Банкеръ Weekly

Briefs

PRIVATISATION OF BOBOV DOL TPP IS ABOUT TO BE EFFECTED

The Greek company PPC will be probably the new owner of the Bobov Dol thermoelectric power plant (TPP). At least, it seems so after the consecutive meeting of the Supreme Administration Court (SAC) on February 14. The magistrates tackled that case after on May 5, 2005 the procedure for TPP's sale was stopped by the Privatisation Agency (PA) although the Greeks offered to pay for it almost EUR71MN. PA's decision, however, was kept in secret for almost two months and only in end-June 2005 the PA announced the procedure had been stopped due to unsatisfactory offers in view of the tender purposes. Logically, the Greeks litigated the administrative act and that was the consecutive dead-end in Bulgarian privatisation.
At the meeting last week PA's lawyers declared PPC's claim absolutely reasonable. This metamorphosis can be easily explained considering the replacements in PA's management after the deal was cancelled.
When a state body establishes it has made an inexpedient decision, it is proper and possible for it to correct its actions, PA's incumbent head Todor Nikolov told the BANKER weekly. According to him, if the court extends a ruling in favour of the Greeks the procedure will be returned to the phase where it was stopped. That means that negotiations with PPC should begin and a final agreement is to be signed if there are no any unbridgeable contradictions.
The implementation of that option seems entirely realistic. As the PA has retracted its own decision, SAC's three-member panel, headed by Boyan Magdalinchev, would hardly extend a ruling in its favour. The other traditional course of development for similar lawsuits - litigation in front of a five-member team of judges is rather in the sphere of fantasies. Thus, the ruling of the Supreme Cassation Prosecutor's Office of July 7, 2005 remains the last obstacle. It was addressed to the chairpersons of PA's Supervisory Board and Executive Board and ordered then not to carry out whatsoever actions regarding the cancelled procedure for the privatisation of Bobov Dol TPP, with the purpose of its renewal and finalization. Copies of that order were sent to the Bulgarian Mining Chamber and the syndicates - the Confederation of Independent Trade Unions in Bulgaria and the Podkrepa Labour Confederation, which had signalled the Prosecutor's Office. Their motives were that the procedure was prepared and conducted to the disadvantage of national interests. Moreover, no requirements for purchase of Bulgarian coal and investing in the construction of installations for environmental protection from harmful emissions were set to the participants in the tender.
PA insiders believe that the order of the state prosecutors is unlawful and they are ready to litigate it in court. We are holding talks with the Supreme Cassation Prosecutor's Office, but we have not received a clear answer from them so far, Todor Nikolov said. Another obstacle, of course, might be new miners' protests behind which, according to pundits, is the businessman from Samokov Hristo Kovachki who owns most of the mines in the region and who supplies coal to the Bobov Dol TPP.
However, one thing is clear - the power plant needs urgent rehabilitation and modernisation in order to continue to be a part of Bulgaria's energy system after the country joins the EU. It would be difficult to find budget money for the repairs, and it is doubtful that anyone would offer more than EUR71MN during a new privatisation procedure.

Losses
Bobov Dol mines ended 2005 with an accounting loss of BGN9.2MN, the Ministry of Economy and Energy announced. The company's financial and economic situation is pretty grave, with total liabilities of BGN39.7MN-plus. According to the mines' Executive Director Plamen Stefanov, they cannot extract sufficient quantities of coal due to the outdated and outworn equipment and the lack of sufficient funds for maintenance. Moreover, no investments for preparation of new mining fields have been made in recent years.
Currently, experts of the Ministry of Economy and Energy are drafting a rehabilitation programme jointly with the management of the Bobov Dol mines. The first step, projected in it, is a 15% increase of the price mined coal 15. The other measures are to improve the production capacity of inefficient mines, liquidation of inefficient capacities and optimize the structure and number of of administrative and management personnel.

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