Southeast Europe's TOP 100 Companies Reklama Tek SEE News 2019-1.Pdf 1 28/08/2019 5:15:22 PM

2019 Published by SeeNews

Southeast Europe's TOP 100 Companies reklama tek SEE news 2019-1.pdf 1 28/08/2019 5:15:22 PM

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Editor-in-chief: Plamena Todorova, Yordanka Contact us: Nevena Krasteva Pencheva, Nadezhda Gesheva 64 Kiril i Metodii Str, 1202 Sofia, Bulgaria tel: +359 2 8012 645/682 Editors: Branimir Kondov, Cover: COG Graphics OOD email: [email protected] Valentina Gerasimova Design & prepress: Analysts: Madlen Nacheva, Krustyo Burski @SeeNewsCompany Deyan Matov, Nina Ivanova Print: Bulvest Print AD SeeNews Authors: Alexia Petrova, Mario Tanev, SeeNews, SEE TOP 100 and their SeeNews Mariyana Yaneva, Nicoleta Banila, logos are registered trademarks of A Data Pro Ltd. Petar Galev, Radomir Ralev, Disclaimer: SeeNews is not liable for the Viktor Laskov All rights reserved. Re-publication or content of the published advertisements. re-distribution of SeeNews content, in- Full liability rests with the advertisers. Marketing & sales: cluding by framing, is strictly prohibited Any content in this booklet branded by a third party excluding the SEE TOP 100 Alexander Gramatikov, without the prior written consent of rankings is sponsored and provided by such Dimitar Rahtaliev, Misho Hristov, SeeNews. third party. Letter from the editor

Investment in capacity expansion and efficiency improvement, a shift to green technologies and a focus on innovation were the key elements of the strategies of the biggest companies in Southeast Europe (SEE) in 2018 as they tried to make the best of the region’s economic upswing and catch up with their West European peers.

Another run completed, the largest companies in the region saw both their combined revenue and profit hit new record highs. Profit growth continued to outpace the rise in sales.

While the entrants in this year’s edition of SEE TOP 100 are predominantly familiar faces and their performance offers little surprise, they are the ones that largely determine the corporate profile of the region and set the direction and pace of its development.

Looking for clues what to expect, we talk to the frontrunners.

Christophe Dridi, managing director of Automobile Dacia and Groupe Renault Romania, comments on the company's readiness to launch an electric or hybrid Dacia.

Christina Verchere, CEO of OMV Petrom, tells us about the potential of the Black Sea to secure Romania's energy supply and boost the company’s revenues.

Igor Stebernak, member of the management board of Slovenia’s Petrol, reveals which new business lines will be generating highest EBITDA.

Elisabeth Stadler, CEO of Vienna Insurance Group, identifies the market segments in the region that hold untapped growth potential.

Is there something wrong with the hefty Chinese investment in Serbia? Will OTP Bank, the most active player on the region’s M&A scene, continue its shopping spree? Is SEE catching up with the global rise in corporate renewable energy procurement? These are among the questions we try to answer as we go.

And of course, Brexit. If it does take place, will it matter? And if it matters, will it be beneficial for SEE? We give you the answers of law firms and the less serious take of local media.

Small business scale, poor infrastructure, shortage of talent, inefficient judiciary and unpredictable regulations are the well-known pitfalls on the local track. Economic slowdown, further exacerbation of the U.S.-Chinese trade frictions, or extreme climate events are some of the new hurdles the companies in SEE may have to overcome in the coming years. Hopefully, the latest run has put them in good shape.

Nevena Krasteva Editor-in-chief

TOP 100 COMPANIES 30 29 33 32 31 28 34 27 25 24 23 22 20 19 18 26 21 17 16 15 14 8 13 12 9 7 6 5 11 10 4 3 2 1 43 42 36 35 45 44 41 37 46 40 39 38 50 49 48 47 Rank 2018 38 New 26 30 29 31 25 37 15 22 20 16 17 21 23 28 24 19 18 14 12 6 33 11 8 9 5 7 13 10 4 3 2 1 45 43 39 36 62 64 40 27 66 34 41 32 56 48 49 53 Rank 2017 Profi RomFoodSRL Serbia Zijin Bor Copper DOO (former RTBSerbia ZijinBorCopperDOO(former BorDOO) Konzum d.d. RomaniaSA Orange Hrvatska Elektroprivreda d.d. Elektroprivreda Hrvatska Engie RomaniaSA Krka d.d. Krka Petrotel -Lukoil SA d.o.o.Holding Slovenske Elektrarne Dedeman SRL RomaniaSA Carrefour SRL Star Assembly Natsionalna Elektricheska KompaniaEAD Natsionalna Elektricheska Lidl DiscountSRL EOOD Lukoil-Bulgaria MOL RomaniaPetroleum ProductsSRL Lukoil RomaniaSRL Johnson MattheyDOOEL Revoz d.d. rts mrcnTbco Rmna rdn SRL Tobacco (Romania) TradingAmerican British Naftna Industrija Srbije Naftna Industrija AD Aurubis Bulgaria AD Bulgaria Aurubis Ford RomaniaSA Kaufland RomaniaSCS GEN-I d.o.o. INA d.d. Lukoil Neftochim Burgas Lukoil Neftochim Burgas AD Rompetrol Rafinare SA Rompetrol Downstream SRL JP Elektroprivreda Srbije JP Elektroprivreda OMV Petrom SRL Marketing OMV Petrom SA Petrol d.d. Automobile-Dacia SA Samsung ElectronicsRomaniaSRL Lek d.d. Arcelormittal GalatiSA Arcelormittal Mega ImageSRL Dante International SA Dante International Hidroelectrica SA Hidroelectrica Prvo Plinarsko Drustvo d.o.o. Drustvo Plinarsko Prvo Poslovni Sistem Mercatord.d. HBIS GroupSerbiaIron&SteelDOO Romgaz SA Romania SRL Metro Cash&Carry Auchan RomaniaSA Delhaize SerbiaDOO SRL Selgros Cash&Carry Autoliv RomaniaSRL SA Furnizare Electrica Company name Romania Serbia Croatia Romania Croatia Romania Slovenia Romania Slovenia Romania Romania Romania Bulgaria Romania Bulgaria Romania Romania North Macedonia North Slovenia Romania Serbia Bulgaria Romania Romania Slovenia Croatia Bulgaria Romania Romania Serbia Romania Romania Slovenia Romania Romania Slovenia Romania Romania Romania Romania Croatia Slovenia Serbia Romania Romania Romania Serbia Romania Romania Romania Country 4 Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Petroleum/Natural Gas Telecommunications Wholesale/Retail Wholesale/Retail Wholesale/Retail Wholesale/Retail Wholesale/Retail Wholesale/Retail Wholesale/Retail Wholesale/Retail Wholesale/Retail Wholesale/Retail Wholesale/Retail Wholesale/Retail Wholesale/Retail Pharmaceuticals Pharmaceuticals Automobiles Automobiles Automobiles Automobiles Automobiles Automobiles Electronics Chemicals Industry Electricity Electricity Electricity Electricity Electricity Electricity Electricity Metals Metals Metals Metals revenue Total 2018 1 316 1 316 1 357 1 256 1 245 1 269 1 409 1 614 1 704 1 236 1 446 1 519 1 615 1 582 1 596 1 650 1 698 1 752 1 777 2 078 2 250 2 286 2 576 2 956 3 008 3 043 2 362 2 349 2 396 3 864 2 376 4 121 4 365 5 348 1 090 1 101 1 219 1 234 1 120 1 191 1 147 1 160 914.1 939.6 990.6 905.1 907.1 881.5 893.4 895.3 revenue Total 2017 1 046 1 131 1 174 1 235 1 174 1 049 1 620 1 375 1 203 1 184 1 658 1 283 1 384 1 477 1 605 1 415 1 485 1 594 1 920 1 953 1 080 2 638 2 447 2 962 2 481 1 942 2 177 2 456 3 264 2 316 3 411 3 791 5 025 1 028 1 041 1 058 1 074 1 199 1 023 1 123 332.1 965.2 717.8 712.9 911.6 844.0 695.3 819.8 871.5 862.2 change in revenue 295.40% 111.82% 25.96% 20.11% 34.45% 23.91% 22.30% 26.03% 14.41% 20.12% 18.05% 11.46% 14.90% 19.25% 22.77% 21.71% 18.50% 20.92% 15.15% 12.96% 17.24% 16.77% 27.45% 31.92% 12.18% 30.16% -0.51% -0.27% -8.35% -2.37% -2.45% -0.71% 7.08% 6.69% 2.74% 8.16% 2.76% 8.30% 1.55% 8.00% 2.34% 6.54% 5.74% 8.76% 4.35% 3.41% 7.33% 7.28% 2.61% 3.92% Y/Y profit/ -130.0 2018 764.2 0.530 163.3 217.2 221.2 179.8 169.1 103.5 831.8 100.6 161.3 116.7 415.8 291.7 0.209 -19.4 -38.3 -37.7 -49.4 -10.9 Net loss 97.8 41.2 47.7 54.6 14.0 56.1 56.7 88.4 97.8 33.6 33.3 37.8 16.3 89.8 13.5 13.0 15.1 40.7 54.5 19.2 19.0 30.2 22.6 15.7 34.4 -9.6 1.1 9.5 7.5 in millions of euro in millionsof profit/ -525.2 -203.7 2017 190.8 235.3 189.8 143.9 201.2 155.4 515.0 115.7 153.7 291.8 398.0 0.336 0.021 -32.9 -23.9 Net loss 72.4 68.5 48.4 28.1 48.3 39.3 18.4 45.0 52.8 75.7 96.8 19.7 34.8 65.6 20.5 36.2 89.8 68.8 28.8 13.5 64.3 83.2 33.7 43.3 13.5 24.9 16.1 36.1 10.5 24.3 -3.1 8.3 3.5 by net profit/ Rank loss 18 30 29 93 82 96 25 64 24 23 84 20 17 72 95 41 42 37 57 15 99 97 19 66 69 16 11 14 62 10 26 52 33 89 53 75 90 45 85 49 60 39 2 7 6 8 9 1 4 5 5

in millions of euro TOP 100 COMPANIES Net Net Rank Total Total Y/Y Rank Rank profit/ profit/ by net Company name Country Industry revenue revenue change in 2018 2017 loss loss profit/ 2018 2017 revenue 2018 2017 loss

51 50 RCS & RDS SA Romania Telecommunications 880.5 858.0 2.71% 32.8 63.2 44

52 70 Renault Commercial Roumanie SRL Romania Automobiles 879.7 661.0 33.22% 16.1 10.4 58

53 95 Saksa OOD Bulgaria Petroleum/Natural Gas 869.2 553.3 57.09% 8.1 5.7 73

54 54 Mediplus Exim SRL Romania Wholesale/Retail 854.4 839.4 1.88% 13.0 10.2 68

55 35 E.ON Energie Romania SA Romania Petroleum/Natural Gas 852.7 1 070 -20.22% 14.2 15.5 63

56 93 Cofco International Romania SRL Romania Agriculture 850.9 565.1 50.72% 0.855 2.4 83

57 51 Vodafone Romania SA Romania Telecommunications 847.8 845.3 0.39% 38.1 12.7 35

58 52 Gorenje d.d. Slovenia Electricity 839.1 823.0 1.96% -126.8 0.473 98

59 55 Hrvatski Telekom d.d. Croatia Telecommunications 835.0 833.8 -1.13% 133.6 111.9 12

60 47 Kaufland Bulgaria EOOD & Co KD Bulgaria Wholesale/Retail 803.1 763.3 5.22% 36.2 39.0 38

61 80 OMV Slovenija d.o.o. Slovenia Petroleum/Natural Gas 802.5 621.9 29.05% 24.0 21.8 47

62 60 IMPOL d.o.o. Slovenia Metals 800.7 751.6 6.54% 18.8 19.6 54

63 75 Ameropa Grains SA Romania Agriculture 790.8 640.3 23.62% 7.1 6.0 76

64 74 ADM Romania Trading SRL Romania Agriculture 788.5 641.2 23.09% -4.5 3.4 88

65 57 Telekom Srbija AD Serbia Telecommunications 784.1 794.2 -1.51% 86.3 123.2 21

66 90 Fildas Trading SRL Romania Wholesale/Retail 783.0 579.8 35.16% 23.4 22.2 48

67 42 FCA Srbija DOO Serbia Automobiles 777.2 992.8 -21.91% 12.9 18.0 70

68 65 Altex Romania SRL Romania Wholesale/Retail 772.9 710.3 8.92% 13.6 10.4 65

69 59 JP Srbijagas Serbia Petroleum/Natural Gas 744.9 758.1 -1.98% 49.3 141.6 27

70 73 REWE (Romania) SRL Romania Wholesale/Retail 744.0 647.5 15.00% 7.7 4.1 74

71 58 Mercator-S DOO Serbia Wholesale/Retail 735.4 787.9 -6.89% -14.1 -58.0 91

72 79 Petrol d.o.o. Croatia Petroleum/Natural Gas 734.3 625.9 15.82% 12.0 8.1 71

73 61 EPS Distribucija DOO Serbia Electricity 723.3 733.5 -1.61% -21.1 19.7 94

74 99 Crodux Derivati Dva d.o.o. Croatia Petroleum/Natural Gas 721.6 521.2 36.68% 15.5 11.9 61

75 82 CFR SA Romania Transportation 715.7 618.4 15.84% 2.2 33.1 79

76 63 OMV Petrom Gas SRL Romania Petroleum/Natural Gas 713.8 714.7 -0.04% 13.4 11.8 67

77 76 Farmexpert D.C.I. SRL Romania Wholesale/Retail 703.4 636.4 10.62% 18.1 19.3 55

78 84 Lidl Hrvatska d.o.o. k.d. Croatia Wholesale/Retail 697.6 617.9 11.47% 37.9 35.6 36

79 86 Tigar Tyres DOO Serbia Rubber/Rubber Products 694.9 611.2 13.44% 41.0 87.3 32

80 83 Hella Romania SRL Romania Automobiles 691.6 618.0 12.01% 41.0 30.4 31

81 78 Porsche Romania SRL Romania Automobiles 687.6 634.2 8.51% 33.0 23.1 43

82 69 Telekom Slovenije d.d. Slovenia Telecommunications 681.2 662.6 2.81% 34.0 1.7 40

83 46 Interenergo d.o.o. Slovenia Electricity 671.9 893.8 -24.83% -4.2 2.9 87

84 68 Nelt Co DOO Serbia Transportation 671.3 669.0 0.11% 4.6 11.3 78

85 91 Bulgargaz EAD Bulgaria Petroleum/Natural Gas 666.7 576.2 15.70% -16.4 4.8 92

86 89 Michelin Romania SA Romania Rubber/Rubber Products 664.1 584.7 13.69% 21.2 11.0 50

87 67 Continental Automotive Products SRL Romania Automobiles 663.2 687.0 -3.37% 124.7 149.7 13

