Do you think we will fly again in the next 10 years? I certainly hope so. The pandemic disrupted the international travel industry and grounded most flights. Nowadays it seems an adventure to even travel to places like Milan or Paris - once a weekly destination for many, courtesy of the low-cost airlines' boom.
Yet to expect that the business will not return to normal in the next decade also seems like a long shot. But this is exactly what the new owners of Sofia airport predict: in their newest request, just before they take over the airport, the concessionaires demand to be freed from paying the agreed fee to the state for 10 years.
You can read more about that further down in today's newsletter. But let me underline something here. Certain decisions made in the next month-and-a half before the elections are going to affect the business field for at least a decade.
The airport concession is one such example, but there are many others. Take the reappointed "independent" regulators, and the formal competitions in state-owned enterprises which always end up with managers close to the current ruling clique (you can read at length here in this piece). Or the new EU-funded programs which are now designed together with the new Resilience and Recovery Plan - altogether worth over 20 billion euro for the next decade.
It is going to be a totally unpredictable election and for the first time in more than a decade, GERB is poised to lose power. It is hardly a surprise that they are doing all they can to maintain their control over the economy even if they lose. Some are looking for ways to cash out.
So hold on for the next 2 months. It is going to be a rough ride.
POLITICS THIS WEEK
The man of the people. And factories
This is of course, the invisible face of the elections. The visible is that of the prime minister, popping up around the country in his jeep and jacket. Just this week, Borissov was seen in at least 4 cities and while he mostly bragged about infrastructure projects, he likes to stop by a factory in an old-Soviet style "meet the people" scene. So if you own a business anywhere and it involves machines and people, expect a visit anytime now and be ready to praise the government for helping you build it.
"When diggers come in, I'd give it a year and a half and the road is ready" were Borissov's words on one such visit, regarding a long-awaited road towards the Danube. What he didn't say is that it takes roughly the same time after completion for the repairs to start. Right now the road network in the country is either partly collapsed, or under repair.
On the last point: you can't visit the top tourist destination in Bulgaria.
Rila Monastery has been closed for visitors for over a month, after the road collapsed. It will be at least another month before it is even partially open.
Yet you can always go to Zanzibar.
This is where many Bulgarians chose to go in the past month. Why? Because Tanzania totally denies the existence of COVID-19. Bulgaria, on the other hand, obviously can't do that, yet it faces the dilemma - how does it attract people in a pandemic? Open slopes and high hopes - read about it here.
And on the topic: vaccines and ways to get them
Chaos. That is the only word that can summarize Bulgaria's attitude towards mass vaccination. After trying to keep an orderly line for special groups like medics, teachers (and even journalists), and promising everyone else they will get vaccines with their GPs, this week the government suddenly threw open the hospital gates. This resulted in long lines of people trying to get a shot through the "green corridors" and in the end - the full stop of vaccination because the country ran out of vaccines.
Now it is anyone's guess whether next week the lines will be open all the same, or are we back to "vulnerable groups" tactics. Organization, which was never the strong side of this government, fell apart at the seams.
With or without order, we are still last
To sum it up: in theory there is an order, in practice it was first come - first serve. In theory, there was supposed to be a choice between three vaccines - Moderna, Pfizer and AstraZeneca. In practice, the latter is the one that most places have, so it will be some time before you can get your hands on any of the others.All of this, of course, just conceals the main objective: fast growth in the number of vaccinated people so the situation returns to normal. Yet we are very far from this. Bulgaria is still dead-last in the EU with 0.4% of its population getting the shot. Romania is first.
ECONOMY
2020 was bad, of course. But not that bad
Foreign direct investment in Bulgaria reached 562 million euro in 2020, according to early estimates of the central bank. For comparison, the initial number for 2019 was 630 million euro, but that has since been revised upward to over 1.1 billion. Thus, the impact of COVID-19 on FDI is, understandably, negative, but not too significant, judging by initial estimates.
Meanwhile, remittances from Bulgarians living and working abroad have gone down drastically - from 1.2 billion euro in 2019 to 340 million euro in 2020. The explanation likely has to do with the wave of returnees and economic stagnation.
Also, GDP shrank in the fourth quarter, but wages were up, and exports made a surprising comeback in December - read everything about it here.
Yet another successful market round
A week after issuing 10.5-year T-bonds for 300 million levs (153 mln euro), the Ministry of Finance and the central bank raised an additional 200 million levs through a 5-year issue. The yield was negative at 0.17%. A year prior, another 5-year issue also brought in a negative yield for the country, but at that time, the number stood at -0.14%.
And now: a Fitch upgrade
The rating agency raised Bulgaria's long-term outlook to positive, and the BBB rating is affirmed. Macrostability was underlined as usual, but a major factor was also the enormous investment injection Bulgaria is about to receive from the EU.
