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Country Commercial Guides
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CHAPTER II. ECONOMIC TRENDS AND OUTLOOK
A. Major Trends and Outlook
1. A Stable Economy
The Government of Prime Minister Kostov has made a clean break with the failed policies of the early and mid-1990s. In this, the Bulgarian Government received the backing of international financial institutions, and committed itself to sound financial and structural policies as the only way out of crisis.
Since July 1997 the Bulgarian government has been operating under a currency board as required by the International Monetary Fund's $510 million standby arrangement of March 1997. From July 1, 1997 to December 31, 1998 the Bulgarian lev (BGL) was tied to the German deutschmark (DM) at a rate of BGL 1000 to one deutschmark. Since January 1, 1999, the lev is tied to the euro at an exchange rate of 1,955.83 levs to one euro. Since July 5, 1999, BGL 1,000 was redenominated by the issuance of new currency and coins to be one lev (BGN). Thus BGN 1.00 equals DM 1.00.
The Currency Board rules provide that the Bulgarian National Bank (BNB) must hold sufficient foreign currency reserves to cover all the levs in circulation including the lev reserves of the banking system; the BNB can only refinance commercial banks in the event of systemic risk to the banking system; and the government is limited in taking on new financial liabilities or providing sovereign guarantees.
Under other IMF conditions for strict financial discipline, the Bulgarian government is pledged to close loss-making enterprises and to speed privatization, bank reform, and restructuring. The government established an isolation list of 70 state enterprises, accounting for half of the public sector losses, that do not have access to commercial credit unless they are privatized. The government succeeded in privatizing or beginning liquidation of all but one of the isolation list's commercial companies (Group B) by June 30, 1999.
The results have been very impressive. Inflation was reined in relatively quickly. Official reserves rebounded from $400 million in January 1997 to $2,964 million at the end of 1998. Moody's Investors Service upgraded Bulgaria's credit rating to B2. Foreign investment, including participation by American investors, has also revived as macroeconomic stabilization and a friendlier business climate have taken hold. The closure of 18 troubled banks has also helped to increase confidence in the banking system. Following declines in GDP in both 1996 and 1997, GDP increased from $10,200 million in 1997 to $12,257 million in 1998. In fact, some experts believe that official statistics underreport economic activity, and the active unofficial market could represent an additional 20 to 40 percent of the official GDP. This means that there is more money flowing through the economy and higher actual disposable consumer income than is officially accounted for.
The private sector contributed between 25-30 percent of GDP in 1995, 35-40 percent in 1996, approximately 65 percent in 1997 and 1998, 62 percent in 1999; it should increase further with continuing privatization. Since the currency board constrains borrowing, the government needs to keep wage growth modest and focus on improving productivity to generate revenues.
Unemployment was estimated to have been 12 percent in 1998, but will drop to 10.7% in 1999. However, substantial layoffs lie ahead at the large industrial enterprises that are targets for privatization or closure. The Kostov government recognizes the importance of small and medium enterprises, which were virtually ignored by the previous Socialist government, for their ability to create jobs. The average wage of approximately $120 per month is one of the attractions for foreign investors interested in production in Bulgaria.
2. Near-term Outlook
Although the Asian and Russian economic crises and the Kosovo conflict have hurt Bulgarian exports and hence economic growth prospects in 1999, the IMF and the Government of Bulgaria envision a scenario of strong growth of 4 to 5 percent annually and single-digit inflation over the next several years. The Currency Board will help provide fiscal discipline, while balance of payments support from international donors will help Bulgaria fund transitional costs of economic reform and public investment. The GOB desires infrastructure investments of $9,000 million in energy, transport, the environment, and agriculture to be the engine of growth over the next several years. Perhaps optimistically, the government plans to put up only $1,300 million and is counting on the private sector to provide the lion's share of new infrastructure investments.