88 New Robert Bosch SRL Romania Automobiles 661.1 503.7 31.38% 26.5 17.9 46

89 44 Complexul Energetic Oltenia SA Romania Electricity 641.2 937.5 -31.54% -243.0 38.8 100

90 87 Alro SA Romania Metals 638.8 592.8 7.86% 48.4 68.2 28

91 96 Express Logistic and Distribution EOOD Bulgaria Wholesale/Retail 626.7 546.6 14.66% 1.4 -5.2 80

92 New Cargill Agricultura SRL Romania Agriculture 620.1 503.1 23.36% -3.8 2.2 86

93 97 Astra Bioplant EOOD Bulgaria Petroleum/Natural Gas 611.1 543.2 12.50% 6.6 1.0 77

94 New Holdina d.o.o. Sarajevo Bosnia and Herzegovina Petroleum/Natural Gas 603.0 436.8 38.04% 1.2 1.7 81

95 New Aerodrom Nikola Tesla AD Serbia Transportation 592.7 81.5 625.83% 451.1 27.6 3

96 71 Transelectrica SA Romania Electricity 589.1 660.9 -10.78% 17.4 6.1 56

97 New AETs Kozloduy EAD Bulgaria Electricity 574.1 477.2 20.31% 83.6 60.3 22

98 New Pirelli Tyres Romania SRL Romania Rubber/Rubber Products 571.0 515.1 10.96% 19.5 16.8 51

99 New Regia Nationala a Padurilor Romsilva RA Romania Electricity 570.9 485.5 17.71% 38.2 53.4 34

100 94 Plodine d.d. Croatia Wholesale/Retail 569.0 564.3 -0.46% 16.0 14.7 59 TOP 100 COMPANIES the beginning of the year and Sandero. In In Sandero. and year the of beginning the at launched Duster New the of mance perfor the to thanks largely 2.9%, of share a market held and Europe in sales 10% higher posted brand Dacia The cles. increase in sales volume to 700,798 vehi 700,798 to volume sales in increase a7.0% of back the on come indicators Dacia’s financial good TOP entrants. 100 SEE the among 11th ranked it profit of 39%, of 161.3to terms in growth though euro, million profit outstanding an booked company the Furthermore, А billion euro in 2018. in euro billion 5.35 to rose by 6.54% revenue year its as running fifth a for SEE in company biggest the is France’s of Renault, unit a Dacia, Automobile than revenuesthan grow faster profits highs, of TOP SEE 100 to new sales propel incomes 2018: personal Rising the ranking did remarkably well. well. remarkably did ranking the in afew, companies only agriculture Evenstill though consumption. rising and upturn economic ofthe best the making performance, good their maintained too makers Car lines. business alternative develop to look eagerly to them forcing however shrank, profit combined Their 34% for revenue ofSEE TOP accounting total 100. ofthe representatives its with ranking, the in foothold its reaffirmed sector and gas oil the recovered, prices oil As global ofprofit. terms in three top the among –returned performer atop –traditionally sector retail/wholesale Agrokor the conglomerate and faded ofCroatia’s largest collapse ofthe effect negative The ofscale. economies for ways seek to continued and innovation, and technologies green capacity, in heavily invested region the in companies biggest The improve. to SEE continued in climate overall the investment Romania, from examples bad particularly some with setbacks, regulatory and volatility political ongoing Despite more. acouple for ground the prepared and several large privatisations successfully completed Zagreb Ljubljana and Belgrade, in governments The pace. abrisk at continued consolidation and high all-time an to surged region the in deals ofM&A volume The bulk. the absorbed Serbia as region, the into pour to continued investments Chinese growth. to contributed region’s the further partner, trading main of Western Europe, economies ofthe performance asolid and lowrates, at funding bank available easily funds, by EU (FDI) complemented investment direct foreign of flow abundant An operations. their (SEE) 2018, in Europe expand to continue to room Southeast in them giving companies top the to sales wages record-high brought increasing and growth economic Steady, consumption-led By Nevena Krasteva - - million lei in state aid to increase produc increase to aid state in lei million 115.8 received company December, the temie prtos n bot effi boost and operations streamline to continue SEE in companies the As digits double in Sales, among them. entrants new no are There TOP 100. SEE of revenue combined the 27% of for account companies biggest ten The 10. top the in company Dacia keep producer metals a and companies electricity sector, two gas and oil the of representatives Six demand. higher meet to order in tion profits grow profits 6

- - EBITDA EBITDA of 171.5 million euro, with sales an had 2018, In Group euro. Petrol billion 4.4 a15% to revenue in posted increase Slovenia’s Petrol position, second In spectively. re 13% of 22%, and increases corded re they when earlier ayear than pace however, revenues, and grew at aslower profits Both 17%.by up euro, billion 5.7 to amounted profit their whereas euro, by 11%ed 126.3 billion a record-high to expand TOP companies 100 SEE the of arow. in year asecond for revenue The profit revenues in with rise the outpacing growth revenues, and profit both financial in growth their double-digit showed reports peers, European West their with gap the close to aiming ciency,

- - - 7 TOP 100 COMPANIES BREAKDOWN BY INDUSTRY (in millions of euro)

43 038 Petroleum/Natural Gas 1 863 24 496 Wholesale/Retail 752 15 664 Electricity 236 18 359 Automobiles 611 7 458 Metals 976 5 284 Telecommunications 366 2 326 Pharmaceuticals 280 TOTAL REVENUE 1 752 Chemicals 98 NET PROFIT/LOSS 2018 2019 1 930 Rubber/Rubber Products 82 3 050 Agriculture -0.277 991 Electronics 19 1 980 Transportation 458

of refined petroleum products contrib- NUMBER OF COMPANIES mining and smelting company Serbia Zi- uting only 60%. The company plans to jin Bor Copper (former RTB Bor) and invest 520 million euro in the 2018-2022 Aerodrom Nikola Tesla which saw their period with highest growth expected in 25 26 bottom lines benefit from capital injec- new business lines such as generation of tions by foreign companies. electricity from renewable sources and mobility. Lowest growth, on the other The financial performance of majority 12 hand, is expected in the oldest core 23 state-owned Aerodrom Nikola Tesla business line – the sale of refined pe- 14 was boosted by 59.3 billion dinars paid troleum products. “Globally and locally, by the concessionaire of Belgrade Niko- we are facing social and technological la Tesla Airport. In 2018, France’s Vinci Petroleum/Natural Gas changes that can be captured concisely Wholesale/Retail Airports signed a 25-year concession Electricity by the notion of “digital globalisation”. Automobiles contract covering the Belgrade airport’s The energy sector is moving towards other financing, operation, maintenance, ex- energy efficiency, novel use of existing pansion and upgrade. Under the terms energy products and development of of the deal, Vinci Airports committed new ones. In addition, a considerable ited,” CEO Christina Verchere says. to pay 417 million euro to the Serbian shift can be observed in the behaviour (see p.12) government and 84 million euro to the of end customers, who are becoming small shareholders of Aerodrom Nikola increasingly engaged,” Igor Stebernak, OMV Petrom is also number 1 in terms Tesla for the concession plus an annual member of Petrol’s management board, of profit – up by an impressive 62% to concession fee of between 4.4 million comments. (see p.10) 831.8 million euro, as the company euro and 15.1 million euro. bucked the general trend toward profit Another oil and gas company, Roma- decline in the sector. Oil and gas com- In December, China’s Zijin Mining nia’s OMV Petrom, ranked third with panies, however, made up a quarter of Group injected $350 million in the capi- 4.1 billion euro in revenue, up 21%. Its all entrants in the ranking and generated tal of RTB Bor, acquiring a majority stake, revenue increase was driven by higher 34% of the total revenue of the SEE TOP and renamed it to Serbia Zijin Bor Cop- commodity prices and electricity sales 100 members. per. The Chinese group intends to invest volumes, partially offset by lower vol- $1.26 billion to improve the production umes of gas and petroleum products In late 2018 Romanian oil and gas com- operations of RTB Bor, open new mines sold. Over the last few years, the panies were hit by an unexpected emer- and increase efficiency. In 2019, Zijin company has been stepping up invest- gency decree enforcing additional taxes plans to invest up to $200 million in the ments and plans to drill around 100 for the sector, which the government overhaul of RTB Bor. The company is new wells in 2019, as compared to just later modified. Apart from increasing expected to increase ore production by 40 in 2016. “The Black Sea opportu- the fiscal burden on the companies, 10% and of copper concentrate by 30% nities create a much-needed resource the new legislation introduced a fixed in 2019, thus making Serbia Europe’s for Romania to secure its energy sup- natural gas price, forcing market players, third largest copper producer. The share ply and to increase revenues, the more including OMV Petrom, to reconsider of mining industry in Serbia's GDP will so that Romania’s national gas produc- their investment programme. grow to 5% from 1%, according to Ser- tion is declining, imports and gas pric- bia's energy minister Aleksandar Antic. es are higher, while interconnectivity In terms of profit, OMV Petrom is fol- with European markets remains lim- lowed by two Serbian entrants - copper The deal for RTB Bor adds to a long TOP 100 COMPANIES to the maintenance shutdown in May- in shutdown maintenance the to due also year last to lower compared be to [2019]The planned are volumes charges. refining and treatment called so the prices, metal the materials, put through our for conditions market the by influenced are results net “The halved. nearly profit 2018, its while in slightly dropped revenue company’s the even though region, the in producer metals biggest the is Bulgaria Aurubis 8 number at group, 10 TOP the to Back 2021. of end by the Serbia in Smederevo Zelezara mill steel its in million $300 invest to plans Steel & Iron Serbia Group HBIS euro. million 46 for group Chinese the to mill steel the sell to agreed government the after 2016, months July in three Smederevo the over of and Zelezara ownership management took HBIS HBIS. a China's of Steel, unit & Iron Serbia Group HBIS by occupied is ranking the in place 46th The in TOP 100. SEE 59th ranks which Gorenje, facturer manu goods household Slovenian of er own became Group China'sof Hisense aunit acquisition, landmark another In cal influence. politi growingBeijing’s and countries some for burdens debt unsustainable about concerns raised has flow ment and invest massive The Road Initiative. Belt government’s Chinese the of part as years past over the made in particular, infrastructure Serbian in SEE, in investments Chinese of list accurate indicator of their performance. performance. of their indicator accurate not is an revenue total as ranking the from excluded (REITs) are trusts investment intermediaries, insurers and real estate investment Banks, Slovenia. and Serbia Romania, Montenegro, Moldova, Croatia, Macedonia, Bulgaria, Herzegovina, and Bosnia Albania, in companies registered non-financial The non-consolidatedannual reports. 2018 from sourced are counterparts 2017 and comparative 2018Both figures 31, 2018. December ended year fiscal the for revenue by total Europe Southeast in SEE METHODOLOGY SEE TOP 100 ranking covers covers TOPSEE ranking 100 TOP 100 ranks the biggest companies companies biggest the TOP ranks 100 - - - - - and downs, the energy prices may im prices energy the downs, and ups temporary the Unlike figures. the on effect one-off have its will that June unit Konzum, its Slovenian subsidiary subsidiary Slovenian its Konzum, unit Agrokor’s Croatian including 23, ing, rank the in representatives of ber num biggest second the has sector The region. the across sumption con rising of back the –on euro billion 22.2 from euro billion 24.5 bined revenues also – increased to earlier. ayear Com euro 75 million of loss a combined from euro million 752 of 2018in aprofit to swung and turnaround aspectacular showed tor sec retail and region’sthe wholesale 2017, in Balkans Western the across shockwaves sent which Agrokor of collapse the from Recovering momentum gain agricompanies comeback, Retailers make ten. top the off –round Srbije Elektroprivreda Serbia’s JP and GEN-I –Slovenia’s companies Two electricity (see p.44) explains. Kurth Tim CEO modernisation,” through efficiency on hard we why working are is That time. of period over a long expenditures pact SEE TOP 100 revenue 2018 in 126.3 TOP 100’s content was finalised. TOP 100’s content finalised. was SEE by the time results financial provide to or failed declined that companies not include does ranking The 2,900. The themselves. companies and providers information business local regulators, industry websites, corporate government and exchanges, stock registers, commercial All subsidiaries. by their ranking the in represented are hand, other on the companies, Holding insurers. and banks 100 largest of the rankings We separate compiled have data is sourced from national national from sourced is data initial pool of companies exceeds exceeds of pool companies initial 8

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TOP 100 COMPANIES/interview 5.35 billion5.35 euro. its revenue to rose 6.54% by running. In 2018, year fifth SEE TOP ranking for 100 a France’s Renault, leads the Automobile Romania and Groupe Renault Dacia of Automobile Managing Director Christophe Dridi, Dacia, aunitDacia, of By Nicoleta Banila vehicles annually 406,000 to increase will capacity production Our 10 11 TOP 100COMPANIES

What are the key factors that products development - cars, engines, rail roads and maritime infrastructure. have helped Dacia remain the gearboxes, etc., as well as manufac- top company in Southeastern turing process optimisation - work- Regarding used cars, it is our duty to Europe (SEE) in terms of to- ing conditions, automation, quality, fight against the invasion of used cars tal revenue over the past five cost reduction and integration of new coming with a high level of pollution, years? technologies. a low level of safety and providing no income for the country. The automotive industry is very im- In order to satisfy our customers, portant for Romania, it represents our production capacity will increase In order to have a competitive auto- 14% of the GDP and 26% of the ex- from 350,000 vehicles per year to motive industry, it is essential to have /interview ports. It is a big part of the Romanian 406,000 units. It is very important for suppliers nearby to develop synchro- economy, a treasure. us to remain the gravity centre of Da- nisation and transversal skills. cia cars. Groupe Renault Romania employs In education, we are supporting tradi- more than 18,800 colleagues and in- Is Dacia considering to intro- tional technologies such as stamping, tegrates all the activities specific for duce a hybrid SUV as a step welding, and toolmakers, as well as a car manufacturer - market studies, toward lowering the average the new ones - software, automati- design, engineering, technical center, emission levels of its vehi- sation, digitalisation, electric and con- manufacturing and supply chain, sales cles and in order to help Re- nectivity. and aftersales, business services and nault meet the European Un- financing - and our teams is at the ion’s toughening antipollution heart of our company, our most im- standards? portant value. The question is not about if we will The Global Access range, which in- have an electric or hybrid Dacia or cludes Dacia models manufactured in not, the question is when. We already Mioveni, is a worldwide success. We have the technology because we are offer attractive quality cars at the part of the Alliance. Our future pro- best price, thanks to a unique business jects will have the capability to add model - “smart buy”. Dacia has con- this technology, but we will launch it quered customers from 44 countries when the market is ready. Infrastruc- and will continue its development and ture is also an important factor, as community engagement. well as regulation. We operate in a competitive industry Do you plan to launch new bln euro which evolves extremely rapidly. This 3 models of the Dacia brand in context and these challenges motivate the next couple of years? Can us to prepare every day our future. you please elaborate? Investment by Groupe Renault Romania since 2000 What are your expectations It is too early to give details but be about Dacia's net profit and sure that we will continue to surprise turnover in 2019 and what do our customers with attractive and you base them on? quality cars at the best price, “the smart buy”. The question is not We have the willingness to keep our about if we will have competitiveness for all Groupe Re- What are your expectations nault Romania activities, underlining about the overall develop- an electric or hybrid long term competitiveness. ment of the car market in SEE Dacia or not, the in the next few years? What Can you please elaborate on about Dacia's performance in question is when your short- and medium- SEE and on a global scale? term investment plans in The Romanian Romania? Has Dacia started The Romanian automotive industry the production capacity ex- has four main priorities: infrastruc- automotive pansion project announced at ture, used cars, local integration and the end of 2018, which is to education. industry has four be supported by 115.8 million main priorities: lei in state aid? In terms of infrastructure, roads and especially Pitesti-Sibiu highway and ac- infrastructure, used Since 2000, the investment made by cess to the West are very important Groupe Renault Romania amounts for the development of the Romanian cars, local integration to 3 billion euro. This includes new economy but we have also to develop and education TOP 100 COMPANIES/interview Petrol d.d. Business Support, responsible for Management Board, Member ofthe Igor Stebernak, SEE TOP 100. in 2018, ranking second in of 4.4a turnover billion euro distributor Petrol d.d. posted Slovenia-based oil and gas By Mario Tanev EBITDA growth to generate highest New business lines 12 13