Don't worry, another round of the EU-funding lottery looms
This is how most of the state agencies, local authorities and unfortunately - a large section of local businesses - view the billions from Brussels. While they are a major source for investment and (possibly) modernization, they are also quite a vehicle for corruption. Most of the funding is not yet agreed on and it is about to become available in the autumn, but some of the projects are already on the table. This week the National Railroad Company (NRIC) announced an open bidding procedure for Vidin-Medkovets line, part of the railroad Vidin-Sofia. The amount is 908 million leva (over 460 million euro).Yet don't rush: given its track-record, this one is going to take a while. The average time it takes NRIC to close a deal? 3 years.
The time it will take Sofia to get the first payment for its airport concession? 10 years!
The Paris-based Meridiam fund, which won last year's concession bid for the largest Bulgarian airport, requested a 10-year delay in paying its annual concession fee. The reason? The pandemic, of course.
Transport minister Rosen Zheliazkov announced in the parliament that Meridiam wants to transfer the payments (no less than 24.5 million euro per year) to the last 10 years of the 35-year concession. This will be quite a change in the contract that is yet to come into force.
It first must go through the Competition Directorate of the European Commission to be cleared on the State Aid rules. The fund would still have to invest at least 600 mln. euro in the airport in the first 10 years.
And if you feel it's a good deal, there is another airport for the taking
Plovdiv airport is looking for a private concessionaire, again. Offers must be sent by 24 March. The bid is going to be on the same day, in the afternoon. The first time the Transport Ministry tried to find someone for the small airport in the second biggest city was last year.
BUSINESS
Heating
Toplofikatsia RuseThe heating company is listing on Sofia stock exchange. But hold your horses, it's not because the market has turned suddenly hot (excuse the pun). More likely, the hidden owner of the company - the energy mogul Hristo Kovatchki, will use it as another vehicle to invest in some of the money of the pension fund his companies control - Toplina. This pattern of doing an IPO only for the pension company to invest money of its clients in businesses of its owner has been repeating for years now. Regulators see nothing wrong in it.
Chemical
AgropolychimThe fertilizers producer from Devnya will invest 30 million euro in a calcium nitrate installation in the next few years (also called Norwegian saltpeter). That will add water-based fertilizers to its product line and will help it grow in hydroponic agriculture. 90% of the new produce will be exported to Europe.
Telecoms
United Group and BTCThe new player on the market - United, kept on growing its portfolio this week. After announcing a deal for two Sofia-based TV and internet providers, the new owner of BTC telecom will buy a Plovdiv-based one. The cable TV operator N3 will be acquired for an undisclosed amount. N3 is one of the big players in Plovdiv - it has 26 thousand subscribers, a little over 3.5 million euro revenue and 500 thousand euro profit for 2019
ENERGY
Bulgaria - a territory controlled by Gazprom
The major claim that Bulgaria gains a lot by building TurkStream (called BalkanStream here) evaporated for a while this week when it turned out Russian Gazprom has reserved 100% of the capacity of the new pipeline to Serbia, while also cutting in half the amount of gas it will transport through it. It was visible for a day from the data of the European Network of Transmission System Operators of Gas (ENTSOG) that Gazprom intends to keep this situation starting on 1 October this year all the way until 31 December 2039.
Right after Capital Weekly announced that, the data changed, again without any explanation.
Less gas means less money for Bulgaria and as Capital Weekly calculated, Bulgartransgaz will be unable to make any profit from the new pipeline and will be in the red.
Also, Gazprom now controls almost all the entry points to the country, except for the Romania border.
So we will build a new connection - to Serbia.
Bulgartransgaz collected 11 offers for the new gas pipeline which is supposed to be finished in 350 days and be an alternative to the brand new TurkStream. Among the candidates are, logically, the ones who worked on the bigger project - the Saudi Arkad S.p.A, Italian Bonatti and Belarusian Beltruboprovodstroy. The cost is estimated at 143 million leva.
WATCH OUT FOR
PEOPLE
Kristina Krasteva
The ex-journalist and writer of a biography of the Prime Minister suddenly got a new position in Brussels - the not-unimportant position of a special representative for the regional ministry. Krasteva obviously won a semi-secret contest in which she was the only candidate and will be the link between the European Commission and Sofia on infrastructure and regional matters
Nikos Stathopoulos
Partner in BC Partners, owner of the majority of shares in the United Group, the company that acquired the Bulgarian Telecom Company (BTC) and the Nova TV media group - read his interview with Capital here.
DATES
4 MarchThe start of the official election campaign.
PLACES
Gabrovo
the small but powerful industrial municipality in the middle of Northern Bulgaria is a rare positive example in this region, as you can read here
Do you think we will fly again in the next 10 years? I certainly hope so. The pandemic disrupted the international travel industry and grounded most flights. Nowadays it seems an adventure to even travel to places like Milan or Paris - once a weekly destination for many, courtesy of the low-cost airlines' boom.
Yet to expect that the business will not return to normal in the next decade also seems like a long shot. But this is exactly what the new owners of Sofia airport predict: in their newest request, just before they take over the airport, the concessionaires demand to be freed from paying the agreed fee to the state for 10 years.
