State-run Companies To Be Put on the Counter At the beginning of 2011, Bulgaria's government plans to put on the counter several big state-run companies, as well as some minority shares in different ventures. Some of the companies have so far been in the so-called "not-for-sale list" of the state. Following amendments to the Privatization Act and the post-privatization control mechanism, the state-run companies VMT Orbita AD and State Laboratory Bulgarian Rose have been excluded from the not-for-sale list, and they may soon be put under the hammer, sources from the economy ministry said. The long-expected privatization of Bulgartabac Holding is expected to kick-off this year. The privatization campaign is expected to raise budget revenues of several billion levs over the next few years, and the revenues to the Silver Fund, mostly used for retirement payments, will gross one billion levs.
Source: Standart (18.01.2011)

Bulgaria expects to finalise the privatisation of tobacco group Bulgartabac Holding and its remaining stakes in local electricity distribution companies by the end of the year, finance minister Simeon Djankov said. The assets, together with Vazovski Mashinostroitelni Zavodi (VMZ), building firms Montazhi and Promishleno Stroitelstvo Holding, the duty-free zones of Bourgas and Svilengrad and ten other companies in which the state owns stakes of over 50% are part of the privatisation agency's 2011 sell-off programme, Djankov said on the sidelines of a parliamentary session on Friday. The agency also plans to sell another 30 companies in which the country holds below 50% this year, he added, declining to say whether the units will go private through sales on the bourse in Sofia or via auctions. A year earlier, the country's government stated that privatisation proceeds for 2010 could reach BGN 1 billion on condition that Bulgartabac's sale takes place.
Source: Dnevnik (24.01.2011)

The troubled VMZ Sopot factory, which is Bulgaria's largest defense industry plant and was once the pride of its military-industrial complex, will be put on the privatization table by the Borisov Cabinet. The decision to start the privatization of VMZ Sopot is No. 1 on the agenda of the government's weekly meeting today. The Bulgarian Cabinet is expected to approve for sale all 118 million shares of the military giant. The privatization is supposed to take place with a tender, rather than on the stock exchange. The potential buyers are supposed to offer detailed 3-year business plans for the factory outlining their investment intentions and their commitments to the number of jobs in the plant. The sale of Bulgartabac Holding, Sopot-based Vazovski Mashinostroitelni Zavodi (VMZ), and the minority stakes in the electricity distributors have been said to be a must-do task in 2011 due to the sorry performance of the state-owned companies.
Source: Standart (27.01.2011)

The defence industry plant in Sopot to receive more purchase orders this year Over the next months orders from VMZ-Sopot (a top mechanical engineering plant from the defence industry sector) will increase and the enterprise will be operating at full speed. Some 300 new employees have been hired and wages are no longer delayed. By the end of March, the workers of VMZ-Sopot will get their overdue wages for August and September. The company owes nearly BGN 1,100,000 in wages and insurance instalments. The defence industry plant is currently operating at full capacity and has ensured orders for production. The workers of VMZ-Sopot have received almost a third of their due remuneration for August and September. "Last year alone, the company disbursed BGN 18 mln to the State in taxes and insurance contributions," specified CEO Ivan Stoenchev. He added he would soon hold negotiating with new customers. Some 3,500 people are employed at VMZ-Sopot at present and the average monthly wage at the enterprise is BGN 526. A strategy for privatisation of 100% of the company has been submitted for approval in Parliament.
Source: Class (02.02.2011)

