Банкеръ Weekly



While all the world speaks about the financial crisis and eventual recession, the mess regarding the Kremikovtzi iron and steel works seems to be not noticed. Once again the state showed self-will towards the enterprise in which it holds a 25% stake. If anyone has expected to know for certain if the plant's air polluting installations would be decommissioned on October 23 (the deadline for the issuance of a complex permission for the company's operation), he would be disappointed. The deadline has been extended once again, at that for an unspecified period fo time. It's a public secret that when Kremikovtzi is concerned its smoke is unbearable and illegal only for drawing political dividends. But when decisions are to be made (and the basket of interests is indeed a complex one) neither regulatory requirements, nor threats of sanctions on the part of the European Commission (EC) may have any influence. Let's recall that still a few months ago the EC opened a punitive procedure against Bulgaria because of the delayed issuance of a complex permission.
The Minister of Environment and Water Dzevdet Chakarov himself said that the procedure for the issuance of that document would not be completed by October 23 when the legally set term elapses, and that the term would be extended by another few months or as long as necessary. The reason he pointed out is that for a long time it was not certain who ran the plant. The truth, however, is that the term for the issuance of that document was postponed several times, at that when the owners were known. On that background his words that pollution of a city of 2 million citizens would not be allowed and that the requirements towards Kremikovtzi would be the same as towards all other iron and steel works holding complex permissions, seem senseless.
Mr. Chakarov explained he was negotiating with the enterprise's trustees in bankruptcy so that they should prepare and implement an ecological programme. It's curious, however, where they would find EUR30MN by the year-end because that is the amount of necessary funds for covering the environmental requirements. They should rather work out a rehabilitation programme and choose a contractor to realize it. And in order to find someone that would agree to rehabilitate the enterprise he should be certainly promised to acquire the plant. According to pundits, that is exactly the idea - to pick up a company to rehabilitate Kremikovtzi under the surveillance of the trustees in bankruptcy and acquire it in a year or two. But till that stage is reached the list of receivables should be approved by court and only then a meeting of creditors should decide if the company would be rehabilitated or its assets sold out. According to pundits, it would take some months to settle the creditors' receivables. The reason is that Kremikovtzi has hundreds of creditors and their receivables exceed BGN2.3BN. However, some of them are contested, for instance the BGN698.95MN claimed by the state because of the financial assistance it has extended to the enterprise years ago. Some of Kremikotzi's bondholders do not agree with the formation of the principal and interest of these receivables. Let's recall that repayment of the state's aid was required just a few weeks ago and that its amount is BGN430MN. The other big creditors to the iron and steel works are the bondholders who claim BGN692.62MN, India's State Trading Corporation - with BGN219MN, and the British metallurgical enterprise Stemcor - with BGN72.24MN. The state monopolies also claim receivables from Kremikovtzi as follows: BGN90.4MN by the National Electricity Company (NEC), BGN35MN by Bulgargas, and BGN5MN by the Bulgarian State Railways (BDZ).
Otherwise, there are plenty of candidates for the enterprise's rehabilitation. For the time being, however, the company owned by the Ukrainian businessman Konstantin Zhevago - Vorskla Steel - is a step ahead of the others as it presently has a contract for production with materials supplied by it and has also offered an ecological programme. Some 6,200 people currently work at Kremikovtzi and in September its output of steel amounted to 58,000 tons.

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