount of the wages grew was only 2,5 times greater.

The analysis is thus said to disprove the claims of the former government led by Sergey Stanishev that salaries had been growing at a large pace than labor productivity.

Bulgarian Maritsa Iztok 2, Bulgargaz Top Management Changed

The Board of Directors of Bulgarian Energy Holding (BEH) announced on November 29 a reshuffle of the top management of subsidiaries Bulgargaz and Maritsa Iztok 2.

Two new members – Boris Todorov and Georgi Gegov - have been elected to the Board of Directors, along with Dimitar Gogov, who has been until now the CEO of Bulgargaz.

The BEH board have also decided to make changes to the senior management at Maritsa Iztok 2, appointing Jivko Dinchev, Ilko Jeliazkov and Georgi Hristozov as new members. Hristozov was, until now, CEO at Maritsa Iztok (Maritsa East 2).

Two serving members of the board of management of the thermal power plant, Evgeny Stoikov and Georgi Hadjiyski, were removed from their positions.

Bulgarian Energy Holding EAD (BEH EAD) was incorporated on 18.09.2008. It is a shareholding company with 100% state owned participation.

The Holding includes Mini Maritsa Iztok, Maritsa East 2 TPP, Kozloduy NPP, NEK, Electricity System Operator, Bulgargaz, Bulgartransgaz and Bulgartel.

BEH assets amount to BGN 10,7 B, group total revenue for the nine months of 2009 amounted to BGN 3.6 B, and the group employs some 22 000 people.

Chinese Car Factory to Open in Bulgaria's Lovech by End of 2010

A Chinese car factory is supposed to start operating by the end of 2010 in the northern Bulgarian city of Lovech.

The Bulgarian company Litex Motors, owned by tycoon Grisha Ganchev, and the Chinese company Great Wall are going ahead with their joint venture, the Xynhua agency reported at the end of November. The investment in the new factory is going to be about EUR 80 M.

The deal with the Chinese car manufacturer is seen as a big opportunity for Bulgaria to prove that it has what it takes for large scale investments in fields such as car manufacturing.

The Xynhua news agency reminds that one such attempt has already failed in Bulgaria after in the mid 1990s Rover set up a joint venture with the Bulgarian Daru Group in Varna, which failed because of a weak market strategy, high prices, and a stronger competitor in the face of Skoda.

The factory in Varna operated in 1995-1996, and produced a total of 2 200 Rover Maestro cars.

Bulgaria's 1st Garbage Processing Plant Opened near Plovd

Bulgaria’s Prime Minister, Boyko Borisov, opened on October 8 in the village of Shishmantsi, Rakovski Municipality, near Plovdiv the country’s first hard waste processing plant.

Borisov said the Plovdiv waste disposal plant would not have to process garbage from the capital Sofia. He reminded that the Plovdiv dump site recently accepted 100 000 tons of waste from the capital but the Plovdiv Municipality got a lot of money from the state for that in order to finance its other projects.

The construction of the waste plant in Shishmantsi started in 2003, and was completed in June 2009. After that the factory awaited its environmental permit. A total of BGN 42 M have been invested in it; of those, BGN 32 M came from the state budget.

It is initially going to work with one production line with a total capacity to process 125 000 tons of waste per year. A second production line, however, is also to be launched at a later stage.

Kraft Foods Opens Expanded BGN 40 M Chocolate Factory in Bulgaria's Svoge

The American company Kraft Foods opened on October 2 its expanded chocolate factory in the Bulgarian town of Svoge to the northeast of the capital Sofia.

The company has invested BGN 40 M in the expansion adding two new production lines to its existing facilities. Thus, the Svoge factory will be able to produce up to 1 000 000 bars of chocolate per day (365 000 000 bars of chocolate per year), turning Bulgarian into a chocolate supplier for the other countries in Southeast Europe.

Kraft Foods employs over 800 people in Bulgaria. The expansion of its Svoge plant will add 120 new jobs at the company, and will create another 200 jobs that are indirectly connected with the new investment.

In 2008, Kraft Foods invested BGN 1,6 M into a factory for cooling coffee in the town of Kostinbrod (also located near Sofia), which has turned into a regional center for the company’s coffee production.

Kraft Foods is the second largest foods production company in the world employing about 100 000 people worldwide.

Bulgaria Sets up Industrial Zones Company to Attract Outsourcing

Bulgaria's National Company "Industrial Zones" Jsc was formally presented June 17 by the then Economy Minister, Socialist Petar Dimitrov. The Company includes seven industrial zones around the country, and is intended to attract high-quality foreign investments, especially manufacturing operations with high added value and processing industries.

The state "Industrial Zones" company is first going to develop seven industrial zones starting with three former duty-free zones in the Danube cities of Ruse and Vidin, and the Southeast town of Svilengrad.

The fourth industrial zone will in the southern city of Plovdiv with an area of 155 decares. The northern city of Pleven will be the site of the Pleven West industrial zone with about 2 000 decares. The central Bulgarian town of Karlovo is also going to host a new industrial zone with an area of 580 decares. The land for the latter two zones is going to be provided by the Ministry of Defense.

The seventh industrial zone to be developed is Varna-West, close to the Port of Varna, and with an area of 535 decares.

Two of Bulgaria's Cement Factories Stop Work over Crisis

Two of Bulgaria's five cement factories, Devnya Cement Jsc and Vulkan Cement Jsc shut down temporarily in June over the lack of demand created by the global economic crisis.

The two factories located in the northern town of Devnya and the southern town of Dimitrovgrad respectively, are owned by the Italian Italcimenti Group.

According to Alexander Carr, CEO of the two cement factories, the reasons for the temporary shutdown have to do with the general effects of global financial crisis and the drop in consumption, bTV reported.

In Bulgaria, another factor that exacerbated the situation of the cement producers was the import of Turkish cement, which was eventually found to contain substances that are dangerous for people's health.

In addition for stopping work temporarily, the two Italcimenti factories in Bulgaria are also going to lay off between 50 and 100 workers in total. The rest of their workers will be asked to take paid leaves.

In 2008, Italcimenti's Devnya Cement was awarded Bulgaria's Investor of the Year Award for a third year in a row.

Bulgaria Prista Oil Group Acquires Hungary's Bogdany Petrol

Bulgaria's Prista Oil Group, one of Eastern Europe's biggest makers of lubricants, has bought a 92 % stake in Hungarian chemical producer Bogdany Petrol, the latter announced on June 21.

The sum of the deal was not disclosed.

The investor has ambitious expansionary plans and will aim to double Bogdany's current revenues and turn it into one of Europe's biggest manufacturer in its line of business.

Bogdany Petrol was founded in 2000. It produces petroleum jelly (used in pharmaceuticals and cosmetics), telephone cable filling compounds, special paraffin waxes, industrial oils and protective lubricants for wire ropes, among others.

The company had revenues of HUF 6.2 B in 2008, a 29% increase over HUF 4.8 B posted in 2007.

Largest Paper Mill in Bulgaria Closes over Crisis

The largest paper mill in Bulgaria in the town of Stamboliyski closed down at the end of February until further notice due to the global financial crisis.

The shutdown is part of the mill owner Mondi's restructuring plan aimed at curbing the effect of the economic crisis. The company has temporarily closed or offloaded factories in the UK, Sweden, Hungary, Denmark, France and Spain to focus on core operations and optimise production.

Mondi entered the Bulgarian market in 2006 and in 2008 its Bulgarian subsidiary worked at around 60 per cent of its top annual production capacity of 120 000 tons.

The mill in Stamboliyski was established in 1957.

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