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Update No: 058

In June the Bulgars voted in a new government, under the exotic leadership of their former king, Simeon Saxe-Coburg- Gotha, who had last ruled them as an infant in 1943. -46. He is descended from Queen Victoria and is certainly of the purple.
The previous government was doing far too good a job to be popular, carrying out necessary, but painful reforms. There is enormous distress over the 20% rate of unemployment, as the old jobs in outdated industry are destroyed.
The new government has taken its time to establish its credentials with the international community, but is now being given BB- rating by international agencies.
The economy is continuing to grow, GDP rising by 4% this year, after 4.4% in 2001.The current account deficit is continuing to grow from 5.9% in 2001 to 6.5% in 2002, but this is typical of a transition economy.
Bulgaria's early entry into NATO now looks on the cards, not only to facilitate the anti-terrorist cause, but to consolidate peace in Macedonia, where in the aftermath of the attack on the US the impetus for a new settlement between rebel Albanians and the majority was redoubled in strength. Bulgaria is a neighbour and indeed was once virtually the same country, speaking the same language and having the same ethnicity. It could provide secure bases for NATO operations in the whole Balkan region.
Simeon Saxe-Coburg-Gotha has promised results by August 2003, the 60th anniversary of his own accession in 1943, which indicates that he has not quite abandoned monarchical ambitions. It is to be hoped that he does not attempt to bribe his way to a throne, which could jeopardise an anti-inflation policy that has brought inflation down to single figures on an annual basis.
The new regime has the alibi of the world crisis to fall back upon if things are slow to improve. Simeon has an excellent young reform team to organise a recovery and probably a more extended honeymoon period than he originally thought to bring improvements to his people's lives.

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BANKING

Hebros creates consortium to offer for Biochim stake

Hebros Bank is expected to set up a consortium to meet a key governmental requirement for bidding for state-owned Biochim bank, CEO of Hebros Bank Gautam Vir told 'Dnevnik Daily,' cited by Novinite.
The CEO was quoted as saying such a move is necessary since the bank had 95m levs in net assets at the end of last year, which is lower than the 100m levs minimum, set by the Bank Consolidation Company (BCC). Vid said Hebros bank (owned by investment fund iRegent) might set up a consortium with a Croatian bank, belonging to iRegent. Letters for signing confidentiality contracts were sent out to seven potential bank buyers - Roseximbank, Hebros Bank, Bulbank, Bank Austria, Commercial Bank of Greece and French Societe Generale and Dutch-based TBI Holding.

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ENERGY

Italian ENEL mulling hydro project investment

Bulgaria's ministry of regional development and public works, the National Electricity Transmission Company (NETC) and Italy's energy giant, Enel Power, have signed a feasibility study agreement on the joint Turkish-Bulgarian hydropower Gorna Arda project, New Europe has reported.
The document enables Enel Power to prepare an analysis of the economic viability of the project and regulates the framework for setting up the consortium, which will fund the project. The cost of the Grona Arda hydropower project is put at US$230m.
If Gorna Arda project's economic efficiency is proved, the Italian energy company is ready to become a main investor and launch construction work within a year. Enel Power, owned by giant Enel Group, was set up in 1999.

Energy Ministry unveils power industry development strategy

The prices of electricity for household and industrial users must draw level this year, according to Energy Minister Milko Kovachev, BTA News Agency web site has reported. 
His ministry presented a concept for working out a power industry development strategy at the Council of Ministers on 7th February. In mid-February the concept will be posted on the government's website, and the strategy itself is to be adopted in March. 
As from the end of last year, the household electricity rate is 0.098 leva/kWh peak and 0.062 leva/kWh off-peak, and industrial electricity costs 0.130 leva/kWh peak and 0.062 leva/kWh off-peak. 
The rehabilitation of the Maritsa East III coal-fired power plant capacities will increase the average selling price of electricity by 3.5 per cent. The closure of Units one and two of the Kozloduy Nuclear Power Plant will add another 3 per cent to the electricity rates, and the construction of new capacities at Maritsa East I will hike the price by a further 10 per cent, Kovachev said. "Every investment in the power industry has its price," the minister explained. 
Energy exerts a strong influence on the country's gross domestic product, he argued. Bulgaria has the most energy intensive production among all EU applicant countries in the region, and the energy intensity of output is increasing. In the early 1990's, 1,000 dollars of GDP took 1,300 kg of fuel equivalent to produce, while the same amount of GDP now requires 1,600 kg of fuel equivalent. 
The concept does not deal with energy prices and deadlines for closure of N-plant units, Kovachev said. The power industry must provide high-quality and environment-friendly services to the economy and the public, the minister said. Bulgaria will be trying to increase its energy exports by improving the efficiency of generating capacities, Kovachev said. 
The state will curtail its administrative role and will create transparent and impartial conditions for business and for protection of public interests. Energy prices must be consistent with production costs, he also said.

