Банкеръ Weekly



MINORS' PROTESTS AGAINST BOBOV DOL'S SALE FOUND SUPPORTERS IN ATHENSThe executive management of the Privatisation Agency (PA) approved on May 9 the state-run Russian company United Energy Systems (RAO UES) as buyer of thermoelectric power stations of Varna and Rousse. No decision about the Bobov Dol power plant was made. The PA only specified that deadlines for extending its stance on the deal have not been included either in the regulations or in the tender terms. But according to the only criterion in the divestment procedure - the issue weighted price of a share, the eventual buyer of the Bobov Dol plant was clear still when the final offers were opened on April 27. This is the Greek Public Power Corporation (РРС), which offered for it a total of EUR70,917,426, or EUR282.09 per share. Its only rival in the competition - Italy's Enel - was ready to pay a modest price - EUR100,560 or EUR0.40/apiece. The problem now is that the syndicates of coal minors will use all possible means to frustrate the sale of the Bobov Dol power station. Their protests continued this week, too, according to the familiar scenario: blockades of highways, processions, and shouting in front of the PA, the Council of Ministers' building and the Energy Ministry. Russia's RAO UES offered the highest price - EUR680.85 per share or EUR389,727,391 for 100% of the Varna plant's capital, and EUR24.93 per share or EUR119, 997,239 for the entire capital of the Rousse power station. On closing the deal, however, the buyer will pay the equivalent of only 51% of the two companies' shares. According to PA's press release, that will cost it EUR198,902,838 for the plant in Varna, and EUR61,198,612 for that in Rousse. But part of these amounts (the value of a 10% package of each of the companies) will be paid in compensation instruments. The PA specified that EUR36,627,730 and EUR11, 999,731 of the two plants' prices could be respectively paid by such instruments, without going into detail about how much cash from their sale will enter the Treasury. Rousse's media quoted the press release of RAO UES, according which the company will initially pay to the Bulgarian Government EUR162.3MN for a 51% stake of the Varna station, and EUR49.2 for the same stake of the Rousse plant. On closing the deal the new owner will have to increase the equity capital of the two companies by the equivalent of 16% of their shares, calculated according to the offered price. Thus, the Russians will remit additionally EUR62,356,328 for the Varna power plant and another EUR19,199,540 for that in Rousse, to be used for investments and current operation. The decision of PA's executive management of May 9 is just the beginning of a long row of actions without which the sale cannot be effected. Within 25 days after the notification that RAO UES has been chosen as buyer, the latter should present to the Bulgarian institution documents about the origin of the money by which it will pay. The two deals are to be approved also by PA's Supervisory Board and the Commission for Protection of Competition (CPC) should extend its stance , too. After fulfilling all requirements, the new owner will assume possession of the two thermoelectric power plants. The remaining 33% of the agreed purchase price could be rescheduled for three years, repayable at a 4.8% interest. The buyer will be allowed to sell up to 16% of its stake to only three, explicitly specified international financial institutions: The European Bank for Reconstruction and Development (EBRD), the Black Sea Bank, and the International Financial Corporation (IFC), which is with the structure of the World Bank group. That will ensure the opportunity to attract additional financial resource in the electricity generating capacities, the PA pointed out. No hindrances to effecting the deals on the Rousse and Varna plants can be seen for the time being and they will be probably finalized before the parliamentary elections in end-June, the PA told the BANKER weekly. But no comments about Bobov Dol's future were made. It was just noted that from a purely expert point of view its parameters were not bad at all, i.e. the price offered by the Greeks was considered good, as well as the preliminary specified commitments about the use of local coal and about NEC's obligation to buy the electricity, produced by the power plant. The problem is that the minors' protests rather than the expert evaluation will prove decisive for Bobov Dol's divestment. We'll proceed to closing a deal only if there are guarantees about the Bulgarian coal-mining, PA's head Atanas Bangachev promised to the protesting minors on May 11. In a reply they handed him an open letter, sent to PM Simeon Saxe-Coburg-Gotha and to Energy Minister Miroslav Sevlievsky. It is a protest against the attempts to rescind PA's decision for cancelling Bobov Dol's divestiture, minors' representatives explained. However, PA insiders said no such a decision was ever made. In fact, the minors' demands cannot be satisfied by the PA, but by the State Commission for Energy Regulation and the Energy Minister. He is the one to approve in written a quota for the electricity from local coal, to be obligatorily purchased by NEC. 1.7 billion kWh for the year 2006, produced by Bobov Dol, have been agreed with the Mining Chamber, but Minister Sevlievsky has not signed it yet. After the protesters occupied the Energy Ministry, Mr. Sevlievsky explained he has not signed the order because the syndicate leaders had withdrawn their signatures from the agreement. The minors threatened that if their demands were not satisfied by the beginning of the following week, as of Monday they would block roads and motorways, and some of their colleagues would remain underground. Meanwhile, the Greek newspaper Vima published a vast article titled Greece Pours Down the Drain EUR70MN for a Heap of Scrap in Bobov Dol Power Plant. According to the publication, the station's purchase by PPC is the first serious investment, aiming at strengthening the Greek influence in the Balkans. Reactions against the deal are coming from trade unionists in the company, from shareholders and financiers, directly connected with the purchase of Bobov Dol. Bank experts believe that the lignite coal which PPC will obligatorily use till 2014, has a big sulphur content , which presupposes considerable investments in environmental protection. Moreover, the lignite mine is owned by a private person, for whom there is information that is an intractable person, the newspaper wrote. PPC's President Yoanis Paleocrassas was also quoted, who explained that the mines have two owners - the Bulgarian State with which we'll have no problems, and a private person with whom we have contracts that we'll vindicate. The total value of the electricity produced in Bobov Dol is 25% cheaper than that, imported from Bulgaria, Mr. Paleocrassas added, specifying that the Greek company would not be making investments for maintenance of capacities. They will be operating that way till 2014 and closed afterwards. As owner of the entire site of Bobov Dol and holding a licence for electricity generation, PPC will then have the opportunity to make alternative decisions, such as the construction of new gas capacities or the use of another input.

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