Considering its solid liquidity, maintain thier share in the total EBIT- TOP 100COMPANIES will the Petrol Group be look- DA. The lowest growth we forecast for ing to expand its operations our oldest core business line – sales of 520 mln euro refined petroleum product. in the future through acquisitions, or it will mostly seek or- Planned investments in 2018–2022 ganic growth? In 2018, Petrol Group achieved 171.5 million euro of EBITDA. It achieved 60% The Petrol strategy is built on develop- of its EBITDA by selling refined petro- ment and expansion. In the strategic pe- leum products, 22% by selling merchan- riod 2018–2022 we plan to invest over dise and related services, 12% by selling mln euro

233 /interview 520 million euro, 50% in sales of petro- energy and environmental solutions, 4% leum and merchandise, 16% in sales of by selling other energy products (LPG, Planned EBITDA in 2022 energy and environmental systems, 19% natural gas and electricity) and 2% by in electricity generation from renewable generating electricity from renewable our business models. Globally and local- sources and 15% in mobility. Whether sources. ly, we are facing social and technological this growth is achieved through acqui- changes that can be captured concisely sitions or organic growth depends on Petrol is planning EBITDA of 233 mil- by the notion of “digital globalisation”. various factors, including market condi- lion euro in 2022, 41% of which from tions, specifics of the business line, the selling refined petroleum products, 20% The energy sector is moving towards region and so on. We take all these fac- from selling merchandise and related energy efficiency, novel use of exist- tors into consideration and choose the services, 13% from selling other energy ing energy products and development option that promises the best results in products (LPG, natural gas and electric- of new ons. In addition, a considerable terms of achieving our strategic goals. ity), 12% from selling energy and envi- shift can be observed in the behaviour Petrol’s strong financial position is a ronmental solutions, 8% from generat- of end customers, who are becoming good base for either organic growth or ing electricity from renewable sources increasingly engaged. The changes de- acquisitions. and 6% from mobility solutions. scribed increase business risks while at the same time providing new opportuni- In which of Petrol Group’s After launching several re- ties. We address these shifts in business countries of operations do you newable energy projects in sectors in our strategy. Our business face the biggest challenges re- the past two years, does Pet- model across all lines of operation is lated to fuel pricing policy? rol plan further investments in built on innovativeness and cost effec- renewables? tiveness, and our customers are offered Oil product prices are still partially simple, comprehensive, modern and re- state regulated in Slovenia, our biggest We have recognised generating elec- liable solutions. market. Gasoline and diesel fuel prices tricity from renewable sources as an at filling stations on highways are freely important part of our strategy. Demand In addition to the business risk de- set based on market conditions, where- for electricity is growing, which is why scribed above, financial risks (price, as the prices are still regulated at other we decided we want to have sustainable credit and FX risks) are considered filling stations. Prices for 98-octane and generation of this important energy major risks, and the Petrol system ad- higher petrol and extra light heating oil product in our portfolio and we want to dresses them accordingly with appropri- have been freely set based on market use renewable sources: water, wind and ate processes and strict mitigation rules. conditions since April 2016. Refined solar power. Our final goal is to pro- Overall, Petrol’s risk management is in- petroleum product prices in Croatia, vide our customers with a sustainable tegrated into all aspects of our business, Serbia, Bosnia and Herzegovina and Ko- portfolio for electricity at the lowest making it possible to create additional sovo are freely set according to market price possible. The Glunca wind power value for shareholders and maintain our conditions, and in Montenegro accord- plant, Jelec small hydroelectric power investment-grade credit rating. ing to the Regulation on the Method of plant and several solar power plants are Setting Maximum Retail Prices of Petro- certainly a step in the right direction. leum Products. Growth in generating electricity from Sales of refined renewable sources is one of our most Which of the company’s mar- important strategic goals, and we will petroleum ket segments seem poised for keep investing in this area in the future. products to the highest growth in the long term? Looking forward, what are the generate lowest In line with Petrol Group’s strategy, major risks to the company’s we will have higher growth of earn- operations and how does the EBITDA growth ings before interest, tax, depreciation group intend to tackle them? and amortisation (EBITDA) in our new Growth in generating business lines: comprehensive energy The Petrol Group operates in two im- supply, generation of electricity from portant and also challenging sectors: en- electricity from renewable sources, ESCO projects and ergy and trade. Both sectors are facing mobility. Sales of merchandise goods significant changes that demand adopt- renewable sources top and services will also grow, and will ing a new view on the core concepts of strategic goal TOP 100 COMPANIES/interview the SEEthe TOP ranking. 100 Petrom in OMV third ranks billion euro revenue in 2018 4.1 With and Kazakhstan. Moldova Bulgaria, Serbia, countries -Romania, five and supply, power in active distributionfuels and gas generation, power refining, in oil and production, gas activities with company, OMV CEO ofOMV Petrom Christina Verchere, Petrom integrated is an By Nicoleta Banila increase revenuesincrease supply, energy its to secure needed resource for Romania Black Sea holds much- 14 15 TOP 100COMPANIES What are your expectations re- manian authorities. Through our efforts garding profit and consolidated and investments, we actively contribute revenue growth in Romania for to the security of energy supply for Ro- 400 mln lei this year and what do you base mania and other countries in the region. your estimations on? OMV Petrom’s expected How do you plan to further de- exploration expenditures for 2019 OMV Petrom’s results for the first half velop the Downstream sector of 2019 showed strong delivery, despite in terms of new investment in difficult market conditions, with our refineries and retail chain? net income amounting to almost 2 bil- /interview lion lei*, 53% higher compared to the OMV Petrom operates the Petrobrazi 40% same period of the previous year. We refinery-one of the most important re- achieved these good results despite un- fineries in Romania, with a capacity to Share of Romania’s gas demand favourable market conditions, with the process 4.5 million tons of crude per covered by OMV Petrom production average Brent price decreasing 7% and year. The Petrobrazi refinery benefited refining margins down 44%. For the full from 1.6 billion euro in modernisation year, we expect demand for oil prod- investments starting 2005. Following the ucts to be above the 2018 level, while 2018 turnaround, we are moving from Move to four-year demand for gas and power is expected two-year cycle between turnarounds to cycles between to be broadly similar to 2018. We are four-year cycles, which will enable higher forecasting $65/bbl for 2019, 4% lower utilisation rates. In the first half of 2019, turnarounds will than in 2018, and refining margins about we completed another important invest- enable higher 20% lower than in the previous year. We ment project in Petrobrazi. We started are closely monitoring developments of operating the new Polyfuels unit. This utilisation rates the fiscal and regulatory framework and unit is based on an innovative technology how the market reacts to these changes. allowing for the conversion of LPG into gasoline and diesel. It is the third of its What are your plans for the kind in the world. The Polyfuels unit is domestic production and security of sup- Upstream segment for this a good example of our strategy to look plies. We believe that there is a need to year in terms of new drilling into innovation. We also aim to improve protect the vulnerable customers and this campaigns and acquisitions or customer experience. This year, we can coexist with a liberalised market. We bids for exploration licences in signed a memorandum of understanding look forward to returning to a fully liber- Romania? with Auchan to extend our partnership alised market. through which we plan to open MyAu- We are the largest oil and gas produc- chan convenience stores in Petrom filling How does the current legal er in SEE, with most of our Upstream stations after a successful pilot phase in framework in Romania affect activities being performed in Romania. which 15 stores were opened. OMV Petrom’s investment de- In 2018, our oil and gas production cisions? What can the authori- amounted to over 58 million barrels How was OMV Petrom im- ties do to unlock a large-scale oil equivalent. Our gas production cov- pacted by the emergency de- investment in Black Sea offers approximately 40% of Romania’s cree enforcing additional taxes shore, Neptun Deep included, demand, while our crude production, for oil and energy companies to offset the impact of decline when refined, can ensure the supply for issued by the government in in production from maturing over 60 million car refuels. Over the last late 2018 and then modified at deposits? years, we have been ramping up our in- the beginning of this year? vestments and projects. This year, we The Black Sea opportunities create a plan to drill around 100 new wells and The emergency ordinance had two key much-needed resource for Romania to sidetracks and to continue our worko- impacts on energy - additional fiscal bur- secure its energy supply and increase ver activities at a high pace, of around dens, as well as the introduction of a fixed revenues, the more so that Romania’s 1,000 wells per year. This is considerably gas price after just two years of liberalised national gas production is declining, im- higher than 2016 for example, when we gas market in Romania. These sudden and ports and gas prices are higher while had less than 40 new wells drilled fol- unexpected regulatory changes caused interconnectivity with European mar- lowing the crude price crisis. We are us to slow down our planned ramp-up of kets remains limited. The fundamental committed to continue exploration in investments to understand this new con- prerequisites for the scale of investment Romania and we expect exploration text. The regulation was amended this required for Neptun Deep – competi- expenditures for 2019 to be around 0.4 year, liberalising 60% of the market, which tive terms, a predictable and stable in- billion lei. We recently obtained a five- was an important step forward towards vestment climate and a liberalised gas year extension of the exploration period returning to a liberalised market. Under market – still need to be put in place. for our concession agreements in Ro- these regulations, the current market is We remain keen to see the Black Sea mania. We welcome the new licensing struggling to function and they continue developed, as it is an opportunity for round recently announced the by Ro- to inhibit investment, thus threatening OMV Petrom, and also for Romania. *1 euro equalled 4.66 Romanian leu as at December 31, 2018, according to the Romanian central bank’s official exchange rate. TOP 100 COMPANIES EBRD EBRD Southeast Europe, Central and Managing Director, Charlotte Ruhe, alone. Balkans billion euro Western in the it plans to invest around 1.1 in Southeast Europe. In 2019 major international investor Development (EBRD) is a and Reconstruction for The European Bank European Bank

By Nevena Krasteva of life in key SEE to growth connectivity, quality Improving competitiveness, 16