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INDUSTRY

Tobacco maker sell-off likely

Bulgaria plans to sell a stake of up to 80 per cent in the state tobacco and cigarette maker Bulgartabak by mid-year, deputy premier and Economy Minister, Nikolai Vasilev, said recently, New Europe has reported. The remaining 20 per cent would go to the stock market, but the state planned to retain its interest in the firm through a "golden share," which usually involves the decisive say in the management. Vasilev made the announcement after the cabinet reached a unanimous decision. The company is one of the giants that have survived since the times of communism. A series of scandals has repeatedly forced postponement of its privatisation. The government announced recently that it would sell up to 65 per cent of the national Telecommunications firm BTK, in the largest privatisation planned for 2002. The first attempt to sell the BTK stake for US$450m fell through shortly before the deal was to be signed with a Dutch-Greek consortium of KPN and OTE in 1999. 
Apart from Bulgartabak and BTK, the list of firms due to be privatised includes weapons factories, thermal power plants, the Varna shipyard and the maritime and river merchant fleets.

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NUCLEAR ENERGY

LMZ wins US$15m contract to repair reactors at Kozloduy

The Leningrad Metals Plant (LMZ) in St. Petersburg, part of the Silovye Mashiny concern, is to contribute to repairs of two reactors at the Kozloduy nuclear power plant in Bulgaria, New Europe has reported. The work, which will begin in the spring of 2003, will cost more than US$15m, Silovye Mashiny stated in a press release. The nuclear power plant's fifth and sixth reactors, each with 1 million kilowatt capacity, will be repaired.
LMZ has firmly entrenched links with Bulgaria. In the past the plant's equipment has been installed at Bulgarian power stations, although it has never participated in the work of Bulgarian nuclear power stations.
According to an agreement signed by Russia's Atomstroyexport and Bulgaria, LMZ will upgrade the reactor's turbine condensers, considerably improving their reliability and increasing their capacity.
LMZ will also repair turbine production at the Kharkiv company Burboatom, the press release notes. The company is confident of gaining unique experience in its work at the Bulgarian nuclear power plant, which can later be used to upgrade Russian energy systems. Silovye Mashiny includes LMZ, Elektrosila, the Turbine Blade Plant, Kaluga Turbine Plant and Energomashexport.
Leading western corporations had competed with LMZ in the tender to repair the reactors; however, the technical resolutions proposed by LMZ were considered the best, the press release noted. LMZ experts developed and tested a unique method to calculate the configuration of turbine clusters, which will be used when designing equipment for the Bulgarian nuclear power plant.

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TRANSPORT

Japan offers US$100m loan for metropolitan subway project

Following an official ratification, the Japanese government will approve a loan of US$100m for the extension of the metropolitan subway, BTA New Agency has reported. Foreign Minister Solomon Passy and Japanese Ambassador Yasuyoshi Ichihashi signed in early February, a note for a guarantee agreement between the two governments at a ceremony which was also attended by Sofia city Mayor, Stefan Sofianski.
According to information posted by the same agency, the money will be used to add two new stations to the existing subway infrastructure. Most experts predict that this subway extension will be technically the most difficult to date.
The Japanese Bank for International Cooperation will loan the money to the Sofia municipality against the provision of state guarantees. The 30-year soft-term loan will have an annual interest rate of 2.2 per cent and a 10-year grace period.
"Sofianites taking the subway will associate the modernisation of their city with Japan," Passy said, adding that the Asian country is a priority partner for Bulgaria on a par with the EU and NATO member states.
Japan has been Bulgaria's biggest net creditor and donor among the G-24 countries in the past 12 years. Bulgaria has so far received US$21m in grant aid and US$100m in loans from Japan; the latter country has provided, in co-financing exercises involving the World Bank, a further US$254m for infrastructure and environment projects.

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