CEE / MIDDLE EAST / NORTH AFRICA THIS WEEK
January 21, 2011
POLAND 2 CZECH REPUBLIC 12 HUNGARY 20 SLOVAKIA 25 TURKEY 31 BULGARIA 40 ROMANIA 45 CROATIA 49 SERBIA 54 BOSNIA & HERZEGOVINA 59 ALBANIA 64 MIDDLE EAST & N. AFRICA 67
Written by IntelliNews. The report is based on sources which we believe to be reliable, but no warranty, either express or implied, is provided in relation to the accuracy or completeness of the information. The views expressed are our best judgement as of the date of issue and are subject to change without notice. Opinions are not necessarily those of Internet Securities Inc., Euromoney Institutional Investor PLC or its affiliates. Internet Securities Inc. and Euromoney Institutional Investor PLC take no responsibility for decisions made on the basis of these opinions. Any redistribution of this information is strictly prohibited. Copyright © 1999-2011 Internet Securities, Inc., all rights reserved. A Euromoney Institutional Investor company. Copyright © 1998-2011 Sofia, all rights reserved.
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MACROECONOMIC REVIEW
Eurostat: Poland's HICP inflation The Harmonised Index of Consumer Prices (HICP) in Poland amounted to 0.3% m/m in accelerates to 2.9% y/y in December December, 2010 and was 2.9% in annual terms vs. 2.6% y/y a month earlier, the EU's statistical office Eurostat has said. In line with Eurostat's estimations, the average HICP inflation for the whole 27 EU amounted to 2.6% y/y in December (vs. 2.3% in November). In the euro-zone, the inflation was 2.2% y/y vs. 1.9% a month earlier. The lowest annual HICP figures were posted by: Latvia (-1.2%), Slovakia (0.7%), and Holland (0.9%). The highest figures were noted by: Romania (6.1%), Hungary and Greece (4.7% each). November CPI inflation (as measured by the Central Statistical Office) rose by 0.4% m/m, while in annual terms, it amounted to 3.1%. In November, the annual inflation amounted to 2.7% y/y. ISB
FinMin pays EUR 382.3mn of foreign The finance ministry has announced that as part of its foreign debt servicing operations, it debt in December has paid EUR 310.9mn of the principal and EUR 71.4mn in interest payments of the state treasury's foreign debt in December. As of the end of that month, total foreign currency funds that the ministry had at disposal were equivalent of EUR 1,633.7mn (PLN 6,470.1mn), the ministry said. ISB
World Bank upholds Poland's 2011 The World Bank has upheld its forecast of Poland's GDP forecast at 4.1% for 2011, the GDP growth forecasts at 4.1% organization said in its "Global Economic Prospects 2011" report, presented in Warsaw. In 2012, the Polish economy will likely expand by 4.5%, according to the World Bank. In November, the World Bank raised its forecast for Poland's GDP growth to 3.5% for 2010 from 3.0% expected in July and to 4.1% for 2011 from 3.7%, respectively. In the current report, the organisation expects Poland's private consumption to rise by 3.8% in 2011 and by the same ratio in 2012, while government consumption - by 1.6% and 2.6%, respectively. Fixed investment is projected to increase by 7.6% and 10.8, respectively. In early January, finance minister Jacek Rostowski said that Poland's economic growth exceeded 3.7% in 2010 (vs. 1.7% in 2009) and was likely to accelerate further this year, if the euro-zone did not witness a major crisis. ISB
RPP hikes interest rates, as expected, The Monetary Policy Council (RPP) has raised interest rates by 25bps across the board in fear of CPI surge in mid-term (to 3.75% in the case of the key market intervention rate), as expected, so as to curb the risk of inflation remaining above the inflation target (2.5%) in the medium term, the NBP said in a communiqué after the RPP's sitting on Wednesday. The Council is not, however, anxious about economic growth as it expects Q4/2010 GDP rise to be close to the Q3 level. The Council noted that in December, 2010, the annual CPI inflation rose to 3.1%, remaining above the NBP's inflation target of 2.5%. The inflation increase was primarily connected with a strong rise in fuel prices driven by growing prices of energy commodities in the global markets. According to the Council, the acceleration of economic growth in Poland supporting the improvement in the labour market may lead to a gradual rise in wage and inflationary pressure in the medium term. At the same time, a strong rise in commodity prices in the global markets - amid economic recovery - creates a risk that heightened inflation expectations persist. Eight out of 12 bank economists surveyed by the ISB newswires deemed that the monetary authorities would likely start the tightening cycle with a 25bps hike this month. Previously, the key market intervention has not been changed since June, 2009. ISB IntelliNews comment In the face of the recently started acceleration of consumer inflation, the interest rate hike came as no surprise - even though merely a few weeks ago analysts were unanimous in expecting the tightening cycle's beginning only in March. Indeed, they now do not rule out another 25bps hike during the next rate-setting sitting in early March, especially as this meeting's press release is widely seen as a hawkish one. We share the view expressed by most analysts that the whole 2011 would likely see interest rate rises of 75-100bps. tom
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED Industrial output up by 11.5% y/y in Industrial output fell by 4.1% m/m in December vs. the last month, while in annual terms, it December, slightly below expectations was up by 11.5%, compared to an 10.0% (revised) y/y rise in November, the Central Statistical Office (GUS) announced in a communiqué on Thursday. In Jan-Dec, it grew by 9.8%. Having eliminated the influence of seasonal factors, sold production of industry reached the level higher by 11.5% than in the corresponding month of the previous year and higher by 0.6% than in November, 2010, the release reads. Building and assembly production surged in December by 38.8% m/m and grew by 12.3% in annual terms. In November, its rise amounted to 14.2% y/y, while in Jan-Dec, 2010 - 3.5%. As compared to December 2009, an increase in sold production was reported in 26 (out of 34) industry divisions; the highest rises were reported in: manufacture of computer, electronic and optical products - by 30,5%, manufacture of metal products - by 27,0%, manufacture of electrical equipment - by 23,3%, the stats office also reported. Ten economists surveyed by the news agency ISB had expected industrial output to rise by 12.9% y/y in December, with forecasts between 9.4% and 15.1%. ISB
Money supply M3 rises by 8.6% y/y to Money supply was PLN 782.25bn at the end of December, which means a rise of 2.5% PLN 782.25bn at end-December m/m and of 8.6% annually, the National Bank of Poland (NBP) has announced. At the end of November, the M3 noted a rise of 10.7% y/y. Net foreign assets dropped by 2.8% m/m to PLN 98.26bn in December, but were up by 43.4% in annual terms. Calculated in the euro, they amounted to EUR 24.81bn, with no changes m/m and a surge by 48.8% y/y. ISB
FinMin: Public debt at 53.5% of GDP The public sector's debt amounted to around 53.5% of GDP in 2010, which means that in 2010, seen broadly unchanged in the ratio managed to stay below the 55% safety threshold, deputy finance minister 2011 Dominik Radziwilll has announced. He expects the ratio to remain broadly unchanged this year, while it should start to decline in subsequent years. In line with the 2011-2014 strategy of the public sector's debt management, the debt of the public sector (according to the Polish methodology) was to amount to PLN 750.8bn, or 53.2% of GDP, in 2010. Hence, it would not exceed the 55% threshold of the debt-to-GDP ratio this year, nor - as government representatives often stress - will it rise above this limit in 2011-2014. tom
Enterprise wages up by 5.4% y/y, Average wages in the corporate sector rose by 9.1% m/m in December, 2010, and were employment by 2.4% y/y in December up by 5.4% in annual terms, amounting to PLN 3847.91, the Central Statistical Office (GUS) has announced. Average employment in the enterprise sector did not change vs. the previous month, whereas year-on-year, it increased by 2.4% and amounted to 5379.4 thousand persons, GUS reported. Ten economists surveyed by the ISB newswires had expected wages growth of 3.7% y/y on the average, with expectations in the range of 2.9-4.1%. The average expectation about the rise of the employment was 2.4% (with forecasts of 2.3-2.5%). ISB
PPI rises by 6.1% y/y in December, Poland's Producer Price Index (PPI) rose by 1.1% on the month in December, while in exceeding expectations annual terms, they went up by 6.1% y/y, the Central Statistical Office (GUS) has announced. In November, producer prices rose by (revised) 4.7% y/y. Prices of building and assembly production did not change both in monthly terms and inched down by 0.1% y/y. In November, they were flat on the year. In December, the highest annual growth of prices was recorded in mining and quarrying (of 23.4%), followed by manufacturing (5.0%). Ten economists surveyed by the news agency ISB had seen December's PPI growth at 5.4%, with forecasts between 5.0% to 5.9%, on the average of 5.44%. ISB
EconMin sees fuel prices pushing CPI Still high fuel prices as well as rising food prices will likely lead to consumer prices growth inflation beyond 3.1% y/y in January at a level similar to December's 0.4% m/m, while the annual figure would likely increase from the previous month's 3.1% y/y in January, 2011, albeit will remain below the 3.5% mark, the economy ministry's experts wrote in their comment to the December data. They attributed the December inflation's rise to fuel prices' hikes - spurred by higher global crude oil prices and the weakening zloty - accompanied by stabilization of food prices. ISB
FinMin sells 28-week T-bills at EUR The finance ministry sold 28-week Treasury bills worth of PLN 1,000mn (EUR 258mn) 0.26bn, with demand at EUR 0.75bn vs. offering of PLN 1,000-1,500mn, the ministry said in a communiqué on Monday. Demand was PLN 2,897.50mn (EUR 748mn). The average yield was 4.045%, and the
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED minimal price was PLN 9,782.50. In December, the ministry held no T-bill sale auctions, while it purchased back bills - at two auctions - totalling PLN 5.89bn. ISB
PKPP's quarterly Business Index up by The quarterly business index of the Polish Confederation of Private Employees Lewiatan 3pts to 52pts in December (PKPP Lewiatan) went up by 3pts to 52pts in December, vs. its deviation range of 0- 100pts, the PKPP has announced. The annual index inched up by 2pp to 46pts. Commenting on the results, the PKPP's experts expect a gradual improvement of the economic situation rather than the stabilization of the moderate growth pace, i.e. the pace above 4% this year. Analysts deem that data from two months of the last quarter proved the consolidation of the growth trend. The high consumption dynamics has been sustained, which is becoming the factor influencing GDP growth. Despite fears, exports are still strong. The Business Index is calculated on the basis of the forecasts of 7 leading economists. It is measured on a 100 point scale, in which 50 is equivalent to forecast of economic growth of around 3.0-3.5% of GDP annually. A fall in the index to below 25 points would mean a recession, and a figure of over 75 - an economic boom. ISB
Core inflation accelerates to 1.6% y/y Core inflation excluding food and energy prices amounted to 1.6% y/y in December vs. in December 1.2% a month before, the National Bank of Poland (NBP) has announced. The core inflation excluding administered prices amounted to 2.9% y/y in December vs. 2.3% in November. The core inflation excluding most volatile prices amounted to 1.8% y/y in December vs. 1.7% in November. The 15% trimmed mean inflation was 3.1% y/y in December vs. 2.7% in November. The Consumer Price Index's (CPI) growth amounted to 2.7% y/y in November vs. 2.8% y/y a month earlier. Ten economists surveyed by the ISB newswires had expected the December core inflation at 1.43% on the average, with their forecasts in the range of 1.2-1.6%. ISB
Poland sells EUR 1bn of benchmark The finance ministry has priced a reopening of 10-year euro-denominated benchmark 10-year eurobonds bond for a nominal amount of EUR 1 bn. The bond matures on Mar 23, 2021, its yields amount to 4.853%, which is 150bps over mid-swap rate, the ministry has announced. The lead managers on the transaction were: Deutsche Bank, ING Bank N.V., Société Générale and UniCredit Bank AG. In September, 2010, the ministry sold 10-year benchmark eurobonds with the value of EUR 1bn. The bond maturing on Mar 23, 2021, yields of 4.016%, which is 120bps over mid-swap rate. The annual coupon has been set at 4%. Both issues were executed under Euro Medium Term Note (EMTN) Programme. ISB
Bankers expect inflation up to 3.53% Bankers from 200 bank branches throughout the country expect inflation in the period of y/y in December 2011 December, 2010 - December, 2011 to be 3.53% y/y, it transpires from Monitor Bankowy published by market research institute Pentor. This means a rise in expected inflation of 0.04pps versus previous month's forecast. CPI inflation was 3.1% y/y in December, 2010 vs. 2.7% in November. The exchange rate expectations as regards the US dollar and the euro at the end of 2011 are PLN 3.91 to the euro, and PLN 3.02 to the dollar. In comparison to the previous month, this means the strengthening of the euro by PLN 0.10, and the stabilization of the USD. On the currency market on Thursday midday, the euro was traded at PLN 3.89, and the US dollar at PLN 2.89. ISB
State treasury debt inches down by The state treasury's debt dropped by 0.1% m/m to PLN 709.30bn at the end of 0.1% m/m at end-November November (and up by 12.3% ytd), the finance ministry has announced. This equals around EUR 174.13bn (-2.0% m/m and +13.3% ytd) or USD 226.56bn (-7.8% m/m and +2.3% ytd). Domestic debt, calculated on the basis of the issue's location, amounted to PLN 507.50bn and fell by 1.5% m/m and was up by 9.7% ytd. In euro terms, it stood at EUR 124.59bn (-3.4% m/m and +10.6% ytd). Foreign debt amounted to PLN 201.80bn, which was lower by 3.9% m/m, but higher by 19.6% ytd. In euro terms, it stood at EUR 49.54bn (+1.8% m/m and +20.6% ytd). Domestic debt in T-bills was worth of PLN 35.05bn (unchanged m/m and by 26.3% ytd) or EUR 8.60bn (-1.9% m/m, -25.7% ytd), while in domestic T-bonds, it amounted to PLN 464.50bn (-1.6% m/m, +14.6% ytd), or EUR 114.03bn (-3.5% m/m, +15.6% ytd). ISB, tom
Value of domestic T-papers maturing The value of domestic Treasury papers (bills and bonds) maturing in 2011 were worth of in 2011 down to EUR 26.3bn at end- PLN 102.33bn (EUR 26.30bn) at the end of November vs. 106.76bn (EUR 26.70bn) a
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED November month earlier, the finance ministry has announced. Of this, wholesales bonds' value was PLN 68.43bn (vs. PLN 70.51bn a month earlier), T-bills - PLN 33.90bn (vs. PLN 33.90bn a month earlier). At that time, the total value of foreign debt maturing in 2011 was EUR 1.57bn, unchanged on the month. At the end of November, 71.5% of the treasury's debt was denominated in the PLN (vs. 72.6% a month earlier and vs. 73.3% at end-2009), while the share of EUR-denominated debt was 20.2% (vs. 19.4% and 18.9%, respectively), while the USD debt was 4.2% (vs. 3.9% and 3.6%, respectively). tom
FinMin sells bonds worth of EUR At Thursday's switch auction, the finance ministry sold Treasury bonds maturing in 118mn at switch auction August, 2023, of IZ0823 series, worth of PLN 459.88mn (EUR 118.2mn) repurchasing papers maturing in May, 2011, of PS0511 series worth of PLN 132.00mn and papers maturing in July, 2011 of OK0711 series worth of PLN 351.08mn. The ministry sold bonds of IZ823 series at minimum price of PLN 964.00-965.51, on the average yield of 3.082-3.097%. In December, at the switch auction, the ministry sold T-bonds of series PS0416, worth PLN 950.267mn, repurchasing papers of series DS0511 maturing on May,2011 at PLN 936.644mn. ISB
BANKING AND FINANCE
Deposits and credits rise by 9.0% y/y The value of deposits amounted to PLN 681.53bn at the end of November, 2010, which each in December means a rise of 2.8% in monthly terms and of 9.0% y/y. At that time, banks' liabilities were at PLN 768.71bn, i.e. down by 0.1% m/m and up by 9.0% in annual terms, the National Bank of Poland (NBP) has reported. Deposits of households were PLN 421.09bn (+0.3% m/m and +9.8% y/y), while enterprises' deposits - at PLN 181.19bn (+6.0% m/m and +9.9% y/y). Liabilities from households amounted to PLN 479.31bn (+0.3% m/m and +13.9% y/y), while from enterprises - to PLN 219.14bn (-1.8% m/m and -0.3% y/y). This year, bank economists expect deposits' growth to continue to accelerate, while they do not yet envisage a run for corporate credits, even though the economic situation will likely improve further - Polish enterprises are likely to keep financing their still moderate investments primarily with their retained profits. ISB, tom
Treasury picks global and domestic The treasury ministry has selected a consortium of investment banks, which will act as coordinators of Bank BGZ's IPO global coordinators in the IPO process of the cooperatives Bank BGZ, the treasury has announced. Citi and UBS, banks from the Top 10 2010 Equity League Table in Europe, which actively expand their presence in Poland, will be the global coordinators of the offer, while PKO BP and Banco Espirito Santo Polska, institutions with strong position on the Polish financial market, will act as domestic bookrunners, the ministry said. In October, BGZ's EGM decided that the lender's initial public offering on the Warsaw Stock Exchange (WSE) would take place between May 1, 2011 and Jan 22, 2012. Earlier in October, the treasury ministry and the bank's strategic shareholder, the Netherlands' Rabobank signed an agreement on their cooperation related to the IPO. In May, 2010, the treasury and Rabobank (holding 59.35% in BGZ) engaged in negotiations on the sale of the state's 37.2% stake in the lender to Rabobank or another branch investor by the end of this year. However, after the talks ended in mid-July, the ministry said that BGZ was now slated for the IPO that should take place by the middle of 2011. ISB
Skarbiec TFI sees WSE's blue-chip The Warsaw Stock Exchange's (WSE) blue-chip index WIG20 will likely rise by about index WIG up by 14% in 2011 14% to 3,100 pts at the end of 2011, and WiG - 55,000-56,000, growing by about 16%, fund managers with mutual fund firm Skarbiec TFI deem. Analysts expect that in 2011, global financial markets will likely achieve positive return rates, mainly due to the positive data coming from the global economy. According to them, the Polish market has a chance to achieve better return rate than neighbouring markets. "The following factors may decide about the above situation: relatively safe valuations of Polish companies, optimal valuations level, the growing role of foreign investors that have so far avoided our market, high dynamics of "hard" macroeconomic data and companies' profits", Skarbiec TFI says. However, the negative risk factor for the above scenario is lower demand from open pension funds OFE that have big influence on the domestic market. In 2010, index
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED WIG20 rose by 14.9%, and WIG - by 18.8%. On Tuesday, WIG20 closed at 2794.58pts, up by 2.72% on the day, while WIG - at 48371.02pts, up by 1.93% on the day, reaching the highest level since May, 2008. ISB, tom
Banking climate indicator Pengab The banking climate indicator Pengab fell by 0.4pts m/m to 28.9pts in January according down by 0.4pts m/m to 28.9pts in to Monitor Bankowy, published by market research institute Pentor. A year ago, the January figure was 30.4pts. The aggregate forecast indicator amounted to 26.2pts in January, and was lower by 0.3pts vs. the last month, while the evaluating indicator fell by 0.6pts to 31.7pts. "The general interest in zloty deposits has increased, especially in respect of firms. However, falls are possible in this sector. The fall was posted on FX term deposits, but it has a temporary character", the release reads. Credit action fell significantly, both on the market of zloty-denominated and FX credits. "A significant fall was posted on the consumer and mortgage loans markets for individual clients, but a rebound is expected - an especially strong one in respect of mortgage credits," the release reads. The market of corporate credit worth of up to EUR 1mn was stable. "The revival is expected in this segment," the report said. Loan prices were stable, and bankers forecast their growth. "In one-year perspective, a distinct fall of economic loans' interest rate is expected," Pentor also said. The general climate indicator, measuring the economic situation of bank branches in the current month, rose by 4.0pts m/m to 35.5pts, Pentor also said. The survey was carried out on Jan 5-11. Representatives of all types of the country's banks took part in a telephone survey, which included 200 bank branches throughout the country. ISB
Romanian property fund Fondul Fondul Proprietatea, established in 2005 to compensate Romanians whose properties Proprietatea allegedly could be listed were confiscated by the former communist government, is due to debut on the Bucharest on WSE Stock Exchange on Jan 25. At the same time, Franklin Templeton, which officially took over as investment manager and sole administrator of the Fund on in September, 2010, is now advocating a secondary listing, with the Warsaw Stock Exchange alongside the London and Vienna bourses as the preferred destinations, the Rzeczpospolita daily has reported. Templeton wants to present the fund's shareholders with such a recommendation, the newspaper explained. tom
Net inflows in mutual funds rises 4 The balance of inflows and outflows in 370 mutual funds amounted to PLN 9.4bn (EUR times y/y to PLN 2.4bn at end-2010 2.4bn) in the whole of 2010, which is nearly four times more than a year before, according to estimations of Analizy Online, a company which monitors the investment and pension fund market. In December alone, the surplus was PLN 451mn (the sixth monthly surplus in a row), with the value of inflows at PLN 13.6bn (100% above the monthly average for 2010), it added. In the whole year, the biggest inflows were directed at money and cash funds (PLN 5.9bn), followed by debt funds (PLN 3.1bn), pushing equity funds (the most popular type in 2009) to the number-three spot (with PLN 0.4bn of net inflows vs. PLN 2.1bn in 2009). ISB, tom
TMS Brokers to switch to WSE's main The share price of brokerage house TMS Brokers rose by nearly 31% to PLN 79.9 market in 2011, eyes Western during its debut on the Warsaw Stock Exchange's (WSE) non-regulated market acquisitions NewConnect. The company wants to switch to the WSE's main market in 6-9 months. It also wants to develop on European markets - by means of both opening its branches (in France) and acquisitions (e.g. in Germany or Spain), the firm's CEO Mariusz Potaczala said. TMS Brokers plans to continue to pay out dividends and might earmark 40-50% of last year's net profit for this purpose, he added. The IPO's proceeds exceeded PLN 85mn (EUR 22mn). Investors took up over 1.39mn shares, or slightly above 39% of the company's capital. The issue price was PLN 61. DM TMS Brokers specializes in money and FX markets. In H1/2010, it posted net profit of PLN 9.8mn on sales of PLN 18.8mn. In the whole of 2009, net profit was PLN 17.5mn on sales of PLN 31.9mn. ISB
COMPANIES AND INDUSTRIES
Antimonopoly watchdog UOKiK bans The Office of Competition and Consumer Protection (UOKiK) has disapproved of the PGE's EUR 10.9bn takeover of country's biggest power group PGE's take-over of Energa, the fourth-biggest power Energa utility, the UOKiK has announced. The watchdog argued that the takeover would lead to
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED limiting competition and stressed that in the near future, there was no chance for a single European energy market (on which PGE would not be a dominant player). PGE replied that it would appeal against the decision at the antimonopoly court. On Oct 20, 2010, PGE submitted the UOKiK with a the motion for the permit after it signed a conditional takeover agreement of Energa in late September. PGE planned to buy 4,183,285,468 shares, representing 84.19% of Energa shares from the treasury for PLN 7.53bn (EUR 1.9bn). PM Donald Tusk repeatedly stressed that he would like to persuade the watchdog's head - who had strongly opposed the transaction - to agree for the deal. Treasury minister Aleksander Grad also maintained that PGE's motion concerning the Energa acquisition was "strong." The Energa sale was a key element of last year's privatization plans, which ended up at PLN 22.0bn (EUR 5.6bn) vs. the plan of PLN 25.0bn as PGE purchased residual stakes in its subsidiaries from the treasury for PLN 3.1bn in the last days of 2010. ISB, tom