What do you see as the main Of course, we have a range of interest- Western Balkans’ constraints to growth in ing financing products which we offer Southeast Europe (SEE)? companies, especially through commer- connectivity will cial banks, to help with competitiveness With respect to the economic outlook, in the European Union as they adapt really make a I always say that these countries face a to EU standards. We have those small difference few key challenges – competitiveness, business programmes in Bulgaria and their connectivity and infrastructure Romania, and not just in the Western and the quality of life of the citizens, and Balkans. there are things that the bank is doing The countries are together with the governments for each In many of these countries, less so Ro- on solid ground of these questions. mania and Bulgaria where our portfolio is largely private, the portfolio is vis-ђ-vis their Increasing the variety of financing tilted to the public sector. And that sources is really important in these brings me to connectivity because government debt markets. They are heavily bank de- these countries, the six countries in pendent. The stock exchanges, where the Western Balkans in particular, they do exist, are small, although we are not well enough connected into The banking do have the SEE Link whereby Bulgaria, the European economy and their North Macedonia and other countries connectivity will really make a differ- sectors are well of the region are linking their stock ex- ence. The faster they can get their capitalised changes to give investors the opportu- goods across borders and to Euro- nity to invest across borders. Capital pean and global markets, the better. markets development is an important The more individuals have the oppor- thing to make the region more com- tunity to move around freely and eas- If you do not create petitive in the longer term. ily in the region, the better. You may the quality of life have heard the prime ministers [of In the shorter term, we do a lot of the Western Balkans] talking about that makes people work with the small and medium-sized wanting to create a Schengen within enterprises (SMEs) to help them be the Western Balkans Six. Getting rid want to stay, you more efficient. We are doing a lot on of the roaming charges and taking will be left with an the green economy, for example, to this further to make the movement help companies identify where they are of people and labour free, to give empty country using more energy than they need to people the opportunity to have their and to buy the equipment that would job qualifications recognised across make them more energy efficient, to borders - all these things I think will Still room for a lot have lower carbon emissions and effec- help to increase connectivity and cre- tively lower their cost and make them- ate a larger market to attract inves- of reforms to be selves more competitive. tors and a larger market for companies to expand. Because if you are in advanced With small enterprises, we offer ad- Montenegro, the domestic market is vice how to improve their manage- small but if you can sell cross border ment capacity, help them to adapt to in your neighbours, then it gives you innovation, adopt online marketing a lot more opportunities. and other things that are really necessary as digitalisation becomes a big- Connectivity on the hard side, we In macroeconomic terms, ger thing in the region. And then of build roads and railways and ports, what are the risks that the re- course, it is also about the stricter but we also work to help companies gion faces? management and understanding what to extend their business across bor- it means to run a company properly, ders, in the Western Balkans particu- Aside from Montenegro, the countries so we help with training CFOs, we larly, through the regional chamber of are on pretty solid ground vis-à-vis their are doing a lot to help companies to commerce and a regional investment government debt, and their banking sec- manage the generational change and portal. tors are well capitalised. I think that if to professionalise management. In a there is a lot of pressure on the emerging family-owned company you need to The regional trade registry still markets generally they will be well posi- change the structure and to hire pro- does not cover all the markets tioned. Many of the governments – and fessionals to do some jobs. As the in the region, what are the Serbia stands out on this because it had company grows it is no longer possi- plans for its development? a very difficult situation a few years ago - ble for two brothers, or a father and a have undergone real fiscal consolidation, daughter, to manage every job them- The plan is to cover all of the markets. and I think that in that respect they may selves, they need to bring in expertise It is just taking time to expand but defi- face a bit of a slowdown in growth if the and we assist them with that. nitely it will be there. European economy slows. That may not TOP 100 COMPANIES You hear about it in France and Ger and France You in it about hear unique. not is This facilitate. to things of kinds these on we focus And help. We to want it. about us to talk They this. of aware are leaders political And country. empty an with left be you will leave and will they country, their in stay to want people makes that life of quality the create not you do if because portant im really are like this things that I think existed. that plant previous the than way cleaner amuch in all plant steel the power for the providing and ing heat district doing is It power plant. and have heat to anew ArcelorMittal, with Steel, Zenica and partner Finnish a with venture joint a was It Bosnia]. [in Zenica in project great a did We heating. district of nature the change water, to waste treatment, like water things also are There step. termediary in an took they fleet, bus electric an to go straight to expensive a bit was Kosovo, of case it the In electric. not are they even if buses, modern or es bus electric buses, cleaner in bringing by pollution like air things tackle to us enables also it but voice heard, their make citizens the that sure make to mayors the enables That public. the engages that away in it we do and city, the in life of prove quality the im to key elements the we tackle which with programme Cities Green greener. We cities the make have the to is with help to alot we doing are things the of one and pollution, air like things about also is it but ment, ele fundamental one is which edu cation, just about not is life of Quality portant. im really is are they where living that earn to opportunity have the then and living agood earn need, they that tion educa and training the get can they feel people that sure making skills, for need the addressing that for and country the in stay to have areason country the of they what youth the that sure make is do to need Because life. of quality the Imentioned why is that and rapidly, ing age are they Kosovofrom Albania, and aside leave and youth of have alot had They issue. have ademographic that countries are these said, being That indebted. highly are that markets like some position vulnerable a real in not are they that Ithink but avoidable be many. That is also about the digital net digital the about many. also is That ------and so we work with women entre women so we with and work in professional roles, particularly small, very is workforce the in women of percentage the Bosnia and Kosovo like a place in issue, an such not is it Macedonia North in even or Bulgaria in while and years of anumber for business in women for a programme We ways. have had different afew in inclusion Inclusion is also important, key three. the really are say those I would etc. systems, chain supply global of part be to and globally compete to aposition in be really them help to corporates, larger the SMEs, Coming back to competitiveness, the connectivity. of because Infrastructure SEE? in porting sup be you will that sectors priority what are other the energy, renewable from Apart sun. of a lot have water have of not alot do that tries coun The energy. renewable for region agreat is this We that think fuels. fossil on reliance the reduces it and in coming investment power, private is it also but have to clean opportunity so much fers of sector. it yet And this to coming tors inves commercial private for viable and practical it make to place in agreements right have to the you need barriers, tory you have regula places some in because countries some in hard very pushing are we and We excited Absolutely. really are renewables? in more investing be you will that mean this Does coal. on ent depend heavily is particular, region, Western the in Balkans Yet coal. in this investments to end an puts which strategy in late 2018 a decarbonisation air, adopted EBRD clean the and Talking Cities Green of region. the in on we working are thing another that’s And today’s world. in ity util a necessary is It ago. years seventy electricity like now is Broadband work. do not have an adequate collateral. collateral. have adequate not an do they if business their in them finance will they so that element risk-sharing a provide to banks the we with work and businesses small for advice them, for support mentoring and working W companies. grow their to confidence them give to preneurs 18 e have net ------doing something similar for young similar en something doing at We well. looking are very doing is it programme, successful a really is This can go to Bulgaria, build their compa their build Bulgaria, to go can They far. not is Bulgaria And hub. a is Bulgaria course of And attracted. are really people young see you can which to industry an is This industry. their for work-ready them make to gineers en young train to group industry ogy technol a is which alliance IT Bosnian the with worked we where Bosnia in We programme agreat scene. IT had the of company, own part be or their create then and education engineering, their take to ways for looking youth you have of alot where incubators and accelerators business with ing work is here we doing are what Also, here. it bring and there lessons our Wevere. learn will se quite also is unemployment youth the where Africa North in something We started have already trepreneurs. reforms because it pays off. pays it because reforms good say, I would So the up well. keep as invest and come will foreigners also but invest, will They population. local the for doing be should [the governments] they things these – judiciary functioning abetter having or invest, and country the into come to investors foreign for easier it making or market, capital the developing is it whether advanced, be to reforms of a lot for room still is there is region like the Iwould for say What conclusion? you would like say to What in of. more do weto it is a that want new thing Balkans already have Western the for but bonds some we done Bulgaria In year. last more. We did the BEH bond in Bulgaria a lot do to we want and it about cited ex we really are and Serbia in doing are we that first the is It countries. vanced ad more in markets capital in much WeWe absolutely. so have will, done Serbia? like in you did bonds private more support to you plan Do space. this in EBRD from more see you will and action this of part be We to want business. their and contacts their develop they while Serbia, in or Bosnia, in working their team keep can they financing, get ny, ------19

New entrant leads money TOP 100 COMPANIES makers ranking

By Alexia Petrova

Two Serbian representa- MOST PROFITABLE COMPANIES SEE TOP Return on Return on tives lead the SEE TOP No Company name Country Industry 100 ranking of the most 100 No revenue 2018 revenue 2017 1 95 Aerodrom Nikola Tesla AD Serbia Air Transport 76.11% 33.94% profitable companies in Serbia Zijin Bor Copper DOO (former RTB 2 29 Serbia Metals 58.06% 2.49% 2018 following massive Bor DOO) financial injections by for- 3 44 Hidroelectrica SA Romania Electricity 44.26% 40.93% T 4 40 Romgaz SA Romania Petroleum/Natural Gas 26.05% 37.06% eign investors. 5 3 OMV Petrom SA Romania Petroleum/Natural Gas 20.19% 15.10% 6 87 Continental Automotive Products SRL Romania Automobiles 18.80% 21.79% At the same time, the three biggest 7 59 Hrvatski Telekom d.d. Croatia Telecommunications 16.00% 13.42% money losers in 2017, all units of Croa- 8 97 AETs Kozloduy EAD Bulgaria Electricity 14.57% 12.63% tia’s failed concern Agrokor, improved 9 24 Dedeman SRL Romania Wholesale/Retail 13.73% 13.79% their financial performance remarkably 10 34 Krka d.d. Slovenia Pharmaceuticals 13.22% 12.78% as a result of the concern’s restructuring, and one even dropped from this list. MONEY LOSERS SEE TOP Net loss Net profit/loss No Company name Country Industry 100 No 2018 2017 Serbian majority-state owned Aerodrom 1 89 Complexul Energetic Oltenia SA Romania Electricity -243.0 38.8 Nikola Tesla, whose main asset is the in- 2 6 Lukoil Neftochim Burgas AD Bulgaria Petroleum/Natural Gas -130.0 155.4 ternational airport in Belgrade, topped 3 58 Gorenje d.d. Slovenia Electricity -126.8 0.473 4 5 Rompetrol Rafinare SA Romania Petroleum/Natural Gas -49.4 89.8 the ranking of most profitable companies 5 33 Konzum d.d. Croatia Wholesale/Retail -38.3 -525.2 with a return on revenue of 76% in 2018, 6 20 Natsionalna Elektricheska Kompania EAD Bulgaria Electricity -37.7 3.5 mostly due to the payment of 500.1 mil- 7 73 EPS Distribucija DOO Serbia Electricity -21.1 19.7 lion euro by the concessionaire of Bel- 8 30 Profi Rom Food SRL Romania Wholesale/Retail -19.4 28.1 grade Nikola Tesla Airport, France's 9 85 Bulgargaz EAD Bulgaria Petroleum/Natural Gas -16.4 4.8 Vinci Airports. 10 71 Mercator-S DOO Serbia Wholesale/Retail -14.1 -58.0

Second-ranked Serbia Zijin Bor Cop- ing company Complexul Energetic Olte- Thus, the Slovenian company turned to a per, formerly RTB Bor, saw its net profit nia posted the highest net loss among 126.8 million euro net loss in 2018 from surge to 766.6 million euro in 2018 af- money losers in 2018, of 243 million a slim net profit of 473,000 euro in 2017. ter China’s Zijin Mining Group injected euro, after booking a net profit of 38.8 $350 million in its capital, acquiring a million euro in 2017. The company, Fifth-ranked Croatian retailer Konzum majority stake. Serbia Zijin Bor Cop- which nosedived to 89th position in the and its Serbian peer Mercator-S, both per posted a return on revenue of 58% TOP 100 ranking from 44th place in the units of Agrokor, remained on the list of in 2018, up from just 2.49% in the prior previous edition, owed some 169 mil- money losers, even though they were the year. Serbia Zijin Bor Copper was also lion euro to the Romanian state budget only companies to improve their financial the most profitable company in Serbia at the end of 2018. It closed the year in performance after being ranked among in 2018, as it generated 12% of the total negative territory even though it ex- the top three in last year’s edition. net profit of the Serbian economy dur- pected 14.8 million euro in net profit. ing the year, according to data from the country’s Business Registers Agency. Bulgarian oil refiner Lukoil Neftochim Burgas and Slovenian household appli- METHODOLOGY Romania’s state-run hydro power produc- ances manufacturer Gorenje ranked er Hidroelectrica descended one position second and third, respectively, among Most profitable companies is a ranking to third place in the money makers rank- money losers. of the top 10 companies with the highest ing, even though its return on revenue return on revenue in SEE TOP 100. Return improved to 44% from 41%. Yet again Lukoil Neftochim Burgas, part of Rus- on revenue is calculated as net profit divided in 2018, the profitability chart remained sia’s Lukoil, turned to a net loss of 130 by total revenue, both in euro terms. dominated by Romanian companies which million euro in 2018 from an impressive Money losers is a ranking of 10 companies represent half of all entrants. net profit of 155.4 million euro in the with the most significant losses in SEE prior year, following a rise in expenses. TOP 100. To allow comparison, all local At the other end of the chart, the elec- currencies have been converted into euro, tricity sector dominated the money losers Gorenje’s financial performance was af- using the central banks’ official exchange ranking, with four members out of ten. fected by its integration into its new rates on the last working day of 2018 and owner, China’s Hisense Group, which has 2017, respectively. Romanian state-controlled energy hold- decided to divest non-core businesses. 20

in millions of euro Total assets Y/Y change Net profit/loss Net profit/ 2018 2017 Bank Name Country 2018 in assets 2018 loss 2017

1 3 Banca Transilvania SA Romania 15 892 24.99% 261.5 254.5

2 2 Zagrebacka Banka d.d. Croatia 15 267 10.82% 250.4 111.7

3 1 Banca Comerciala Romana SA Romania 14 561 0.26% 208.1 122.4

4 4 BRD – Groupe Societe Generale SA Romania 11 597 1.12% 331.5 296.2

5 5 Privredna Banka Zagreb d.d. Croatia 11 175 9.80% 186.0 192.1 TOP 100 BANKS 100 TOP 6 6 UniCredit Bulbank AD Bulgaria 9 926 1.66% 219.9 152.2

7 8 UniCredit Bank SA Romania 8 908 10.68% 118.1 69.8

8 7 Nova Ljubljanska Banka d.d. Slovenia 8 811 1.13% 165.3 189.1

9 9 Raiffeisen Bank SA Romania 8 587 10.99% 188.9 105.4

10 10 Erste&Steiermarkische Bank d.d. Croatia 8 282 7.39% 111.9 86.4

11 11 ING Bank N.V. Amsterdam Branch Bucharest** Romania 8 227 14.01% 144.6 104.7

12 13 DSK Bank EAD Bulgaria 7 389 18.99% 111.0 134.0

13 12 CEC Bank SA** Romania 6 293 -7.39% 76.0 36.8

14 19 United Bulgarian Bank AD Bulgaria 5 760 53.11% 89.9 -26.1

15 34 OTP Banka Hrvatska d.d. Croatia 5 667 114.46% 22.4 6.9

16 14 Nova KBM d.d. Slovenia 4 978 1.30% 75.5 45.8

17 15 Banca Intesa AD Serbia 4 846 1.10% 107.0 100.3

18 16 First Investment Bank AD Bulgaria 4 723 6.89% 83.9 43.7

19 17 Raiffeisenbank Austria d.d. Croatia 4 399 3.98% 29.5 52.7

20 18 Eurobank Bulgaria AD Bulgaria 4 196 10.60% 85.4 69.7

21 21 Raiffeisenbank (Bulgaria) EAD Bulgaria 3 977 11.12% 67.3 68.8

22 20 Abanka d.d. Slovenia 3 729 1.99% 66.7 42.6

23 26 Unicredit Bank Srbija AD Serbia 3 712 20.58% 78.3 56.2

24 23 Alpha Bank Romania SA Romania 3 635 8.43% 4.5 46.1

25 27 Banka Kombetare Tregtare Sh.a. (National Commercial Bank) Albania 3 464 6.14% 60.2 52.8

26 25 Komercijalna Banka AD Serbia 3 404 8.66% 69.1 68.7

27 24 Societe Generale Expressbank AD* Bulgaria 3 288 -0.24% 56.2 54.6

28 28 SKB Banka d.d. Slovenia 3 089 3.27% 53.7 40.6

29 32 UniCredit Bank d.d. Mostar Bosnia and Herzegovina 3 043 13.75% 49.7 45.8

30 30 Central Cooperative Bank AD Bulgaria 2 872 3.80% 17.3 18.8

31 33 Hrvatska Postanska Banka d.d. Croatia 2 863 7.36% 20.5 1.1

32 36 Societe Generale Bank Srbija AD Serbia 2 682 9.76% 69.2 51.1

33 31 UniCredit Banka Slovenija d.d. Slovenia 2 656 -1.86% 20.6 38.3

34 37 Banka Intesa Sanpaolo d.d. Slovenia 2 596 8.27% 10.7 4.2

35 29 Addiko Bank d.d. Croatia 2 478 -13.30% 23.0 30.6

36 39 Raiffeisen Banka AD Serbia 2 477 10.32% 56.2 56.1

37 42 OTP Bank Romania SA Romania 2 370 20.86% 5.6 18.1

38 35 SID – Slovenska Izvozna in Razvojna Banka d.d. Slovenia 2 319 -5.42% 14.3 14.0

39 41 Raiffeisen Bank d.d. Sarajevo Bosnia and Herzegovina 2 248 6.27% 43.2 37.1

40 40 Garanti Bank SA Romania 2 199 2.70% 24.0 27.8

41 63 Banka Postanska Stedionica AD Serbia 1 867 56.48% 18.9 32.8

42 48 Komercijalna Banka AD North Macedonia 1 860 9.09% 29.0 13.3

43 44 Gorenjska Banka d.d. Slovenia 1 832 -2.16% 17.1 6.5

44 43 Raiffeisen Bank Sh.a. Albania 1 806 -10.86% 27.4 33.5

45 46 AIK Banka AD Serbia 1 753 -1.34% 47.9 102.3

46 47 Sberbank Banka d.d. Slovenia 1 748 0.40% 8.2 3.0

47 54 Erste Bank AD Serbia 1 722 25.33% 24.8 22.3

48 51 Citibank Europe Plc Dublin - Romania Branch** Romania 1 721 19.48% 46.6 35.5