Bulgaria will be looking for a strategic investor for its largest weapons factory, VMZ Sopot, which has been scheduled for privatization. This a major win for Minister of Economy and Energy Traicho Traikov, who has been fighting with FinMin Simeon Djankov, a supporter of a mere financial investor. "Financial investors will be able to participate only in a consortium with stategic investors," said Traikov for the Bulgarian National Radio. "Our goal is not to get rid of the company, but rather to guarantee its development. This is a business in which one must already know what one is doing," added the Bulgarian Economy Minister. The Bulgarian Cabinet is expected to approve for sale all 118 million shares of the military giant. The privatization is supposed to take place with a tender, rather than on the stock exchange. The potential buyers are supposed to offer detailed 3-year business plans for the factory outlining their investment intentions and their commitments to the number of jobs in the plant. The Vazovski Mashinostroitelni Zavodi (VMZ) plant employs 3 700 workers. It is located in the town of Sopot in central Bulgaria, which is the birthplace of Bulgarian writer and poet Ivan Vazov, after whom it was named. The plant was founded in 1936, and during the communist period was developed into a large-scale military industrial unit. VMZ Sopot produces anti-tank guided and unguided missiles, aviation unguided missiles, artillery ammunition, fuses. It also manufactures civilian products – it makes diamond tools, abrasive discs and grinding wheels, gas cylinders, food industry equipment, and household appliances. VMZ Sopot has been in a troubled financial condition in the last few years. In 2007, Bulgaria's Privatization Agency started to sell some of the plant's assets in order to cover part of its debts; some of its assets were also sold at the beginning of 2009. Over the years, several governments failed to decide on a strategy to privatize VMZ Sopot, and the Privatization Agency is said to be expecting a solution from the GERB government and the new Parliament dominated by them. In February 2010, VMZ Sopot, which is in deep financial troubled, fired workers who protested against delays of salaries. In April, the head of Bulgarian Privatization Agency Nikolov announced that in 2010 the Bulgarian state planned to initiate the privatization of VMZ Sopot – a plan which has failed to materialize to date. In his words, the struggling arms giant will take a while to be privatized because the respective strategy for the it had to be approved by the Parliament first. In May, Bulgarian authorities started investigating former managers of VMZ Sopot over suspected abuses that may have contributed to the dire financial situation of the plant. All information pertaining to the investigation is classified. The names of the former directors and senior managers of the military factory who are under investigation for abuses have not been revealed. VMZ Sopot currently has total debts amounting to about BGN 100 M.
Source: profit.bg (03.02.2011)

The Bulgarian state companies, arms dealer Kintex and the Agency for Diplomatic Properties (ADIS) will not be sold, Economy Minister Traicho Traikov and Foreign Minister Nikolai Mladenov said in Parliament. Regarding the Sopot machine-building factories, Parliament must first approve the privatisation strategy before any actions are implemented, Traikov said. But as far as arms dealer Kintex is concerned, whose long-standing director Anton Saldzhiyski was replaced last week, there will be no deal, Traikov told Parliament, cited by Dnevnik. According to the Economy Minister, the company can develop and function well as a state-run establishment. In regard to the sacking of Saldzhiyski from his post at Kintex, Traikov said the decision was based on the back of a thorough "analysis" without actually disclosing any details. Candidates interested in purchasing VMZ Sopot, must have a three-year business-investment programme and have experience in the defense industry production, as well as production designed for civilian use as well.
Source: Dnevnik (17.02.2011)

Over 5 candidates are interested in the privatization of Bulgartabac. Among them are both strategic investors and financial institutions. The procedure is expected to be published in the Official Gazette within days and the candidates to step up. Yesterday the privatization strategy for VMZ Sopot was presented in parliament. It is envisaged that the prospective owner is a big company working in the industry, with a minimum of EUR 120 mln revenue for the past 3 years, presence of a certificate for access to classified information. Besides NATO countries, Moldova, Ukraine, Serbia, FYROM and Croatia meet this condition. Decisive criterion for choosing a buyer will be the price weighting 60%, followed by the investment - 30%, and commitment to employees - 10%.
Source: Standart (24.02.2011)

The future owner of Bulgarian arms manufacturer VMZ Sopot will be obliged to preserve the core activities of the plant and keep it operative for at least five years, according to the privatisation strategy for the entity presented in parliament on Thursday. The successful bidder will also be required to settle the plant's public obligations and not to reduce labour costs three years after the takeover. VMZ Sopot will be sold through a one-off public tender after the parliament endorses the strategy proposed by the government. According to unofficial information, however, trade unions are not satisfied with the privatisation terms, specifically when it comes to the requirements concerning employees, and will seek ways to prevent the strategy's endorsement.(
Source: Dnevnik (25.02.2011)