PGNiG raises natural gas sales by Blue-chip natural gas company PGNiG sold around 14.4bn cu.m. of natural gas in 2010 8.3% to record-breaking 14.4bn cu.m. vs. 13.3bn cu.m. a year before, the company has announced. Earlier, the company in 2010 targeted a return to the 2008 sales level of 13.9bn cu.m. in 2010 and a growth to above 14.0bn cu.m. only in 2011. PGNiG also reported that in Q4/2010 alone, the gas sales were 4.4bn cu.m. As for production volumes, they amounted to around 1.1bn cu.m. in Q4 and to around 4.2bn cu.m. in the whole of 2010, the blue-chip also said. The volumes of gas imports were around 2.8bn cu.m. and 10.1bn cu.m., respectively, it added. As of Dec 31, 2010, the high-methane gas underground storage facilities (i.e. underground gas storage facilities Brzeznica, Husow, Mogilno, Strachocina, Swarzow and Wierzchowice) contained around 820mn cu.m. of gas, including the volume managed by state-held gas transmission operator Gaz-System and the mandatory stocks managed by the economy minister. The firm stresses that the above data are estimates and may differ from the actual data, due to be disclosed on Mar 21, 2011 during the publication of the 2010 results. ISB, tom
Beer sales down by 0.3% to 33.9 mn hl The sale of beer beverages in Poland fell by 0.3% in the whole 2010, reaching 33.9mn hl, in 2010 Poland's leading brewing group Kompania Piwowarska (KP) has said. The group expects further improvement on the beer market in 2011, however, this rise may be hampered by VAT rates' rise. The sales' decrease comes from tragic events, such as the national mourning and floods, we well as unfavourable weather (short, hot summer, early winter with snow and frost), the firm said. In the same period, KP sold 14.2mn gallons of beer, which allowed the company to uphold the safe position of the leader on the market with share of 41.6% (nearly 1.1pp down y/y). KP is the owner of the biggest brands on the market, in respect of the sale: Tyskie, Zubr, but the highest rises between brands were posted by Wojak (over double rise) and Grolsch (nearly triple rise). ISB
PGNiG to up gas output to 4.7bn Blue-chip natural gas company PGNiG plans to increase its natural gas production to cu.m., crude oil - to 0.9mn tonne in around 4.7mn cu.m. from around 4.4bn cu.m. planned for 2011, the firm has announced. 2012 At the same time, crude oil output is to rise to around 900 thousand tonnes in 2012 from around 570 thousand tonnes in 2011. "In 2012, natural gas production is estimated at approximately 4.7bn cubic meters, measured as high-methane gas equivalent, of which approximately 4.3bn cubic meters will be produced in Poland and about 0.4bn cubic meters - in the Norwegian Continental Shelf," the release reads. PGNiG said that it aimed at increasing domestic gas production to around 4.4-4.5bn cu.m. in 2015 from last year's around 4.2bn cu.m. (measured as high-methane gas equivalent), while the combined domestic and foreign output would reach around 6.2bn cu.m. in 2015. "The production of crude oil in 2011 is estimated at about 570 thousand tonnes, of which approximately 480 thousand tonnes will be produced in Poland and about 90 thousand tonnes will come from the Norwegian Continental Shelf. In 2012, crude oil production is estimated at approximately 900 thousand tonnes, with about 500 thousand tonnes and 400 thousand tonnes coming respectively from Poland and the Norwegian Continental Shelf," the document also reads. ISB
Automotive exports up by 0.8% y/y to The value of the Polish automotive industry's exports rose by 0.83% y/y to EUR 1.49 bn EUR 1.5bn in October in Oct,2010, internet service AutomotiveSuppliers.pl. has said. Its report says that in Jan- Oct, 2010, the automotive exports' value rose by 9.09% and amounted to EUR 14.3 bn,
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED while in the whole year will reach - EUR 17.0bn in line with the forecast. "In October last year, the automotive export from Poland amounted to over EUR 1.49bn and was slightly higher (+0.83) from the obtained one a year ago. The export for non-European markets was marked by the dynamic of 181.85%, while deliveries for EU countries were lower by 7.86% than 12 month earlier", the release reads. ISB
Multiplex operator Multikino sees IPO The initial public offering of the country's second-biggest cinema operator Multikino is possible in Mar-Apr possible in March or April, the firm's CEO Piotr Zygo has said. The company has submitted the Financial Supervision Commission (KNF) with its issue prospectus, but the procedure has later been suspended. He added, though, that the timing would depend on the financial market's conditions. Zygo also said that in 2010, the company's revenue rose, though the number of tickets decreased. Earlier, Poland's number-one player, Cinema City reported that the number of its admissions in Poland fell to 15.00mn in 2010 from 15.44mn a year before. In H1/2010, Multikino posted net profit of PLN 7.25mn (EUR 1.75mn) vs. profit of PLN 2.31mn (EUR 0.56mn) a year before, on sales of PLN 141.51mn (EUR 34.13mn) vs. PLN 151.71mn (EUR 36.6mn), respectively. ISB
Over 53% of power generated in 2010 The turnover of electrical power on the Polish Power Exchange's (TGE) both markets is traded on Polish Power Exchange totaled 81,757.8 TWh in the whole of 2010, which was over 20 times more than a year TGE before, the TGE has announced. Thus, 53% of electrical power generated last year was traded on the TGE. In the entire 2010, the turnover on the day-ahead market amounted to 7,577.6 TWh (up by 146.59% y/y), while on the commodity derivatives market - 74.1 TWh, which is up by 11,165.44%, the bourse also reported. This year, TGE plans to introduce markets for biomass, coal and natural gas, it also said. ISB
Automobile production down by 1.4% The production of passenger and delivery cars amounted to 887,241 items vs. 899,737 in 2010 items in 2009, according to a report by Samar, the company, which monitors the car market. Passenger car output fell by 4.09% to 799255 items, while the production of delivery cars surged by 32.46% to 87986 items. In December alone, total car output was 66,438 items, which down by 2.59% m/m and down by 8.40% in annual terms. As for passenger car makers, merely Opel reported production growth in the whole of 2010 - by 64.66%, while the output of Fiat, Volkswagen and FSO dropped by 12.16%, 12.43% and 23.19%, respectively. However, Fiat remained the biggest producer with 522,6 thousand cars (65.39% of market share), followed by Opel with 158.7 thousand cars (19.86% of market share). The delivery cars segment is dominated by Volkswagen Poznan, with the market share of 87.72% (up by 3.49pps y/y). Its output grew by 37.94% to 77,178 items last year, while that of Fiat - by 3.20% to 10,808 items. tom
Number of housing permits down by The number of dwellings for which building permits were granted dropped by 2.2% to 2.2% in entire 2010 174,929 units, the Central Statistics Office (GUS) has announced. In December alone, the number of such permits rose by 2.9% m/m to 13,868 units, while in annual terms, it decreased by 5.1%. In the whole year, developers increased the number of dwellings for which permits were obtained by 8.2% to 68,581 units. The number of new residential constructions started in the entire 2010 rose by 10.6% to 158,064 dwellings, the GUS also said. In December alone, the number of new constructions was down by 20.5% m/m to 8,043 units, while in annual terms, it fell by 4.1%. In the entire year, developers started 63,015 dwellings, i.e. up by 42.2% on the year. The number of housing units handed over in 2010 fell by 15.2% to 135.715 dwellings, the stats office also reported. In December alone, the number of delivered units rose by 19.1% m/m to 15,005 units, while in annual terms, it dropped by 6.7%. In the whole 2010, developers completed 53,225 dwellings (which accounted for 39.2% of the total number of dwellings completed), i.e. by 26.4% less than a year earlier, the GUS also reported. ISB, tom
Penta Investments could invest EUR Regional PE firm Penta Investments could invest between EUR 80-250mn in Poland in 80-250mn in Poland in 2011 2011, the company has said. Penta reiterated that it was still considering three possible scenarios with regards to Zabka convenience stores chain, i.e. taking the firm to the stock exchange, selling it to a strategic investor or continuing its development within the Penta group. According to market speculations, the IPO of Zabka could be worth over PLN 1bn (EUR 250mn). Penta is also active on the frozen food market in Poland. Last
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED October, it signed a deal with Ipopema FIZ investment fund to merge their frozen food firms, Penta's Iglokrak and the Polish fund's Iglotex. Both funds will hold 50% of the merger entity. The merged firm is expected to be listed within the next few years. ISB
Treasury backs from privatisation of The treasury ministry has wound up the privatisation process of chemical plants ZCh chemical plants ZCH Police, ZA Police and ZA Pulawy without picking an investor for any of the companies mainly due to Pulawy unsatisfactory price offers, the ministry has announced. It stressed that the prices offered failed to reflect the firm's current market value. The ministry plans to renew the companies' privatisation this year, with decisions as to the process's directions due at the turn of Q1 and Q2/2011. Earlier, ZA Pulawy said that it would place a bid for its peer, while the offer for ZA Pulawy was filed by the firm's employees company Chemia-Pulawy. The ministry wanted to sell 9.686mn shares (or 50.67% stake) in ZA Pulawy and 44.557mn shares (59.41% stake) in ZCh Police. In the last 12 months, their share prices surged by 35% and 84%, respectively. According to the current valuation of the companies on the Warsaw Stock Exchange (WSE) these stakes would be worth of PLN 1,050.93mn (EUR 269mn) and PLN 488.79mn (EUR 125mn), respectively. ISB, tom
Biggest housing developer J.W. The country's biggest housing development company J.W. Construction Holding plans to Construction eyes 20% rise in units increase the number of its housing units sold this year by 20% to 1,500 flats (vs. 1260 sold in 2011 items in 2010), the firm's chief shareholder and head of its supervisory board has told the Parkiet daily in an interview. The country's economic situation is sound, which should prompt customers to buy flats, he argued. The company, one of the leaders of the Warsaw market, plans to launch new projects also in Katowice, Lodz, Szczecin, Wroclaw and Gdansk-Sopot-Gdynia as well as to enter new market in Poznan. Wojciechowski stressed that the firm would continue its strategy of focusing on selling turn-key flats rather than units at earlier stages of construction as this strategy proved more profitable. tom
Number of petrol stations rises to The number of petrol stations rose to 6755 outposts at the end of 2010 from 6715 a year 6755 in 2010, first growth in 3 years before, according to the data of the Polish Organisation of Oil Industry and Trade (POPiHN), cited by business portal WNP.pl. The portal stressed, though, that the data concerning privately-owned stations were only estimates. In 2010, the number of stations owned by foreign concerns grew to 1351 from 1311 a year before, which was the main factor responsible for the entire market's rise. WNP.pl notes that at the same time, the decline of retail networks of Poland's main players has decelerated - the number of PKN Orlen's outposts dropped by 33 stations to 1714, while Grupa Lotos cut its network by 3 stations to 324 outposts. Among foreign concerns, BP is the leader with 402 stations, followed by Shell with 381 stations and Statoil with 308 outposts. At the end of last year, super- and hypermarkets ran 146 petrol stations. tom
Modern office area in Warsaw rises by The volume of modern office area in Warsaw rose by almost 190 thousand sq.m. in about 190,000 sq.m. in 2010 2010, reaching 3.436 mn sq.m. in total, it ranspires from Warsaw Research Forum. "The biggest completed projects last year were as follows: Poleczki Business Park I (buildings A1 and A2) in the South-Lower zone, New City Mokotów in the South-Upper zone, Crown Square in the Western zone, and Zebra Tower in the Centre zone," the release reads. Market data, which are prepared together with analysts, concern the volume of modern office area, new completed buildings, the number and volume of office lease transactions and the amount of unleased area. ISB
Sweden's Vattenfall could sell Polish Sweden's power group Vattenfall AB, whose share in the Polish power market is 7%, assets 'relatively quickly' does not rule out moving "relatively quickly" to selling its Polish assets, its executive board member Tuomo Hatakka has said in an interview with Dow Jones Newswires. He stressed, though, that at the same time, Vattenfall was in no rush and was now examining "if the sale of the [Polish] assets is the right thing to do strategically." He also declined to say if and how many investors had expressed interest in the firm's Polish assets. Earlier, preliminary interests in these assets was mentioned by natural gas producer PGNiG, power group Tauron and (unofficially) power utility Fortum. In Poland, Vattenfall owns power distributor Vattenfall Distribution Poland SA (formerly, GZE), heat-and-power plant group Vattenfall Heat Poland (formerly, EC Warszawskie) and 18.67% stake in the third-biggest power group Enea. ISB, tom
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED
China's LiuGong buys civil part of Chinese construction equipment manufacturer Guangxi Liugong Machinery Co. signed a steel mill Huta Stalowa Wola preliminary agreement to buy the civil part of steel mill Huta Stalowa Wola (Division I of HSW), with treasury minister Aleksander Grad (now visiting China) participating in the ceremony, the treasury has announced. LiuGong has come to an agreement regarding transaction price and other important conditions into a preliminary enterprise acquisition agreement with HSW over acquisition of assets and a subsidiary involved in civil production of Division I of HSW, the ministry reported. The assets include the country's biggest producer of excavators and bulldozers, with annual revenue of PLN 418mn (EUR 108mn). According to unofficial estimates presented by the Rzeczpospolita daily, the deal's value is around PLN 250mn (EUR 65mn). tom
PGE, treasury prolong accord on sale The country's biggest power group PGE and the treasury ministry have signed an annex to of power group Energa by 12 months the agreement on the sale of 84.19% in Energa, the fourth-biggest power utility, for PLN 7.53bn (EUR 1.9bn). Under the annex, the accord's termination date has been set for 12 months since the date of the agreement, while PGE and the state treasury decided to suspend the course of termination date of the agreement until the date of the legally valid conclusion of the appeal proceeding to the decision of the Office of Competition and Consumer Protection (UOKiK) prohibiting concentration of PGE and Energa, PGE has announced. In mid-January, the UOKiK banned the acquisition arguing that it would lead to limiting competition and stressed that in the near future, while there was no chance for a single European energy market (on which PGE would not be a dominant player). PGE replied that it would appeal against the decision at the antimonopoly court. PM Donald Tusk repeatedly stressed that he would like to persuade the watchdog's head - who had strongly opposed the transaction - to agree for the deal. Treasury minister Aleksander Grad also maintained that PGE's motion concerning the Energa acquisition was "strong." The Energa sale was a key element of last year's privatization plans, which ended up at PLN 22.0bn (EUR 5.6bn) vs. the plan of PLN 25.0bn as PGE purchased residual stakes in its subsidiaries from the treasury for PLN 3.1bn in the last days of 2010. ISB, tom
Soft drink firm Maspex sees revenue The country's biggest soft drinks maker Maspex Wadowice expects to increase its up by 5% in 2011 after 3.5% growth in revenue - merely via its organic growth - by around 5.0% in 2011 after it rose by 3.5% to 2010 above PLN 2.5bn (EUR 0.65bn) in 2011, the privately-owned firm's CEO Krzysztof Pawinski has told the Rzeczpospolita daily. He upheld the stance that the firm (of which he is one of the six co-owners) could debut on the Warsaw Stock Exchange (WSE), if it sought financing for a big-scale (i.e. of a firm with annual turnover of PLN 1bn) takeover. In 20 years of its existence, Maspex - which operates on soft drinks and pasta markets - has taken over 14 companies, including 8 foreign firms. tom
Boryszew cleared to 2nd phase of bid Industrial holding Boryszew's non-binding offer to buy German automotive sector firm for Germany's SaarGummi SaarGummi has been accepted and Boryszew has thus been cleared for further phase of the sale, the company has announced. Boryszew placed the free offer to purchase assets of enterprise SaarGummi GmbH in bankruptcy in Germany, assets of enterprise SaarGummi Deutschland in bankruptcy, shares in subsidiaries of SaarGummi GmbH, participations titles by SaarGummi GmbH in joint-ventures with third parties or other common projects of SaarGummi GmbH with third parties in Europe and in the world. SaarGummi Group is the leading in Europe and key in the global scale producer of highly technological, mobile and static vehicles seal systems. The group's products have been applicable also out of automotive branch, among others in modern building industry and in aeronautics. SaarGummi has 12 production plants (including three joint-venture ones): in Germany, Brasil, Czech Republic, Spain, USA, China, India, Russia and Slovakia. In mid-August, Boryszew completed a PLN 74mn takeover of Maflow's Polish unit, also buying its inventories and ready products. Then it also acquired Maflow's subsidiaries in Italy, Spain, Brazil and India. Boryszew is now also carrying out due diligence at another Italian auto sector firm, Cablelettra. ISB
Vodka sales in Poland seen falling by Poles will likely purchase nearly 275mn l of vodka in 2015, which will be 5% less than the 5% to nearly 275mn l in 2015 2010 figure, according to forecasts of the International Wine and Spirit Research (IWSR), cited by the Rzeczpospolita daily. However, by that time, Poland will not lose its number-four position in the world's vodka markets, the newspaper adds. It notes that
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED already in 2010, the sector's major players started to counteract the slowdown by introducing new mainstream brands. tom
POLITICAL
Ruling PO preliminarily sets general The national council of the senior ruling party, the Civic Platform (PO) Has approved of poll date at Oct 23 the preliminary date of the parliamentary elections at Oct 23, the PO's MP Danuta Pietraszewska has told the Radio Information Agency (IAR). She stressed, though, that the date was merely tentative, while the final decision was up to President Bronislaw Komorowski. According to Pietraszewska, the Premier would like the PO's preliminary election candidate lists to be ready by the end of March, while the final lists - by the end of April. PM Donald Tusk is due to discuss the election schedule with the President during their forthcoming meeting, she concluded. According to all current public opinion surveys, the PO would likely receive a clear majority of votes, but it is unclear whether it would be able to form a parliamentary majority on its own. In H2/2011, Poland will be holding the rotating EU presidency. tom
Support for ruling PO down by 9pps The support for senior ruling centre-right Civic Platform (PO) plummeted by 9pps in the m/m, opposition PiS's- up by 4pps last month, to 45% (from the 2010 highest level of 54%), according to the Jan 13-17 survey by pollster GfK Polonia, commissioned by the Rzeczpospolita daily. At the same time, the support for the biggest opposition party, centre-left Law and Justice (PiS) was up by 4pps, to 30%. In the general polls of October, 2007, the PO received 41.5% of votes and the PiS - 32.1%, while in the November, 2010 local government elections (on the provincial councils level) - 30.89% and 23.05%, respectively. Other parties that would pass the 5% threshold for parliamentary representation would be the post- communist Democratic Left Alliance (SLD) with 12% of votes (up by 2pps) and the junior coalition partner, the Polish Peasants' Party (PSL) with 5% (down by 1pp m/m). Political experts quoted by the newspaper attribute the PO's loss of some of its popularity primarily to the publication of the Russian report on the Apr 10 plane crash that killed President Lech Kaczynski, his wife and 94 other high-ranking political and military officials near Smolensk in Russia. The report, ordered by the Russian government at the Interstate Aviation Committee (MAK) did not answer the questions on the possible mistakes made by the personnel of the Smolensk airport, focusing merely on the Polish side's shortcomings. Experts deem that other recent developments - such as delays in railway connections in December and the plan to cut down on transfers to pension funds - were of lesser importance, as proved by other public opinion surveys. tom
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED CZECH REPUBLIC
MACROECONOMIC REVIEW
PM says Czech Republic to adopt euro The Czech Republic will adopt the euro only after it meets the Maastricht criteria and the after meeting Maastricht criteria. European currency proves to be more advantageous than maintaining the Czech crown, PM Petr Necas told a news conference. Necas underlined that the country is to introduce the single currency only after the euro zone restores its stability and if the costs of euro adoption are lower than the costs or maintaining the independent crown, the government website vlada.cz informed. We remind that at the end of December, the government decided to refrain from setting a euro adoption date for the time being in line with joint recommendations of the central bank and the finance ministry that the country will not be able to fulfil in a sustainable manner the convergence criteria this year. Under the Maastricht criteria, the country's public finance deficit is not to exceed 3% of GDP and its total public debt is not to be higher than 60% of GDP.
Household savings grow by 5.7% to Household savings grew by 5.7% y/y to CZK 2,065.4bn (EUR 83.9bn) in the third 56.4% of GDP in Q3 2010. quarter of 2010, representing 56.4% of full-year GDP, central bank data showed. In quarterly terms, savings fell by 0.7%. The increase in the first three quarters of 2010 suggests that Czechs do not expect their incomes to improve significantly in the months to come nor the unemployment rate in the country to decrease. Household investments in deposits and foreign currency rose by 4.7% y/y. Investments in shares and other equity increased by 5.3% y/y, supported by the recovering capital market. Household loans, however, also increased in the period by 4.4% on the year. Long-term credits were by 5.2% more compared to the same period of 2009. The credit growth might create a risk of rising number of bad credits in case the economic recovery momentum slows down and the labour market deteriorates. Additional government austerity measures are also expected to hurt households’ incomes. The net financial assets of the general government sector were negative at CZK 76.1bn at end-September and represented 2.1% of GDP on a 12-month rolling basis. The government indebtedness surged 20 times on the quarter and on annual basis was well above the CZK 265.4bn savings a year ago. This development mainly reflected the necessity for the government to finance budget spending amid still low revenues by issuing new debt instruments. On the asset side, currency and deposits increased in annual terms, while shares and other equity decreased. On the liability side, securities other than shares and loans increased compared to the same period of 2009. The net borrowing of non-financial corporations decreased by 5.5% y/y to CZK 3,111.7bn at end-September, accounting for 85% of GDP, on the back of growing investments in currency and deposits, and other receivables on the assets side, as well as lower sales of shares and other equity.
