Банкеръ Weekly



Instead of a happy end, the general shareholders' meeting of the Sofia Heating Company only shuffled the layers and created new mess, involving not only the World Bank, the European Bank for Reconstruction and Development, but also the European Union's institutions in Brussels. This time nobody dared to propose a way out of the crisis and there were even no hypotheses this time. The revolution, foretold by the mayor of Sofia, Boyko Borissov, didn't take place, but some important facts surfaced that will need further analysis. The first one is that the GERB party led by Mr. Borissov obviously has no good solicitors at hand who could draw a legitimate plan for the economic, legal and financial measures for Sofia Heating Company and its share capital increase.
Economy Ministry officially said is was in support of the share capital increase, through issuing BGN55 million worth of new shares, but it also explained why the move from the part of the Sofia Municipality would be immediately made illegitimate in the way it was planned. The first problem is that there is no approval from
the respective authority so as to be sure that increase would not be regarded as state aid. According to the Ministry of Economy and Energy, there is no such permission on behalf of the European Commission, which may lead to a fine of BGN110 million to be imposed on the country if the measure is later recognised as state aid.
According to the chief secretary of Sofia Municipality, Rossen Zheliazkov, the consultations with Brussels on the topic have already started and the enquiry will be sent within several days. The response should come in November, before the transferring of the shares is registered in court.
According to the legal experts of the Ministry, the second problem with the proposal of the municipality is that there is no statement from the Supreme Auditing Office that the financing of the move with funds from the Municipal Privatisation Fund is in line with the Privatisation Act with respect to its provisions for post-privatisational control on the expenditure of accumulated funds. As the BANKER weekly has found out, such a document does exist, but its states that purchases of shares may be carried out through the municipal budget, while the draft decision for the share capital increase does not mention particular source of financing.
No notices have been sent to the crediting banks under state-guaranteed loans so that these loans may not be regarded as immediately executable debt, which may cause even more troubles to the company, experts from the ministry said. Sofia Mayor Mr. Borissov said such letters had been sent by the ministry itself. The information the BANKER weekly obtained showed that such letters had been sent in fact.
However, the general shareholders' meeting of the Sofia Heating Company did not fall through because of the problems outlined by the Ministry. The problem with the heating utility of Sofia is not only its poor financial condition, but mainly the question who to privatise it, representatives of the municipal authorities said. According to Boyko Borissov, the Government has already agreed the sale with an undisclosed company and has collected the commission. They expect us to transfer the municipal share to them, so that they may start the privatisational procedure and harvest the political dividend, he pointed out, but refused to name the company.
Minister Petar Dimitrov didn't answer in public to these statements, but insiders said he informed Prime Minister on the situation around the Sofia Heating Company and alleged municipal intentions for its hidden privatisation.
As the BANKER weekly has already written, the idea of the local authorities was to sign a contract with an alternative to Bulgargas supplier of natural gas. With the low collection rate, that comes to 53% of the citizens' due payments, the utility's total obligation to the new supplier will reach at least 100 million Bulgarian by the end of the starting heating season, so that the latter will be in position to start proceedings for taking over the heating company. The move will have an adverse effect on Bulgargas, that will not only cut its sales by one third this way but will become in fact the creditor of the new private owner. According to data the BANKER weekly collected, Sofia Heating Company has signed a contract with Bulgargas for rescheduling of its old debts that come to BGN120 million. The contract envisages repaying of the sum for five years and the penal interest rate is equal to the main rate plus 0.5 percentage points (which is less than the interest paid on interbank transfers).
These reasons led to the decision for hindering the general shareholders' meeting of the company on October 28. The Ministry sent a letter to the Municipality on October 24, elaborating on the three problems before the raising of the share capital. Of course, nobody could expect the four required statements of institutions to be obtained in just four days, so it turns out that the letter of the Ministry was not intended at helping the share capital increase, but at halting it.
Insiders comment that Sofia municipality has already started talks for the sale of Sofia Heating Company with the French Suez, a subsidiary of Gaz de France, and the offshore New Energy, 100% owned by Gasprom. A preliminary invitation for talks has allegedly been sent also to the U.S. Horizon, insiders say. The fourth company in the list is a private entity registered in Hungary that has contracted gas deliveries from Turkmenistan. No name is mentioned but it may well be Rosukrenergo that once supplied gas to Ukraine, but was scrutinized by authorities for connections with organized crime groups.
The favourites of the ministry are not known.

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