The Bulgarian state will no longer be required to keep a 34% share in formerly fully state-owned defense industry plants, according to a draft decision of the Bulgarian Cabinet to be approved Wednesday. Thus, the Borisov government will pave the way for the complete privatization of what remains in terms of state assets in partially privatized military plants For example, the new decision will allow the state to sell the 35.78% minority stake it still holds in one of the largest Bulgarian military factories, Arsenal Kazanlak. The formal motives of the Economy Ministry to shed the obligatory minority state quotas in the formerly fully-state owned military industrial complex are that this will ease the privatization procedures and will help attract more investments in the defense industry. The requirement that the state should keep a minority stake in the privatized military plants was made in March 1998 by the right-wing government of PM Ivan Kostov. Back then, the Kostov Cabinet approved a list of 25 companies from the military-industrial complex where the state was supposed to keep a minority stake; the government also envisaged the creation of a special institution to manage the state-owned stakes, the Dnevnik daily points out in a report. Subsequent cabinets, however, have moved ahead with the restructuring of the Bulgarian defense industry by declaring six of these companies for liquidation. At present, the Bulgarian government is the sole owned of the capital of VMZ Sopot, NITI Kazanlak, and TEREM, and holds a minority stake in Arsenal Kazanlak. The troubled VMZ Sopot, which is the largest Bulgarian military plant, is expected to be privatized in 2011 in accordance with a privatization strategy to be approved by the Parliament, which will provide for holding a tender. According to Economy Minister Traicho Traikov, state arms trading company Kintex will not be privatized. The TEREM military-industrial complex consists of eight companies, and for the time being the sale of the state assets in its is banned by the Privatization Act. Back in 2008, the Stanishev Cabinet divided the eight military factories in two groups. The first group includes "Terem Flotski Arsenal - Varna", "Terem Georgi Benkovski - Plovdiv", "Terem Khan Krum - Targovishte", and "Terem Ivailo - Veliko Turnovo". These factories are considered strategic for Bulgaria's national security, and 66% of each of these is to be offered for sale. The second group includes "Terem Letetz - Sofia", "Terem Ovech - Provadia", Terem Gen. Vladimir Zaimov - Bozhurishte", and "Terem Tsar Samuil - Kostentz". 74% of each of these will be offered for sale. The state has already sold sections of three of the eight Terem factories. The sale of Terem Flotski Arsenal Varna – a naval ship repair yard – which was expected to attract the greatest investor interest – was blocked with an order of the Defense Minister at the end of 2008. The Dnevnik Daily points out that for the time being the state is failing to privatize NITI Kazanlak because the company has a legal dispute for land ownership with another military plant, Arsenal Kazanlak. The bulk of the Bulgarian military-industrial complex was created during the communist period when the People's Republic of Bulgaria made lots of cash by selling arms mostly to developing countries. Together with the former USSR and the former Czechoslovakia, Bulgaria was the third COMECON member specializing in the defense industry.
Source: Dnevnik (09.03.2011)

Parliament voted for 100% of the capital of VMZ-Co Sopot, Bulgaria (the former State munitions factory) to be offered for privatisation. Yesterday, at the session of the National Assembly, MPs approved the government's strategy for the sale of the Vazovski Mashinostroitelni Zavodi Co., (Vazov Engineering Plants) with 86 votes in favour, 19 against and 6 abstentions. The proposal led to a controversy in many parliamentary groups. Six MPs from the Ataka party (Attack), who attended the plenary hall during the vote, took a stand against the strategy. Four lawmakers from MRF (Movement for Rights and Freedoms) abstained, as well as two MPs from the left-wing party. Another 13 MPs from the Coalition for Bulgaria also opposed the document, while a total of 80 MPs members from GERB attending the hall supported the vote jointly with 6 lawmakers from the Blue Coalition. According to the Cabinet, the proposal is aimed at the preservation and expansion of the main business activity in terms of both defence and civil production. Some of the deal's objectives cover the modernisation of company production, as well as maintaining it as the major employment factor in the region. A total of 118 million shares will be offered to investors, constituting 100% of the capital under the set public tender procedure for the sale of stocks. The bidders involved in the transaction must accept the terms and conditions stipulating that VMZ-Sopot, Sofia should not be declared insolvent or bankrupt for a period of 5 years from the date of acquisition of ownership of the sold shares. Pursuant to the strategy, lay-offs of employees will not be allowed for a period of 3 years. Under the terms and conditions for the transfer of shares, potential investors must repay all public liabilities of the engineering plants, as well as the overdue receivables of employees. The representatives of Siderov's Ataka party and the Opposition demanded greater safeguards for the employment of workers in the factories, as well as the repayment of liabilities by the new investor.(Klassa)
Source: Dnevnik (24.03.2011)