Industrial producer prices in Industrial producer prices rose at their fastest annual rate since October 2008 increasing December rise at fastest pace in 26 by 3.7% y/y in December 2010, up from 2.7% in the previous month, statistics office data months. showed. The growth was supported by the 30.1% rise in the prices of coke and refined petroleum products, the 10.1% rise in the prices of basic metals, the 12.7% rise in the prices of chemicals and chemical products and the 8.6% increase in prices of mining and quarrying. Food, beverages and tobacco prices increased by 1.8%, while transport equipment prices fell by 3%. In full-2010, the industrial producer prices grew by 1.2% y/y on average, versus an average decline of 3.1% y/y in 2009. The industrial prices growth might be expected to further speed up in the following months on the back of oil and gas prices which have already started to climb up and are expected to gradually gather pace. However, the faster increase of industrial prices will be hindered by the relatively weak world demand and unused capacities. The resumed growth in industrial producer prices rules out further interest rate cuts on part of the central bank as their development suggests a moderate acceleration trend of the consumer price inflation. Only the exact timing for the start of the monetary tightening is currently under certain question. Agricultural producer prices grew for a fifth consecutive month in December, when they registered a 23.6% y/y increase, speeding up from 23.4% in November. Crop prices
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED surged by 39.4% - cereals rose by 54.6%, oil plants by 37.2%, potatoes by 87.6%, fruits by 25.5% and vegetables by 50.3%. In 2010, the agricultural producer prices grew by 5.4% y/y on average, mainly due to faster growth in the last five months and the low comparison base in 2009. As expected, rising crude oil prices and poor harvest, together with producer price developments pushed up consumer prices that grew by to 2.3% y/y in December speeding up from 2% in November, exceeding the central bank target for the first time in 2010. The higher world grain prices, as a result of the weak harvest in Russia and Ukraine, will also influence the domestic market in the next months. The inflation, however, will be moderated by the still relatively subdued household consumption, which is to remain quite weak in view of the planned budget austerity measures, which leaves certain room for a delay of the central bank’s monetary tightening. Construction prices fell by 0.4% y/y in December, slightly higher than the 0.3% annual decline in November. They fell by 0.2% y/y in 2010, the first decline since 1994. The prices of market services fell by 1% y/y in December, decreasing for a twelfth month in a row. In 2010, they were down by 1.2% y/y on average.
Terms of trade worsen by 3.4% y/y in Terms of trade fell for a twelfth month in a row registering an annual decline of 3.4% y/y in November. November, slightly down from the 3.6% decrease in October, statistics office data showed. Import prices increased by 4.3% y/y in November, speeding up from 3.8% in October. This was the seventh consecutive month in which an annual increase in import prices was reported, after 13 months of decline. The increase was supported by the weakening of the CZK exchange rate vis-a-vis the USD, and mainly reflected the growth in the prices of mineral fuels, lubricants and related materials, which rose by 20.3%, up from 19.7% a month ago. The growth also reflected the fact that the import prices of crude materials went up by 34.2% y/y in November. Import prices of miscellaneous manufactured articles went down by 1.5% and of machinery and transport equipment were down by 0.1%. Export prices grew by 0.8% in November after being flat on the year in October. Prices of crude materials registered the highest rise of 25.4%. Mineral fuel prices rose by 10.7% and chemicals by 7.1% y/y. Export prices of machinery and transport equipment fell by 2.7% and of miscellaneous manufactured articles by 2.2%. The considerable investment upgrades in the main export-oriented industries over the past years and the already quite visible economic recovery of the main trading partners this year are likely to support the trade surplus in 2010. However, it is not likely to exceed the 2009 level as the unstable exports growth pace suggests that the foreign demand is not that strong as earlier expected due to the uneven and unsustainable economic recovery abroad. Therefore, the implementation of effective export promotion measures and the identification of new market niches for the exporting companies would be of key importance for sustaining high foreign trade surpluses in the future.
Government approves higher 2011 The Czech Republic’s budget revenues and spending will grow by CZK 11.7bn in 2011 budget revenues, spending, keeps gap due to measures aimed at limiting the state support to photovoltaic power plants, the unchanged. government decided on January 19, 2011. Originally the budget revenues were planned at CZK 1,044.8bn and expenditures at CZK 1,179.8bn. The government expects to generate CZK 4.2bn in budget proceeds from the introduced 26% withholding tax on solar energy, CZK 4.8bn from a 32% tax on carbon emissions permits granted in 2011 and 2012, CZK 1.7bn from the higher fees for expropriating land from the agricultural fund for building solar power plants and CZK 1bn more from value added tax (VAT), the government website vlada.cz informed. These additional revenues are to be spent on partly offsetting the expected hike of electricity prices due to the solar boom. Thus, the electricity prices will increase by 4.6% for households and by 5.2% for companies in 2011, well below the originally expected increases of 11.2% and 15.4%, respectively. As both revenues and expenditures were raised by the same amount, the central budget deficit will remain unchanged at CZK 135bn or 3.5% of the projected GDP. Therefore, the general government’s deficit will represent 4.6% of GDP, down from 4.8% pledged in the country’s convergence programme, from 5.8% in 2009. The government is seeking to lower the public deficit to below 3% of GDP in 2013 and to achieve a balanced budget in 2016.
Government plans to abolish tax The government plans to abolish tax exemption for lotteries and betting firms under exemption for lotteries, betting firms. amendments to the income tax law, CTK newswire reported. The tax revenue will be
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED used to support the ëîöàë sport, culture and charity îrganisations, finance minister Miroslav Kalousek said. Deputy finance minister Tomas Zidek has earlier said that hazard would be subject to a single 21% tax. Currently lottery and betting companies pay 6-20% of their revenues for publicly beneficial objectives, mainly sports. The annual revenue of lotteries, betting and gaming stands at CZK 130bn, of which some CZK 95bn is paid in winnings. Profits of the companies are estimated at CZK 35bn.
Monetary base falls 1.2% m/m in The monetary base decreased by 1.2% m/m to CZK 431.5bn (EUR 17.4bn) at the end December. of December, the central bank said. In annual terms, the monetary base rose by 0.3%, slowing down from the 3.2% y/y growth in November. Foreign reserves covered 184% of the monetary base as of end-December, up by 6.4pps on the year, which suggests a lack of major short-term liquidity problems in the financial system. The monetary base comprises cash in circulation and vaults as well as and reserves of commercial banks kept at central bank accounts.
Government okays CZK 131.6bn bond The government decided on January 19 to issue CZK 131.6bn bonds in 2011 to cover issue to finance 2011 budget deficit. part of the central budget deficit planned at CZK 135bn, the government website vlada.cz reported.The bonds will have a maturity of up to 55 years. The finance ministry will borrow CZK 219.5bn in 2011 under its debt financing and management strategy, published in December 2010. According to the strategy, the issuance of medium and long-term bonds, including direct secondary market sales and sales to the EIB (up to CZK 16bn), will be at the value of between CZK 174bn to CZK 194bn in 2011. Some CZK 86-194bn is to be issued on the domestic market and no more than CZK 88bn - on the foreign markets. The ministry plans to make at least one Eurobond issue in 2011, depending on the market conditions. The ministry is to borrow CZK 218.8bn in 2012 and CZK 207bn in 2013. The state debt totalled CZK 1,344.1bn at end-2010, up 14.1% y/y but down 2.9% q/q. The debt equaled to 36.5% of the projected GDP. Per capita debt increased to CZK 128,000. The country’s debt is expected to continue rising in the next few years. It is to grow to CZK 1,342.5bn in 2011, to CZK 1,448.8bn in 2012 and to CZK 1,556.2bn in 2013.
Trade unions call for higher pension of The umbrella trade union CMKOS has said that pensions of people with average monthly high-income people. income of over CZK 28,000 should be raised to comply with the Constitutional Court conclusion that currently they are “inappropriately” low, CTK newswire reported. Under the draft pension reform presented by CMKOS, the pensions of the high-income Czechs is to be formed by taking 20% of the average monthly income instead of 10% at present, which would cost CZK 28.6bn until 2020. Currently, 100% of the average monthly income for low-income groups (up to CZK 11,000) and 30% of the average monthly income for middle-income groups (CZK 11,000-28,000) is being taken for forming the pensions. By contrast, the labour ministry wants to increase the pensions to the highest income category by lowering with 1-5% the pensions for the rest of the categories, which form about 80% of future pensioners. CMKOS also proposed that the current contribution to the pay-as-you-go pension system is preserved at 28%, while the government works with two options of lowering the contribution to 23%. Under the first option, people would contribute 3pps of their 23% pension contributions to private pension funds (to cost CZK 18bn per year), and the remaining will go to the state pension funds. Under the second option, the entire contributions would go to the state pillar. The private fund pillar will be voluntary and people will contribute another 3% of their gross wage into individual pension accounts there. CMKOS also proposes that pension companies are created from the pension funds – they are to enable people younger than 40 years of age to save 3-9% of their wages in individual accounts, while the state would contribute another 3%. Special pension plans for workers doing heavy manual and risky work for a long time will be introduced – they would receive 3% pension contribution from their employers. In the meantime, PM Petr Necas (ODS) joined finance minister Miroslav Kalousek (TOP 09) on the stance that a unified VAT of 19% should be introduced to finance the pension reform. Currently the low VAT rate is 10% and the high VAT rate is 20%. Higher unified VAT rate is opposed by junior coalition partner VV, as well as by the opposition parties CSSD and KSCM. PM Necas said that the introduction of the new VAT rate, which is expected to bring additional CZK 45bn per year to state coffers, could be accompanied by some compensation for the low-income
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED and socially sensitive groups of population. PM Necas wants the government to reach agreement on the pension reform by the end of February or in early-March at the latest. The coalition parties have not yet agreed whether the private pension schemes would be obligatory or optional either - TOP 09 prefers the former option, ODS - the latter.
BANKING AND FINANCE
Household mortgage lending grows Local mortgage banks provided 50,386 mortgage loans worth CZK 84.3bn (EUR 3.3bn) 13% in 2010 – Fincentrum Hypoindex. in 2010, which is by 13% more than in the previous year, the Fincentrum Hypoindex indicator showed. The lending equalled to 2.3% of the projected GDP. In December alone, mortgage lending soared by 71.7% y/y to CZK 10.3bn, reaching its highest value since July 2008, according to data published by hypoindex.cz website. The number of new mortgage loans provided last month was 6,106. The growth was supported by the gradual revival of consumer demand and improvement of consumer confidence as the country starts to recover from the global financial crisis. The low interest rates and the fact that analysts expect them to soon increase, also had a positive effect on the increasing number of mortgage loans. However, the market might be seen to deteriorate again in 2011 as the planned by the government austerity measures are to hurt incomes and the central bank is expected to raise rates later in the year. In the beginning of January, major mortgage bank Hypotecni Banka estimated that the household mortgage market had expanded by 11% to CZK 82bn in 2010, after contracting by 38.4% y/y to CZK 73.9bn in 2009.
Health insurance premiums fall by Czech health insurers reported written premiums of CZK 119.2bn (EUR 4.8bn) in the 2.1% in Jan-Sep. first nine months of 2010, down by 2.1% y/y, statistics office data showed. The data do not cover health insurance paid by the state and the collected fines. The bulk of premiums - 88.9% or nearly CZK 106bn (down by 0.1% y/y), were those written from employers. Self-employed paid CZK 10.9bn, down by 16.9% y/y, and Czechs without taxable incomes paid CZK 2.3bn, down by 7.3% y/y. According to the latest health ministry data, the revenues of health insurance companies (written premiums reduced by premiums not paid) increased by 1.4% y/y to CZK 158.2bn in the first nine months of last year. The ministry’s data included health insurance paid by the state, which by 6.8% y/y to CZK 723 per person a month. Total costs increased by 0.2% y/y to CZK 166.6bn, while the cost of healthcare (accounting for 94.7% of overall costs) increased by 1.2% y/y to CZK 158bn at end-September, the statistics office said. The total assets of health insurance companies reached CZK 78.1bn at end-September, down by 19.9% y/y. Nine health insurers operated on the local market as of end-September, down from 10 a year ago.
Lending of building societies falls by The country’s five building societies provided 113,696 housing loans worth CZK 58.3bn 12% in 2010. (EUR 2.3bn) in 2010, down by 12% y/y, CTK newswire reported. The lending equalled to 1.6% of the projected full-year GDP. The decline was higher than the 10% expected by the Association of Czech Building Societies (ACSS). The association expects this year’s results to be close to the ones reported in 2010. Ceskomoravska Stavebni Sporitelna (CMSS) was the largest building society in terms of value of provided loans, with CZK 27.2bn worth of loans, down by 14% y/y. Second ranked Raiffeisen Stavebni Sporitelna, whose loans fell by 1.3% to CZK 10.6bn. Modra Pyramida followed with loans of CZK 9bn, down by 13% y/y. It was mainly Raiffeisen that drove the lending up amid the falling interest. Stavebni Sporitelna Ceske Sporitelna, which ranked second some 2 years ago and third about a year ago, reported a 16% y/y drop in the value of housing loans extended in 2010 and was outperformed by Wuestenrot, which provided loans worth CZK 5.9bn, down by 17% y/y. The building societies signed 906,143 new contracts on home-building savings in 2010, up by only 2.2% y/y, reflecting expectations for a continued fall in housing prices and rising unemployment, which made households delay their investments. CMSS signed the largest number of new contracts - 364,277, up by 19.6% y/y. The sector is not likely to recover soon, as President Vaclav Klaus ratified an amendment cutting the state subsidies to home-building savings as part of the government’s austerity budget measures. Under the amended law, a 50% tax on the state contribution to home-building savings for 2010 will be introduced and paid in 2011 - it will apply even to already negotiated contracts. In the next years the state contribution will
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED be reduced to 10% from the current 15% of the annual client deposit and its maximum amount should be at CZK 2,000 per year. Moreover, interest income on home-building savings will not be tax-exempt any more.
Ceska Sporitelna to open 10, Ceska Sporitelna, the country’s second largest high-street bank, plans to open 10 and modernise 80 branches in 2011. modernise 80 branches this year, the bank said on its website. It opened seven branches in 2010, expanding its network to 667, including three CS Premier Branches for affluent clients, which were launched in the second half of 2010. The bank said it will launch in 2011 the so-called “mobile branch” to serve clients during the renovation or to operate as an independent branch during fairs and festivals. It will start operating later in January during the renovation of a branch in Brandys nad Labem. In 2010, the bank launched 58 new ATMs (4.8% y/y increase), of which 13 deposit ATMs, and 34 transaction terminals. It now operates a network of 1,276 ATMs and 36 transaction terminals.
COMPANIES AND INDUSTRIES
Government enables future merger of The government has decided to partly privatise Prague airport operator allowing the future Prague Airport and Czech Airlines. merger of the company with national flag carrier Czech Airlines (CSA), government website vlada.cz reported. The government will offer for sale short-term financial assets worth CZK 55mn of Sprava Letiste Praha. CSA and Sprava Letiste Praha will be merged into joint-stock company Cesky Aeroholding, which will have a share capital of CZK 50mn. The new holding structure is expected to streamline air transportation and ground services, to boost restructuring and growth of the two merged companies, as well as to make their operations more effective due to a number of shared services.
EPH still interested in buying 82.9% of Czech energy group Energeticky a Prumyslovy Holding (EPH) is still interested in buying Polish Energa. 82.9% of Polish power distributor Energa, CIA newswire quoted EPH spokesperson Martin Manak. The Polish antitrust office decided on January 14, that it will not permit power group Polska Grupa Energetyczna (PGE) to buy state-controlled Energa, as the acquisition will distort the competition on the market. PGE won the tender for Energa in September, offering to pay PLN 7.5bn (CZK 46.9bn, EUR 1.9bn) for the stake. According to earlier information, the merged entity of PGE and Energa would have controlled over 40% of the market. EPH was established by financial groups J&T and PPF - each of them controlling a 40% stake (PPF jointly with Generali), while former J&T partner Daniel Kretinsky holds the remaining 20%. So far EPH’s major acquisition is a joint investment with CEZ in German brown-coal mine Mibrag. EPH has reportedly failed in the tender for 51% of Polish power utility Enea - the stake is valued at some PLN 4.3bn (EUR 1.1bn). EPH is also eyeing the acquisition of Steag, the energy division of German group Evonik.
Prague court launches insolvency The Prague municipal court launched insolvency proceedings against the country’s largest proceedings against lottery firm lottery company Sazka upon request of local billionaire Radovan Vitek, CTK newswire Sazka. reported. Vitek is Sazka’s largest creditor as he bought nearly CZK 1.5bn of bank claims over the company. He filed the insolvency claim after the company failed to repay its debts by the deadline - January 17. According to media reports ,Vitek is willing to withdraw the insolvency claim only after a replacement of Sazka’s managemen, including the dismissal of CEO, Ales Husak. Vitek has earlier said that Sazka should restructure and issue new shares in the amount of some CZK 10bn, which corresponds to its current debts. Vitek has also said that following the restructuring, Sazka’s shareholder structure will be changed and the sports association CSTV, which now owns a 68% share, will no longer control the company. Sazka CEO Ales Husak said on January 14 the firm would fight any insolvency claim because it had a high market value. He estimates Sazka market price at CZK 15bn, while the value of its subsidiaries is about CZK 4bn. Sazka management and representatives of five foreign funds and banks, which own most of Sazka bonds, will meet later today to decide how to restructure the debts. Sazka controls 94% of the domestic lottery market, and more than 6% of the gaming market. Sazka ran into debt during the construction of the multipurpose O2 Arena in Prague, which cost the firm CZK 7.2bn. Entrepreneur Martin Ulcak, Holding Synot and financial group Penta offered financial help to the company. Ulcak proposed to pay CZK 220mn per year for a
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED period of 10 to 15 years conditional on keeping net profit at current levels. Holding Synot offered CZK 250mn per year for 15 years in exchange for a 2/3rd stake in the company. Penta is ready to give Sazka CZK 130mn for 30 years in exchange of a 100% stake. All of them offered CZK 2-3bn of immediate help. On January 13, the international rating agency Standard & Poor’s (S&P) downgraded Sazka long-term corporate credit rating to ‘D’ (Default) from ‘CC’ after the company failed to pay the principal - due on Jan 12- on its EUR 215mn secured bond maturing in 2021. Thus, S&P also lowered to ‘D’ from ‘CC’ the issue rating on the bond issue.
EPH merges with Elektrarny Energy group Energeticky a Prumyslovy Holding (EPH) has merged with coal-fired Opatovice, Elektrizace Zeleznic Praha. power plant operator Elektrarny Opatovice and power systems developer Elektrizace Zeleznic Praha, the CIA news agency reported. The subsidiaries of the two companies have also become part of EPH, including Prague heat supplier Prazska Teplarenska. We remind that in September 2010 the antitrust office UOHS approved EPH’s acquisition of 49% in Prazska Teplarenska Holding, which owns 47.33% stake in Prazska Teplarenska. Following the transaction, EPH and the city of Prague will gain control of the holding company. In a separate statement EPH said it plans to issue bonds and place shares on the stock exchange in 2012, E15 daily cited CEO Daniel Kretinsky as saying. The company will use the issue proceeds to finance its expansion, which will also be funded with bank loans and reinvested profit. EPH also plans to set up EP Energy to deal with energy assets and float shares and bonds. EP Energy will incorporate EPH’s companies - United Energy, Pilsen Energy, United Energy Trading, Prvni Energetika (PEAS), Energzet, Aise, Czech Wind Holding, VTE Pchery, VTE Pastviny, Powersun, Triskata, Alternative Energy, Arisun, Elektrarny Opatovice and Greeninvest Energy, including the 49% EPH has in Prazska Teplarenska Holding, the 47.33% stake in Prazska Teplarenska and the 50% stake in German brown-coal mine Mibrag. Kretinsky expects EPH operating profit to reach EUR 500mn in 2010. In the first nine months of last year the company had an operating profit of EUR 350mn. EPH was established by financial groups J&T and PPF - each of them controlling a 40% stake, while Kretinsky holds 20%.
CEZ sets price for EUR 40mn bond The country’s major energy company CEZ has set at 4.75% the average annual coupon issue in Germany. on its EUR 40mn (CZK 1bn) bond issue, to be launched in Germany, the company said on its website. The bonds will have a maturity of 12 years. The expected issue date was set for January 31. We remind that CEZ raised EUR 40mn from the issue of 20-year bonds on the German market on November 29, 2010. CEZ net profit fell by 14.9% y/y to CZK 40.2bn (EUR 1.6bn) in Jan-Sep, while its revenues increased by 2.5% y/y to CZK 144.4bn.
Skoda Auto car sales grow by 11.5% The country’s major car manufacturer Skoda Auto sold 762,600 cars in 2010, up by in 2010, driven by China. 11.5% y/y, mainly due to strong sales on the Chinese market, CTK newswire informed quoting Skoda spokesperson Rudolf Dreithaler. Sales in China surged by 47.3% on the year to 180,500 cars. Skoda Auto gained an all-time-high market share of 2.6% in Russia, where it sold 45,600 cars, up by 38.1% y/y. Skoda is considering the production of cars in the GAZ plant in Nizhny Novgorod in the future. Domestic sales rose by 2.7% to 58,000 cars, securing the company a market share of 34.5%, up from 33.4% in 2009. The best-selling Skoda brand in 2010 was Octavia with 318,900 sold cars, up by 16.6% y/y. Fabia followed, although its sales decreased by 13.3% y/y. Skoda Superb had the fastest pace of increase - up by 121.9% to 98,900 cars. CEO Winfried Vahland has earlier said that the company plans to expand its model range and strengthen activities on international markets in order to double worldwide sales by 2018. Skoda Auto boosted its net profit by 115.5% y/y to CZK 6.1bn (EUR 238.2mn) in the first nine months of 2010, as sales revenue grew by 16.3% y/y to CZK 160.1bn.
CEZ starts gas, electricity supplies to The country’s major energy company CEZ has started supplying natural gas and Slovak retail clients. electricity to retail clients in Slovakia, E15 daily cited CEZ Slovakia’s executive Igor Nagy. CEZ has so far offering electricity and natural gas to Slovak corporate clients. The Czech company targets to become the largest alternative gas and electricity supplier in Slovakia. The Slovak electricity market is dominated by three regional distribution companies, while the natural gas retail market is controlled by SPP.
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Installed output of solar power plants Photovoltaic power plants with a total installed output of 1,727MW were connected to nearly quadruples in 2010. the grid in 2010, up from only 463MW a year earlier, CTK newswire reported. In global comparison, only in Germany and Italy were built more solar panels last year. The six largest solar power plants in the country have an installed output of 155.8MW. Four of them are operated by the energy group CEZ and have a combined capacity of 101.7MW. According to information of state-owned power grid operator CEPS, distribution companies have made contracts for connecting another 1,505MW to the grid. As of March, the state support in the form of advantageous purchasing prices and ‘green bonuses’ will apply only to small solar panels on roofs.