The main threats to the Bulgarian economy's medium-term prospects are the effects of the Kosovo conflict and the threats of wider regional instability and turmoil in global financial markets affecting investments in emerging markets. This may adversely affect revenues to the government from privatizing large enterprises. Due to Bulgaria's geography, the Kosovo situation has interrupted Bulgaria's main highway and Danube River trade routes with Western Europe through Serbia in Yugoslavia, which have increased transport costs and may reduce future economic growth and market potential over the short term. However, the governments of the United States, European Union countries and Southeast European countries have committed to a Stability Pact aimed at developing prosperity and stability throughout the Southeast Europe region. Washington is currently developing a major comprehensive plan for economic development in the region to be implemented in the aftermath of the Kosovo crisis. This should lead to new and expanded trade and investment opportunities in Bulgaria over the long term.
A second potential impediment to Bulgaria's economic transformation is the slow and less than fully transparent privatization process itself. The GOB has relied heavily on controversial management-employee buyouts for smaller enterprises, and on use of foreign consultants to privatize pools of medium and large companies. The privatization framework has also included complex criteria for selecting buyers that has generated concerns about transparency and corruption. As a result, ownership transfer has been delayed and, in some cases, has provoked litigation.
However, the government completed a number of large privatization deals in mid-1999, meeting its commitment to sell or commence liquidation of a group of loss-making enterprises by June 30, 1999. These deals for a sale of the Kremikovtsi Steelworks, Balkan Bulgarian Airlines and the DZU compact disk factory.
As a relatively small market in the Balkans, Bulgaria will have to make extra efforts to attract investors--by improving transparency, for example--as well as by more fully marketing its many advantages, including a highly skilled, low cost labor force and proximity to both European and Near Eastern markets.
B. Principal Growth Sectors
The service sector of the economy, which generates approximately 40 percent of Bulgaria's gross domestic product (GDP), continues to experience the highest growth. Most private sector activity involves some form of trade or retail. A small percentage of new companies are involved in manufacturing. Private sector growth is greatest in construction; the food sector (meat, dairy, bread); maintenance and repair of electronic tools/equipment, household appliances and automobiles; financial services such as insurance and lending; some health care services and tourism.
Much of Bulgaria's earlier economic strength was in heavy industry, powered, until the mid-1990's, by subsidized energy from the former Soviet Union. State-owned chemical, petrochemical and metallurgical plants are now targets for privatization and under study to determine whether they can compete cost-effectively in a wider international market. Over the next few years there may well be more growth in light industry, led by electronics, textiles and food processing.
Bulgaria was formerly renowned for agricultural output, but the sector now accounts for just 12 percent of GDP and employs a fifth of the population. Restitution of land to private owners has been complicated. Many private holdings are small and can only be serviced with decent equipment or irrigated adequately if the owners band together in some form of cooperative. Such efforts are slowly underway. A shortage of fodder has led to distress slaughtering, raising questions about the adequacy of herds to feed the domestic population. The good news is that price liberalization should encourage more output, especially as discretionary income gradually rises.
Agriculture has the potential to make Bulgaria basically self-sufficient in grains (wheat, corn and barley) but will require animal protein feed such as soybean meal for the foreseeable future. When the livestock sector recovers, genetic material and animal feed ration components, perhaps including corn, will also need to be imported. Prospects are excellent for further increases in hard currency earnings for wine and cheese.
C. Government Role in the Economy
The state's presence remains sizeable in Bulgaria's economy. As of June 1999 about 40 percent of state enterprises have been privatized, and the public sector occupies 36 percent of GDP. In 1997 690 enterprises or parts of enterprises were privatized for a total revenue of $1,499 million, while in 1998, 1,114 enterprises or parts of enterprises were privatized for a total revenue of $1,029 million.
Priority sectors for privatization are: tourism, food processing, agriculture, heavy industry and engineering, textiles, and construction/building materials.
