Банкеръ Weekly



The process of privatisation in the Bulgarian energy sector increasingly resembles the title of Lenin's work One step forward, two steps backwards. Just a couple of days after the government described the sale of the country's electricity distribution facilities as a record in the Bulgarian privatisation, another big deal threatens to go in the courtroom. The case in point is the choice of a bank adviser on the sale of three Bulgarian thermoelectric stations - Bobov Dol, Varna and Rousse, which total price in experts view is over EUR400MN. At the end of last week the Privatisation Agency (PA) announced Credit Suisse First Boston - London a winner. The other offers placed belonged to ABN AMRO Bank - Amsterdam, Lazard Freres Banque - Paris, Citigroup Global Markets Limited - London and Dresdner Kleinwort Wasserstein Limited - London. At a press conference on July 19 the Balkan Consulting Company (a partner of Dresdner Kleinwort Wasserstein Limited) and Forem Consulting jointly with First Financial Brokerage House (which represent the ABN AMRO Bank's interests) accused the PA in bias in determining the winner.We suspect the choice of adviser is absolutely subjective and does not protect Bulgarian interests, said Vladimir Karolev from Balkan Consulting Company. He maintained that offers were not placed in sealed envelopes (needed according to the regulation) and after their opening the Privatisation Agency urged for changes in financial terms. Lazard Freres Banque has asked for the lowest commission of 0.9%, followed by ABN AMRO Bank with 1.2%, Dresdner Kleinwort Wasserstein Limited - 1.39% and Citigroup - 1.5 per cent. According to unofficial information of Forem Consulting and Balkan Consulting Company, the winner has at first demanded a commission of 2.25%, which was lately changed to 2.15 per cent. Moreover Credit Suisse First Boston has required the highest fixed reward of EUR999,999. ABN AMRO Bank pretended for EUR450,000, while Dresdner Kleinwort Wasserstein Limited - for EUR675,000. Karolev argued that in this case the state would lose between EUR3MN and EUR5MN from the higher amount that it would pay to the adviser. We wish the exact results of all admitted participants in the competition to be announced, including the fixed rewards for the documents preparation and the commissions paid in case of successful close of the deal, asked for from the banks, said the Forem Consulting representative Mario al-Jebury.The competition was opened on May 17 with the main requirement for participants to be amongst the top 15 banks in the international financial agency Thomson Financial Services rating. They should also prove that during the last five years they have been leading advisers in at least two privatisation deals (sale, merger or acquisition) in the energy branch. I doubt that the condition for participating in energy privatisation has been taken into account, as for the last ten years Dresdner Kleinwort Wasserstein Limited has been adviser in such deals for a total amount of about USD30BN and it surpassed all other participants in the competition in this term. In the final position, however, the bank is placed last but one, pointed out Karolev for the BANKER weekly.Credit Suisse First Boston is a familiar name in the Bulgarian energy sector. It is one of the six banks which landed the needed EUR219MN for the hydroelectric facility Zankov Kamak. The loan was pledged by a mortgage and the equipment and materials for the construction of the dam and the new station. Dresdner Kleinwort Wasserstein Limited has sent a letter to the PA executive officer Atanas Bangachev, in which the bank urged an independent team of five experts to be set and a new positioning of the applied offers to be made by it. This body is proposed to include the Minister of Economy Lidiya Shouleva, the Minister of Finance Milen Velchev, the Minister of Energy Milko Kovachev, Bill Drysdale - adviser on economy and financial affairs of the PM Simeon Saxe-Coburg-Gotha and a lower with a suitable experience. A similar letter, but to the Prime Minister has sent also ABN AMRO.I cannot understand the aim of such independent assessment of the procedure asked and what kind of results are expected from it. The PA is the institution which organizes the competition and I think that the choice of adviser was objective, pointed out Atanas Bangachev. He also added that the agency had not a practice to distribute any information on the offers without the approval of the respective candidate as it was strictly confidential. It is most likely, however, the choice of adviser to be attacked in the court. And while Dresdner Kleinwort Wasserstein Limited is still discussing whether to use that possibility the Balkan Consulting Company would address the magistrates, said Karolev. The most affected from a potential trial will be the three thermoelectric stations, which need urgent modernisation and rehabilitation in order to meet the ecological requirements of the European Union.

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