Austrian Strabag plans to cut 10% of Austrian construction company Strabag plans to reduce the number of its employees in staff in Czech Republic. the Czech Republic by at least 10%, as it seeks to cut costs and improve performance, Strabag representative Jaroslav Katzer told E15 daily. Falling orders and expected decline in the local construction sector are the reasons for the dismissals. Katzer said that between 10% and 15% of the 2,500 Strabag employees will be laid off. Strabag’s main competitors on the local market - Skanska, Hochtief and Metrostav, have already reduced their staff. Strabag’s Czech unit reported a net profit of CZK 516.4mn in 2009 on CZK 17.9bn revenues. The company’s 2010 financials will be released in February.
Bus maker Iveco to expand The local unit of bus producer Iveco plans to expand its production and create 450 jobs production, create 450 jobs in Czech this year, E15 daily reported. The company will increase the production of low-floor city Republic. buses and will open a new production hall in late-March. The state investment promotion agency CzechInvest has said that the company had already applied for an investment incentive seeking to invest CZK 160mn to boost production. The company produces city buses in its plant in Vysoke Myto. It is part of Iveco Irisbus, which has 27 production facilities and five research centres in 16 countries.
Technoexport to finance USD 65mn Czech Technoexport will finance a USD 65mn (CZK 1.2bn) project for the restoration power plant project in Tajikistan. and reconstruction of a hydroelectric power plant in Sarband, Tajikistan, Asia-Plus news agency reported. The plant has an installed capacity of 240MW. The project is to be finalised by 2012. Technoexport is the leading Czech exporter of equipment for oil and gas processing and food industries.
Railway operator Ceske Drahy calls State-owned railway company Ceske Drahy (CD) has called 3 tenders for modernisation EUR 65mn tenders for rail track of 190 coaches, E15 daily reported quoting company spokesperson Petr Stahlavsky. The upgrade. preliminary value of the three tenders is estimated at CZK 1.6bn (EUR 65mn). CD’s deputy general director Antonin Blazek has recently said that the company will invest more than CZK 7bn to buy new wagons and locomotives and to modernise existing ones in 2011. In 2010, the company invested CZK 5.5bn for the purpose. CD reported a net profit of CZK 48mn (EUR 1.9mn) in the first nine months of 2010, versus a loss of CZK 548mn a year ago.
Natural gas consumption grows 10% Consumption of natural gas in the country grew by 10% y/y to 8.979bn cubic metres in in 2010. 2010, CTK newswire reported. The increase was supported by the reviving industrial production and lower temperatures in 2010, Oldrich Petrzilka, president of gas union CPU, said. In December alone, the natural gas consumption soared by 20% y/y. Petrzilka expects the consumption to continue increasing in the next few years supported by the launch of new steam-gas power plants, new gas pipelines and the extension of the underground gas storage tanks. Moreover, high and growing electricity prices make natural gas and steam-gas power plants a preferred source of energy.
Antitrust regulator gives nod to The Czech Republic’s antitrust office UOHS has given the green light to local food and Agrofert to buy Animalco, Prochazka. chemical group Agrofert Holding to buy meat procession companies Animalco and Prochazka Holding, CIA newswire reported. Agrofert will acquire 70% of Animalco and 100% of Prochazka. The decision has already taken effect. Agrofert Holding is owned by entrepreneur Andrej Babis.
Vehicle production up by 9.4% in The production of road vehicles rose by 9.5% y/y to 1.095mn units in 2010, CTK 2010. newswire reported citing data from the Automotive Industry Association (SAP). The
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED production of passenger cars in the country grew by 9.5% to 1.072mn units, a level surpassed for a first time ever. The country’s major car manufacturer Skoda Auto accounted for 52.6% of the total output. It produced 576,362 cars last year, up by 9% y/y. TPCA ranked second with a 27% share. Its output fell by 11% to 295,712 vehicles. Hyundai followed with a production of 200,135 vehicles, up by 70% y/y. Truck production grew by 29.3% y/y to 1,411 units. Tatra was the leading truck maker with 931 units, up by 15% y/y. Avia made 480 trucks, up by 70% y/y. The production of buses decreased by 11.6% y/y to 2,177 units. Czech producers’ exports grew by 11.2% y/y, while domestic sales of road vehicles grew by 4.4% y/y in 2010.
Government decides not to reduce The government decided not to reduce the budget support to projects co-financed by the financing to EU-funded projects. European Union, it said on its website www.vlada.cz. The projects are part of the regional operational programmes and the operational programmes for Prague and have been approved until September 2010. Originally the government was planning to reduce the budget spending on such projects in a bid to cut costs.
POLITICAL
Government approves final 5 points of The government, during its meeting on Jan 19, approved the last 5 controversial points of anti-corruption strategy. the anti-corruption strategy, the government website vlada.cz informed. We note that the government approved the strategy as a whole on its meeting on Jan 5, but decided to establish a working group to modify 5 of the 58 articles. The working group comprised interior minister Radek John (chairman of the junior coalition partner Public Affairs (VV), finance minister and conservative TOP 09 deputy chairman Miroslav Kalousek and justice minister and centre-right ODS (Civic Democrats) deputy chairman Jiri Pospisil. We remind that at the end of December, VV decided to support the government during the no-confidence motion at the parliament’s lower house mainly thanks to PM Necas pledges that the anti-corruption strategy will be adopted as soon as possible.
President Klaus appoints Chalupa as President Vaclav Klaus appointed Tomas Chalupa as the country’s new environment new environment minister. minister, the government website vlada.cz informed. Chalupa, mayor of Prague 6 district, is a member of the centre-right ruling party Civic Democrats (ODS). This was the first change to the coalition government of PM Necas, which came to power in the summer of 2010. Upon his appointment, Chalupa underlined that his main task would be to restore the confidence in the environment ministry. Chalupa replaced Pavel Drobil, who resigned in December amid a scandal that threatened to overthrow the government last month. Drobil was forced to quit over corruption allegations linked with the state environmental fund SFZP. Chalupa said he will appoint a new head of SFZP and will order an audit of the fund. The centre-left opposition party Social Democrats (CSSD) has earlier criticised Chalupa’s nomination claiming he had no experience in the environmental sector.
Opposition CSSD still most popular The centre-left major government opposition party Social Democrats (CSSD) is still the political party - poll. most popular party in the country, enjoying the highest support among voters, a January poll of STEM agency showed. CSSD is supported by 26.4% of those polled in January, down from 28.5% a month ago and compared to a 22.1% backing during the May elections. By contrast, the current senior governing party, the centre-right Civic Democrats (ODS) is backed by only 15% of those surveyed in January, down from 15.6% in December and compared to 20.2% in the May elections. Thus, the lead of CSSD over ODS narrowed to 11.4pps in January from 12.9pps in December. The support for the other three parliamentary parties is also declining as compared to the election results. The backing for the conservative and junior ruling party TOP 09 declined by 4pps m/m to 10% in January, to leftist party KSCM (Communist) remained unchanged on the month at 11.2%, while to the centre-right junior ruling party Public Affairs (VV) was up to 6.2%. Thus, if the elections were held now, the government’s coalition parties would have won only 87 seats in the 200-seat parliament’s lower house as compared to their current comfortable majority of 118 votes and 92 seats.
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MACROECONOMIC REVIEW
Government aims at budget balance, The government aims at a rational restructuring that will cut budget spending and boost higher employment - PM. revenues, restoring the budget balance, MTI reported, quoting PM Viktor Orban’s speech at the presentation of the state investment programme. The government targets a budget deficit below 3% of GDP and a lower state debt, Orban added. The PM pointed out that the main goals of the investment plan, called the New Szechenyi Plan, include economic recovery and GDP growth. A special focus will be put on SMEs, whose success will have a major positive effect on the country’s economy. Orban said that the government does not intend to employ austerity measures or borrow funds from abroad. Regarding employment, one of the purposes of the investment plan is to create a million jobs over this decade and to raise labour force participation rate from the current 55% to the EU average of 65%. National economy minister Gyorgy Matolcsy said the budget of the state investment plan stands at HUF 7tn for the 2011-2014 period. It is expected to raise Hungary's investment rate by 5% annually until 2014. GDP is forecast to increase by 4-6% in the period, Matolcsy added. A total of HUF 4tn had already been allocated, while HUF 2tn will come as new funding and HUF 1tn will be provided by the Hungarian Development Bank (MFB). National development minister Tamas Fellegi said that budget and international funding, as well as EU funds will finance the state investment plan.
Construction output down by 2.2% y/y The output of the construction sector decreased by 2.2% y/y in both working days in Nov. adjusted and unadjusted terms in November, in line with an overall slowdown of the sector, observed over the past months, the statistics office reported. In aggregate terms, the volume of construction works narrowed by 2.2% y/y in both working days adjusted and unadjusted terms in January-November. The seasonally adjusted indices showed that the volume of completed construction works increased by 2.2% m/m in November. In terms of main groups classification, the volume of construction of buildings was up by 5.5% y/y in November due to the low base effect. The segment’s output decreased by 5.6% y/y in January-November. On a seasonally adjusted basis, the output of buildings was 6.6% higher. The volume of construction of civil engineering works decreased by 8.4% y/y in November mainly on the weak performance of the railway construction. In the first eleven months of 2010, the construction of civil engineering works fell by 14%, while in monthly terms it grew by 2.7% m/m in November.
Number of employed up by 1.5% y/y in The average number of employees in the public and the private sectors (the latter including Jan-Nov. corporations employing at least 5 persons) increased by 1.5% y/y to 2.702mn in January– November 2010, the statistics office reported. The number of persons, working for companies with headcount above 5, numbered 1.826mn, almost unchanged on the year. Since May the headcount has been higher every month than in the corresponding month a year before. A total of 773,900 persons worked in the budget sphere, up by 3.5%.
Business, consumer confidence index The combined consumer and business confidence index, gauged by Tarki and Kopint- inches up in Q4. Tarki, slightly inched up by 0.5pts to 43pts during Q4, the research companies told MTI news agency. The index value showed recovery from the pre-crisis period, but still below the 45-53 level, achieved in 2000-2005. The index of the manufacturing sector in particular improved to 44pts in Q4 from 35 in Q3 and 32 in Q2. The consumer confidence index on the other hand inched down to 39 points in Q4 from 40 the previous quarter. The indices are measured on a scale from 0 to 100.
Statistics office restructures consumer The country’s statistics office changed the structure of the consumer basket, used to basket – report. calculate annual inflation, daily Napi Gazdasag reported. A total of 25 new items were added, while 19 were left out from the new consumer basket. The statistics office justified the reform with the need to reflect better the consumption habits of the population, as well as to incorporate some suggestions of the EU statistics service Eurostat. The domestic consumer basket consists of about 1,000 units, split into five categories: food, alcohol and
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED tobacco; clothing; consumer durables; energy and fuel; and services. Each of these categories has a different relative weight, which will be a subject to amendment, as well. One of the changes will be reduction of the relative weight of durable goods. This sort of changes to the consumer basket are carried out every year and aside from adjusting them to consumer preferences, they also approximate the domestic with the EU statistics methodologies in order to make comparable the statistics of the EU member states.
Average gross wage up by 2% y/y in The average gross nominal earnings of full-time employees increased by 2% y/y to HUF Jan-Oct. 201,840, the statistics office reported. The employees of the private sector earned an average HUF 205,727 (up by 3.8%) and of budgetary institutions - HUF 196,486 (down by 2%). The best paid sectors in terms of nominal value were financial and insurance activities (HUF 433,700), information and communication (HUF 368,700) and electricity, gas, steam and air conditioning supply (HUF 358,200). The lowest average earnings were in the accommodation and food service activities (HUF 122,600), and agriculture, forestry and fishing (HUF 140,900). The average net earnings increased by 7.5% to HUF 132,257.
Hungary's GDP to grow by 3% in Hungary's economy is expected to grow by 3% in 2011, Hungary Around the Clock 2011 - governor. reported, quoting a statement on central bank governor Andras Simor at the Euromoney conference in Vienna. The governor said the economic policies of centre-right Fidesz government are risky, but refused to elaborate further. Simor attributed the country’s progress in getting out of the economic crisis to exports, but not consumption, which he does not expect tor recover until H2 2011.
BANKING AND FINANCE
Number of bank cards up to 8.9mn in The number of bank cards increased by 38,000 to almost 8.9mn in Q4, Hungary AA Q4. reported, quoting central bank data. The growth in the number of new cards was driven by the issuing of new debit cards, whose number stood at 90,000. However, over 50,000 credit cards were cancelled, thus bringing the total number of active credit cards to 1.4mn. The number of active ATMs in Hungary rose by 138 to over 4,838 over the year.
Yields on 3-month treasury bills ease The yields on Hungary’s three-month bonds eased to 5.63% at the three-month treasury to 5.63%. bill auction on January 18, the state debt manager announced. The authority sold HUF 55bn, exceeding the initially planned HUF 45bn on strong demand. Primary dealers bid for HUF 154.3bn with the yields ranging from 5.53% to 5.68%. The average yield was 15bps below the January 17 benchmark fixing and 8bps below the previous auction a week ago.
Yields ease on Hungary’s 12-month Yields eased to an average of 5.99% at the January 20 auction of HUF 50bn of twelve- bills on strong demand. month treasury bills, the state debt manager said on its website. Primary dealers bid for HUF 113.7bn with yields ranging from 5.89% to 6.04%. The achieved average yield is 1bp below the January 19 secondary market benchmark and 17bps below the yield from the auction two weeks earlier.
Foreign investors hold 72% of OTP OTP Bank issued a statement on its ownership structure, showing that foreign institutions Bank as at end-2010. held 72% of bank and 73.1% of the voting rights as at end-2010. Domestic institutions controlled 16.8% of the shares and 17% of the voting rights. Domestic individuals controlled 9.1% of the bank and 9.3% of the voting rights. The remaining shareholders are OTP Bank Plc (1.5% of the bank), government-held owners (0.4% of the bank and of the voting rights) and foreign individuals (0.2% of the bank and of the voting rights).
COMPANIES AND INDUSTRIES
Power firm MVM cancels construction Hungary’s state-owned power company Hungarian Electricity Works (MVM) will cease of EUR 136mn plant. further financing of the construction with Karpat Energo of its gas-fuelled combined-cycle power plant in Vasarosnameny, northeastern Hungary, the company said in a statement on its website. The company said it will incur a further HUF 10bn-15bn worth of losses if
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED it had decided to proceed with the project. MVM's board will cancel the construction contract with Karpat Energo. Karpat Energo, a JV between MVM (51%) and System Consulting (49%), began the construction of the EUR 136mn plant in April 2008. MVM had spent HUF 18.5bn on the plant so far.
Telenor Hungary appoints new CEO. Christopher Laska was appointed Telenor Hungary CEO, replacing Anders Jensen, Portfolio.hu reported. Laska has held executive positions in Telenor’s units in Serbia, Montenegro and Pakistan prior to joining the Hungarians division of the Norway-based Telenor. Jensen will work outside Telenor Group.
MOL fails to become majority owner Hungary's MOL failed to become the majority owner of Croatia's oil and gas company of Croatian INA. INA, the Croatian financial watchdog said in a statement on its website. MOL owns 47.15% stake of INA, while the government holds 44.84%. The announcement follows the expiry of the one-month offer to small shareholders on January 14. MOL was offered only 10,082 shares, or 0.1% of the company. Croatia’s four pension funds bought last week about 3.6% of INA. In December, MOL offered a price of HRK 2,800 (EUR 378) per share to the small shareholders in a bid to acquire the outstanding 800,910 shares, corresponding to 8% of the company, for EUR 304mn. These shares are owned by company’s employees and individuals, and are traded on the Zagreb stock exchange. The Croatian government said it was notified about MOL’s intentions. In 2008, MOL bought 22.15% of INA trough a voluntary takeover bid.
Wing to invest EUR 9.1mn in office Property developer Wing, part of holding company Wallis, will invest HUF 2.5bn (EUR project expansion. 9.1mn) in the expansion of one of its business parks, MTI news agency reported, quoting a company statement. The project, named East Gate Business Park, is located in the town Fot, just outside Budapest. Its floor space will be expanded from the current 65,000 square meters, 98% of which have already been leased, by an additional 18,000 square meters of warehouse space and 2,000 square meters of office space. The construction works will start in Q2 and be completed in mid-2012.
Hungary sets up supervisory body for The National Development Ministry established a reconciliation body, which will review public-private partnerships. existing public private partnerships (PPP) and work on boosting their efficiency, Tozsdeforum.hu reported. The authority will also support communication between the involved parties and provide recommendations and resolutions in case of disputes. The new body will have the authority to review PPP contracts and re-negotiate on their terms. The PPP reconciliation body will have eight members and will be chaired by state secretary in charge of reviewing state contracts and subsidies, Sara Nemes Hegemann.
Porcio-Vikuv consortium wins HUF A consortium between Porcio-Vikuv won a HUF 491mn procurement to expand the 491mn deal for heating plant Veresegyhaz geothermal heating plant, MTI news agency reported, quoting an expansion. announcement in the public procurement bulletin. The winner will have to plan the expansion procedures, which include drilling down to 1,500 meters for new thermal springs, 633 meters of stainless steel pipeline network and 10km of plastic tube infrastructure. The planned construction works include a pump station and eight heating sub-units. The consortium defeated the other bidder AQUAPLUS Kutfuro. The project is support with EU funding.
Number of construction firms facing The number of construction companies, against which creditors have filed liquidation liquidation up by 14.5% y/y in 2010. procedures, grew by 14.5% y/y to 3,822, Hungary AM reported, quoting company data provider Opten. The number of voluntary liquidation procedures surged by 4% to 2,183. A total of 5,786 new construction firms were set up during the year, which is a 14.7% y/y increase.
Audi Hungary boosts engine, car The Hungarian plant of German car maker unit Audi boosted the production of engines production in 2010. and cars by almost one-fifth, the company said in a statement on its website. The number of manufactured engines at the Gyor-based plant soared by 19.1% y/y to 1.648mn. The engines portfolio was expanded with the addition of 16 new types, while the plant also opened an engine research unit. The number of assembled vehicles surged by 18.2% to 38,541, including 20,413 Audi TT Coupe cars (up by 12.7%), 5,804 Audi TT Roadster cars (up by 20.6%) and 12,309 Audi A3 Cabriolet cars (up by 25.8%). The plant also
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED started the production of the RS 3 model, making 15 vehicles last year. In September 2010, Audi Hungary announced a EUR 900mn expansion programme, raising the annual output capacity to 125,000 vehicles.
Latvia's airBaltic to launch flights to Latvia's flag carrier airBaltic will launch flights from Riga to Budapest starting May 16, the Budapest in May. company said in a statement on its website. The flights will be operated 4 times a week on Mondays, Wednesdays, Fridays and Sundays. AirBaltic currently serves about 80 destinations.
Farming machinery maker Robix to Agriculture machinery maker Robix Hungary will invest over HUF 2bn in expansion, Napi invest HUF 2bn in expansion. Gazdasag daily reported. The company plans to build a new production facility and upgrade equipment in its greenfield investment in Zirc, western Hungary. Robix, which sells nearly all its products abroad, has some 80 employees in its two production units in Veszprem and Zirc. Robix generated HUF 1.58bn of revenues in 2010, up by 4.6% y/y.
Hungarians spent more on hotel Hungarians spent an average HUF 43,000 for hotel accommodation in the country in accomodations in 2010. 2010, which is an 8.6% y/y increase, MTI news agency reported, quoting data compiled by booking website szallas.hu. Two-thirds of domestic travelers booked rooms in the lower segment and spent less than HUF 50,000 on accommodation. Hungarians spent an average of 2.6 nights at hotels throughout the year, while those that spent a week accounted for 4%.
Japanese Sanyo starts production at Japanese electronics maker Sanyo started production at its newly built solar cells plant in new solar cells plant in Dorog. Dorog, northern Hungary, MTI new agency reported. The facility is the third plant of the investor in the city and would lead to the expansion of the total production capacity by 30% to 315MW annually, administrative director of Sanyo Hungary Csaba Horvath said. The total investment in the plant, which created 300 work positions, stood at HUF 3.7bn and was supported by the EU with HUF 900mn. Sanyo’s first plant was opened in Dorog in 1999 and produced air conditioners, mobile phones and batteries. The production of solar cells was added to the company’s production portfolio in 2005.
MOL energy trading unit sets up Swiss Oil and gas company MOL's energy trading unit, MOL Energiakereskedo, set up a subsidiary. subsidiary in Switzerland under the name MOL Energy Trade International, in which it owns 50%, Hungary Around the Clock reported. The remaining stake is owned by an unnamed Russian-controlled company, registered in Belize. The subsidiary will expand operations to cover central Europe. The company denied media speculations that the establishment of a subsidiary abroad was means to avoid paying the crisis tax imposed by the current government on several sectors, including energy.
Qatar Airways starts flights to Qatar Airways started flying to Budapest's international airport Ferihegy on Monday, Budapest. January 17, MTI news agency reported. The Doha-Bucharest flights are four times a week with a stopover in Bucharest.
Insurer CIG Pannonia secures EUR Life insurer CIG Pannonia secured a EUR 20mn capital investment from Swiss fund GEM 20mn capital investment from Siwss Global Yield Fund, CIG Pannonia said in a statement on its website. The capital GEM. investment should be made by end-2013. The capital agreement also allows GEM to subscribe 4mn of CIG Pannonia's shares in four years at a price of HUF 1,595 per share as long as the turnover-weighted average spot market share price in the 24th month from CIG Pannonia's listing reaches HUF 1,501. Otherwise, GEM can subscribe the shares at a price, equaling the midpoint between the original issue price of HUF 938 and the turnover-weighted average in the 24th month after the listing.
Magyar Telekom wins in court against The Metropolitan Court of Appeal confirmed the decision of the first instance judgment, small shareholders' claim. rejecting a claim by several Magyar Telekom minority shareholders’ against the decision of the extraordinary general meeting on June 29, 2009, the company said in a filing to the Budapest Stock Exchange. The claim was related to a decision of the shareholders, endorsing the merger of Magyar Telekom's cable unit T-Kabel and its subsidiary Del- Vonal with the parent company, and the settlement with shareholders, who wished to leave the company after the merger. The Metropolitan Court dismissed the claim on June 16, 2010, but the minority shareholders appealed the ruling. The decision of the court of
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED appeal is final and binding.