The government's aim is to privatize all state-owned firms except for the public utilities and a small number of strategic enterprises. These include Bulgarian State Railways, Bulgargas, Bulgarian Posts, Education & Sciences, El Bi Bulgarikum (producer of yogurt bacteria), National Cadastral Company, National Geodesy Company, Geopribor (geological equipment), Cartography Company, Geozashtita (geological protection), and Vodokanalenzhenir (water pipe engineering). Legislation mandates that the state retain at least a 51 percent interest in certain enumerated companies: the Ruse and Varna merchant and passenger marine fleets; major airports; the ports of Burgas, Lom, Varna and Russe; Varna's aquatic ecological company; Transtroy road/rail/port construction company; and highway construction companies.
The GOB's privatization program is being implemented in three ways: capital market offerings, mass privatization, and cash privatization. The offerings on the capital market are small. In the mass privatization program on the Czech model, all Bulgarian citizens and company employees are eligible to receive free vouchers for company shares or shares in privatization funds. The Council of Ministers approved a list of 1,050 companies slated for mass privatization in industry, agriculture/food-processing, transport, construction, tourism, trade, energy and culture. The second wave of the mass privatization program began in January 1999. The government offered 31 companies worth BGL 200 million (approximately $120,000).
Third, and most significant for potential foreign investors, is the cash privatization program, in which investors, including foreign investors, may negotiate to buy smaller state enterprises from government ministries and larger ones from the Privatization Agency, and municipally owned enterprises from the respective municipality. The Privatization Agency has in many cases hired foreign consulting firms to analyze the value of and to market important state enterprises. While the GOB's cash privatization program offers some excellent opportunities, the process has been criticized as slow, cumbersome, and challenging for foreign as well as Bulgarian investors.
Some potential investors have expressed their frustration at a lack of transparency in the process, while others are unhappy with inflexible procedural decisions that lack a commercial justification.
To stimulate investor interest, the Privatization Agency has encouraged the use of Brady bonds (debt-for-equity swaps) in the privatization process. These have been used in the purchase of a major hotel and two beer breweries. Only Discount Bonds (DSCs) and Front Loaded Interest Reduction Bonds (FLIRBs) may be used in the privatization of state, as opposed to municipal, assets. Bulgarian bad debt bonds (ZUNKs) also may be used as a payment instrument in the privatization process. ZUNKs can be purchased on the local market at a 30-35 percent discount and are an acceptable form of payment for privatization deals at a 40 percent premium on face value.
D. Balance of Payments Situation
Bulgaria's balance of payments situation is currently stable. According to World Bank statistics, Bulgaria's current account deficit was -$252 million and the trade balance was -$316 million in 1998. External debt was $10,071.7 million as of December 1998. Foreign reserves were $2,964 million in December 1998. Fiscal discipline and limited growth of real wages should limit future current account deficits. However, the balance of payments statistics may reflect some impact of the Kosovo conflict on Bulgarian exports and new foreign investment. The United States has pledged $25 million to Bulgaria for balance of payments support. Bulgaria's currency board arrangement, supported by its three-year agreement with the IMF and sound macro-economic policies, provide for a stable balance of payments for the foreseeable future. In the opinion of one major American brokerage firm, Bulgaria's external debt is high but not out of proportion to that of other emerging markets.
E. Infrastructure
1. Telecommunications
Bulgaria has the highest penetration of telephone service in Eastern Europe, with 38.47 telephones per 100 persons. Bulgaria's telecommunications network is owned by the Bulgarian Telecommunications Company (BTC), which in turn is regulated by the Committee on Posts & Telecommunications. Over 95 percent of Bulgaria's telephone subscribers can make automatic domestic long-distance calls. As of 1998 BTC had a total of 3,186,631 phone lines -- 2,337,038 residential lines serving 2,327,000 residential subscribers, and 849,493 business lines serving 230,000 business subscribers, of which total 230,000 subscribers have digital lines. Domestic and international traffic accounted for 49 and 31 percent respectively of BTC's total traffic in 1998. In 1998 BTC completed the four-year Digital Overlay Network (DON) Project, connecting Bulgaria's major cities with 17 digital exchanges, 2 satellite ground stations, 2,000 km of fiber-optic lines and a 2,000 km digital microwave network. The World Bank, the European Bank for Reconstruction and Development (EBRD), and the European Investment Bank (EIB) provided financing for the $300 million project.