Bulgaria's center-right GERB party Cabinet plans to raise BGN 450 M from privatization of fully or partly state-owned companies in 2011, according to Emil Karanikolov, head of the Privatization Agency. The companies on the table include a couple of "giants" – cigarette-maker Bulgartabac, Bulgaria's largest military plant VMZ Sopot, and construction company Technoexportstroy – as well as some smaller companies and state minority stakes in power utilities. The government will most likely sell Bulgartabac through a tender, allowing no consortiums but only strategic and financial investors to participate, Karanikolov said on Darik Radio Thursday. 100% of VMZ Sopot, an arms producer employing 3 700, will be sold through a public tender as well; in both cases the government will emphasize social and investment requirements for preserving and expanding the traditional production and the jobs. In the case of VMZ Sopot, the government will evaluate the bidders on a 100-point scale, awarding up to 60 points for the price offer, 30 points for the investment plan, and 10 points for social commitments. The head of Bulgaria's Agency for Privatization and Post-privatization Control is convinced that there will be eager investment interest in the factory. The sale of VMZ Sopot was approved by the Parliament on Wednesday. The privatization of Bulgaria's state-owned construction company Technoexportstroy was also approved recently as the MPs voted to take it off the list of companies whose sale is prohibited. According to Karanikolov, several other state-owned companies will be sold through the Bulgarian Stock Exchange – including "Duty-free Zone – Svilengrad" and the 33% minority stakes of the state in Bulgaria's three regional power utilities – E.ON, EVN, and CEZ. He said that the government is almost ready with the procedure for the sale of the minority stake in E.ON. The first privatization income for 2011 was registered just recently as the state sold its minority stake in Nestle Ice Cream Bulgaria through the stock exchange for BGN 2.5 M. With respect to the recently failed sale of energy construction company "Montazhi", Karanikolov said there will be more investor interest in it when the larger energy projects start to kick in. He further announced that in 2010 his institution raised BGN 27 M from post-privatization control – a record sum. "We have never seen such results to date. The experts that we now have are great. We are about to review accepted investment programs, and will press charges where we need to," Karanikolov said. He further announced that the government was going to file a suit with Viva Ventures, the buyer of the Bulgarian Telecommunications Company (BTC), now called Vivacom, for failing observe privatization commitments it made to the Ministry of Defense – unless Viva Ventures agrees to pay its dues within a 30-day notice.
Source: Darik Radio (25.03.2011)

Investors interested in the privatisation of Bulgaria's arms manufacturer VMZ Sopot will be required to prove by presenting accounting and bank statements that they have sufficient funds to acquire the company, settle its old debt and pay obligations to workers, according to the privatisation strategy for the plant published in the Official Gazette on Friday. The successful buyer will be also obliged to keep the current number of employees and abstain from lay-offs in the next three years. The future owner will be also required to pay off the plant's overdue labour costs, including wages, social security contributions and taxes.
Source: Dnevnik (04.04.2011)

The sale of the state-owned residual shares in EDCs to be initiated "The Agency for Privatisation and Post- Privatisation Control will initiate the sale of the state-owned 33% stakes in the Electricity Distribution Companies (EDCs) EVN Bulgaria and CEZ Electro Bulgaria in a few days," said Executive Director Emil Karanikolov yesterday for BNR (Bulgarian National Radio). Investment intermediary companies in charge of the forthcoming sale on the Stock Exchange will be invited to tender. The contract for the sale of the residual state-owned share in E.ON Bulgaria is currently being implemented. "Minority packages in Terem JSC, Arsenal JSC and VMZ-Sopot JSC will be offered for privatization as well," added Karanikolov. According to him, Bulgartabac Company must be sold while it is still profitable. The consultant on the transaction, Citigroup, is now negotiating with foreign investors alone. Karanikolov rejected the accusations in selectivity when considering the candidates for the acquisition and lack of transparency in the tender conditions for the sale of the state-owned tobacco holding. "Those who criticize the agency, should first examine the tender documentation in order to see how the transaction is structured and to understand how we intend to protect the state and public interests," said the Head of the Privatisation Agency. Only strategic and financial investors will be eligible to participate in the tender procedure. According to Karanikolov, there is a danger with respect to the Bulgartabac deal and the investor might only buy the enterprise in order to close it down. Karanikolov announced that only one member of the Supervisory Board of the Prtvatisation Agency abstained from voting, regarding the announcement of the procedure for privatisation of the tobacco holding last week, because he had doubts whether a profitable company should be sold. Klassa found out that this was Russi Statkov.
Source: Class (02.05.2011)