Wireless penetration reaches 120.2% The wireless penetration in Hungary reached 120.2% in December, slightly up from in Dec. 119% the previous month, telecommunications agency statistics showed. The number of active mobile phone subscriptions, i.e. those that are generating traffic, rose by 171,000 in December to 11.049mn. The total number of mobile phone subscriptions rose by 111,000 to 12.012mn. The number of active subscription stood at 10.931mn, while the total number of subscriptions amounted to 11.792mm as at end-2009. T-Mobile remained a market leader although its share, based on subscribers generating turnover, declined to 44.82% from 44.83%. Telenor's share narrowed too to 32.43% from 32.64%, but still secured its second position. The third mobile operator, Vodafone controlled 22.75% of the market, up from 22.52pc.
Telenor Hungary to provide mobile Telenor Hungary won a two-year HUF 6.4mn deal to provide mobile internet access to Internet to GySEV railway passengers. the passengers on 17 services of railway operator GySEV, Hunagry AM reported, quoting a note in the public procurement bulletin. Telenor defeated the other bidder in the tender, incumbent telecom operator Magyar Telekom. GySEV had previously estimated the price of the contract at HUF 8mn. Mobile internet service will be available as of March. GySEV is co-owned by Hungary (61%), Austria (33.3%) and Austrian construction company Strabag (5.7%).
Colliers sees slow improvement of Colliers International forecast that 2011 will be a year of a slowly improving growth on domestic property market in 2011. the Hungarian property sector, the company said in a news release on its website. Last year showed signs of improvement on the Budapest hotel market and decline for the hotels around Lake Balaton and rural Hungary. The EU Presidency and the overall increase in the number of foreign guests will affect positively the tourism sector, while changes in the income taxation will also allow more Hungarians to travel within the country. The number of hotel rooms in Budapest increased by 1,000 rooms in 2010, but this growth will decelerate in 2011. The industrial properties segment remained stable in 2010 with 63,000 sqm in new developments. The volume of new rental contracts remained flat at 122,000 sqm, while the achieved vacancy rate of 20.7 % is expected to decrease in 2011. On the office space segment, 2010 put an end to the falling rents. This year, the market is more optimistic in terms of prices, but the vacancy rate will decrease significantly. New developments can be expected if banks boost financial support for the sector. The demand in the retail sector is expected to stabilise in 2011, especially in the non-food sector after five years of decline, especially with the lower income tax, which is expected to boost retail consumption.
Insolvency procedures up by 10.5% y/y The number of insolvency procedures against Hungarian companies grew by 10.5% y/y to in 2010. 32,182, thus decelerating from a 36% rise in 2009, MTI news agency reported, quoting data from credit insurance and factoring company Coface Hungary. The growth in the number of insolvencies in 2010 is the slowest since the 5.8% increase in 2005. The mandatory liquidations, which account for about half of all procedures, surged by 17%, while the voluntary ones increased by 2pps. The number of bankruptcy procedures stood at 343. The small enterprises generated 86% of all insolvency procedures among firms with annual turnover below HUF 300m. The sectors, facing the highest risk of liquidation, turned out to be construction and retail and wholesale trade.
MOL to raise wholesale fuel prices Oil and gas company MOL will raise the wholesale fuel prices to record high levels again again. a week after the previous increase, Portfolio.hu reported. Gasoline price will go up by HUF 3 to HUF 349.5 per litre. The price of diesel will increase by HUF 5 to HUF 341.9. The move is explained by the soaring fuel prices on the international markets and the depreciating forint against the US dollar.
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED SLOVAKIA
MACROECONOMIC REVIEW
New industrial orders increase by New industrial orders increased by 22.7% y/y to EUR 3.2bn in Nov, the statistics office 22.7% y/y in Nov. (SUSR) reported. This is a slight deceleration compared to the 23.7% y/y growth in Oct. All main industrial sectors registered positive developments in Nov. The manufacture of motor vehicles, which is the main sector with a 41.2% share, surged by 23.7% y/y. The second largest sector in terms of orders, computer manufacturing, went up by 21.2% y/y to EUR 669mn - a significant slow down compared to 32.8% y/y in Oct. After two months of decline, the basic metals manufacturing returned to positive growth climbing by 21.7% y/y to EUR 332.3mn. The important exporting branch of machinery and equipment production received new orders for EUR 179.8mn in Nov, climbing by 33.9% y/y. Three industrial sectors received less orders y/y - manufacturing of textiles, wearing apparel and paper but their cumulative share in total orders was only 4%. Cumulatively, total new orders in industry were up by 25.9% y/y for the Jan-Nov period, amounting to EUR 31.1bn.
The annual inflation for 2010 is 1%. Headline inflation reached 1.3% y/y in Dec, speeding up from 1% y/y in Nov, the statistics office (SUSR) reported. The higher inflation reflected higher prices of food and transport. Food prices increased by 6.2% y/y while fuel prices pushed up the transport costs by 0.3% y/y. Prices surged by 1% y/y for the whole 2010, triggered mainly by the rise in food and alcohol prices which increased by 1.6% y/y and 5.7% y/y respectively. Other groups that contributed positively to the price dynamics for the year were health (3.7% y/y increase) and education services (4.5% y/y). On the other hand, the prices of clothing and footwear and furnishing eased by 1.3% y/y and 3.5% y/y respectively. Core inflation, which excludes the impact of administrative prices and indirect tax rate changes, also sped up to 1.9% y/y in Nov from 1.5% y/y in Nov. For the whole year it stood at 1.2% y/y while net inflation which excludes the impact of indirect taxes was 0.9% y/y. Intellinews comment:: The dynamics in core and net inflation for 2010 show that the inflationary pressures in the year were mainly a result of the rising prices in food and some services. The floods in late spring and the summer were probably the main driving factor behind the food price hike. The inflation in 2011 is expected to pick up triggered by a rise in some excise taxes and the VAT rate by 1pp to 20%.
Unemployment rate climbs to 12.46% The unemployment rate stood at 12.46% in Dec, down 0.2pps y/y, the Central Office of in Dec. Labour reported on its website. On a m/m basis, the rate increased by 0.24 pps, reflecting a surge in the number of unemployed in production and transport equipment operators. The total number of registered unemployed stood at 381,209 at the end of the month and expanded by 0.44% y/y. The unemployment rate calculated on the basis of total number of job seekers increased m/m to 14.19%, but decreased by 0.13 pps on the year.
Recipients of social benefits increase A total of 190,391 people received social benefits in Dec, 238 more than in Nov and up by 5.8% y/y in Dec. by 5.8% y/y, the Central Office of Labour reported on its website. Unemployment benefits represented the major 65.7% part of all benefits, followed by child benefits with a 33.7% share. Unemployment benefits also accounted for over 90% of the absolute annual increase in the indicator. For the whole 2010, 189,653 people on average received social benefits of any kind, a sharp increase from 164,707 in 2009.
Harmonised inflation up to 1.3% y/y in Consumer inflation, measured by the EU methodology of the harmonised consumer price Dec. index (HICP), increased to 1.3% y/y in Dec from 1% y/y in Nov, the statistics office (SUSR) reported. This corresponds to the development of the headline inflation. Food prices in the HICP inflation sped up to 6% y/y in Dec from 5% y/y in Nov. The other main pro-inflationary factor was the increase in prices of education by 4.5% y/y and health prices by 2% y/y. Prices of household equipment and utilities continued to decline and partly offset the rise in the food prices.
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED Unemployment benefits paid drop State-owned social insurance provider Socialna Poistovna paid out unemployment 22.7% y/y in Dec. benefits to 37,408 people in Dec, representing a significant decline of 22.7% y/y, the company informed. However, the number of people eligible to receive unemployment benefits was higher by 1.9% m/m, the first increase of the indicator since Apr. As recalled, the eligibility conditions for unemployment benefits were eased in September. In order to be eligible to receive unemployment benefits, one should have paid unemployment insurance for two of the past three years. The previous condition required payment of insurance for three out of the last four years. In Dec, the higher number of benefits corresponded to the increase of the unemployment rate.
Real wages in industry up by 4.8% y/y The real average wage in industry rose by 4.8% y/y in Nov and 4.6% y/y in Jan-Nov, the in Nov. statistical office (SUSR) reported. This is a significant improvement from the 0.4% y/y growth in Oct. Wages increased in all industrial groups but the hike was most pronounced in utilities by 10.7% y/y and accommodation services - by 5.4% y/y. Real wages in manufacturing swelled by 4.6% y/y after a minor drop of 0.2% y/y in Oct. The real wages in all remaining economic branches developed positively as well. Employment in industry continued to expand, speeding up to 2% y/y in Nov from 1.4% y/y in Oct. On a cumulative basis, however, employment dropped by 4.4% y/y in Jan-Nov.
Industry sales accelerate to 16.8% y/y Industry sales in Nov amounted to EUR 6.4bn, up by 16.8% y/y, the statistics office in Nov. (SUSR) reported. All sectors registered positive growth rates except coke manufacturing and water supply, where turnovers declined by 1.9% y/y and 3.2% y/y, respectively. Sales of important sectors like transport equipment, computer products and basic metals retained their two-digit growth. Sales of transport equipment increased by 28.3% y/y and those of computer products and basic metals were up by 17.5% y/y and 15.6% y/y, respectively. Overall, in the first eleven months industrial turnover stood at EUR 61.4bn, up by 18.8% y/y. The increase was mainly due to positive developments in transport equipment manufacturing and metal and fabricated metal products manufacturing, where turnovers saw an annual increase of 37.1% and 23.2%, respectively.
BANKING AND FINANCE
Slovenska Sporitelna to float EUR Slovenska Sporitelna (SLSP), the largest bank in Slovakia, plans to float a EUR 10mn 10mn five-year mortgage bond issue. five-year mortgage bond issue, the bank announced on its website. The bonds, whose par value will be EUR 1,000, will bear a fixed annual interest of 2.95%, payable semiannually. The minimum investment is two bonds and the issue price is set at 100% of the par value. The bonds could be obtained at every office of the bank and will be traded on the Bratislava Stock Exchange. SLSP is part of the Austrian financial group Erste Bank. It had a 25.86% share in the housing loans market as at end-Nov 2010.
OTP Banka reports EUR 3mn loss in OTP Banka Slovensko ended the year with a loss amounted to EUR 3mn, news agency 2010. SITA reported. However, this is a sharp improvement compared with the EUR 24.5mn loss in 2009. Tatiana Jonakova, spokesperson for OTP Banka, commented that the crisis deteriorated sharply the credit portfolio and reduced the number of new deals in 2009. In 2010 the bank focused on portfolio consolidation, loans provisioning, operating costs reduction and reassessing internal processes. This resulted in improvement of credit quality, positive dynamics of new deals in the retail segment and a positive financial result in Q3. The bank also expects further improvement in 2011 and a profit as of end-year. Hungarian OTP Bank holds 97.24% of OTP Banka Slovensko. It is in top 10 banks in Slovakia in terms of revenues.
Finance ministry plans setting a cap The finance ministry plans changing the constitution in order to set a legal limit on the on public debt. public debt level, news agency SITA reported. The limit will be less than 60% of the GDP and should not be exceeded under any circumstances. If the change in the constitution does not succeed, the ministry would propose changes in other bills to define strict institutional and legislative rules on public debt. The ministry also plans to create a fiscal council. The council should be responsible for overseeing the effectiveness and the transparency on public funds spending. The opposition SMER-SD and former finance minister Jan Pociatek commented that setting a legislative cap on public debt level was a
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED broad topic that would require a number of changes in the fiscal rules. However, the opposition is open to discussion and to make own proposals, too. Should the opinions on finance ministry and opposition parties coincide, the opposition would support the legal limit on public debt and the establishing of the fiscal council.
Slavia Capital Group to float EUR Slavia Capital Group will float EUR 3.5mn 2-year bonds, news agency SITA reported. 3.5mn 2-year bonds. The bond par value is EUR 10,000 and will earn 7% fixed coupon paid annually. The issue price is set at 98%-102% of the par value. It will be increased by the accrued interest after the start of the issue on Feb 1st. The issue will be closed in one year. The bonds will be issued in book-entry form and will not be traded at the Bratislava Stock Exchange or other bourse. Slavia Capital Group plans to use the capital to restructure its debt. The group operates in Central and Eastern Europe and focuses chiefly on private equity operations.
Home savings bank Wustenrot reports Home savings bank Wustenrot Stavebna Sporitelna (WSS) reported a nearly 32% increase in deposits. increase of new deposits in 2010, news agency SITA reported. The number of new contracts reached 31,000, increasing by 12% y/y. At the same time, loans recovered to their levels in 2009. The net profit in 2010 exceeded the originally budgeted EUR 2.5mn. Austrian Wustenrot Verwaltungs - und Dienstleistungen has 60% stake in WSS, the rest is owned by the German Wustenrot & Wurttembergische AG.
State debt manager places EUR The Debt and Liquidity Management Agency (ARDAL) issued EUR 208.6mn of 208.6mn of T-bills. government T-bills with 364-days maturity period at the latest primary auction, the agency informed. It accepted 22.1% of the total bids as investor demand reached EUR 944.7mn. Non-resident investors made bids for EUR 110mn and were sold EUR 50mn of the T- bills. The average yield of the accepted bids stood at 1.45%. Last year ARDAL placed EUR 2.4bn T-bills and another EUR 7.1bn in bond issues.
SLSP expects double-digit growth in The largest bank in Slovakia, Slovenska sporitelna, a.s. (SLSP) expects a double-digit operating profit in 2010. growth of its operating profit in 2010, webnoviny.sk informed. The successful result reflects the positive development in revenues and the optimisation of costs. The operating profit for the Jan-Sep period was EUR 241mn or up by 27% y/y. The net profit as of end-Sep was EUR 95mn. Among the factors that contributed to the profit were the growth of new credit and the improved structure of deposits. The reduction of loan provisions also helped the bank to finish the year with a profit. In 2011 SLSP expects a modest decline in unemployment that would stimulate the entire banking sector. The retail banking and also the corporate banking are expected to enjoy expansion. SLSP is part of Austrian financial group Erste Bank.
Leasing market up by 5.3% y/y in The leasing market volume increased by 5.3% y/y to EUR 1.6bn in 2010, compared with 2010. a 45% annual decrease a year ago, news agency SITA reported. The recovery of corporate leasing was the main contributor to the improvement in the market. Leasing of trailers, trucks and buses expanded by 12% y/y on higher demand for vehicle leasing by businesses. Passenger cars and utility vehicles, on the other hand, increased more slowly - by 5% y/y. Leasing of machinery and equipment reported a 13% y/y drop in 2010.
COMPANIES AND INDUSTRIES
SE Predaj plans to increase electricity The power utility SE Predaj plans to increase its sale of electricity by 36% in 2011 to sale by 36% in 2011. 1,500GWh, according to Slovenska Energetika monthly. Stanislav Reguli, CEO of SE Predaj, commented that the company became the main electricity supplier among the new companies in the country. SE Predaj targets companies with annual consumption of minimum 100MWh in various economic sectors. Among the new target groups that the company will address are municipalities while households are outside the plans of the company. SE Predaj is a subsidiary of the dominant power utility Slovenske Elektrarne (SE) that holds 100% of the company. SE is a member of Enel group.
Social insurer Socialna Poistovna to State-owned social security provider Socialna Poistovna (SP) will lay off 600 employees lay off 600 employees by end-H1. or approximately 10% of the staff in an attempt to achieve better functioning of the
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED company, news agency TASR reported. The process will start in Feb and should be completed by end-June. It is expected that the insurer will save EUR 8mn annually after paying EUR 2mn on compensations. The company’s management hopes to increase the motivation of the workers and to make SP client-oriented. In addition, the flexible part of the wages of the employees would depend on the economic results. In the next three years SP is budgeted to release about 300 employees annually or approximately 14% of the current staff. In Oct 2010, the government approved the revised 2010 budget for SP with a projected deficit of EUR 35.2mn, which combined with last year's surplus will result in a positive result of EUR 385mn. The projected full-year revenues for 2010 stand at EUR 6bn and the expenditures - at EUR 6.03bn.
Cargo Slovakia requests 1-year The state-run railway freight company Cargo Slovakia requested a 1-year postponement postponement of state loan repayment. of the EUR 166mn financial assistance repayment, website sme.sk informed. The company had to pay EUR 10mn in Feb and further EUR 10mn installments were due twice a year until 2019. The state loan amounted to EUR 400mn and was approved by the former government of Robert Fico in order to mitigate the impact of the financial crisis. The funding was spent on covering operating and investment costs. Earlier it was announced that the company would close 2010 with a loss of EUR 102.8mn or 18.8% y/y improvement of the economic result.
Used car registrations shrink by 16% The number of used car registrations reached 66,248 in 2010, down 15.9% y/y, the y/y in 2010. Slovak Automotive Industry Association (ZAP) informed. Imports of new cars exceeded the used car sales by 6.6%. In Dec alone, imports of used cars were up by 3.7% y/y to 5,545 units. The majority of imported vehicles, 73.35%, were diesel-powered while the average age of imported used vehicles was 7.17 years, including small trucks. German Volkswagen was the most commonly imported car, accounting for 14.22% of the total, followed by Czech Skoda with 11.11% and Ford with 10.28%.
Panasonic Electronic Devices Electronic producer Panasonic Electronic Devices Slovakia (PEDS) will lay off about Slovakia to lay off 17.5% of its 17.5% of its workers or 90 people, news agency SITA reported. The reduction of the workers. staff reflects the decline in production of analog tuners. Miroslav Sochuliak, administrative director for PEDS, said that the production of increasingly popular digital tuners for TV sets was much simpler than the production of analog ones and the clients started to produce tuners themselves. This resulted in a 48% y/y drop in orders of tuners. PEDS tried to minimize the number of workers that would be lay off by extending existing productions and gaining new clients from the car and energy industries. Panasonic Electronic Devices Slovakia has two plants in Slovakia, in Stara Lubovna and in Trstena, northern Slovakia. It produces tuners for TV sets, wireless communication modules, power sources and control boards.
SPP to invest EUR 22mn in The gas utility Slovensky Plynarensky Priemysel (SPP) will invest EUR 22mn in the modernisation of compressor station. modernisation of the compressor station in Velke Zlievce, webnoviny.sk informed. About EUR 17mn will be used for purchasing new turbo sets and the rest EUR 5mn will finance the construction work. The deadline for submitting the bids is mid-Feb and the offer price is the sole criterion in the public procurement. The duration of the contracts is expected to be approximately 2.5 years. Earlier this month SPP announced that it plans to spend EUR 20mn on the third energy market liberalisation package and to invest another EUR 110mn in the distribution system through its subsidiary SPP - distribucia. In Oct 2010 eustream, the gas transit subsidiary of SPP, announced that it signed a contract with power systems provider Rolls-Royce to buy two 66MW turbo compressors for a total EUR 70mn. The compressors will be installed at the Velke Zlievce compressor station by H2 2013. SPP is the leading Slovak natural gas transporter and distributor. The National Property Fund holds 51% of the company and the remaining 49% belong to a consortium between E.On Ruhrgas, Gas de France and Gazprom.
Gas utility SPP secures 75% market The gas utility Slovensky Plynarensky Priemysel (SPP) announced at its website that it has share in 2011. secured a market share of 75% in 2011. Dusan Randuska, director of gas sales department, said that it was a success to win again large corporate clients such as Mondi SCP, Heineken, Continental Matador or the retail chain Billa. The 436MW gas-steam power plant in Malzenice is among the new clients of SPP. Other major business clients
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED are glass products manufacturer RONA and Slovenske magnezitove zavody. SPP holds 100% of the household segment despite the fact that the market has been liberalised since 2007 and the customers are free to choose their gas supplier. The company took that as a sign for the poor price regulation on the retail market. SPP suffered EUR 83mn loss in 2010 because of low prices for households. If the prices don’t change, the loss in 2011 could be even higher. SPP is the leading Slovak natural gas transporter and distributor. The National Property Fund holds 51% of the company and the remaining 49% belong to a consortium between E.On Ruhrgas, Gas de France and Gazprom.
The link of Slovak and Hungarian gas The project linking the gas transmission networks of Slovakia and Hungary gained transmission systems politically additional political support as representatives of the two governments signed an agreement supported on the wording of the international bilateral agreement, information on the website of the economy ministry reveals. The final bilateral agreement is expected to be signed by the prime ministers of the two countries by end-Jan. The economy ministry expects to outline the technical aspects of the project and the capacity of individual sections by the end of the year, as well as to define the costs of the routes and to design a timetable for the implementation of all activities. The project enjoyed strong political support from the European Commission. The link is included in the European Economic Recovery Plan and was supported by a EUR 30mn subsidy. The interconnecting pipeline should be 115 km long and connect Velky Krtis on the Slovak side and Vesces on the Hungarian side. The pipeline should start operations in the beginning of 2013, allowing gas transport in both directions. The Slovak gas transit company eustream and the Hungarian MOL FGSZ are in charge of the project.
Kia gains 6.6% market share in 2010. Car dealer Kia Motor Sales Slovensko sold 4,267 passenger cars in Slovakia in 2010, ranking it fourth in the car market with a market share of 6.6%, news agency SITA reported. The most popular model was Kia Cee’d with 2,026 sold cars followed by the new model of Kia Sportage with 677 sold vehicles despite the fact that the model was released on the market in the autumn. Worldwide, Kia sold over 2mn vehicles or improved its sales by 26.5% y/y. Kia Motors Sales Slovensko is the exclusive importer of Kia vehicles in Slovakia.
Slovak Telekom could go 100% The economy minister Juraj Miskov announced that the state could sell all its shares in private. Slovak Telekom (ST), news agency SITA informed. The state holds 15% through the National Property Fund (FNM) and 34% through the economy ministry. Earlier this month the FNM proposed the sale of its stake in ST. The economy ministry said that the privatisation of ST should be based on an economic analysis that compares the expected dividends and the sale receivables. The analysis should be completed by end-Feb. Upon a positive political decision another analysis on the possible ways for privatisation should be made. Slovak Telekom offers a full-array of data and voice services via its brands T- Com and T-Mobile. The company owns and operates fixed and mobile telecommunications network covering almost the entire territory of the country. Deutsche Telekom owns 51% of ST.
Businesses paid EUR 460mn for TV Companies in Slovakia spent EUR 460mn on TV commercials in 2010, news agency advertising in 2010. CTK reported. A monitoring of TNS Slovakia showed that the commercials broadcast by the eight nationwide TV stations took 4,000 hours or less than half of the nearly 8,500 hours that are allowed by the law. In estimating the TV ads’ budget, TNS Slovakia used the official price list of the TV stations, not taking into account possible rebates and bonuses. The market leader in terms of spent money was the telecommunication operator Slovak Telekom, followed by its rival Orange. Third is Henkel, followed by Unilever and Procter&Gamble. Of the private TV stations, JOJ and Markiza utilized most advertising time.