BTC's next project will focus on residential development, which is expected to reach EU standards by 2008. The U.S. Trade and Development Agency has granted funds to BTC for a feasibility study for improvements in rural telephony through the use of wireless local loop technology. BTC's other priorities for 1999 include implementation of an access network (n x 64 kbit/s) for business services, including Internet; participation in building a new submarine fiber-optic cable system in the Black Sea (BSFOCS project); building of a fiber-optic long haul line from Sofia to the Greek border using SDH technology and an STM-16 system; and building new digital local exchanges in Sofia, Plovdiv and Burgas. Realization of these projects will result in increasing digital network capacity to 380,000 subscriber and 160,000 junction lines. Also in 1999 BTC will connect with AT&T and MCI Worldcom's networks through completion of the COLUMBUS II and COLUMBUS III submarine cable systems.
Central Sofia, the location of most U.S. firms, already has largely moved to seven-digit digitally-switched lines offering direct-dial access to the United States. Bulgaria has a large number of very small, unregulated Internet service providers. Current access speeds generally offer a reliable connection at 33,600 bps. Line quality and Internet access speeds elsewhere in the country are of lower reliability.
Bulgaria has an analog cellular telephone network (450MHz) operated by Radio Telecommunications (Mobifon), a joint venture between Cable & Wireless (49 percent), Bulgarian Telecommunication Company(BTC) (39 percent) and Radio Electronic Systems (12 percent). Bulgaria has one digital cellular telephone network operated by the Bulgarian company Mobiltel which uses the Pan-European digital GSM standard (900 MHZ). Radio TELECOM/Mobifon operates one of two national paging systems. The second system is operated by Link Communication Systems of the United States using Motorola technology.
The $502 million privatization of 51 percent of BTC under the cash privatization program has been the largest privatization in Bulgaria. In July 1999, the only bidder, a consortium of two telecommunications firms, Hellenic Telecommunications Organization (OTE) of Greece, and the Dutch telephone company KPN, agreed to purchase and operate BTC and also obtained Bulgaria's second GSM license. In addition, the consortium paid $8 million for BTC's 39 percent share of Mobikom. The consortium will invest $200 million in BTC's telecommunications infrastructure over the next three years. BTC has a monopoly on voice telephony as well as on ISDN telecommunications services in the country until the end of 2002.
There are two providers of mobile communication services: Mobikom (a joint venture between BTC and Cable & Wireless) for analog services and Mobiltel (a privately owned company) for GSM digital services. The second GSM operator is expected to introduce highly needed competition on the mobile market, which through increase of quality and decrease of prices will increase subscribers and will make the service more accessible to end-users.
Packet-switching network services and the value-added services (e-mail and fax by e-mail) are provided in Bulgaria mainly by Global One, a joint venture between Sprint, Deutsche Telecom and France Telecom. Private networks are also widely used by private companies in the country. Global One uses X.25 networks for data transmission, as well as frame relay. An X.25 network is also used by Bulgarian banks and local companies, while frame relay is mainly used by the big multinational companies like Glaxo-Welcome, Coca-Cola, and DHL.
To facilitate the BTC privatization, and to improve the regulatory environment for telecommunications, the Committee on Posts and Telecommunications (the supervisory agency of the GOB over BTC) drafted a new Telecommunications Law to replace the old Communist-era 1975 law. The new law went into effect on January 1, 1999.
2. Road Transport
The Ministry of Transport oversees the transport sector as a whole. The road network is administered by the General Road Administration (GRA) which falls under the Ministry of Regional Development and Public Works portfolio. There are 37,000 kilometers (km) of roads in Bulgaria, although only 250 km is four-lane highway--and most of that is the 160 km between Sofia and Plovdiv. Regionally, only Romania has a lower road density than Bulgaria.