49 50 Addiko Bank d.d. Slovenia 1 618 5.23% 37.2 19.0

50 55 Credins Bank Sh.a. Albania 1 588 8.39% 9.7 7.8 (*) Since Jan 28, 2019 the bank has been operating as Expressbank AD. (**) Net assets 21

in millions of euro TOP 100 BANKS Total assets Y/Y change Net profit/loss Net profit/ 2018 2017 Bank Name Country 2018 in assets 2018 loss 2017

51 59 Bulgarian Development Bank AD Bulgaria 1 546 22.31% 19.8 10.3

52 62 Banca de Export-Import a Romaniei – Eximbank SA Romania 1 544 29.64% 24.3 3.2

53 49 Piraeus Bank Bulgaria AD Bulgaria 1 489 -3.40% 4.2 3.9

54 52 Stopanska Banka AD - Skopje North Macedonia 1 472 4.85% 44.7 33.2

55 56 Banca Romaneasca SA Romania 1 451 8.20% 8.0 4.2

56 53 First Bank SA (formerly Piraeus Bank Romania SA) Romania 1 445 4.65% -7.6 2.3

57 57 Eurobank AD Serbia 1 439 7.49% 19.1 12.6

58 58 Allianz Bank Bulgaria AD Bulgaria 1 408 7.61% 15.1 14.2

59 65 Intesa Sanpaolo Bank Albania Sh.a. Albania 1 388 -4.77% 6.8 11.4

60 60 NLB Banka AD Skopje North Macedonia 1 331 8.01% 34.5 34.6

61 64 Sberbank d.d. Croatia 1 300 8.39% 9.2 -18.1

62 61 Banka Sparkasse d.d. Slovenia 1 223 0.72% 8.5 9.2

63 74 Intesa Sanpaolo Romania SA Romania 1 216 26.79% 5.0 6.0

64 67 Moldova Agroindbank SA Moldova 1 211 6.49% 27.2 22.3

65 72 Libra Internet Bank SA Romania 1 170 18.39% 20.5 12.8

66 68 Vojvodjanska Banka AD Serbia 1 134 8.89% 5.1 -17.8

67 70 ProCredit Bank Bulgaria AD Bulgaria 1 106 10.21% 19.4 16.4

68 71 Investbank AD Bulgaria 1 085 8.59% 11.6 -15.0

69 75 Intesa Sanpaolo Banka d.d. Bosnia and Herzegovina 1 054 10.38% 18.6 12.7

70 73 Sberbank Srbija AD Serbia 1 032 4.85% 11.1 6.8

71 66 Nova Banka a.d. Banja Luka Bosnia and Herzegovina 998.0 3.83% 5.5 5.0

72 76 Dezelna Banka Slovenije d.d. Slovenia 990.8 6.42% 5.4 3.8

73 81 Municipal Bank AD Bulgaria 967.8 25.58% 3.5 0.016

74 78 ProCredit Bank AD Serbia 942.4 14.87% 8.5 10.1

75 69 Credit Europe Bank (Romania) SA** Romania 929.4 -7.48% 11.0 8.6

76 New Raiffeisen Bank Kosovo Sh.a. Kosovo 888.9 -1.33% 20.5 17.6

77 82 UniCredit Banka a.d. Banja Luka Bosnia and Herzegovina 849.9 12.26% 14.2 13.2

78 79 Addiko Bank AD Beograd Serbia 849.6 6.38% 11.0 10.3

79 83 Moldindconbank SA Moldova 844.4 8.78% 25.6 17.8

80 84 Credit Agricole Banka Srbija AD Serbia 840.0 13.86% 6.4 2.9

81 88 Halk Banka AD Skopje North Macedonia 766.6 11.74% 10.7 8.8

82 New ProCredit Bank Sh.a. Kosovo 754.0 -5.15% 17.4 18.5

83 87 Sparkasse Bank d.d. Sarajevo Bosnia and Herzegovina 750.0 8.84% 10.0 10.1

84 94 OTP Banka Srbija AD Serbia 743.4 19.58% 2.4 -3.9

85 80 Patria Bank SA Romania 740.5 -5.26% -0.057 -9.1

86 86 International Asset Bank AD Bulgaria 735.7 4.87% 5.3 3.1

87 89 Sberbank BH d.d. Bosnia and Herzegovina 733.1 7.20% 3.8 3.0

88 85 Victoriabank SA Moldova 727.9 -1.95% 2.2 13.8

89 91 Bulgarian-American Credit Bank AD Bulgaria 726.2 14.53% 6.2 4.0

90 90 NLB Banka a.d. Banja Luka Bosnia and Herzegovina 722.1 7.58% 16.5 23.1

91 93 Crnogorska Komercijalna Banka A.D. Montenegro 694.6 11.45% 7.4 4.2

92 New NLB Banka Sh.a. Prishtina Kosovo 668.1 14.39% 14.8 14.2

93 95 Banka Societe Generale Albania Sh.a. Albania 666.1 0.97% -4.5 3.0

94 98 Ohridska Banka AD North Macedonia 643.3 12.35% 9.4 5.7

95 97 Alpha Bank Albania Sh.a. Albania 624.8 0.48% -7.9 -10.5

96 New American Bank of Investments Sh.a. Albania 608.6 82.30% 4.3 4.4

97 92 BCR Banca Pentru Locuinte SA Romania 600.5 -4.14% -1.2 -4.2

98 96 Tirana Bank Sh.a. Albania 591.2 -5.72% -13.2 0.522

99 99 NLB Banka d.d. Sarajevo Bosnia and Herzegovina 588.7 10.78% 7.9 7.8

100 New BC Mobiasbanca - Groupe Societe Generale SA Moldova 562.7 8.61% 15.1 13.6 TOP 100 BANKS impairment costs. Despite the accom the Despite costs. impairment lower as well as region, the in growth economic strong and stable relatively billion euro, well above the 3.524 billion 3.524 billion above the well euro, billion 4.467 arecord-high reached banks SEE the of profit Top 100 net combined The assets almostremained unchanged. Romana’s Comerciala Banca 11%a rise. posted Banka Zagrebacka whereas Eurobank, Greece's of unit a Bancpost, of acquisition the of sult are 25% as by about assets total its increased Transilvania Banca sitions. po their swapping banks Romanian two the with third, in Romana ciala Comer Banca and place, second in Banka Zagrebacka Croatia’s Transilvania, Banca for reserved remained podium The top. at the changes tle lit saw otherwise which a ranking in SEE in by assets bank largest the re as Romana Comerciala TransilvaniaBanca placed Banca Romania’s Balkans. Western the in particularly high, atively rel remained they ratios, NPL in decline steady the despite and marginal mained re However, growth organic stable. keeping time same positions the balance at while portfolios, loan their expanded lenders regional the SEE, across banks central of policy monetary modative W hefty profits last last year, by the backed profits hefty sector recorded Europe’s banking Southeast liquid, highly and generally Well capitalised as leader as Transilvania emerges Banca growth, profit banksSEE post robust By Radomir Ralev Radomir By ------lenders recorded losses last year, last com losses recorded lenders biggest 100 the of six only Remarkably, 2017. in lenders 100 top the of profit in euro 15th spot. At the same time United Bul United time same the At 15th spot. 19leapt Hrvatska to positions Banka the OTP structure, its into Banka Splitska of integration successful by the backed 114% impressive an With growth asset sector. the in consolidation ongoing amid sum that of aquarter for counting ac lenders five top the with euro, lion 7.2% up went 2018 in banks 294.9 bil to biggest 100 SEE’s of assets total The euro. billion 4.5 of aprofit made 94 while euro, million 34.6 worth losses booked banks six 2018 the In ranking, worsen. saw it 28 while year-on-year, line bottom their improved banks 72 of Atotal loss. to while turned three only year, last profit to swung ers million loser, 13.2 up ending biggest the was euro Bank in Tirana 11.9%. up Albania’s euro, Generale the Societe red. 331.5 of a profit million with shined Groupe Five – lendBRD 10 to 2017 in pared 12 and 2016. in from 20 last year, as a result of the con year, the of down a result last 20 as from banks, 19 with the ranking in 100 Top represented best was country, region’s populated the most Romania, 13%.fell six lost d.d. assets its as place 35th the to positions Bank Addiko other hand, the On CIBANK. absorbing after assets in a53% of rise back 19th the on the from place 14th the to up went Bank garian 22 ------of its banks, equal to 31.6% to equal re the of banks, its of sheet balance 93.1 aggregate euro billion a with assets of terms in a leader was nia Roma system. banking its of solidation growth, of 82.3%. of growth, of Bank asset largest the posted Investments American Albania’s whereas 76th, position, highest at the ranking the joined Bank of Raiffeisen sovo subsidiary Ko the entrants, new the Among each. Moldova and Albania from one voand the in including entrants three from Kosoranking, new five were There gion’s total. foreign banks. foreign of offices representative and branches including region the in registered banks 260 exceeds of pool companies initial The themselves. corporate and companies and websites, government tions, associa bank commissions, supervision financial registers, commercial national All changes. year-on-year calculating when used been have figures currency Local respectively. of day 2018 2017, working and last the on rates exchange official banks’ central the using euro, into converted been have To 31, of 2018. December as sheets balance non-consolidated from assets total of terms in Europe Southeast in banks largest SEE METHODOLOGY allow comparison, all local currencies currencies local all comparison, allow data is sourced from central banks, banks, central from sourced is data TOP 100 banks is a ranking of the of the aranking is TOP banks 100 - - - - - TOP 100 BANKS/interview 23 24

Fragmented SEE banking

/interview sector leaves room for further consolidation

By Radomir Ralev

TOP 100 BANKS 100 TOP Hungary's OTP Bank has been the most active player on the region's M&A scene in the past years after buying Croatia's Spitska Banka from Societe Generale in 2017 and then six more of the French group's units in the region - in Albania, Bulgaria, Montenegro, Moldova, Slova- kia and Serbia - in 2018.

Gabor Kolics, managing director of M&A Coordination Department, OTP Bank

Why did OTP Group choose non-banking services (like movie ticket being, a significant number of customers to expand via acquisitions in purchase or parking) and catering for still require non-digital care. According Southeast Europe (SEE) at a about 750,000 customers, and it was to surveys, a significant proportion of time when competitors prefer also OTP that made available Apple Pay customers have greater confidence in to focus investment in digitali- on the Hungarian market. The intro- banks that have traditional accounts and sation of services? duction of Apple pay was a huge suc- know that if they have a problem they cess, the number of registered users can go to a banking associate. Of course, Although OTP Group indeed has been was 10,000 in one hour, and 30,000 in I can't predict for sure what will happen very active in terms of acquisitions in two days after the launch of the ser- in the future, digitisation will obviously recent years, this was definitely not at vice. Our efforts in innovation are also continue to grow, but over the next ten the cost of cutting back investment in recognised by the market, OTP Group years, truly successful banks I think will digitalisation. was named the “Best Digital Bank” for be strong, advanced and active on both the third time in 2019 by Global Fi- channels. OTP has always been a frontrunner nance, and OTP Lab – the innovation in innovation in Hungary. OTP is the hub of OTP – was chosen among the Our customers are satisfied with our market leader in Hungary in terms of TOP 25 financial innovation labs in the digital services and are very happy to use digital developments and utilisation of world also by Global Finance. them and OTP is committed to leverage alternative channels and digital services its know-how in digital innovation in the by the clients. Just to mention a few There was a time when we thought that countries where we operate. examples: online-available products online banking would completely take now include cash loans, overdrafts and the market away from traditional banks, Referring back to our recent acquisition building society accounts. In 2018 21% but now we see the most successful track, besides the strong organic growth of cash loan applications were initiated banking model in the world is when a of our loan book since 2016, we had online. OTP was a pioneer on the Hun- financial institution has traditional bank- almost a 60% growth through acquisi- garian market in setting up a mobile ing channels, branches, and it also has tions, which is outstanding in the Euro- application called Simple, integrating advanced digital channels. For the time pean banking universe. TOP 100 BANKS/interview ------rozone, expect we further monetary loosening in line with the consensus and the communication of could beRate round the cut(s) corner the ECB. and a new asset purchasing programme is likely to be launched before the end October. of The already lax and very likely soon fur ther loosened monetary the policy of FED and the ECB helps US and the Eurozone, but also South not only the east economies Europe’s through sev eral channels. First, the ECB’s support ofeconomic activity in the Eurozone results in stronger demand for SEE ex portsand tourism services. inter Lower est rates in the Eurozone help to keep the euro weak, which also benefits SEE monetaryeconomies.Looser conditions in major economies also debtservice on FX meandebt, which is also lower a positive taking factor, into considera tion that the SEE countries are usually strongly euroised. Finally,local currency interest rates couldbe kept levels, low at which also supports these economies. As domestic inflation for ratenot call would pressure hikesin most of these economies, nega effectstive negligible. are We definitely do not expect the ECB to tighten soon.On the contrary, due to persistently weak economic activity and low inflation pressure in the Eu edgeduring the almost two decades since our first acquisition in theregion. believe that learned have we We to how operate a sustainable business model to deliver profit anding stability in termsgrowth of portfolio quality, while maintaincapital liquidity and position. expectWe the consolidation process to continue further. The main driver of consolidation will continue to be the strive for economies ofscale as the SEE banking sector is still fragmented with many small-size universal players in the market. What will be the effect of a po lax tentiallycontinuing mon etarypolicies of the Fed and the ECB on the banking sec torin SEE? Do expect you ECB to tighten once Christine La ECB presi at garde takes over dent? thecrisis and in recent years.has OTP gainedknowl market comprehensive ------bln euro 25