The deal on VMZ-Sopot will be difficult "The deal on VMZ-Sopot (a top mechanical engineering plant from the defence industry sector) will be difficult, even more difficult than the sale of Bulgartabac Holding," Emil Karanikolov, Executive Director of the Privatisation and Post-Privatisation Control Agency told Dartsnews. "Bulgartabac is an operating company, generating profit, while although well-managed, VMZ is able to cover its overhead expenses alone. Moreover, it has borrowed many loans and interest on them is being accumulated. This will make the task of finding a potential investor more difficult, which is the reason for my worries. But let’s hope for success," added Karanikolov. According to him, a procedure is to be launched for the selection of an evaluator who will have to prepare a due diligence report, an evaluation and draft an information memorandum. "No interest has been shown so far. Let’s hope to find a buyer because privatisation is indispensable in this case," added Karanikolov. He did not venture to comment on whether the munition factories Teraton and Kintex should remain state-owned. In addition to VMZ-Sopot, the agency has also undertaken to sell the minority stake of the State in another defence industry company – Arsenal. Besides, talks are being held for the sale of detached parts of the subsidiaries of Terem, which is on the prohibitive list for privatisation.
Source: Class (17.05.2011)

Four containers of ammunition intended for Bulgaria stolen in Romania Four containers with fuses for missiles were stolen from a train transporting arms from the Romanian town of Brasov to Bulgaria, the Bulgarian National Radio (BNR) announced today, citing Romanian media. A total of 64 fuses for military missiles disappeared from a train, guarded by Romanian gendarmes. The absence was established on Saturday afternoon at the customs in Giurgiu where the train was checked before leaving Romania. The composition was guarded by 10 armed gendarmes. “The Military Prosecutor’s Office in Bucharest was approached on Saturday by the gendarmerie in Giurgiu after railwaymen found broken seals and an open door of a wagon of the train carrying the military items,” read the message of the Prosecutor’s Office. According to a spokesman of the Romanian Gendarmerie, the stolen items are not dangerous but they could become dangerous if mounted. Romania’s Gendarmerie set up a Committee of Inquiry because the escort of the consignment coming from a military factory in the region of Brasov was entrusted to gendarmes. “It is not yet clear whom the consignment was intended for,” the press office of the Defence Ministry commented for Klassa daily. According to the Ministry’s information, the consignment was most likely intended for a private company. The Army stated it has nothing to do with the escort of the train. According to information of Klassa, if the consignee is a private company indeed, the case will be outside the jurisdiction of the Defence Ministry since the regime of trade in arms is under the surveillance of the Ministry of Economy, Energy and Tourism.
Source: Class (18.07.2011)

The only candidate-buyer of Bulgartabac Holding - BT Invest, registered in Austria - will be able to resell the tobacco holding company earlier than the 5-year period set in the draft contract, Emil Karanikolov, Executive Director of the Privatisation and Post-Privatisation Control Agency, announced. The deadline for submission of a final binding offer for Bulgartabac expires today. “I am optimistic that the only candidate will submit a bid,” said Karanikolov. According to him, the Agency’s Supervisory Board will approve the submission of the bid only if it meets the criteria and objectives of the privatisation. Procedures for the sale of minority stakes in the defence industry companies Arsenal and Terem are to be held, too. By the end of June, the revenues of the Privatization Agency stood at almost BGN 7 mln. Revenues by the end of 2011 are projected at BGN 450 mln, including the expected proceeds from the sale of Bulgartabac, of state-owned stakes in the electricity distribution companies, of Arsenal, of Technoexportstroy, which has been recently removed from the prohibition privatisation list, of the building and land plot of the Rodina Publishing and Polygraphic Complex, as well as the sale of state-owned properties whose evaluators are being selected at present. According to sources of Livenews.bg, the Privatisation Agency expects revenues of between BGN 120 mln and BGN 150 mln from the sale of the state-owned stake in the Austrian electricity distribution company EVN Bulgaria alone. If the sale of 33% in EVN Bulgaria brings BGN 150 mln, this amount will be some BGN 100 mln lower than the price at which the majority package was purchased seven years ago when the Austrian company acquired 66% for ˆ271 mln. Therefore, the residual 33% stake should cost about BGN 270 mln, the sources explained.
Source: Class (29.08.2011)

Tsvetan Vasilev, owner of Corporate Commercial Bank, is trying to get his hands on the arms manufacturing business in Bulgaria, 24 Chasa Daily reads. At the moment, Vasilev controls the military plants Dunarit – Ruse and T.Benkovski – Plovdiv. He tried to privatize Samuil – Kostenets, but refused to pay up in the last moment, scoring the winner in the tender Alma D. This year, Corporate Commercial Bank has been N1 bidder for the nation’s top arms manufacturer – Vazovski machine building plant EAD and should it succeed in acquiring it, this will surely mean dominant position for Vasilev in the defense industry.
Source: 24 chasa (19.12.2011)