Roads in Bulgaria are not to U.S. standards. Streets in Sofia are frequently old cobblestone, and potholes are common on main streets and side streets. There is frequent unmarked road work on inter-city roads. The U.S. Embassy in Sofia recommends against driving Bulgaria's roads at night.
Just one bridge, at Ruse, spans the Danube between Bulgaria and Romania. The Kosovo situation and other political troubles involving Serbia have made the shorter route to western Europe across the Bulgaria-Serbia border problematic, resulting in greater traffic between Bulgaria and Hungary via Romania, requiring a ferry crossing at Vidin. Bulgaria recognizes the need for a second bridge, preferably a road/rail bridge at Vidin estimated to require $120 million to build, but mixed signals from Romania as to the need for a second bridge and Romanian preferences for a bridge farther east have held up the project. Current traffic volumes and inability to finance the building of two bridges rule out that option as well.
Bulgaria currently has two border crossings with Turkey. Given steadily improving relations between the two countries, the government of Bulgaria has requested the reopening of a third crossing which is likely to be favorably considered by Turkey. Three new border crossings will also be opened with Greece west of the current crossing at Kulata. Bulgaria, Greece and Turkey are actively working to improve the border crossing conditions and to alleviate bottlenecks through the Southeast Europe Cooperation Initiative (SECI). The GOB has applied for a World Bank loan to improve the infrastructure for border crossings.
Bulgaria has many highway projects underway, including portions of the Trans-European Motorway (TEM). These include routes connecting Budapest with Athens via Vidin and Sofia and with Istanbul via eastern Bulgaria. The EBRD, EIB, the European Union's PHARE Program, and the GOB budget are the main sources for financing improvements in Bulgaria's road network. Completion, modernization and overhaul of different portions of the Trakia, Cherno More and Hemus motorways will be given out on concessions. The Plovdiv-Burgas highway section is expected to cost $500 million, while the Burgas-Varna section is expected to cost $300 million. There are also plans for a north-south road tunnel under Shipka Mountain estimated at $120 million.
The U.S. Trade and Development Agency (TDA) has provided a number of grants to Bulgaria, as well as to the Former Yugoslav Republic of Macedonia (FYROM) and Albania, for feasibility studies and for basic maintenance equipment to improve the regional road infrastructure, mostly under the South Balkan Development Initiative (SBDI). SBDI is a $30 million, multi-year program launched by President Clinton in February 1995 and managed by TDA. It gives U.S. companies an excellent opportunity to participate in the planning of transportation infrastructure development in Bulgaria. One major ongoing TDA grant is for a feasibility study for a Sofia Southern Bypass road to enable traffic from eastern Bulgaria and Istanbul bound for Thessaloniki and southern Greece as well as to FYR Macedonia to bypass Sofia.
3. Railways
The Bulgarian Railway Company (BDZ) oversees Bulgaria's railway system. The infrastructure consists of 4,300 km of track. An estimated 61 percent is electrified (25 Kv, 50 Hz).
Failure to perform routine maintenance combined with the inability to purchase new equipment has resulted in a rapid and noticeable deterioration of the installed infrastructure. For example, an estimated 10,000 switches are worn. Nearly 85 percent of BDZ's maintenance equipment is obsolete. BDZ also requires new signaling equipment, aerial wires, communications system and radio equipment.
The government has a railway restructuring project which will focus on the repair of 414 km of main tracks, construction of an automated locomotive system, the procurement of new railcars and repair of existing stock, and the improvement of information and technical services. Bulgaria has received funds from the World Bank, the EBRD, and EU-PHARE totaling $158 million, with the government contributing an additional $133 million.
Bulgaria also plans to complete a two-kilometer link with the FYR Macedonia and to upgrade/electrify 80 kilometers of track between Sofia and the Macedonian border. This linkage is integral to the formation of the European East-West Balkan Transport Corridor No. 8, which is endorsed by the governments of Bulgaria, FYROM and Albania, as well as by European Transport Ministries. Bechtel prepared a comprehensive feasibility study of this corridor's economic competitiveness in the region for TDA under SBDI. The Sofia-Skopje rail link is expected to require $180 million.