OTP Bank Group’s market OTP Bank Group’s 2019 14, August on capitalisation ing sector? Do expect you the the in process consolidation region's banking sector to con tinue? Group hasOTP always believed in the region as economic growth in the SEE often exceeds growth of Western Euro pean economies as saw both we before 10.7 sent. In all cases, our goal is to achieve optimum operational size and to lever expertiseage OTP in regional markets with the interests of our shareholders in are constantly we mind.Moreover, ex opportunities, new amining addition in to the member countries in new mar kets,further strengtheningposition our in the region. What are the advantages and shortcomingsbank the of SEE vices, such as cheaper cash withdrawals transfers between discounted banksor differentin countries. The strategic goal Group of is OTP to become the most successful universal banking group in Central and Eastern believeEurope. in the future We of the region and will actively contribute to its development. As part of our strategy, strivewe to increase our share through organic growth andacquisitions in all our markets where are already we pre tionand strengthening the profit contri bution of foreign group members. Our current and future clients also benefit from our investments, asreceive more and more discounted ser they OTP Bank has been one of the most ac Bank the most of has been one OTP European the in institutions financial tive market. theacquisition crisis, Following new transactions started and in 2014 since then OTP Bank, hasthe purchase announcedof financial11 institutions banking and portfolios countries nine in out– of which only two transactions have not been closed financiallyenterednew countries such as Albania, - and Moldova and Slovenia. With this unique acquisition performance, Group OTP hasbecome the most active banking marketconsolidator in the CEE region, substantiallyimproving its market posi ------Will theWill expansion of OTP serve as a conduit for increased Hungarian investment in SEE? sionresulted in an all-time high share price and market capitalisation bil (10.7 making a lioneuro on August 2019), 14, takeover much more difficult. holding, and the majority less of institutional being owning investors investors than do share. not 5% expect We any change in that. recent expan Moreover, The shareholder The structure OTP of Group has always been diverse, with onlyfewa investors exceeding share 5% coming a takeover target it self? With such a rapid expansion, what is the chance be of OTP ingevaluated. Our excellent capital and liquidity positions this make possible. Growth through acquisitions is not a options acquisition process: completed in the CEE region are continuously be tention? the Are avoiding you the time for market Bosnian being? In May, Sandor Csanyi,In May, CEO Bankof OTP Group, said that is interested OTP in entering North and Macedonia Kosovo. Which banks attract your at gets for optimal size and market share in Serbia. ing further ahead, with the upcoming completion of the SG Srbija deal, which is expected in a short time, OTP Bank's market share will be higher even in the country,most probably meeting our tar InSerbia, present, at following the merg er process of Vojvodjanska banka with OTP banka Srbija, which we closed April in this year, OTP Bank focused on the smooth and successful is primarily operation of Vojvodjanska banka. Look ally say is that the primary focus is the Central and Eastern European region. termined seeking by acquisition oppor tunities that will allow usto achieve the optimal size. We do not name specific targets in markets, any the most usu we In general, our acquisition strategy is de Do you have plansDo have you for ac new media to According quisitions? reports, is interested OTP in theprivatisation of Serbia's Banka. Komercijalna 26

MAIB shares likely to be listed

/interview on regional stock exchange

namic and registering increasingly better results, by late July its shares reached a record-high price, going up by 17% compared to early 2019 to reach 2,501 Mol- dovan lei (over 128 euro) per share with face value of 200 lei (over 10 euro). TOP 100 BANKS 100 TOP "These are the only shares on the controlled market which display a stable increase in price,” a representative of the National Commission for Financial Mar- ket commented. “The increasing quota- tion of shares is the result of the dynamic development of Moldova Agroindbank. In 2019, the bank registered good financial results, increasing its profit, assets, capital, loans and deposits portfolios, and the most important, preserving the Serghei Cebotari, CEO of Moldova Agroindbank (MAIB) biggest market share - over 30%." Moldova Agroindbank Horizon Capital Partner Vasile Tofan For his part, MAIB CEO Serghei Ce- (MAIB), the lead- shared the same position: “MAIB is the botari described the price dynamic as “a ing bank in Moldova, heart of Moldova’s banking system and I natural and expected outcome." plans to list its shares want to assure you that we will do our on a regional stock best to be the partner that will help the “I am very glad that the value of the bank's M exchange following a bank to become even stronger”. shares has been recognised. We have been steady and continuous improvement in working hard to reach this result over the its portfolio, assets, capital and profit over Several months later MAIB and the past five years, streamlining our efforts in the years, its CEO Serghei Cebotari says. EBRD signed several financial agree- five directions at a time: quality corporate ments, thus enhancing the competitive- management, aggressive and quality lend- The bank is even more optimistic about ness of its loan portfolio and extending ing, transparency of shareholders, digi- that now that it has welcomed fit-and- access of the bank’s clients running small talization of banking processes and fight proper international investors, which have and medium-sized enterprises and those against money laundering,” Cebotari said. expressed confidence that the bank, who dealing with export/import operations “The fact that the objectives set were met currently holds a share market of about to more advantageous loans. brought about the current results, when, 30%, will step up its position even more. for instance, the widest loan portfolio in Concurrently, the bank pressed ahead the banking system, the one of MAIB, has In late 2018, the Moldova Agroindbank with its structural transformation. More- the lowest NPL index. As of June 30, it (MAIB) welcomed new shareholders, as over, with digitalisation being among its stood at 5.6%.” a consortium of international investors top priorities, MAIB has upgraded its acquired 41.09% of its shares. mobile banking service which got more He added that the high quality of MAIB's client-friendly, launched online person- portfolio is not the only achievement, Back then, both the bank’s leadership to-person, transfer-to-card, account-to- specifying that over the past years, the and the consortium made up of the Eu- account, cash-by-code transfers, and kept bank practically doubled its assets, capi- ropean Bank for Reconstruction and on extending its self-service centres. tal and profit. Development (EBRD), US equity fund Horizon Capital and Latvian equity fund With the bank witnessing upward dy- “I have to say that the current price of Invalda INVL saw the move as “a new de- 2,500 lei per share does not reflect their velopment stage” in the bank’s history. real value, if we take into account the MAIB key financial indicators balance-sheet value of 3,922 lei and the The EBRD is proud to be part of the big- as of June 30, 2019 huge potential of MAIB. Therefore, the gest bank in Moldova, the head of the Assets 24,748,000 lei next important step that will reveal the EBRD office in Moldova, Angela Sax, said, Loans 13,466,000 lei potential of the bank will reside in list- adding that the consortium and MAIB ing MAIB shares on a regional stock ex- Deposits 19,666,000 lei “will join forces so that the bank becomes change. It is an objective we are working even better and even more successful”. Profit 397,600,000 lei on," Cebotari commented. MAIB - a reliable partner for your business in Moldova 28

in millions of euro Gross Y/Y written Change in Net profit/loss Net profit/ 2018 2017 Company Name Country premium GWP 2018 2018 loss 2017 2018 (%)

1 1 Zavarovalnica Triglav d.d. Slovenia 660.2 6.15% 65.5 62.5

2 2 Zavarovalnica Sava d.d. Slovenia 392.3 7.83% 29.5 25.1

3 3 Croatia Osiguranje d.d. Croatia 376.5 13.30% 36.5 20.1

4 6 City Insurance SA Romania 318.4 18.30% 10.6 5.2

5 5 Vzajemna Zdravstvena Zavarovalnica d.v.z. Slovenia 304.3 6.95% 0.678 -0.749

TOP 100 INSURERS 100 TOP 6 4 Adriatic Slovenica d.d. Slovenia 300.4 -1.10% 8.9 11.4

7 7 Allianz - Tiriac Asigurari SA Romania 280.8 7.60% 31.4 32.7

8 9 Omniasig Vienna Insurance Group SA Romania 251.4 10.72% 1.2 7.4

9 10 Dunav Osiguranje AD Serbia 233.9 10.59% 13.4 9.7

10 8 Euroins Romania Asigurare Reasigurare SA Romania 216.1 -7.31% 6.8 21.5

11 11 Groupama Asigurari SA Romania 215.2 8.76% -1.4 7.7

12 12 Asirom Vienna Insurance Group SA Romania 185.9 -10.35% -41.0 1.6

13 13 Generali Osiguranje Srbija AD Serbia 181.8 8.31% 32.7 24.5

14 15 NN Asigurari de Viata SA Romania 165.3 4.63% 10.5 6.3

15 14 Allianz Zagreb d.d. Croatia 157.2 1.39% 16.7 15.0

16 17 Euroherc Osiguranje d.d. Croatia 150.8 22.26% 19.2 12.4

17 16 Triglav Zdravstvena Zavarovalnica d.d. Slovenia 144.7 11.38% 1.3 1.3

18 19 Lev Ins AD Bulgaria 143.3 36.91% 0.913 0.185

19 18 Bulstrad Vienna Insurance Group AD Bulgaria 120.5 14.37% 6.8 3.1

20 23 DZI - General Insurance EAD Bulgaria 120.1 24.29% 7.1 3.3

21 21 Armeec AD Bulgaria 106.3 6.76% 2.7 3.8

22 28 Wiener Osiguranje Vienna Insurance Group d.d. Croatia 103.4 29.11% 5.7 3.7

23 22 Generali Zavarovalnica d.d. Slovenia 102.3 3.06% 4.7 2.7

24 24 DDOR Novi Sad AD Serbia 101.3 9.02% 5.4 4.1

25 25 Wiener Stadtische Osiguranje AD Serbia 98.7 6.75% 5.7 3.1

26 36 Bul Ins AD Bulgaria 97.8 52.89% 2.8 0.018

27 20 Generali Romania SA Romania 96.6 -6.46% 9.2 12.1

28 32 Generali Osiguranje d.d. Croatia 96.2 26.22% 1.9 1.8

29 29 Adriatic Osiguranje d.d. Croatia 89.3 11.71% 8.3 5.7

30 34 Euroins AD Bulgaria 88.4 20.11% 1.1 0.020

31 30 Generali Insurance AD Bulgaria 86.7 12.44% 3.3 3.5

32 26 Allianz Bulgaria AD Bulgaria 84.7 -3.00% 7.7 4.2

33 33 UNIQA Osiguranje d.d. Croatia 78.5 3.80% 3.2 3.5

34 31 BCR Asigurari de Viata Vienna Insurance Group SA Romania 78.3 3.43% -6.5 3.5

35 35 NLB Vita d.d. Slovenia 76.9 8.60% 8.3 6.9

36 27 UNIQA Asigurari SA Romania 75.5 -9.25% -3.9 0.318

37 39 OZK - Insurance AD Bulgaria 74.3 40.01% 0.316 0.305

38 37 Grawe Hrvatska d.d. Croatia 58.2 4.49% 4.2 6.9

39 38 Triglav Osiguranje d.d. Croatia 57.9 7.16% 0.810 0.107

40 43 Bulstrad Life Vienna Insurance Group AD Bulgaria 55.5 27.84% 1.9 1.1

41 41 Triglav Osiguranje AD Serbia 49.2 9.20% 1.8 0.544

42 42 Agram Life Osiguranje d.d. Croatia 47.4 6.53% 1.7 0.664

43 40 Merkur Zavarovalnica d.d. Slovenia 47.1 1.95% 3.2 2.8

44 44 Grawe Zavarovalnica d.d. Slovenia 43.3 1.67% 0.696 1.6

45 57 Modra Zavarovalnica d.d. Slovenia 43.2 47.72% 6.3 7.8

46 50 Dall Bogg Zhivot i Zdrave EAD Bulgaria 41.9 32.80% 0.151 0.061

47 60 BRD Asigurari de Viata SA Romania 39.2 41.08% 3.1 3.8

48 46 Merkur Osiguranje d.d. Croatia 37.6 -0.34% 3.0 3.7

49 45 UNIQA Life Insurance AD Bulgaria 37.5 -1.38% 0.596 0.433

50 54 UNIQA AD Bulgaria 35.6 19.15% 0.006 -1.2 29

in millions of euro TOP 100 Gross Y/Y written Change in Net profit/loss Net profit/ 2018 2017 Company Name Country premium GWP 2018 2018 loss 2017 2018 (%)

51 65 Adriatic Osiguranje d.d. Bosnia and Herzegovina 33.7 31.75% 0.266 2.3 INSURERS 52 51 UNIQA Nezivotno Osiguranje AD Serbia 33.5 6.83% 1.5 1.1

53 52 Sigal UNIQA Group Austria Sh.a. Albania 33.3 2.74% 1.5 1.9

54 66 Gothaer Asigurari Reasigurari SA Romania 33.1 29.70% -8.9 -4.6

55 48 Grawe Osiguranje AD Serbia 33.1 1.49% 5.3 4.0

56 49 Pool-ul de Asigurare Impotriva Dezastrelor Naturale SA Romania 32.9 2.84% 8.3 8.5

57 55 UNIQA Osiguranje d.d. Sarajevo Bosnia and Herzegovina 31.6 6.62% 0.946 0.851

58 53 Lovcen Osiguranje AD Montenegro 30.7 2.78% 0.412 0.124

59 58 Sarajevo Osiguranje d.d. Bosnia and Herzegovina 30.6 6.36% 0.244 0.132

60 56 Wiener Stadtische Versicherung AG - Branch Ljubljana Slovenia 30.6 3.69% 4.5 3.9

61 59 Euroherc Osiguranje d.d. Bosnia and Herzegovina 30.5 6.04% 3.6 3.5

62 64 Milenijum Osiguranje AD Serbia 29.3 11.95% 1.3 3.3

63 67 Sigma Interalbanian Vienna Insurance Group Sh.a. Albania 28.5 4.33% 0.925 0.637

64 63 Hrvatska Osiguravajuca Kuca d.d. Croatia 28.2 4.04% 1.4 1.1

65 68 AMS Osiguranje AD Serbia 27.8 11.74% 1.0 2.1

66 47 ERGO Asigurari de Viata SA Romania 26.7 -18.52% 1.3 0.812

67 73 Grawe Osiguranje d.d. Sarajevo Bosnia and Herzegovina 26.7 21.70% 1.0 0.667

68 69 Croatia Osiguranje d.d. Bosnia and Herzegovina 25.1 2.14% 0.069 0.818

69 62 Allianz Bulgaria Life AD Bulgaria 25.0 -7.97% 0.500 3.4

70 77 Triglav Insurance AD North Macedonia 23.2 8.60% 0.512 1.4

71 75 Triglav Osiguranje d.d. Sarajevo Bosnia and Herzegovina 22.4 2.93% 0.926 0.919

72 76 DZI - Life Insurance AD Bulgaria 21.2 -2.31% 4.6 3.7

73 71 Energia AD Bulgaria 20.4 -12.79% 4.8 7.8

74 New Central Osiguranje d.d. Bosnia and Herzegovina 19.6 44.19% 1.7 2.0

75 80 Sava Nezivotno Osiguranje AD Serbia 19.5 14.13% 1.1 0.448

76 72 UBB-Life Insurance EAD Bulgaria 19.4 -13.14% 3.3 2.1

77 87 Albsig sh.a. Albania 18.9 19.71% 0.940 0.642

78 79 Eurosig Sh.a. Albania 18.2 -1.03% N/A N/A

79 81 GRAWE Bulgaria Life Insurance EAD Bulgaria 17.8 11.41% 1.5 1.8

80 98 UNIQA Asigurari de Viata SA Romania 17.7 44.97% 2.1 0.679

81 82 Signal Iduna Asigurari de Viata SA Romania 17.7 11.22% -0.098 -0.898

82 86 Eurolink Osiguruvanje AD North Macedonia 17.4 18.08% 0.695 0.115

83 New Grawe Romania Asigurare SA Romania 16.9 46.76% -0.822 -0.561

84 New Zavarovalnica Sava d.d. - Branch Croatia Croatia 16.7 15.69% -0.705 -1.2

85 85 UNIQA Zivotno Osiguranje AD Serbia 16.6 10.66% 1.1 0.491

86 78 Wiener Osiguranje Vienna Insurance Group a.d. Banja Luka Bosnia and Herzegovina 15.7 -12.93% -0.206 -1.2