Green Answers to invest EUR 70- German Green Answers plans to invest between EUR 70 and EUR 90mn in a wind farm 90mn in wind farm. in southern Slovakia, website webnoviny.sk informed. The company will build between 21 and 29 wind turbines. The construction is scheduled to start in 2013 and is expected to be completed in a year. The projected lifespan of the wind turbines is up to 25 years. The wind power plants will increase the renewable energy sources in Slovakia. However, the national electricity transmission network operator Slovenska Elektrizacna Prenosova
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED Sustava (SESP) decided in 2010 not to approve any construction of wind or solar power plants until end-2011 because t considers the resources unstable. Green Answers needs a positive answer to get a certificate from the economy ministry that the wind power plants comply with the energy concept of the country.
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED TURKEY
MACROECONOMIC REVIEW
Central budget posts EUR 7.8bn The central government budget ran a record deficit of TRY 16.1bn (EUR 7.8bn) in deficit in December. December while primary deficit came in at TRY 14.3bn. The budget deficit increased 151.5% y/y in December. Please note that in the same month of 2009, the central budget produced a primary deficit of TRY 5.4bn. Revenues declined 2.4% y/y to TRY 21.7bn as tax revenues fell 1.3% y/y to TRY 18bn. Special consumption tax revenues increased by 34.2% y/y while VAT collected from imports rose 43% y/y in the month. VAT tax collection was down 50% y/y. The increase in expenditures was 32% y/y as expenditures amounted to TRY 37.9bn in December. The significant increase in non-interest expenditures, reported at TRY 36bn, is noteworthy. Looking at the cumulative data, the budget produced TRY 39.6bn of deficit (3.6% of estimated GDP) in Jan-Dec, which is below the government’s revised forecast of TRY 44.2bn annual deficit target while the primary surplus came in at TRY 8.7bn which is also above the revised target of TRY 5.3bn. Revenues were up 18% y/y, amounting to TRY 254bn versus the revised forecast of TRY 253bn and expenditures increased 9.5% y/y to TRY 295.6bn lower than the government’s revised target of TRY 297bn. This year government targets to reduce the budget deficit to 2.8% of GDP. On a related note, finance minister Mehmet Simsek says that the government will remain committed to fiscal discipline despite the upcoming general election this summer.
Central bank governor: Rising CA Central bank governor Durmus Yilmaz says that the biggest threat to Turkey’s financial deficit biggest threat to financial stability is the rising current account deficit. To address this problem, the bank has taken stability. several measures, including lowering interest rates, aimed at curbing hot money inflows and reducing domestic demand, Yilmaz asserts.
Central bank surprisingly cuts policy The central bank’s monetary policy committee unexpectedly cut the policy rate (one- rate by 25bps. week repo rate) by 25bps to 6.25%. The markets expected the monetary authority to keep the rate constant at 6.5%. ON borrowing and lending rates remained unchanged at 1.5% and 9%, respectively. The statement released after the committee meeting reads that aggregate demand conditions do not exert upside pressure on inflation, which is expected to decline significantly in January, remain below the end-year target of 5.5% in Q1 and reach the end-year target after displaying fluctuations starting from Q2. The committee also assesses that the impact of the measures taken in December to contain credit supply will be seen in the coming days additional macroprudential measures to curb loan expansion will provide more flexibility for monetary policy. Additional hikes in required reserve rations for short-term liabilities will be necessary and in order to preserve financial and price stability a policy mix of a lower policy rate with higher reserve requirements emerges as an optimal policy mix under the conditions, the committee says.
Unemployment rate retreats slightly to Data of the statistics institute show that the unemployment rate declined to 11.2% (or 11.2% in October. 2.9mn people) in October from 11.3% in the previous month and from 13% in October 2009. Non-farm unemployment rate also fell to 14.1% from 16.4% a year ago. The economy created a total of 953,000 jobs between October 2009 and October 2010. On a seasonally adjusted basis, the unemployment rate was 11.6% in October which compares favourably with 11.8% a month ago and the jobless rate of 13.4% in October 2009.
Treasury borrows EUR 4bn in two The Treasury raised a total of TRY 8.4bn (EUR 4bn) in two auctions it held on Jan 18 for auctions. 3-year TRY-denominated fixed coupon bond, and 10-year CPI-indexed bond. The authority sold TRY 5.2bn of 2013 bond and market makers purchased TRY 1bn worth of the security. Demand for the bond was TRY 7.9bn. The Treasury also sold TRY 3.1bn of the CPI-indexed bond in the auction while non-competitive sales amounted to TRY 909mn.
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED End-year inflation expectations The biweekly survey of the central bank shows that the end-year CPI inflation increase slightly to 6.61%. expectations increased, though slightly, to 6.61% from 6.56%. The 12-month ahead inflation expectations also rise to 6.55% from 6.42% two weeks ago. Consumer prices are expected to increase 0.62% m/m in January while participants of the survey had predicted a monthly inflation of 0.59% two weeks ago. CPI inflation is seen at 0.59% in February which compares favourably with 0.61% in the previous survey. CA deficit expectation stands at USD 48.4 versus USD 46.9bn two weeks ago. GDP growth expectations for this year and 2012 remained unchanged at 5% and 4.9%, respectively.
Consumer confidence deteriorates in A joint survey by the central bank and statistics institute show that the consumer December. confidence index declined 0.38% m/m to 90.99 in December. The decline in the confidence indicator was mainly due to consumers’ negative assessments regarding current and future purchasing power, and economic prospects.
State minister Caglayan sees State minister Zafer Caglayan says that December imports are likely to come in at USD December imports at USD 18-20bn. 18-20bn. The statistics institute has not released official foreign trade data for December 2010 yet. Caglayan also asserts that imports should have increased around 30% in 2010 to USD 183bn. According to the latest official data, imports rose 35.7% y/y to USD 17bn in November.
Central government debt stock rises to EUR 222bn at end-December. Data of the Treasury show that the central government debt stock grew to TRY 473.3bn (EUR 221.7bn) at end-December from TRY 465.5bn at end-November. TRY 347.3bn of the debt stock is denominated in local currency while TRY 126bn is denominated in foreign currencies. Domestic debt stock increased to TRY 352.8bn at end-December from TRY 350.8bn while external debt stock grew to TRY 120.5bn from TRY 114.6bn. Looking at the details of data, we see that debt to the market stood at TRY 301.4bn at end-December against TRY 299.2bn at end-November.
External debt of private companies The central bank says that the long-term external debt of the private companies declined declines to USD 118.6bn at end-Nov. to USD 118.6bn at end-November from USD 120.5bn at end-October. Financial companies’ long-term debt was USD 34.7bn at end-November, down from USD 34.96bn a month earlier. According to central bank data, non-financial companies’ long- term external debt declined to USD 83.95bn from USD 85.5bn. Private sector’s short- term external debt (excluding banks) was USD 1.88bn at end-November, slightly lower than USD 1.87bn at end-October. As a final note, banks’ short-term external debt grew to USD 13.5bn from USD 12.99bn.
Treasury borrows EUR 1.2bn through The Treasury held an auction on Jan 17 for 14-month TRY-denominated zero coupon 14-month bond. bonds through which it raised a total of TRY 2.1bn (EUR 1.2bn). The authority sold TRY 1.8bn of the paper in the auction and non-competitive sales amounted to TRY 308mn. The demand for the security was TRY 2.86bn. The compound interest rate appeared at 7.39%. There will be two auctions on Jan 18 for 3-year TRY-denominated fixed coupon bond, and 10-year CPI-indexed bond.
BANKING AND FINANCE
Yapi Kredi Sigorta records EUR Insurer Yapi Kredi Sigorta informs that the company recorded TRY 758.2mn 366mn premium revenue in 2010. (EUR 366mn) premium revenue in 2010, representing a 24.7% y/y increase from TRY 608mn in 2009. Please note that private lender Yapi Kredi Bankasi holds a 53.10% stake in Yapi Kredi Sigorta while 33.7% shares of the company are publicly traded on Istanbul Stock Exchange (ISE).
Branch association: Bank loans rise Head of the Banks Association of Turkey, Ekrem Keskin, says that bank loans 34% last year. rose 34% to TRY 532.5bn (EUR 258bn) while deposits increased 21% to TRY 644.6bn last year. Keskin comments that loan growth is expected to be between 20% and 30% this year. On a related note, the association says that the number
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED of branches of banks operating in the country increased to 9,465 at end- December 2010 from 9,027 at end-December 2009. The number of bank employees also increased to 178,504 from 172,402.
Bank Asya targets 20% y/y asset General manager of Islamic lender Bank Asya, Cemil Ozdemir, says that the bank growth this year. targets 20% y/y growth in assets in 2011. Bank Asya also aims to increase loans more than 20% y/y and to increase the share of SME loans in total to 40% which currently stands at 30%, Ozdemir adds. Ozdemir also asserts that the bank plans to open a branch in Northern Iraq. Please recall that Bank Asya had established a financial institution together with the Islamic Development Bank in Africa and Ozdemir asserted last month that similar ventures may be established in other countries.
Eczacibasi Group in talks to buy TAIB Daily Sabah reports that Eczacibasi Group is in talks to buy TAIB Investment Bank. Bank. 60% of the bank is owned by Dubai Financial Group, a division of Dubai Holding. The daily notes that Eczacibasi Group had applied to the banking watchdog to obtain an investment banking licence one year ago. Eczacibasi Group has several companies operating in the local finance sector.
Garanti board mandates management Private lender Garanti Bankasi informs in a filing with the Istanbul Stock Exchange for EUR 480mn bond issue. that the bank’s board has mandated the headquarters to issue TRY 1bn (EUR 483mn) corporate bond. The bank details that the TRY 1bn bond issue is part of its plan to sell up to TRY 3bn worth bonds with different maturities.
Insurer Aviva Sigorta reports EUR Insurance company Aviva Sigorta informs in a filling with the Istanbul Stock 136mn premium revenue last year. Exchange that its premium revenues reached TRY 281.8mn (EUR 136.2mn) in 2010, representing a 2.5% y/y increase from TRY 274.8mn in 2009. The company details that vehicles insurance premiums had the largest share in total with TRY 100.2mn.
COMPANIES AND INDUSTRIES
Kiler plans IPO for real estate unit in Head of Kiler Holding retail group, Umit Kiler, says that the holding company plans an H1. IPO for its real estate unit Kiler REIT in the first half of the year. Umit Kiler declines to provide further details. Please note that Kiler Holding will sell 13.5% of its retail unit Kiler Alisveris in an IPO which will take place this month. The shares will be offered at a price range of TRY 5.30 and TRY 6.10 and the book building is scheduled for Jan 20-21.
Ford Otosan targets to sell 308,000 Ford Otosan announced on its website that the company foresees a 4% contraction in units in 2011. domestic automotive market to 760,000 units in 2011. The company also expects a decrease in its market share from 15.6% in 2010 to 15.2% and a 6% contraction in its domestic sales volume from 124,000 units in 2010 to 116,000 this year. The announcement details that the company plans to increase capacity utilisation rate of Kocaeli plant having an annual production capacity of 320,000 units from 74% in 2010 to 80% and as a result,total production is expected to increase by 6% to 256,000 units this year from 242,000 units in 2010. The company targets to increase total sales by 2% to 308,000 units (domestic sales and exports combined). Ford Otosan targets to export 190,000 units this year, up from 177,000 in 2010.
Turkish Airlines signs agreement to THY (Turkish Airlines) informs that it signed a partnership agreement to take a 10% stake take 10% stake in KKHY. in KTHY (Northern Cyprus Airlines). According to daily Sabah a group of Turkish Cypriot businessmen holds a 60% stake in KKHY while the stake of the government of northern Cyprus is 30%. KKHY will have domestic and international flights and undertake cargo operations.
Global Yatirim’s Enerji Holding to Global Yatirim Holding informs in a filing with the Istanbul Stock Exchange that its increase stake in Energaz. subsidiary Enerji Yatirim Holdings agreed with other shareholders of Energaz to increase its stake in Energaz to 99% from the current 52.5%. Enerji Yatirim holding will apply to the relevant authorities for the share transfer. Global Yatirim details that it owns 50% of
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED Enerji Yatirim and following the share transfer its indirect stake in Energaz will increase to 49.5% from 26.2%.
BIM may sign JV agreement with Organised retailer BIM informs in a filing with the Istanbul Stock Exchange that if the Savola in six months. parties reach an agreement, the final deal will be signed and the joint venture in Saudi Arabia with local Savola Group will be established in six months. Please recall that BIM announced earlier this week that it signed a memorandum of understating with Saudi Savola Group to establish a discount chain in Saudi Arabia.
Saudi ACWA interested in Igdas CEO of Saudi Arabia’s ACWA Power International, Paddy Padmanathan told Reuters privatisation. that the company is interested in the privatisation of Istanbul’s natural gas distribution firm Igdas. The natural gas distribution company will be privatised through a block sale in April. Padmanathan also asserts that ACWA plans 4,000-5,000 megawatts of investments in Turkey. It was recently announced that ACWA will establish a natural gas power plant in Turkey together with local Eser Holding. The plant, in which ACWA holds a 70% stake, is estimated to cost USD 800mn.
Energy minister expects no delay in Energy minister Taner Yildiz says that there will be no delays in the privatisations of electricity privatisations. electricity generation companies because of the general elections scheduled for this summer. The process will begin with the privatisation of Hamitabat power plant and officials from the privatisation administration, energy ministry are working on details, Yildiz asserts. Recently, head of the privatisation administration said that bids for Hamitabat could be invited shortly with tender announcements but he declined to give any certain date. The power plant will be privatised through share sale.
UN Ro-Ro to bid for ferry firm IDO. US-based private equity company KKR’s (Kohlberg Kravis Roberts & Co) subsidiary local shipping company UN Ro-Ro’s CEO, Kaptan Cemil Bayulgen told daily Sabah that the company plans to bid with a consortium for ferry firm IDO’s 100% stake in the privatisation tender. Please note that bids should be submitted by Mar 31, foreign stake in bidding companies must not exceed 49%. According to Sabah Local conglomerates Koc, Sabanci, Zorlu are also interested in IDO tender. Chairman of Yilmaz Ulusoy Holding, Yilmaz Ulusoy, had already announced that his company would bid for IDO.
Tourism revenues seen at USD 25bn in Head of the Turkish Hotels Federation (Turofed), Ahmet Barut, says that the country’s 2011. tourism revenues are expected to increase 5% y/y to USD 25bn while the number of tourists is targeted to be 31mn this year. Tourism statistics for 2010 will be released in this month, but Barut estimates a 5.23% increase in the number of tourist arrivals to 28.5mn last year and a 7.31% decline in the number of tourists visited Istanbul. Barut asserts that Turkey is the 7th largest country in the world with respect to tourist arrivals and 9th largest country with respect to tourism revenues, according to the World Tourism Organization data. Barut adds that foreign direct investments to tourism sector boosted 50% y/y to USD 94mn in Jan-Oct 2010.
Indeks to acquire majority stake in IT products distribution and marketing company Indeks Bilgisayar informs in a filing with Alkim Bilgisayar. the Istanbul Stock Exchange that it launches talks to acquire majority stake in Alkim Bilgisayar which provides after-sale technical services for global branded IT products such as Hewlett Packard. Statement details that Alkim Bilgisayar, which was established in 1996, operates service points in Istanbul, Ankara and Izmir.
Vestel Group targets USD 3bn exports Chairman of Zorlu Holding, parent company of Vestel Group, Ahmet Nazif Zorlu says in 2011. that Vestel produced 7.5mn units of television sets last year and targets to produce 8.5mn units in 2011. Vestel Group increased its exports 15% to USD 2.25bn in 2010 and targets USD 3bn in exports in 2011, according to Zorlu. Zorlu asserts that Vestel produced 85% of television sets manufactured in Turkey last year and targets to increase sales volume to USD 15bn in 2020.
Agaoglu Group plans to go public this Chairman of Agaoglu Group, Ali Agaoglu, announces that the company plans to go public year. within 2011. The company closed 2010 with a 20% growth by increasing annual turnover to TRY 1bn (EUR 0.49bn) and targets TRY 2bn (EUR 0,97bn) of sales revenues in 2011, according to Agaoglu.
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Borusan Mannesmann wins EUR Steel and plastic pipes manufacturer Borusan Mannesman informs in a filling with the 20.8mn tender. Istanbul Stock Exchange that it wins a EUR 20.8mn tender held by Denmark-based Energinet.dk to supply 6,300 units of steel pipes for Ellund-Egtved Natural Gas Pipeline. The statement details that when Ellund-Egtved project is completed pipes produced by Borusan will have been used in 10% of natural gas network in Denmark. The latest EUR 20.8mn deal corresponds to 5% of Borusan’s gross sales revenues announced its latest financial statement.
Logistics company Reysas signs USD Logistics Ccmpany Reysas Lojistik informs in a filing with the Istanbul Stock Exchange 5mn contract. that it signed a warehousing and handling contract amounting to USD 5mn (VAT included) with Chinese Huawei Telekomunikasyon for a period of 3 years. The company expects that the contract will increase 1% its year-end turnover volume, statement details. On a separate statement to the Istanbul Stock Exchange, Reysas announces that it signed a contract with commercial car rental company Hama Oto Kiralama in order to lease 100 units of Mercedes Benz Axor vehicles for 36 months.
Construction costs increase 8% y/y in The statistics institute reports that the main building construction costs index increased by Q4 2010. 7.52% y/y and 1.57% q/q in Q4. Labour costs recorded a 6.07% y/y increase while the labour cost index rose 0.42% compared to Q3. Construction materials cost index was up 7.98% y/y and 1.94% q/q in the fourth quarter.
Bids to be invited for Hamitabat Acting chairman of the privatisation administration, Ahmet Aksu, told news agency power plant shortly. Anadolu that the administration plans to invite bids for Hamitabat thermal power plant with a tender announcement in the coming days. The power plant will be privatised through share sale, according to Aksu. Aksu also informs that privatisation method for hydropower plants will be the transfer of operating rights while asset sale method will be used for thermal power plants and public offering may be considered for some plants.
Mercedes-Benz plans EUR 35mn Wolf-Dieter Kurz from Mercedes-Benz Turk says that the company invested EUR 30mn investment in 2011. last year and plans to increase its investments to EUR 35mn in 2011. The company sold 29,663 units of vehicles in total and reached an annual turnover amounting to EUR 157mn in 2010 and these are the record high figures since 1973 when the company launched operations in Turkey, according Kurz. Kruz also announces that the Mercedes-Benz Turk foresees a 12-13% growth in domestic automotive market in 2011 and plans to invest EUR 130mn between 2010 and 2015. Marketing and sales manager of the company, Suer Sulun, says that the company targets to sell 35,000 units of vehicles in 2011 and expects a growth in domestic city bus market due to the general election this summer.
Daihatsu to cease sales in Turkey in Daihatsu announces that it decided to cease sales of new vehicles in Europe, including 2013. Turkey, as of Jan 31, 2013. But the company will continue to provide after-sales services. Daihatsu explains that it decided to halt sales because of increasing development costs to comply with regulations in Europe. Local daily Milliyet reports that Daihatsu has sold a total of 12,000 vehicles in Turkey up to date.
Katmerciler in joint venture talks with Katmerciler Arac Ustu Ekipman Sanayi, which produces vehicle top equipments and French Giamex. spare parts, informs in a filing with the Istanbul Stock Exchange that it started talks with France’s Giamex International to establish a 50-50 joint venture for the production of new equipments. The joint venture will be located in the city of Izmir and the equipments to be produced will be sold in international markets.
Peugeot rules out production in Chairman of carmaker Peugeot, Vincent Rambaud, says that the company produces Turkey in near future. vehicles with local partner Karsan while some Peugeot brand vehicles are manufactured at some local plants but Peugeot does not consider establishing a production facility in Turkey in the near future. Meanwhile, general manager of Peugeot Automotive Marketing, Jean Pierre Vieux estimates total vehicle sales in local market at 1mn units this year. Most analysts expect sales between 750,000 and 800,000 units in 2011. As for Turkey operations of Peugeot, Vieux asserts that the company’s market share increased to 5.7% last year and Peugeot targets to increase its share above 6% this year.
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED Guris to construct EUR 280mn cement Guris will establish a cement plant in Syria’s Akkai city. Construction of the plant, which plant in Syria. will cost USD 280mn, will be completed in 24 months. The plant will produce annually 1.5mn tonnes of cement.
Lender Halk Bankasi plans IPO for State-owned Halk Bankasi has applied to the capital markets board to register the shares Halk REIT. of its subsidiary Halk Real Estate Investment Trust for a possible public offering. Business daily Dunya reports that 47% shares of the company will be offered in the IPO.
Value of TSKB REIT’s portfolio TSKB Real Estate Investment Trust informs that an independent appraisal firm calculated calculated at EUR 139mn. the value of real estate portfolio of the company at TRY 290.3mn (EUR 139mn). The portfolio includes a shopping centre, office buildings and a land.
Value of Is REIT’s real estate portfolio Is Real Estate Investment Trust informs in a filing with the Istanbul Stock Exchange that an estimated at EUR 680mn. independent appraisal company calculated the value of the real estates under Is REIT’s portfolio at TRY 1.4bn (EUR 682mn). The portfolio includes office buildings, shopping centres, lands and hotels in several cities.
Ronesans Insaat to develop USD Construction company Ronesans Insaat informs that it signs a build-operate-transfer 180mn project in Syria. agreement with the Syrian authorities to develop a mixed-use project in Aleppo. The project, named Taj Halab, consists of a shopping mall, hotels, convention centre, office buildings, movie theatres and entertainment centres. Ronesans Insaat will cooperate with Damascus-based Cham Holding’s subsidiary Bena Proporties for Taj Halab project which is planned to be completed in Jan 2013 and which is expected to cost USD 180mn.
Sinpas REIT buys land in Ankara for Sinpas Real Estate Investment Trust informs that it purchased 6,241 square meters of land USD 9mn. in Ankara’s Cankaya district for USD 9mn and made the payment in one instalment. The company already bought a land in the same district and it plans to develop a real estate project on the lands.
Construction sector expected to grow According to a survey conducted by the construction materials manufacturers’ association 5-12% this year. (IMSAD) local construction sector is expected to show a strong performance this year. 46% of participants expect construction sector to grow between 9% and 12% while 43% anticipate an expansion between 5% and 8% this year.