The Bulgarian State Railway Company (BDZ) plans electrification of 200 kilometers of existing rail track on the road to Turkey between Plovdiv and Svilengrad. Along with electrification, the track needs communications lines and rail safety equipment.
4. Ports
Bulgaria has two major ports on the Black Sea, Varna and Burgas. Both are the East-West transport corridor gateways of Bulgaria. Port facilities are generally adequate for bulk commodities, but lack facilities for special handling. Rehabilitation of both ports is planned.
Bulgaria has plans for a $300 million expansion of Burgas Harbor, to include new ro-ro, ferry, and container terminals, and new facilities for general and bulk cargo. The Japan Fund for Reconstruction and Development provided a $120 million 30 year 2.58 percent interest loan with a ten-year grace period to the Bulgarian Ministry of Transport for construction of a new container terminal at Burgas. They also initiated a project to improve the breakwater facility in the port of Burgas. The Trade and Development Agency has also provided $300,000 for intermodal cargo terminal feasibility study for the port of Burgas.
The EBRD has provided technical assistance to Varna for its master plan preparation and assistance concerning its container and grain handling facilities. Ruse, a Danube port, is also commissioning a feasibility study on development of its port facilities.
Intermodal transportation is a new approach for Bulgaria. It provides freight forwarding and route alternatives. With joint efforts, Sea Land Services, Inc.(USA), TDA and the Bulgarian Ministry of Transport recently completed two feasibility studies to establish a rail-truck intermodal terminal to handle ocean containers in Sofia and Burgas.
5. Air Transport
There are three international and seven domestic airports in Bulgaria. Sofia Airport is the largest in the country and handles most international traffic. All are owned by the central government but are required to operate independently on commercial principles.
a. Sofia Airport
Sofia Airport, with a terminal and other infrastructure dating from 1940, is in need of massive modernization. Plans call for a completely new passenger terminal, longer runway, and expanded taxiways. This $200 million project is starting to come into focus as financing has become available and a detailed master plan has been prepared as part of the Sofia Regional Development Plan.
Current reconstruction plans are for the new terminal to have a capacity of 2.5 million passengers/year (2,500 passengers/hour at peak hours), have a floor area of 26,000 square meters, new aprons covering 38,000 square meters, and road access and parking lots covering 18,000 square meters.
The current single 2,800-meter runway will be extended 540 meters to the east to a total length of 3,340 meters and completely resurfaced with specifications of 45 x 3600 cm and PCN 90, together with additional taxiways covering 20,000 square meters.
In March 1998 the Government of Bulgaria approved a financial agreement with the European Investment Bank (EIB) for a loan of 123 million ECU for development planning of the expansion of Sofia airport, design and construction of a new passenger terminal building and extension of the existing runway. Technical assistance to be provided by the financial agreement includes completion of the airport master plan, planning and supervision of the project implementation, and operation and financial management of the airport. In August 1998, the Government of Bulgaria approved a $40 million loan from the Kuwait Development Fund for additional financing for extension of the runway, construction of a new parallel runway and additional taxiways.
b. Sofia Airport Cargo Terminal Construction
In September 1998 a consortium led by the large Bulgarian construction company Glavbolgarstroy and Siemens that won a tender under the previous Socialist government to build a new cargo terminal failed to obtain the necessary financing, and a $200 million tender is expected to be announced by the Ministry of Transport for a possible BOT or concession. The new cargo terminal is intended to be able to handle 10,000 - 15,000 tons of tons of air cargo annually.
c. Burgas Airport Modernization
A prefeasibility study for modernization of Burgas Airport has been performed concerning a new cargo terminal and modernization of the runway areas. The airport upgrade project will have an estimated value of $60 million.
