Банкеръ Weekly

Briefs

THE ENGAGEMENT IS OVER, BUT THERE MAY BE NO WEDDING

The Polish company Intersell S.A. is waiting to hear the stance of the Agriculture Ministry about wood industry before saying yes to the deal on the assets of the former paper mill Tselhart.The owners of the financially stable enterprise with good market positions should not doubt they'd sell it advantageously. The more so when they have a candidate buyer. But things developed differently with the paper mill Stambolijski AD, which was set up in the beginning of 2002 with Tselhart's assets. During the week the European Bank for Reconstruction and Develoment (EBRD) and the International Financial Corporation (IFC), each of them holding 50% of the company, were expected to announce officially that they had sold their majority shares to the Polish company (with Swiss capital) Intersell S.A. But instead of drinking champaign, the representatives of the two financial institutions kept silence and recommended journalists to ask EBRD's London-based headquarters about the deal. The pulp and paper mill's Executive Director Viktor Zarev was laconic: I cannot comment. The company's sale is in the hands of its shareholders. The only thing he specified in front of the BANKER weekly was that he's maintain his post. There are several possible explanations about the failed deal, but the most plausible one is that the Polish became hesitant due to the constant lack of inputs, which affects not only the enterprise in Stambolijski. Or they may have decided to wait for the move of the Ministry of Agriculture and Forestry, which has promised to prepare by March 2003 a national strategy for the sector's development.Although the pulp and paper mill posted a BGN8.8MN loss for the first nine months of this year, there is BGN10MN on its accounts as of November 20, 2002. The reasons for the negative financial result according to the managers are several: the enterprise operated with expensive fuel oil in the first quarter of the year. In the same period liabilities to Tselhart's former workers (reappointed into the pulp and paper mill Stambolijski) exceeding BGN2MN were paid off. Moreover, 22,000 tons of wood-pulp (940 waggons) were necessary for full loading of the production capacities, but only 10,000 tons were supplied. The Executive Director Zarev did not conceal that the enterprsie loses EUR450,000 each month, and would therefore have to import wood-pulp from the Ukraine which is twice more expensive. The problem in fact does not concern only the pulp and paper mill Stambolijski, but the entire sector. For that reason, eight of the biggest consumers of wood-pulp (among them Kronoshpan Bulgaria, Sviloza, and Lesoplast, in addition to Stabloijski AD), with an annual capacity of 1,370,000 cu m (the annual output is 4,500,000 cu m), have sent a letter to the Minister of Agriculture and Forestry Mehmed Dikme, his deputy Meglena Plugchieva, and the head of the National Forestry Adminsitration Iliya Simeonov, insisting for urgent measure to satisfy their needs of wood-pulp, ordered for 2003. One of the proposals is that the tender procedures for supply of inputs, organized by big wood-processing enterprises, should be completed by end-March, 2003. The eight companies demand to suspend exports and allow them only in case there is proved surplus over domestic consumption. The letter points out as well that the exports to the state-subsidized Greek companies places Bulgarian wood-processors in an inequal footing on the wood-pulp market. And while the companies in northern Greece have sufficient inputs, those in Bulgaria meet the winter with empty warehouses. According to the National Forestry Administration, the present deficit is a result of the reform, carried out in the 1998-2000 period. Then the forestry farms were transformed into state-run forestry boards with 100% state participation, which were later on privatized. The situation in Bulgarian forests is presently as follows: there is sufficient wood, but there is noone to do the felling. The forestry boards cannot do that as they don't have the necessary equipment, while the private companies prefer to immediately cash their investments and profit from commercial activities and not from lumbering. Great hopes for a way out of the stalemate situation are currently set on the establishment in the year 2004 of a National Forestry Company, which will have the statute of a state-owned trade enterprise (in compliance with art. 62, para 3 of the Commercial Code). The drafters of the bill believe that sufficient financial resource for the implementation of adequate projects would be accumulated. The setting up of the National Forestry Company has been projected as well in the amendments to the Forestry Act, to be discussed by the MPs. Whether this will be a step forward or a return to the reformes that started three years ago is yet to be commented.

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