SPV transfers 15% stake in Bimeks to Consumer electronics retailer Bimex informs in a filling with the Istanbul Stock Exchange RP. that one of its shareholders SPV Bilisim (SPV) transfers its 14.75% stake in Bimeks to RP Explorer Netherlands (RP) in accordance with the option agreement signed between the parties. RP increases its stake in Bimex to 25% and SPV’s stake in the company declines to 24% following the share transfer, the statement details. As a final note, majority shareholder of Bimeks, Mehmet Murat Akgiray’s direct and indirect stakes in the company totals to 59.9%, according to the statement.
Anadolu Hayat Emeklilik reports EUR Pension and insurance company Anadolu Hayat Emeklilik reports in a statement to the 174mn premium revenue last year. Istanbul Stock Exchange that its premium revenues amounted to TRY 357.6mn (EUR 174mn) last year. In 2009, the company had reported TRY 500mn of premium revenues.
UniCredit to focus on Turkey. Reuters quotes Gianni Franco Papa from UniCredit as saying that UniCredit has no plans to exit any emerging markets but it will refocus the bank’s presence in Turkey, Russia, Poland, Romania, Croatia and the Czech Republic. In December last year, CEO of UniCredit, Federico Ghizzoni, said that the bank planned to open a total of 900 new branches mainly in the central and eastern markets in five years, of those new branches 300 were planned to be opened in Turkey. UniCredit holds stakes in local lender Yapi Kredi.
Insurer Ray Sigorta reports EUR Insurer Ray Sigorta discloses to the Istanbul Stock Exchange that its premium revenues 123mn premium revenue last year. reached TRY 252.4mn (EUR 123mn) last year. In 2009, the insurer’s premium revenues had stood at TRY 253.8mn.
Denizbank to take 10% stake in Private lender Denizbank informs in a filing with the Istanbul Stock Exchange that it
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED agricultural products warehousing decided to participate in the establishment of a licensed warehousing company for company. agricultural products, named Ege Tarim Urunleri Lisansli Depoculuk. The statement details that Denizbank participates to the company’s capital with TRY 800,000 (EUR 375,098) and takes a 10% stake in the company.
Capital markets board approves Is The capital markets board announces that it approved an application by private lender Is Bankasi’s bond issue. Bankasi regarding the issuance of up to TRY 5bn (EUR 2.4bn) bonds and/or bills with different maturities.
Insurer Allianz Turkey to focus on CEO of insurer Allianz Turkey, Alexander Ankel, says that the company will focus on organic growth. organic growth this year but they will always keep a close eye on opportunities for inorganic growth. Ankel asserts that Turkish insurance sector grew 5% last year and a significant growth in the sector is not expected this year. Ankel also anticipates some large acquisitions and expects new players to enter the market in 2011.
Anadolu Efes reports 11% increase in Brewer Anadolu Efes informs that its consolidated sales volume (including beer and soft sales volume last year. drinks) was up 11% y/y to 43.2mn hectolitres in 2010. In the final quarter of 2010, consolidated sales grew 14% y/y. Total beer sales volume increased 9.2% in 2010 to 24.2mn hectolitres while the increase in Q4 was 10.9% y/y. The company also informs that total soft drinks sales volume was 665.4mn unit cases in 2010, presenting a 13.5% y/y increase compared to 2009 while in Q4 the increase was 18.5% y/y.
Beypilic plans USD 40mn investment Chairman of poultry firm Beypilic, Sait Koca, says that the company plans to invest USD this year. 40mn in 2011 and to increase production capacity to 400,000 tones which currently stands at 150,000 tones. The company also plans to begin to produce eggs with a daily capacity of 1.5mn and to increase the capacity to 5-6mn by the completion of new investments, Koca asserts. Koca also states that the company’s profitability is being affected by the increase in raw materials prices. As a final note, Beypilic plans to enter Saudi Arabian market, according to Koca.
Bilici Group to establish olive oil plant Bilici Group plans to establish an olive oil production plant together with an unnamed together with Italian company. Italian company in the Turkish town of Ceyhan, news agency Anadolu reports. A delegation from Bilici Group held preliminary talks with the Italian partner and the plant is expected to become operational this year, says Tamer Bilici head of finance group of Bilici Yatirim. Please recall that Bilici Group has applied to the capital markets board and the Istanbul Stock Exchange for an IPO.
SDIF to hold tenders for Cine5, Viva, The saving deposit and insurance fund (SDIF) will hold tenders for TV channel Cine 5 on Show Radyo shortly. Jan 31, for Viva TV–Radyo Viva, the radio channels Show Radyo on Feb 8 and Feb 15, respectively. The SDIF set the minimum sale price for Cine 5 at USD 40mn, for Viva at USD 6mn and for Show Radyo at USD 11mn.
Retailer Tesco Kipa opens news store Retailer Tesco Kipa informs in a filling with the Istanbul Stock Exchange that it opened a in Izmir. store in Izmir Province. Please note that, it is the 119th store of the retailer nationwide.
Authorities impose EUR 22mn tax on Migros informs in a filing with the Istanbul Stock Exchange that following an audit for retailer Migros. 2009, the finance ministry imposed a tax bill of TRY 45.6mn on the company (TRY 14.6mn tax and TRY 31.2mn fine). Migros says it will use all legal means to challenge the bill, including seeking a settlement, and an immediate payment is out of question at this stage.
Textile firm Hateks raises EUR 7mn Textile firm Hateks Hatay Tekstil Isletmeleri, which is the first textile company going from IPO. public in the Istanbul Stock Exchange after six years, raised TRY 13.8mn (EUR 6.72mn) from the IPO in the ISE Emerging Companies Market. Board chairman of the company, Abud Abdo asserted that the company may consider offering shares of its subsidiary Letoonia Hotels, which operates two hotels, to public. Abdo adds that the company considers a hotel investment with a capacity of 250 beds on its land in Hatay Province and an office building and shopping mall investment on its land in Izmir Province. Hateks has an annual turnover of TRY 100mn (EUR 48.7mn) and plans investments amounting to EUR 3.5mn for a 20% of capacity increase, according to Abdo. As a final note, Abdo
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED says that the company will use the IPO revenue to promote its Sensei brand which is marketed in 550 sales points across Turkey.
Utopya Turizm to use proceeds from Utopya Turizm Insaat will use proceeds from the planned IPO to fund convention centre IPO for new investments. and real estate investments. A 35.71% stake will be offered to public and the IPO currently awaits approval from the capital markets board. Aysegul Dursun Karaca from Utopya details that the convention centre will cost USD 1-2mn and the real estate project will be developed in Ankara’s Esenboga district. Utopya targets to increase its revenues by 25% this year from TRY 27mn in 2010.
TAV says airports operated by TAV Havalimanlari issued a statement to the Istanbul Stock Exchange in response to company in Tunisia continue media reports that following the disturbance and political turmoil in Tunisia, the air space operations. of this country was closed and the Tunisian military took control of all airports. The statement details that TAV’s subsidiary TAV Tunisie SA operates two airports in this country, namely Monastir and Enfidha airports, and these airports continue their operations and Enfidha airport is used to evacuate foreign citizens. There are no security problems at Monastir and Enfihda airports, the statement adds.
Some fuel distribution companies Fuel distributor Opet announces that it will lower its profit margin to TRY 0.35 from TRY lower profit margins. 0.40 starting from February 1. Please recall that the energy market regulator asked the distribution companies to end promotional campaigns to customers as of February 1. Opet details that the reduction is related to the company’s promotional campaign costs and corresponds to 10% of total profit margin. Shell & Turcas has already announced that it lowered profit margin.
Power company KCETAS targets to Electricity company KCETAS (Kayseri ve Civari Elektrik A.S) officially took control of increase installed capacity to 100mn Bunyan, Camardi, Pinarbasi and Sizir hydropower plants. In the privatisation tender held kWh. for the power plants, the company outbid its rivals with its USD 89.7mn offer. General manager of KCETAS, Sadi Buyukkececi, says that the company targets to increase its installed capacity to 100mn kWh from 70mn kWh with a USD 5mn investment.
Energy minister Yildiz paying visit to Energy minister Taner Yildiz is currently paying an official visit to Venezuela in an effort to Venezuela. explore opportunities to diversify Turkey’s energy supply sources. Yildiz says that Turkey hopes to buy oil and oil products from Venezuela at lower prices. Yildiz reminds that foreign minister of Venezuela visited Turkey recently and the two countries signed energy cooperation agreements.
Verusa Girisim acquires 45% stake in InvestCo’s subsidiary Verusa Girisim Sermayesi informs that it acquired a 45% stake in Ata Elektrik. Ata Elektrik with the approval of the energy market regulation agency (EPDK). Chairman of Varlik Girisim, Mustafa Unal, says that the company aims to specialize in electricity wholesaling.
Finance minister Simsek rules out fuel Finance minister Mehmet Simsek says that the government currently does not consider tax reduction. lowering the tax on fuel products. Simsek admits that taxes on fuel products, communication and telecom services are high and the government may look into the issue in the future but all depends on budget performance. A debate over high fuel prices has been going on for sometime. Oil retailers blame extreme taxes for high fuel prices but there were reports in media suggesting that the authorities may consider introducing a cap on fuel prices if oil retailers and distributors do not reduce mark-ups.
Ayen Enerji acquires 70% stake in Ayen Enerji informs in a filling with the Istanbul Stock Exchange that the board of Aksu Temiz Enerji. directors decided to apply to the energy market regulation agency (EPDK) in order to acquire a 70% stake in Aksu Temiz Enerji. The statement details that Aksu Temiz owns a wind power plant with an electricity generation capacity of kWh 295.8mn per year.
Emek Elektrik receives EUR 2.4mn Producer of electromechanical products Emek Elektrik Endustrisi informs in a filing with order. the Istanbul Stock Exchange that it signed three agreements in the first three weeks of 2011with AK-AY Elektrik for a EUR 1.5mn worth of orders, with Italian grid operator ENEL Direzione for EUR 533,010 and with TEIAS for EUR 314,460 amounting to EUR 2.37mn in total. The statement issued by Emek Elektrik also details that the value of
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED orders the company received amounted to EUR 13.63mn in total consisting of EUR 5.72mn worth of domestic orders and EUR 7.91mn worth of export orders including orders from Nigeria, Italy, England, Colombia, Pakistan and Malezia.
BOTAS to hold tender for Russian gas Board of directors of the state-owned pipeline company BOTAS decided to hold a contracts shortly. tender soon in order to sell 6bn cubic meters of Russian gas contracts on Blue Stream pipeline, unnamed government officials told Reuters. The report details that companies interested in the contracts will primarily win approval from Russian Gazprom.
Tosyali Group plans to invest USD 3- Chairman of Tosyali Group, Fuat Tosyali, says that the company plans to invest USD 3- 3.5bn by 2015. 3.5bn in steel, pipe, energy and seaport projects in total until 2015 and to increase its molten steel production capacity to 5mn tones in 2015. The company increased its total steel production 85% y/y to 2.5mn tones, its annual turnover 133% y/y to USD 1.6bn and its total exports 40% y/y to USD 400mn in 2010, according to Tosyali. Tosyali asserts that the company targets to increase its total steel production 42% y/y to 3.54mn tones, its annual turnover 63% to USD 2.85bn and its total exports 25% y/y to USD 500mn in 2011. Please recall that Fuat Tosyali had announced in Dec 2009 that the company’s revenues were likely to increase to USD 1.2bn in 2010 and he says now that revenues exceeded 25% of the target last year.
Unilever Foodsolutions increases General manager of Unilever Foodsolutions Turkey, Middle Asia, Caucasia and Iran, turnover 25% y/y to EUR 100mn last Onder Arsan, asserts that Unilever Foodsolutions Turkey increased its annual turnover year. 25% y/y to EUR 100mn in 2010 and became the fastest growing subsidiary of Unilever Foodsolutions in the world. Please recall that CEO of Unilever Turkey Group, Izzet Karaca, told daily Sabah on December 30 that the company targeted to double its annual TRY 2.9bn (EUR 1.39bn) turnover until 2020.
Industry minister announces major Industry and trade minister Nihat Ergun says that one company has expressed its intention investments in automotive, energy to increase vehicle production to 250,000 units from 90,000 units while another carmaker sectors. company plans a USD 1bn investment. Ergun also asserts that one company considers USD 1bn investment in energy sector. The minister declines to give the names of the companies.
Gersan to establish company in Qatar. Gersan Elektrik Ticaret informs that its board decided to establish a company Qatar, namely Gersan Electric Qatar. The capital of the new firm will be USD 1mn and Garsan Elektrik will take a 90% stake.
POLITICAL
Poll estimates public support for A monthly opinion poll, conducted by Konsensus in early January for daily Haberturk, ruling AKP at 46%. estimates public support for the ruling AKP at 46%, up from 40.9% in the previous survey. The poll shows support for the main opposition centre-left CHP at 26.5%, a slight increase from the previous survey’s 20% while 12.5% said they would vote for the nationalist MHP, support for the party declined from 14.2% in the previous month. A 11.5% of the participants said they are undecided and around 10% said they would not vote.
GENAR poll estimates support for A survey conducted by polling agency GENAR between Jan 5 and Jan 15 in 17 cities ruling AKP at 46.4%. shows that public support for the ruling stands at AKP 46.4%. According to the poll, support for the main opposition CHP and nationalist MHP stand at 24.3% and 13.4%, respectively. Separately, daily Aksam reported the results of a poll commissioned by CHP. The survey was carried out by PR-NET in January, which shows 38.8% support for AKP and 33.9% support for CHP. The poll estimates MHP’s support at 17.2%.
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MACROECONOMIC REVIEW
Current account gap narrows to EUR Bulgaria’s current account deficit (C/A) narrowed to EUR 9.8mn in January to November 9.8mn in Jan-Nov. from EUR 3.02bn a year earlier, accounting for 8.6% of the GDP, central bank preliminary data showed. The lower deficit was mainly a result of a fall in trade and income deficits and a rise in net current transfers and the services balance. The country’s foreign trade gap shrank to EUR 2.07bn in the first 11 months of 2010 from EUR 3.79bn in the same period of 2009, as the gap represented 5.7% of the GDP. Exports rose by 31.8% on the year to EUR 14.2bn, after decreasing by 24.7% to EUR 10.7bn a year ago. Imports increased by 11.7% to EUR 16.2bn, while in the same period in 2009, it fell by 34.6% to EUR 14.5bn. In November alone, the C/A deficit widened to EUR 337.6mn from EUR 267.4mn a year earlier, due to a higher trade gap, which rose by EUR161.6mn.
FDI falls more than three times to Bulgaria attracted foreign direct investments (FDI) of EUR 894.7mn in January to EUR 894.7mn in Jan-Nov. November 2010, more than three times lower than the EUR 2.78bn in the same period of 2009, central bank preliminary data showed. FDI equalled 2.5% of the projected GDP, well below the 7.9% in Jan-Nov 2009. The Netherlands was the largest net FDI investor in the country with EUR 1.23bn, followed by Cyprus with EUR 109.9mn and Russia with EUR 108.2mn. In November alone, FDI fell to EUR 49.2mn from EUR 256mn in the same month a year earlier.
BANKING AND FINANCE
Yields on 10-1/2 year bonds ease to The yields on Bulgaria's 10-1/2 year fixed-rate treasury bonds eased to an average of record low 5.49%. 5.49% at the January 17 auction for BGN 45mn, which is the lowest yield since May 2008, the finance ministry said in a statement on its website. The low yields show domestic investors' confidence, deputy finance minister Boriana Pencheva said. Primary dealers submitted bids for BGN 154mn with yields ranging from 5.44% to 5.51%. The issue bears a 5% annual coupon due semi-annually.
FIBank increases stake in local health Bulgaria's First Investment Bank (FIBank) has increased its holdings in local health insurer insurer. Zdravnoosiguritelna Kasa FI Health to 59.1%, FIB said in a filing to the Bulgarian Stock Exchange. FIBank bought 100,000 shares with a par value of BGN 1 each from individual shareholder Radoslav Milenkov, the filing read. No financial details about the deal were available. FIBank was set up in 1993. In the first nine months of 2010 the bank posted a profit of BGN 21.3mn (EUR 10.9mn).
Insurance market shrinks by 2.6% in Bulgaria’s insurance market shrank by 2.6% on the year in January to November 2010, Jan-Nov. the Financial Supervision Commission said in a statement. General insurance companies reported a combined gross premium income of BGN 1.214bn (EUR 613.5mn)in January to November 2010, down by 4.4% on the year. Motor vehicles insurance accounted for 37.4% of the overall and third-party liability insurance accounted for 34.5%. Life insurance gross premiums grew by 9.2% to BGN 214.9mn. The combined gross premium income of voluntary health insurance companies in the country reached BGN 37.5mn, rising by 6.2% from the same period last year.
COMPANIES AND INDUSTRIES
Chinese Great Wall starts hiring for Chinese car maker Great Wall started hiring for its car plant in Lovech, which is currently Bulgarian car plant. being built, BTA news agency reported, quoting the executive director of the Bulgarian partner in the project – Litex Motor, Ilia Terziev. The company has already employed 26 engineers, who are currently on training in China, and plans to hire additional 40 afterwards. Some 800 workers will join the plant in the first stage of the construction
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED works, and another 500 – in 2012. According to previous media reports, the plant will need 3,000 employees when operating at full capacity. The assembly of vehicles is scheduled to start in the summer. The initial production capacity is expected to be 1,000 vehicles annually and is to reach 50,000 afterwards. The initial investment in the car- assembling facility is estimated at EUR 80mn, while the total price of the project is expected to reach USD 420mn. The production units are being built on a land plot of 42.9ha.
EVN Bulgaria to invest EUR 57.8mn EVN Bulgaria will invest BGN 113.1mn (EUR 57.8mn) in infrastructure upgrades, in infrastructure upgrades. econ.bg reported, quoting company executive Jorg Sollfelner. Two-thirds will be spent on modernisation of the company's network. Investments will be made in improving the security of electricity supply. In case electricity prices rise, the company vowed to invest more. EVN Bulgaria, wholly-owned by Austrian regional energy utility EVN AG, started operations in 2005, following the acquisition of Elektrorazpredelenie - Plovdiv (Electricity Distribution Company-Plovdiv) and Elektrorazpredelenie Stara Zagora (Electricity Distribution Company-Stara Zagora). Thus, EVN supplies electricity to 1.6mn customers in southeastern Bulgaria. As of December 2007, it also started heating distribution in Plovdiv and Assenovgrad. EVN Bulgaria has poured in BGN 620mn in the period 2005- 2009. Its investment programme for 2010 was planned at BGN 146mn.
Sofia airport handles record 3.3mn Sofia’s international airport handled a record high of 3.297mn passengers in 2010, up by passengers in 2010. 5.2% compared to the previous year, the airport said on its website. The number of passengers using the airport exceeded for the first time 3mn in 2008. Passengers on international lines rose by 6% on the year, while travellers on domestic lines increased by 2% last year. Twenty-six air carriers, of which six low-cost, used the airport to operate flights to 51 destinations. The airport handled 47,061 flights in 2010, by 3% more than in 2009. Cargo traffic increased to 15,332 tonnes, up by 200 tonnes compared to 2009. Despite the increase, the cargo traffic remained well below the pre-crisis levels. In December alone, the number of passengers rose by 1.7 y/y to 252,045. Cargo traffic went up by 2.5% to 1,548 tonnes.
Food producer Bella Bulgaria to Food producer Bella Bulgaria plans to open a second frozen pastry production unit in expand production capacity. Svilengrad, the company said in a statement on its website. The company already operates another facility there, thus concentrating production and logistics in the area. Bella Bulgaria is the biggest frozen pastry producer in the country, and also occupies a 40% share on the Romanian market segment.
Paper mill Kostenets HHI mulls EUR Paper mill Kostenets HHI plans to borrow a EUR 10mn credit from Corporate 10mn credit from CCB bank. Commercial Bank (CCB) to repay old debts and finance operations, Dnevnik daily reported. The company’s shareholders will vote to give rights to the management board to apply for the loan at a meeting scheduled for March 3, 2011. The loan will have a four- year maturity and carry an annual interest of 8%. Recently companies linked to CCB’s owner, local businessman Tsvetan Vassilev bought stakes in the paper mill. Telprom bought a 34% stake in Kostenets HHI at the end of last year and Shields Investment acquired 20% of the company earlier in January. Kostenets HHI reported a net profit of BGN 456,000 on sales of BGN 7mn in the first nine months of 2010. No comparative figures were available.
Passenger numbers of Fraport’s The passenger numbers of Fraport's two airports on the Bulgarian Black Sea coast Bulgarian airports rise in 2010. increased in 2010, Fraport said in a statement on its website. The Bourgas Airport reported an 11.1% rise to 1,894,109 passengers, while Varna Airport’s passenger numbers inched up by 0.6% to 1,227,442. Fraport Twin Star Airport Management, a 60/40 joint venture of Fraport and Bulgarian company BM Star, won a 35-year concession to manage the airports in Bourgas and Varna in 2006. Fraport launched a BGN 12mn expansion project at the Bourgas airport in 2010. The project envisages the construction of new administrative buildings and fire-fighting facilities at the airport, as well as four stands for large airplanes.
Telecom watchdog proposes The country’s telecommunications watchdog will propose restrictions to the number of restriction to number of SIM cards per SIM cards registered to a single individual or company, Dnevnik daily reported. The
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED person. proposed restrictions are to be included in the draft amendments to the communications act. The communications watchdog wants to restrict the number of registered SIM cards to three cards per individual. The number of SIM cards that could be registered to a company should be equal to the number of its employees, the watchdog’s chairman said. The registration of prepaid SIM cards became obligatory in the beginning of 2010. Leading cell phone operator MobilTel has voiced its discontent with the watchdog’s proposal, however, all three cell operators in the country have agreed that they would comply with such restrictions, if necessary.
Sales of drug dealer Sopharma Sales of drug dealer Sopharma Trading rose by 14.4% y/y to BGN 401mn in 2010, Trading rise by 14.4% in 2010. Dnevnik daily reported. Sales in December accounted for 10% of the overall. In November, Sopharma Trading's sales increased by an annual 11.2%, after rising by 4.6% in October. The company reported a pre-tax profit of BGN 4.9mn last year, as only in December it stood at BGN 504,000. No comparative profit data was available. Sopharma Trading is majority owned by Sopharma, one of the leading pharmaceuticals groups in Bulgaria. The company had a market share of 20.7% as of end-2009, according to information on its website.