d. Varna Airport Modernization
The Varna Airport master plan provides for extension of the runway, a new cargo terminal, modernization and extension of the international departure lounges, construction of safety side strips for taxiways, and construction of an apron for cargo aircraft. This project will have an estimated value of $100 million.
e. National Air Traffic Service Center Phase III
In 1997 the Government of Bulgaria ratified a financial agreement with the European Investment Bank for a loan of $60 million ECU for construction of a new air traffic control tower in Sofia under the authority of the Air Traffic Services Authority. The National Air Traffic Service Center will control all air traffic over Bulgarian air space, both civilian and military. The tender has been split into three phases: Phase One consisted of construction of the new tower, which was completed in December 1997. Phase Two consists of additional construction and installation of basic utilities and the winning bidder was Glavbolgarstroy, a Bulgarian company. The third phase with an estimated value of 30 million ECU will consist of procurement of radar and navigation aid equipment for the needs of the civil and military authorities which will operate the new air traffic control center.
f. Balkan Bulgarian Airlines
The national air carrier Balkan Bulgarian Airlines (BBA) flies to many destinations from Sofia with a fleet of aging Russian planes and leased Boeings. The airline wants to completely revamp its current fleet by purchasing modern western aircraft, but the Bulgarian government is prevented by its agreement with the International Monetary Fund from providing any sovereign guarantees to Balkan, due to Balkan's weak financial situation. A 75 percent share of Balkan was recently purchased by a consortium of the Israeli Zeevi Group and Arkia Airlines for $150,000, although this will be reduced to 51 percent by issuance of shares through a public offering. The new owners will invest $100 million over the next five years and plan to repay $30 million of Balkan's accumulated debt.
6. Energy
Bulgaria's electrical generation capacity consists of nuclear, fossil fuel (thermal), and hydropower facilities. The nuclear power station at Kozloduy, on the Danube River, currently supplies 41.4 percent of Bulgaria's power. The older units, 1 through 4, pose a safety concern due to lack of a containment system. The Bulgarian government is reluctant to decommission those Soviet design reactors, however, until alternative power sources are developed. An upgrade of the controls for the newer units 5 and 6 will be carried out under a $77 million plus contract signed June 2, 1999 between the National Electric Company (NEK) and Westinghouse Electric Company of the United States with a credit guarantee from Eximbank.
Among the larger coal-fired plants include Maritza East 1, which will be replaced by a new $700 million plant to be built, owned and operated by a U.S.-owned joint venture CCC, and Maritza East 3, which will be upgraded by U.S. utility Entergy for approximately $370 million. It is expected that some of the electricity generated at Maritza East 3 will be exported to Turkey under a recent ten-year export agreement, to meet rising demand in Turkey.
The other major thermal power plant in Bulgaria is in Varna. The challenge there is to upgrade and adapt the plant to use non-Ukrainian coal, which has proven harder to obtain in recent years. A number of foreign companies have expressed interest in this project.
Trade and Development Agency-funded feasibility studies to determine the potential for oil pipelines to carry Caspian Sea oil from Burgas to either the Greek port of Alexandropolous on the Aegean Sea or the Albanian port of Vlore on the Adriatic Sea may lead to future opportunities for construction and engineering firms as well as for suppliers of oil pipeline equipment to Bulgaria.
7. Water Systems
The waterworks system of Bulgaria's capital Sofia and of the entire country is suffering massive leaks from the aged asbestos concrete water pipes that will require a complete overhaul of the water pipes. The first upgrade project will take place in Sofia and will be financed by the European Bank for Reconstruction and Development (EBRD). Conservative estimates put the amount of investment needed just for the reconstruction and upgrading of the Sofia Water and Sewage Company at $150 million. Current plans are for a three-stage competitive procedure for selection of a company that will be given 49 percent ownership of the Sofia Water and Sewage Company concession. Reconstruction and upgrading of the waterworks systems in other Bulgarian cities may follow. Currently four companies, including a joint venture between Bechtel and a British company, are on the short-list of bidders for the Sofia concession.
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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