87 90 Prva Osebna Zavarovalnica d.d. Slovenia 15.5 13.21% 2.8 3.1

88 83 Vienna Osiguranje d.d.(former Merkur BH Osiguranje d.d.) Bosnia and Herzegovina 15.5 -0.39% 0.860 1.0

89 91 Makedonija Skopje - Vienna Insurance Group AD North Macedonia 14.8 8.89% N/A 1.6

90 84 SID – Prva Kreditna Zavarovalnica d.d. Slovenia 14.3 -5.19% 1.0 1.2

91 95 ERGO Osiguranje d.d. Croatia 14.1 9.71% -0.340 -1.7

92 New ASA Osiguranje d.d. Bosnia and Herzegovina 13.8 20.78% 0.853 0.484

93 96 Intersig Vienna Insurance Group Sh.a. Albania 13.6 0.74% 0.609 0.504

94 93 ERGO Versicherung AG - Branch Slovenia Slovenia 13.1 -0.72% -1.4 -0.265

95 94 Sava Osiguruvanje AD North Macedonia 13.1 2.51% 0.392 0.358

96 New UNIQA AD North Macedonia 13.1 15.06% 0.258 0.344

97 New Asset Insurance AD Bulgaria 12.9 22.15% 0.268 -0.863

98 92 ERGO Asigurari SA Romania 12.8 -4.53% -0.729 0.010

99 97 Sava Montenegro AD Montenegro 12.8 3.64% 1.9 1.2

100 New Croatia Osiguruvanje - Life AD North Macedonia 12.5 23.95% 0.573 0.479 TOP 100 INSURERS in 2018 GWP compared to their results results their 2018 to in compared GWP a6% rise posted ranking the of edition year’s this in present insurers Slovenian The euro. billion 2.1 of GWP generated which peers, Romanian by their trailed closely again were yet and euro, billion 2.2 some of GWP combined by booking regional their peers outshined ranking year’s this of members Slovenian The year’s edition. last of members by the set euro billion 7.5 of high previous the 2018, beating in euro over of 8.1 billion GWP bined com boasted TopThe insurers SEE 100 2018. in third 13.3% GWP in rise a hefty bagging in place, remained Osiguranje Croatia region. the in insurers 100 top the of GWP combined the of over 8% to equal euro, 6.15% million 660.2 to Triglav's grew by GWP Zavarovalnica significant. remained two the between volume GWP in difference the but Triglav running, nica year athird for Zavaroval rival local its outpaced Sava of Slovenia’s growth, GWP Zavarovalnica terms In profit. net and GWP their year, both improving straight a third for places their kept insurers three top The again. once way the leading mania, Ro and – Slovenia heavyweights two the grow 2018, in with representatives its of GWP combined the saw ranking the in countries the of Each rates. low interest and requirements regulatory stricter competition, from tougher stemming pressure offset consumption increased and performance macroeconomic robust 2018. in slowdown countries’ nomic The S bucked the global eco global the bucked region the (GWP), as gross premiums written year of record-high other gest insurers boasted an Europe’s big Southeast to top GWP SEE ranking fend off growing competition Slovenian giants insurance By Mario Tanev ------is wt 1 cmais demonstrat companies, 19 with first ranked Bulgaria ranking, the in members of number However, the of terms in respectively. euro, 1.2 and billion euro 1.3of billion GWP with Bulgaria, and Croatia were threshold euro 1billion the crossed that ranking the in countries two other The 4.1% increase. 2017,in saw a members Romanian while A total of 41 members of this year’s rank this of 41 of members A total threshold. entry the cross to managed lier. Kosovo from insurer Moldova or No ear a five year to year, this compared as ranking the into it made insurers new Seven 44.19%. –of year’s ranking this of members the among GWP of growth est occupied sharp fifth the posting which after place 74th Osiguranje, Herzegovina’s Central and Bosnia was entrant new ranked Croatia highest The Romania. and Bulgaria, of each from entrant new saw one also ranking The each. –two year’s ranking this in entrants new of number highest the with had edonia Mac and North and Herzegovina Bosnia 14 with each. Slovenia and by followed Croatia year’s ranking, this in 18 members posted Romania market. local the on competition strong the ing 100 insurers in the region generated a a generated region the in insurers 100 top The ranking. 2018 the of the edition in peers their like much decline, profit net combined their saw year’s ranking this of members the region, the across premiums in growth robust the Despite a46.76% increase. with third in came - Asigurare Romania -Grawe entrant 43.2 millionto new euro, another while a47.72% with followed rise varovalnica Za Slovenia’s Modra spot. 26th to higher places ten company the propelling euro, 97.8 to million increase a52.89% with way the led Ins Bul GWP. Bulgaria’s their in rise percentage saw a double-digit ing 30 ------euro in 2018, after the same 100 compa 100 same the 2018, in euro after million 398 over just of profit combined net profit of their members in the rank the in members their of profit net combined the see to countries other 2017. to 2018, compared as only The in profits their of euro million 82 some erased which ranking, the of members profit Romanian from stems mainly decrease overall The region. SEE the of part larger the to pertain not does profit er low the However, that noted be must it before. 418 year pocketed the euro nies million on nine insurers for price fixing. price for insurers nine on total in euro million 50 exceeding fines slap to December in decided Companies Reinsurance and Insurance of Union Romania’s National addition, In surance. in motor on premiums cap to decision can Romania government’s the to in attributed be largely decrease profit The lion euro, respectively. 1.8 and mil euro 1.3 of million decreases slim posted which Macedonia, North ing fall were and Bosnia and Herzegovina companies exceeds 240 insurers. 240 exceeds companies themselves. companies and websites, corporate and government associations, insurance commissions, supervision financial registers, commercial national banks, central from sourced is calculating year-on-year changes. when used been have figures currency of 2018 2017, and Local respectively. day working last on the rates exchange official banks’ central the using euro, into converted been have currencies local all 2018. for To statements income non-consolidated from premium written of gross terms in Europe Southeast largest insurers (excluding re-insurers) in SEE METHODOLOGY TOP 100 insurers is a ranking of the of the aranking is TOP insurers 100 The The allow comparison, comparison, allow initial pool of pool initial All All data data - - - - - ALBANIA CZECH REPUBLIC LATVIA ROMANIA ALBANIA CZECH REPUBLIC LATVIA ROMANIA

AUSTRIA AUSTRIA SERBIA CZECH REPUBLIC (Headquarter) GERMANY (Branch) SERBIA CZECHFRANCE REPUBLIC (Branch )(Headquarter) GERMANY (Branch) LIECHTENSTEIN FRANCE (Branch) LIECHTENSTEIN ESTONIA ESTONIA

BELARUS LITHUANIA BELARUS LITHUANIA SLOVAKIA SLOVAKIA

BOSNIA-HERZEGOVINA BOSNIA-HERZEGOVINA

GEORGIA GEORGIA SLOVENIA MOLDOVA SLOVENIA MOLDOVA

BULGARIA BULGARIA MONTENEGRO GERMANY MONTENEGRO TURKEY GERMANY TURKEY

HUNGARY UKRAINE HUNGARY NORTH MACEDONIA NORTH MACEDONIA UKRAINE

CROATIA CROATIA ITALY ITALY Status: September 2019 Status: September 2019

POLAND POLAND

WE ARE NUMBER 1 WE ARE NUMBER 1 IN AUSTRIA, CENTRAL- IN AUSTRIA, CENTRAL- AND EASTERN EUROPE. AND EASTERN EUROPE. 32

Health, SMEs insurance hold

/interview untapped growth potential

Elisabeth Stadler has been chairwoman and CEO of Vienna Insurance Group since January 2016. She has been working in the insurance industry for more TOP 100 INSURERS 100 TOP than 35 years now. She was member of the managing board of various companies of UNIQA Group, CEO of ERGO Austria International AG, CEO of Donau Versicherung, a member of Vienna Insurance Group. Stadler holds several positions on the supervisory board of companies of VIG Group and Austrian groups OMV and voestalpine.

Elisabeth Stadler, CEO Vienna Insurance Group 33 TOP 100 The merger and acquisition about your financial perfor- We look at several scene in Southeast Europe mance in SEE? (SEE) remained quite ac- potential acquisitions As much as 56% of the premiums and tive last year and in the first every year INSURERS months of 2019. How does this 53% of our profit are earned in CEE. dynamics affect your opera- Our results clearly show the benefit of tions and do you see room for maintaining our investments in this re- expansion? gion. Also, in nearly all parts of SEE we We follow the strategy see stable growth and falling unemploy- Last year, we made an acquisition in Bos- ment. The markets where we operate of multibrand and /interview nia and Herzegovina and significantly are growing, on average, twice as fast local entrepreneurship strengthened our position there. As the as the eurozone countries. We intend market leader in Central and Eastern Eu- to continue investing in this region and rope we have been represented in 25 mar- our more than solid solvency ratio of tainability strategy. The environment is kets, so nearly in every market, even in 238% provides the necessary financial also a key element of this strategy, with Southeast Europe. While the fundamen- resources. In general, the forecast for particular importance given to adjusting tal focus is on this region, we are always VIG’s premium volume is 10.2 billion the business model to climate change. looking to exploit any opportunities that euro and profit is expected to range be- As a part of this effort, VIG has decided those markets present. We are follow- tween 530 and 550 million euro in 2020. to implement a dedicated investment ing the clear goal to maintain our leading and underwriting strategy to support position and to improve our performance What are the key factors for green investments and a low-carbon fu- in the countries where we have not yet the successful development of ture. In particular, VIG clearly reduces achieved our targeted market position. VIG and what makes you dif- investment and underwriting policies in That is why we look at several options for ferent compared to other in- the coal sector. potential acquisitions every year. In all our surance groups? reflections we are always keeping a close Insurers are traditionally eye on profitable growth. We have about 50 companies with dif- among the early adopters of ferent brands in 25 countries. I think our new technology. How would you Which market segments do diversity is one of our main competitive comment on the penetration of you see as top-performing in advantages. We follow the strategy of new technologies in insurance SEE and where do you see un- multibrand and local entrepreneurship. services in SEE and what are tapped potential for growth? This strategy makes VIG totally differ- your plans in this area? ent from international competitors. We Currently the main business comes from believe that it is an advantage to have a I think that after global warming, the non-life products, especially from the mo- wide diversification in markets, prod- digital transformation is the trend with tor insurance business. Even though there ucts, sales channels and brands. This the greatest effect on society and the has been improvement in the last years, makes us less dependent on the changes economy. The whole insurance industry life insurance is still far below Western occurring in individual markets. We also and also VIG have to work on the digital European countries in terms of penetra- follow a sustainable and long-term strat- agility as a necessity in order to be pre- tion and share in total market. We see egy in our markets. We have not come pared for the changed requirements of also room for improvement in private here for a short term. That is why we the future. More than 150 digitalisation property insurance. This type of insur- want to be seen as a stable and reliable projects are currently underway in a vari- ance in the SEE region is perceived as partner in times of dynamic change. ety of areas within the VIG Group, most an expensive service, while that is really of which are scheduled to be completed not the case. This puts a great responsi- Is climate change affecting within the next two years. We are invest- bility on all the players on the insurance your operations? ing on average 50 million euro per annum market to educate people and raise the in digitalisation. We see two stages of awareness of the importance of insur- Yes, of course, because the ability to digitalisation. We are currently in the first ance. Another segment with potential is fulfill all commitments we make to our stage, which is concerned with digitalising the insurance for small and medium sized customers today and to take responsi- today’s business models. To achieve this, enterprises. If SMEs are considered as a bility for future generations is core to we apply technologies intelligently to im- leading force of the local economies in the our business. Accepting responsibility is prove the products and services offered forthcoming years, they need adequate an important part of VIG’s business ori- at customer contact points. The second insurance coverage and support. We have entation and forms the basis of its sus- stage concerns the use of new business to be prepared to educate them on this models, including those with new prod- need and to provide them with such type ucts and services that are not typical for of coverage. Last but not least, we be- the insurance industry, such as assistance lieve that health insurance also has a great services. We have already performed growth potential in view of demographic 50 mln euro some activities very successfully for ex- developments. ample in Romania and Bulgaria and we VIG annual investment in are now planning to set up our next as- What are your expectations digitalisation sistance company in Serbia. 2007: + Euroins Romania + EIG - start 2011: 1998: + Listed in the BSE + Listed on the WSE 2014: + Eurohold - start + Euroins Greece - start

2006: 2008-2009: 2013: + Euro-Finance + Euroins N. Macedonia + Interamerican - acquired + Avto Union from Achmea; + Eurolease - start + QBE BG & RO - acquired portfolios

2017: + ATE RO portfolio - acquired from Piraeus GR + Stake in Euroins Russia 2015: + Rating by Fitch 2019: + HDI BG & UA - acquired + EUR 70 mln of EMTN notes + 4 ERGO subsidiaries in CZ; RO; BLR - from Talanx Int acquired

2016: 2018: H2 2019 + EMTN programme on the + ERV UKR - acquired from + Coming soon Irish Stock Exchange ERGO Int + JSC Insurance Georgia

www.eurohold.bg 35

Eurohold aims to add TOP 100

energy group INSURERS /interview

strengthen their market positions. The Does this deal threaten Euro- key to their successful transformation hold's financial stability? is to have built the right expert and management teams. And Eurohold has Electricity distribution and supply is a done it too. Firstly, we made sure that heavily regulated business but it gen- the current CEZ Bulgaria management erates stable cash flows. So if this deal stays and sees to it that operations and brings in stable cash flows and financial transition run smoothly. Secondly, we predictability, how can it threaten our set up an advisory board of leading en- financial stability? Just the reverse. The ergy experts that is supporting the ac- deal could impact positively our group's quisition process and will oversee the credit profile, as Fitch Ratings has not- integration of CEZ Bulgaria’s business ed. Also, it would be neutral to Euro- into the structure of Eurohold after the hold's insurance-related financial lever- completion of the transaction. age ratio and capitalisation.