EBRD mulls EUR 31.95mn loan for The EBRD mulls extending a loan of up to EUR 91.95mn to support a series of urban Bulgarian transportation projects. transportation projects in Sofia, the bank said in a project description on its website. The project consists of four separate agreements, which will be extended to the urban transport project (EUR 12.95mn), the centre for public mobility’s e-ticketing system (EUR 7mn), the electric transport company (EUR 6mn) and the underground company Metropolitan (EUR 6mn).
Investment funds pay EUR 75mn for Investment funds advised by Citi Venture Capital International (CVCI) have completed 37% stake in Huvepharma. the acquisition of a 37% stake in drug maker Huvepharma for EUR 75mn, Focus newswire reported. The deal was completed on November 30, but its value was not announced then. Huvepharma, majority owned by real estate developer Advance Properties, focuses on developing, manufacturing and marketing human and animal health products. The company has production units in Bulgaria and the USA. Sales in countries from the EU and USA account for 65% of the company’s overall annual sales. CVCI is part of Citigroup’s alternative investment fund Citi Capital Advisors.
Mining complex Maritsa East to invest The largest domestic coal mining complex Maritsa East plans to invest BGN 88.2mn EUR 45.1mn in 2011. (EUR 45.1mn) in 2011, the company said in a statement on its website. The investment programme will back the company’s output target of some 27.3mn tonnes of coal. The investment priorities include the construction of a loading terminal for coal supply to the new 670 MW coal-fired power plant, AES Galabovo, built by U.S. power firm AES for EUR 1.3bn; and rehabilitation of the company’s mining equipment. According to previous media reports, Maritsa East beat its output target by 8%, extracting over 26.1mn tonnes of coal in 2010.
Bulgaria to launch large scale Bulgaria will start a large scale campaign to sell off state-owned companies and minority privatisation in 2011. stakes, econ.bg reported. The privatisation programme for 2011 includes tourist company VMT Orbita and Bulgarian Rose State Laboratory, which will be removed from the list of state run companies not slated for privatisation. Arms producer VMZ will also be removed from this list and put up for sale, once the parliament adopts a privatization strategy for the company, representatives of the economy ministry said as cited by econ.bg. The 2011 privatisation strategy also includes local tobacco producer Bulgartabak Holding, the Svilengrad Free Trade Zone and possibly the Rousse Free Trade Zone. Construction company Montazhi will be sold through the stock exchange. The state also plans to sell off its minority stakes in a number of companies, among which Nestle Ice Cream Bulgaria and several electricity distributing companies.
Grid operator NEC to request The national grid operator (NEC) will request an increase of electricity tariffs by BGN electricity price rise. 0.01 per kWh from the current BGN 0.18, VAT included, Dnevnik daily reported, quoting the company’s CEO as saying at an energy conference. NEC needs more resources tp finance the investment programme, which in 2011 is estimated at BGN 219mn. The company plans to focus on the rehabilitation of the existing networks as
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED opposed to last year’s priority, which was the construction of new power capacities, such as the Belene nuclear power plant and the Tzankov Kamak hydropower unit. The price of electricity is being determined every year in July. In July 2010, the electricity for retail end-users increased by an average of 1.5%. The electricity distribution companies will ask in February to be allowed to raise prices as of July, as well. In the beginning of the year, the energy state regulator had said that there are no reasons for power price hikes considering the inflation rate.
US CHS expands East European US agribusiness company CHS Inc has bought Agri Point seeking to bolster its business. operations in Bulgaria, Romania, Hungary and Serbia, the company said in a statement. CHS acquired Agri Point from Cyprus-based East Point Holdings. The acquisition, made via CHS’s fully-owned unit CHS Europe SA, is part of the company's ongoing global grain origination expansion, adding approximately 1.5mn to 2mn metric tonnes of corn, wheat and barley. CHS is one of the US's leading publicly traded, cooperative marketers of grain, oilseed and energy. CHS trades grain and sells farm supplies to members through its stores. It processes soybeans for use in food and animal feeds, and grinds wheat into flour used in pastas and bread. Through joint ventures, the company sells soybean oil and crop nutrient and protection products, and markets grain. CHS also provides insurance and financial and risk-management services, and operates petroleum refineries and sells Cenex brand fuels, lubricants, and energy products.
Sofia to seek loans, EU funds for Sofia's local authorities will seek loans and EU financial support for the implementation of major projects. major projects in 2011, Dnevnik daily reported, quoting the municipality’s draft budget, presented by mayor Yordanka Fandakova and her deputies. The budget envisages capital expenses of BGN 624mn, half of which will come from the EU, while BGN 131mn will be raised through loans. Some of the major projects include the construction of a waste processing plant and several roads and road junctions, as well as improvements of the urban transportation infrastructure and e-ticketing system.
UN to decide on restoration of The United Nations Compliance Committee of the Kyoto Protocol will decide in Bulgaria’s CO2 trade accreditation in February on the restoration of Bulgaria’s accreditation for greenhouse gas emissions Feb. trading, after the country’s licence was suspended in June, Dnevnik daily reported, quoting the chairperson of the executive environmental agency, Vanya Grigorova. According to previous media reports, the restoration procedure was initiated in December. The UN terminated Bulgaria’s trading rights in June due to the lack of a functioning system for measuring annual greenhouse gas emissions in 2007 and 2008. The country was also criticised for excluding certain sectors (e.g. landfills) from the system and for not considering the effect of forestation on emission levels. The latest review of Bulgaria’s readiness to enter CO2 trade in October showed that Bulgaria already has a working system and its accreditation might be restored in end-2010 or early 2011.
Energy company Enemona voices Bulgarian energy and engineering firm Enemona inked an agreement with Belgian plans to list on Warsaw exchange. brokerage KBC Securities' units in Poland and Bulgaria on the listing of Enemona’s ordinary shares on the Warsaw Stock Exchange and an increase of the company’s capital, Enenoma said in a statement on its website. According to the statement, further information regarding the share offering and the capital increase will be released later. Enemona was set up in 1990. It is active in power, industrial and civil engineering, energy efficiency and electricity trading. Enemona launched an IPO of its shares on the Bulgarian Stock Exchange in 2007 through which the company raised BGN 33.6mn (EUR 17mn). At the end of September 2010, Enemona posted a net profit of BGN 2.77mn.
Shield Investment buys 20% in Local Shield Investment has purchased 20% in Bulgarian paper mill Kostenets, the paper Kostenets paper mill. mill said in a note on its website. Shield Investment aims at acquiring control over the paper mill, the note read. No financial details about the deal were disclosed. However, according to the Dnevnik business daily, the 20% stake in the paper mill was worth around BGN 3mn (EUR 1.5mn). At the end of December, local company Telprom bought 34.07% in the paper mill. According to the Dnevnik daily, both Shield Investment and Telprom are affiliated with Tsvetan Vassilev, owner of local Corporate Commercial Bank.
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED POLITICAL
Government wins confidence vote. The Bulgarian government won its first vote of confidence sought by PM Boiko Borisov in regard to its overall policy, Investor.bg reported. A total of 141 MPs supported the cabinet, 72 voted against it and 13 abstained from voting.
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MACROECONOMIC REVIEW
Central bank says lending lags despite The central bank worked hard to stimulate lending, but its efforts are neutralised by the efforts. commercial banks, which have not decreased the interest rates in line with the monetary policy rate cuts, Wall-Street reported, quoting central bank governor Mugur Isarescu's interview for The Money Channel. The central bank tries to encourage credit growth, but still makes sure it does not drain the excess resources on the money market, Isarescu added. The central bank’s focus this year will be on price stability and financial stability. The monetary policy alone cannot stimulate growth if not supported by the fiscal policy, Isarescu added.
IMF: Next agreement to focus on The next agreement that Romania will sign with the IMF will include targets for the arrears arrears of public companies. of the state-owned companies, because sorting out this problem would free supplementary resources needed for the support of economic growth, Mediafax quoted the head of the IMF expert team, Jeffrey Franks, as saying at the Euromoney conference in Vienna. Regarding the central administration’s arrears, certain progress was made although the Fund had to waive six times the quarterly performance criteria under the ongoing stand-by arrangement, Franks said. Regarding the arrears of the local administration, Franks mentioned that the new legal provisions enforced as of January will produce effects in several months.
WB disburses EUR 300mn tranche The World Bank disbursed the second EUR 300mn tranche of the EUR 1bn loan under policy development loan ... earmarked to Romania under the two-year agreement signed back in May 2009, Mediafax reported, quoting WB's country representative, Stefan Nanu. The disbursement was conditioned on certain structural reforms, including the public pension system, the remuneration system in the public sector, the social security system and the medium-term fiscal programme. The bank has thus disbursed EUR 600mn out of the EUR 1bn Policy Development Loan, agreed upon in spring 2009, with the remaining EUR 400mn most likely to be postponed for the next agreement, to be signed with the country soon. This option was mentioned by World Bank country director for central Europe and the Baltics when commenting on the new agreement to be reached by Romania with IMF, WB and EC. Initially, the second disbursement under the EUR 1bn loan was scheduled for H1 2010, but the pre-requisites were not met timely.
... and joins IMF, EU in new loan The World Bank (WB) will provide Romania with technical assistance and financing agreement with Romania. under the new loan agreement, which the country will sign with the IMF and the EC, Mediafax reported, quoting WB country director Peter Harrold. The new agreement should focus on reforms in social security, healthcare and tax management, and making the state-owned companies more efficient, Harold added. The current loan agreement is for EUR 20bn and was signed with the three IFIs in May 2009 for a two-year period.
BANKING AND FINANCE
Romania to launch EUR 7bn medium Romania will make the first issue under its three-year programme for medium term notes term notes programme in Q1. (MTN) by the end of Q1, finance ministry state secretary Bogdan Dragoi told Agerpres. The government plans to draw EUR 7bn worth of financing under the MTN programme. The launch of the issue programme was initially scheduled for October 2010, but has been repeatedly postponed since then. At this moment, the time is right for an issue, Dragoi said, adding that the credit default swap for Romania is 70 base points for a five- year maturity, and is below that of Hungary. The government plans to finance half of the budget deficit, planned at 4.4% of GDP or some EUR 2.5bn, from the foreign markets.
Treasury places record-high one-year The Treasury sold this week RON 2.54bn (EUR 600mn) of one-year bills, more than T-bill issue. twice the RON 1bn target size of the issue, while the average yield for the maturity decreased to 6.69% from 6.81% on January 12, the central bank reported. On the COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED secondary market the ask/bid quotations for the one-year maturity was announced by the central bank at 6.39/6.82 on a downward trend from the 6.48/6.95 on January 10 when the central bank started calculating reference rates for the government debt. The size of this week’s issue was the largest in the past years, but not totally unexpected given that the Treasury thus rolls over a RON 2.36bn treasury bills issue from January 18, 2010, maturing this week. Since end-2010, the Treasury has organised three auctions for one- year treasury bills and the yield has gradually decreased from 6.91 in the first by 22bps until this week amid abundant resources, held by banks. The banks bid for RON 3.9bn worth of treasuries in this week’s auction, maintaining the high subscription rate from the past months.
Central bank drains RON 0.5bn in The central bank tested the money market thisn week when draining RON 0.5bn in one one-week deposits. week-deposits at the standard monetary policy interest rate of 6.25%, the central bank reported on its website. The test confirmed the existence of abundant liquidity on the market as the banks placed massive offers for RON 7.8bn of funds, showing excessive short-term resources. The central bank’s move had therefore no significant impact on the money market’s interest rates, where the overnight rates lingered to 2%/2.5% and the one-week rates, directly comparable to the 6.25% monetary policy rate, stood at 2.33%/2.83%. The value of the offers made by the banks in similar deposit taking deals has gradually increased from RON 4.6bn in mid-November, to RON 6bn in mid- December and RON 7.8bn this week.
Property Fund to go public on Jan 25. The Property Fund will list shares on the Bucharest Stock Exchange on January 25, Agerpres reported, quoting officials from the company's manager, Franklin Templeton Investment The value of the fund’s assets stood at EUR 3.58bn as at end-2010, or EUR 0.26 per share, slightly up y/y, according to Greg Konieczny, fund manager at Property Fund. The face value per share is RON 1 (EUR 0.24). The fund reported a RON 456.3mn (EUR 108mn) profit in 2010, exceeding its own projections by 130% on the back of the strong revenues, generated by the energy companies in its portfolio, Ziarul Financiar daily reported earlier this week. The Property Fund was set up by the government back in 2005 by amassing stakes in large companies to compensate communist expropriations. Meanwhile, the state became a minority shareholder and passed the management of the fund to a private management firm.
COMPANIES AND INDUSTRIES
Coface sees rise of insolvencies, The number of firms insolvency procedures will keep rising in 2011 on the lack of growth bankruptcies in 2011. stimuli, while some bankruptcy cases will have broad impact, Mediafax and Agerpres reported, quoting corporate rating agency Coface Romania. Pne of the sectors, facing highest risks, is the distribution of pharmaceuticals since the local firms rely on the trade credit supplied by the foreign producers, which might become anxious as the debts pile up, Coface credit risk manager Anca Catrina explained. A total of 15,422 insolvency cases were filed in January-September 2010, mainly in the construction, trade and transportation sectors.
Government might resume Hidroelectrica or Hidroenergetica, into which it will merge, will continue selling off its small privatisation of micro-hydro power hydropower plants as independent assets, Mediafax reported, quoting a document, which plants. it had obtained. Thus, the hydropower plants can thus be upgraded. Hidroelectrica also intends strengthen its investment capacity through joint ventures. Hidroelectrica had already sold 81 of its 150 micro hydropower plants in 2004-2008 for some EUR 60mn. The document, quoted by Mediafax, says that Romania pledged to the EC to privatise all of its micro hydropower plants. Former Hidroelectrica general manager, Mihai David, had previously objected the privatisation of the small production capacities because they bring tradable certificates under the renewable energy incentive scheme to the companies and by selling them, Hidroelectrica generates competition against its own interests.
Antitrust body notifies EC on national The antitrust body has already notified the EC regarding the renewable energy incentive green energy incentives. law and expects an answer in two weeks, Agerpres reported, quoting the authority's chairman Bogdan Chiritoiu. The main problem of the law is the introduction of incentives,
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED which might be seen as excessive, Chiritoiu explained. The Parliament amended the tradable green certificates system in 2010, raising the number of green certificates given to photovoltaic power generators from 4 to 6 and prolonging the period for high incentives for wind power producers. The wind power generators have already received the first certificates under the law.
Enel Green Power commissions 30MW The local wind-energy division of the Italian utilities Enel group, Enel Green Power, wind farm. launched its second wind farm with an installed capacity of 30MW, Mediafax reported. The new unit has an annual planned output capacity of 85.5mn kWh. The new wind farm is located in Salbatica, Tulcea county in southeastern Romania. It is situated nearby the company's other facility - a 34MW wind farm in Agighiol. The two wind farms are expected to yield an aggregate 180mn kWh per year. The company’s CEO, Francesco Starace, announced further investments in the power generation sector over the coming years. The group operates two electricity distribution networks and is still part of the nuclear project aimed at doubling the capacity of Cernavoda nuclear plant by adding two new 720MW reactors.
Monsson Group reportedly to sell Monsson Group, the wind farm developer firm controlled by the Romania-born Swedish 1,000MW wind power projects. investor Emanuel Muntmark, will reportedly develop new projects with a combined installed capacity of 1,000MW in several months and put them up for sale, unofficial sources told Mediafax. Monsson Group will keep minority stakes in the projects, the sources said. The projects are being developed in Dobrogea, a popular location for wind farms, as well as in Banat, southwestern Romania, and Moldova, northeastern Romania. Monson Alma controls 33 firms, most of which are project companies for individual renewable energy projects. The largest deal involving Muntmark was concluded in 2008, when Czech group CEZ bought for around EUR 300mn wind farm projects with an installed capacity of 600 MW from the Swedish investor and the Polish investment company Continental Wind Partners. Muntmark further developed many other wind power project, including the one sold to OMV Petrom for EUR 7-9mn.
Iberdrola to commission 80MW wind Spanish utilities group Iberdrola will start installing the turbines of its 80 MW wind farm in farm by end-2011. Romania, which should start energy production by end-2011, Mediafax reported, quoting Iberdrola Renovables Romania representative, Adrian Goicea. Spain's Iberdrola announced last fall plans to start building in Romania the first 600MW unit of what should be the world's largest on-shore wind park. The whole project would be completed by 2016-2017. In April last year, Iberdrola said it had been granted a licence by the Romanian power grid operator Transelectrica to connect to the grid a total of 1,500 MW of wind power. The project envisaged the construction of 50 wind farms in the region of Dobrogea, southeastern Romania, between 2011 and 2017. Iberdrola is also involved in the construction of Romanian nuclear power plant reactors 3 and 4.
CWP to sell 230MW wind farm in Continental Wind Partners is currently building a 230MW wind farm in Galati county, Galati. which will be completed by 2013 and sold afterwards, Agerpres reported, quoting company executive Mike Scholey as saying at the Wind Power Conference. The developer has already obtained part of the necessary permits and is currently looking for prospective buyers. The head of CWP’s local branch, Radu Popoiu, estimated the costs at EUR 394mn. US-registered CWP is one of the most active developers of wind farms in Romania, which sold a 600MW project to CEZ in 2008.
German Premium Aerotec starts German Premium AEROTEC, part of the EADS group, started the production of aircraft production of aircraft parts in Brasov. parts at its EUR 45mn facility in Brasov, central Romania, Bursa daily reported. The new plant will specialise in the production and assembly of metal components for all Airbus series programs (A320 family, A330/A340, A380). Currently, the plant employs 100 workers, planning to expand the headcount by a further 200. The plant will be developed in a second stage of production, starting this year, and will eventually boost its payroll by another 500. The Romanian unit will be integrated in the production chain that already includes plants in Augsburg, Bremen, Nordenham and Varel. Premium AEROTEC GmbH employs more than 6,000 and reported total revenues of EUR 1.1bn in 2009.
GDF Suez, Iberdrola, RWE leave GDF Suez, Iberdrola and RWE decided to discontinue their participation in the EUR 4bn
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED nuclear project. Cernavoda nuclear project,Mediafax reported, quoting a press release of the three companies. Thus, the state-owned Nuclearelectrica remains with only two partners in the project company in charge of developing nuclear units 3 and 4. The government has not confirmed yet whether it was notified about the withdrawal of the three investors. The leaving companies pointed out the problematic financing of the project amid broad economic uncertainties as well as risks specifically related to the project as the reasons for their withdrawal. The decision does not reflect the technical quality of the project, acknowledged by the EC, nor does it weaken the companies’ commitment to the development of the domestic energy market, the press release said. GDF Suez and RWE controlled 9.15% each in the project company. Iberdrola held a 6.20% stake. The remaining shareholders are Enel (9.15%), ArcelorMittal (6.20%) and the government, which also acquired the shares of CEZ (9.15%) after it pulled out of the project.
Three bidders submit letters of intent Three bidders submitted letters of intent for the construction of units 3 and 4 at the for nuclear reactors. Cernavoda nuclear power plant, Bursa daily announced. The contract envisages design, equipment procurement and construction works. The potential bidders are Bechtel; a consortium, formed by SNC Lavalin Nuclear INC (Canada), Ansaldo Nucleare SPA (Italy) and Elcomex IEA SA (Romania); and another consortium of four Russian companies, led by Atomtechnoprom. The project value was estimated at EUR 3.2bn by the project company EnergoNuclear when the auction started. The government said the construction works of the 720MW nuclear reactors could begin in 2012, or a two-year delay from the official schedule. The delay is partly caused by the withdrawal of CEZ from the project, possibly followed this week by RWE according to unofficial sources of Romanian media. This would bring the state’s stake in the project to 70% up from the initially planned 20%. However the state already announced plans to seek other partners.
Railway company CFR generates EUR The state-owned railway company CFR SA ended last year with revenues of RON 2.3bn 183mn loss in 2010. (EUR 540mn) and a loss of RON 778.5mn (EUR 183mn), Bursa daily reported, quoting the latest revision of the company’s budget, drafted by the transport ministry. The company’s revenues exceeded the initial financial projections for 2010 by 50%, while the loss was lower by 20%. The better than expected financial performances of the company does not reflect RON 3.1bn worth of debts to the budget and to suppliers, as well as RON 1.2bn in receivables from passenger and freight railway companies. The railway operator invested RON 637.8mn (EUR 150mn) last year.
POLITICAL
Ministry: Romania meets Schengen An evaluation report, drafted by EU expert teams, confirms that the country fully meets accession requirements. the requirements for a timely entry in the Schengen agreement in April and it was approved almost unanimously on Friday by all member states, except for France, which requested more time to assess the document, the Romanian foreign ministry announced. The final vote will take place on January 28. The Schengen evaluation group SCH-EVAL debated last Friday on three documents regarding Romania’s and Bulgaria’s accession to the Schengen agreement, out of which one concerned Romania’s Schengen-integrated information system - Supplementary Information REquested at the National Entries (SIS- SIRENE). This was the last evaluation report on Romania, after all other reports have already been approved. Bulgaria, which supposed to join the Schengen agreement together with Romania in April, reportedly needs to address issues with its terrestrial border with Turkey.
President calls for quick accession to President Traian Basescu said in a public statement that Romania’s accession to the Schengen treaty. Schengen agreement cannot be conditioned on irrelevant issues or it might threaten the EU integration process. The statement came after Germany reiterated this week, in an informal meeting of the interior and justice EU ministers in Budapest, its decision to oppose the accession of Romania and Bulgaria to the borderless area. German interior minister Thomas de Maiziere said his country’s objections are not linked to technical details of the Schengen accession process, but rather to the political problems raised by the judicial system and the corruption in the applicant states.
COPYING PROHIBITED. COPYRIGHT 1999-2011 INTERNET SECURITIES, INC., ALL RIGHTS RESERVED CROATIA
MACROECONOMIC REVIEW
CPI up by 1.8% y/y in Dec. Croatia's CPI accelerated to 1.8% y/y in December, following an 1.2% y/y increase in the previous month, the statistics office reported. The highest inflation was observed in transportation - up by 2.3pps to 6.6% in December. Other categories, where hiking prices were registered, included food and non-alcoholic beverages (0.9%), alcoholic drinks and tobacco (3.8%), and housing and utilities (5%). Prices of clothing and footwear declined by 1.9% y/y in December from a 3.7% y/y drop the previous month. The prices of goods increased by 2.2% y/y versus 1.4% y/y in the previous month, while services posted a 0.3% y/y growth in December against 0.6% y/y a month earlier. Within goods, the prices of foods, beverages and tobacco surged by 1.4% y/y. In monthly terms, consumer prices remained unchanged.