Банкеръ Weekly



The Bulgarian company Agropolychim in consortium with EP Commerce may become the new owner of the chemical plant SC Turnu S.A. in Turnu Magurele, Romania. The consortium is bidding in a tender, invited by the Romanian Privatisation Agency (PA), for the sale of the local producer of carbamide and sulphuric acid. The other candidate is a consortium between the Serbian Universal Holding and a Romanian commercial company. July 31, 2003 was the deadline for submission of final offers. Philippe Rombaut, Executive Director of the Devnya-based Agropolychim, announced for the BANKER weekly that the real negotiations for the plant's sale would be launched in September and most probably the winner of the tender would be revealed in October. The Romanian PA has placed three main requirements to the candidate-buyers: to be able to produce 40,000 tons of fertilizers annually, to have three years of experience in the field of fertilizers' production, and to have annual turnover of USD40MN.The enterprise, offered for sale by the Romanian PA, has not been operating at full capacity for years. It manufactures mainly carbamide and ammonium nitrate. The plant also has a production line for sulphuric acid, but it has not been operating for more than five years. Mr. Rombaut commented that there was no use in putting the line in production again. The Romanian plant is in the same condition as Agropolychim was when its was offered for sale. We've already proved our ability to recover such enterprises, Mr. Rombaut added.In case the Devnya-based company wins this tender, it will entirely close its production cycle. Carbamide is an input for the production of liquid nitrate fertilizer. Its production in Romania is cheaper as the gas price in our northern neighbour country is some 30% lower than in Bulgaria.Last year's plans for transfering part of the installations for the production of carbamide from the Vratsa-based Chimco to Agropolychim will obviously fail. Nikolay Vuzev, Executive Director of Chimco, pointed out that all negotiations on the subject had already been terminated.Hard pressed by the increased price of natural gas which it uses as an input, Agropolychim has been recently trying various ways to reduce the prime cost of its production. According to Philippe Rombaut, it is cheaper for the Devnya-based plant to import ammonia than buy fuel through the mediation of Bulgargas. Therefore, Agropolychim has invested USD10MN in the construction of a terminal for import of ammonia at the port of Varna. The port itself and the Varna Municipality participate in its construction. However, the project has been frozen at present and it is not known when construction will be resumed. Agropolychim reported a profit of BGN4.6MN for 2002, 21 times up from 2001. The enterprise's management explained that the better financial performance was to a large extent due to the new production line for phosphate, the bulk of which output is exported, mainly to Serbia and Turkey. The prime cost of phosphate fertilizers is less dependent on the price of gas. The Devnya-based company is owned by Acid and Fertilizers, registered in Wyoming, USA. The consortium between Umicore Med (with 1% stake) and Davenport Industries (with 99%) holds almost 98% of Agropolychim's capital. Acid and Fertilizers purchased 63% of Agropolychim in 1999 against the token price of BGN1, but undertaking to invest USD15MN in the enterprise by the end of 2004. Since then the majority shareholder has invested USD13.3MN.Opportunities:Presently, the price of carbamide on international markets is USD140/ton and it is expected to increase during the peak season (in about two or three months). Natural gas currently costs about BGN220/1,000 cu. m before VAT. According to Nikolay Vouzev, Executive Director of the Vratsa-based Chimco, the plant's output might become profitable at such prices and it might resume operation in the autumn. Last autumn the price of gas was around BGN238/1,000 cu. m, and carbamide was selling at some USD92/ton.

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