For the time being, the board consists EIG, our insurance group, maintains of three experts with solid international high capital buffer and liquid position. Vasil Stefanov, Head of experience in the energy business and Its SCR ratio is 180%, well above the M&A, Eurohold Bulgaria the distribon of electricity - Garry Lev- regulatory requirement of 100%, and esley, the former director for Europe we plan to keep this level of coverage in and Central Asia of London-listed Con- the next years. Sofia-based Eurohold Bulgaria is a tourGlobal; Dan Catalin Stancu, the leading independent business group, former group CEO and chairman of the Do you plan other acquisitions operating in the CEE/SEE/CIS region board of the three power distribution in the energy and insurance and the largest publicly-listed holding subsidiaries of Romania-based Ener- sectors in SEE? company by revenues in the country. getica Electrica, and Georgi Mikov, pre- Eurohold's subsidiaries operate in the viously CEO of Bulgarian state-owned The successful acquisition of CEZ’s areas of insurance, leasing, car sales, National Electricity Company. The en- business in Bulgaria gives us a solid asset management and investment ergy board will also elaborate a strategy foundation for growth in the power services in ten European countries. for the development of the energy com- distribution business in CEE/SEE. We The company is listed on the stock pany we will set up within Eurohold. plan to set up an energy group following exchanges in Sofia and Warsaw. On This new energy subholding company the EIG model. We are also monitoring June 20, 2019, Eurohold signed a deal will consolidate the operations of the closely all opportunities in the region, to acquire the Bulgarian business of CEZ subsidiaries in Bulgaria. including the Czech group’s plans to sell Czech energy group CEZ for for 335 its assets in other SEE countries. million euro. The transaction is subject Let us not forget that our group has to approval from Bulgaria's competition gained solid experience in acquiring, Eurohold is considering divesting its and energy regulator. developing and growing businesses, par- operations in the automotive and car ticularly heavily regulated businesses leasing sectors with the aim to increase such as insurance. With more than 16 its focus on the segments that would Regarding the CEZ deal, how acquisitions behind our back, we have generate the highest value - insurance, will you build the capacity to a successful M&A track record and we asset management and energy. handle the electricity distri- have proved that we are able to identify bution and supply business promising transactions, negotiate rea- EIG, our insurance sub-holding com- and compensate for the lack sonable prices and terms and generate pany, will continue to explore new of management experience in superior value. Furthermore, the rapid expansion opportunities in CEE and power utilities? growth of our group over the last five SEE. The energy and insurance busi- or six years shows that we are able to nesses can complement each other For the last 50-70 years leading corpo- develop and grow the companies we very well and generate intragroup rations worldwide have transformed have bought. We believe that the deal synergies. and continue to transform their busi- for the CEZ assets in Bulgaria will suit ness models in order to grow and perfectly our business model and goals. *This interview was made in August 2019. 36

Sigal Uniqa Group Austria

/interview sees unused growth opportunities in voluntary insurance and online sales

Sigal Uniqa Group Austria, part of Vienna-based TOP 100 INSURERS 100 TOP Uniqa Insurance Group, consists of seven insurance companies and a private pension fund operating in Albania, Kosovo and North Macedonia.

Avni Ponari, Sigal Uniqa Group Austria (Albania, Kosovo, North Macedonia) CEO

Sigal Uniqa booked an increase of the leading groups in the markets of where Sigal Uniqa operates, approximate- in gross written premiums in Austria and Central and Eastern Europe, ly 50% of the insurance policies that are the three markets where it with approximately 19,000 employees and being purchased are compulsory, mainly operates in 2018. On which exclusive sales partners serving over 10.1 motor insurance. This shows that we market segments do you see million customers in 16 countries. have the potential to increase sales in the highest growth and where do voluntary life, health and property insur- see untapped potential? In 2018, Sigal Uniqa saw its highest growth ance segments. Given that Albania is part in the non-life insurance segment, where of a seismic zone and that it has had un- 2018 has been a positive and successful it generated approximately 56 million controlled construction over the years, as year for Sigal Uniqa Group Austria thanks euro in gross premiums, which translates well as the fact that the public healthcare to the company's strategy to meet cus- into a rise of about 10% as compared to system is overloaded and outdated, the tomer requirements and its adoption of 2017. This increase is the result of the potential of property and private health digital technologies. Sigal Uniqa Group clear vision of the top management and insurance is encouraging. Austria is a regional insurance group, con- dedication of the employees to deliver sisting of seven insurance companies (life, high-quality customer service and prod- Furthermore, Sigal Uniqa is strongly pro- non-life and reinsurance) and a private ucts that meet market demand. moting the online purchase of insurance pension fund, which operate successfully products to reach untapped potential. in Albania, Kosovo and North Macedonia. If we compare the per capita insurance This provides the client with simplified Sigal Uniqa has been a leader in the Al- densities of Albania (35 euro), Kosovo procedures and 24/7 availability from any banian insurance market since 2002, with (43 euro) and North Macedonia (65 euro) location. an average market share of 30%. Since with other Southeast European countries, 2007 Sigal Uniqa is part of the financial gi- we see a very large difference that shows I also see long-term untapped potential ant Uniqa Insurance Group, which is one untapped potential. In the three countries with regard to private pensions in Albania. 37 TOP 100 The problems that the state pension sys- placed by a new one which realises that a tem faces, especially the increasing finan- secure future can be achieved only with cial deficits of the state-run schemes re- the help of private insurance. 30% sulting from the rates at which the elderly population is growing, and the expecta- Thus, the biggest challenge facing insur- INSURERS tions for an increase in life expectancy and ance companies is to reinforce their Sigal Uniqa’s average market share a drop in birth rates require the urgent credibility and to inform people of the in Albania development of the private pension mar- potential benefits that they can have in ket in Albania. Such development would the event of a disaster by serving them require focusing on finding the appropri- with dedication and being a good exam- /interview ate ways and the right financing model ple in how to deal with insured clients in mln euro through which the individual and the state cases of accident. 56 would share the responsibility for covering the needs of the elderly people. With What are your expectations Sigal Uniqa’s gross premiums in non- the development of this market and the regarding Sigal Uniqa’s finan- life insurance in 2018 inclusion of private pensions as a manda- cial performance in 2019? tory financial support option for the Alba- next generation about insurance products nian people, security for the future of the Being a market leader since 2002 has and the benefits they provide in guaran- elderly people would increase. its advantages and disadvantages, as our teeing a less stressful, better-quality, life. strong and positive image puts us in a fa- What major regulatory or oth- vourable position when it comes to cus- For this reason, we have organised several er challenges do you face on the tomers’ choice, yet we have the respon- meetings at the Insurance Association of markets where you operate? sibility to meet innovative and dynamic Albania with all insurance companies in the market demands. We are happy to have country to find methods to test the infor- Insurance companies with their taxes held the leading position all these years mation that young people have on insur- and well-organised financial system con- and we assure you that we are ready and ance products and to discuss how we can stitute one of the main pillars of the well-prepared to successfully advance equip them with the right information for a financial system as they are major con- further in 2019 as well. safer future. We often publish information tributors to the Treasury. However, the raising awareness of insurance on social Albanian state policies could be more Sigal Uniqa is always focused on meet- media, news portals, newspapers and tel- supportive of insurance companies, as ing customer needs, developing services evision. We have organised competitions seen in a comparison with the other Eu- and diversifying online sales channels in universities to select the best student ropean countries. The successful opera- through its website and mobile applica- ideas for innovative insurance products or tion of Albania’s private pension schemes tion, and expanding its sales network services. We are also offering students op- requires, among other things, to put in across the group’s markets. Our com- portunities for internships at our company. place at this early stage the driving fac- pany is investing every day to educate tors for their creation and proper func- the younger generation about our digital Another medium-term goal that we have tioning. In this context, the role of the platforms. Online insurance sales plat- is to help develop the insurance market state, as the main regulator in the eco- forms are an investment for the younger in the region, improve insurance culture, nomic field, is to make the development generation. raise awareness of the need for insurance, of private pension schemes more attrac- add new insurance products tailored to tive through the application of fiscal fa- What are your main short and customer requirements, and increase pri- cilities not only for the entities involved medium-term goals on the vate pension contributions, hoping that in this type of financial activities, but also markets where you operate? the Albanian government will truly under- for the beneficiaries of these schemes. All stand the importance of liberalising the over the world, where alternate systems Our short-term goal is to maintain a lead- pension contribution system and continue are applied, fiscal incentives exist. Adop- ing position in Albania’s insurance market to adopt the pension legislation that is in tion of European laws on private pension and to advance in the insurance markets force in developed countries. contributions would help develop private of Kosovo and North Macedonia. We are pension funds and ease the state budget committed to train our staff in the most obligations for future pension payments. modern practices within the Uniqa Insur- ance Group and to deliver high-quality Our goal is to help Clients in the insurance markets where European products and services. develop the insurance we operate (Albania, Kosovo & North Macedonia) have emerged from a com- In the short term, we aim to increase market in the region, munist system and are not used to tak- voluntary insurance sales, as mentioned raise awareness of the ing financial responsibility in the event of above, as they would provide security for a disaster as it was the state that used the future of the individual and will have a need for insurance, to pay off or offer free services when positive impact on the development of the add new products, disasters occurred. This mentality is fad- country's economy. ing with time, but it will continue to have and increase private an impact until the old generation is re- Our medium-term goal is to inform the pension contributions reklama tek SEE news 2019-2.pdf 1 28/08/2019 5:10:24 PM

38 We are Our Success Story 1999 SIGAL UNIQA SIGAL sh.a "The Albanian Insurance" was founded, one of the first private insurance BANKS companies in Albania, with the idea and Group Austria initiative of Mr. Avni Ponari. Foundation Albania Kosovo TOP 100 100 TOP 2002 Only 3 years after its foundation, SIGAL has become the leader of the Albanian insurance market. 2003 Market The Albanian-American Enterprise Fund, Leader established on the initiative of the US State Department, bought 13.3% of SIGAL's shares, becoming the first foreign investor to invest in the insurance industry in Albania. First Foreign Investor North Macedonia

2004 C

The geography of SIGAL's operations was M

expanded to 3 countries: Albania, Kosovo, Y North Macedonia, becoming a Regional 2007 CM 13.1% Operates Insurance Group. Local UNIQA Insurance Group, one of the most MY Investors powerful insurance groups in Europe, buys in 3 86.9% countries CY 45.64% of SIGAL shares and becomes the UNIQA Insurance Group largest shareholder of the company. UNIQA CMY also represents the first European strategic K investor to invest in the insurance market in Albania and the region through SIGAL sh.a. Part of 2015 UNIQA UNIQA Insurance Group owns 86.9% of SIGAL shares. 2011 We are SIGAL UNIQA Group Austria Part of UNIQA Insurance Group SIGAL UNIQA Group Austria counts 7 We are the leading insurance company in the UNIQA Group is one of the leading insurance companies (Life, Non-Life & Albania since 2002, where SIGAL owns 30% insurance groups in its two core markets: Re-Insurance) and 1 Private Pension Fund company in the region. of the market. Austria and Central and Eastern Europe 2019 8 Companies SIGAL UNIQA is a large group with over (CEE). Around 19,000 employees In its 20 years of operation, SIGAL UNIQA has 1500 employees and agents serving 1 million and exclusive sales partners serve 10.1 known how to lead the market, to be a leader and how to develop the insurance market. customers in three countries: Albania, Kosovo million customers across 16 countries. For 20 years, SIGAL UNIQA has been the and North Macedonia. Commanding a market share of around 22 supporter of hundreds of social, cultural, sports, SIGAL UNIQA is one of the largest financial per cent, UNIQA is the second largest educational activities and never ended promoting groups in the region, consisting of 7 insurance insurance group in Austria. In the CEE growth Albania and contributing in the economy of the country. SIGAL companies and 1 private pension fund and region, UNIQA is present in 15 markets. In appreciation for the clients, partners, staff and UNIQA owns 121.2 million euro of assets, counts all those who have trusted and continue to trust 20 years over 65 million euro written premiums for SIGAL for over 20 years, the largest and most 2018 and about 300 million euro paid claims trusted insurance company in Albania, perform the "Gratitude and Thanksgiving" work at the among years. center of Tirana. Scan the code to learn more Gratitude to Clients, Partners, Sta ! about the Group SIGAL UNIQA reklama tek SEE news 2019-2.pdf 1 28/08/2019 5:10:24 PM

39 We are SIGAL UNIQA Group Austria

Albania Kosovo

North Macedonia

CM 13.1% Local MY Investors 86.9% CY UNIQA Insurance Group

CMY

We are SIGAL UNIQA Group Austria Part of UNIQA Insurance Group We are the leading insurance company in the UNIQA Group is one of the leading Albania since 2002, where SIGAL owns 30% insurance groups in its two core markets: of the market. Austria and Central and Eastern Europe SIGAL UNIQA is a large group with over (CEE). Around 19,000 employees 1500 employees and agents serving 1 million and exclusive sales partners serve 10.1 customers in three countries: Albania, Kosovo million customers across 16 countries. and North Macedonia. Commanding a market share of around 22 SIGAL UNIQA is one of the largest financial per cent, UNIQA is the second largest groups in the region, consisting of 7 insurance insurance group in Austria. In the CEE growth companies and 1 private pension fund and region, UNIQA is present in 15 markets. owns 121.2 million euro of assets, counts over 65 million euro written premiums for 2018 and about 300 million euro paid claims among years. Scan the code to learn more about the Group SIGAL UNIQA THE ACCESSIBLE SECURITY 40

OZK Insurance expects to be among Bulgaria’s top five /interview general insurers

Where do you see opportuni- ulism servicing ill-meaning interests will ties for growth and where do not always have the upper hand, as this is where all the problems come from, to TOP 100 INSURERS 100 TOP you see bottlenecks on the Bulgarian market? the distress of all of us.

The Bulgarian market has been ex- Do you expect changes on the tremely competitive in the past years market as a result of merger and this has resulted in more favour- and acquisition deals? able terms for clients. Unfortunately, demand is dominated by compulsory According to a recent report on M&A insurance, car insurance in particular. deals by Clyde & Co, a total of 222 M&A The last few years saw a number of sig- deals were registered in the insurance nificant changes in the regulation of our industry the first half of 2019, including activities, leading to a general upgrade 88 deals completed in Europe, as the au- of services in the sector. However, thors stress that the growth trend con- two big gaps remain in our regulatory tinues for a fourth consecutive quarter. framework – we still lack a standardised In Bulgaria, major changes will take place methodology for determining the size if the health reform is carried out as out- of indemnification payable for material lined in the latest draft made public by and non-material damage resulting from the health minister and his team. In that Aleksander Lichev bodily harm, and the bonus-malus sys- case I believe that we will be seeing a CEO and chairman of the tem for third-party liability Insurance is number of M&A deals involving the for- yet to be introduced. mer health funds which were relicensed board of directors, OZK as insurance companies in 2013 follow- Insurance Bulgaria’s insurance market is relatively ing regulatory changes. Some of these young, and this is precisely why it offers companies, even though relicensed as opportunities for growth even amid lim- insurers, kept their profile unchanged OZK Insurance was established in ited economic growth. The first prereq- and focused on their main product – 1996 and was majority-owned by the uisite for grasping these opportunities is health insurance. Now, with the new Sofia municipality until 2008 when to change our way of thinking. We will model and its concept that health insur- the municipal stake was privatised. see growth to the benefit of our whole ance should be offered by funds that are Currently, Bulgaria-registered LM society when our society acknowledges licensed specially for this purpose and Impex holds 65.73% of the company. that we are all in the same boat and can have at least 500,000 contributors, only With a network of 70 branches across have a better life only through well-in- a small number of these companies will the country, OZK Insurance offers 12 tentioned joint efforts, that insurance is able to remain on the market. types of insurance policies. the smartest and most virtuous solidar- ity model that mankind has designed, What are your expectations and that insurers are not a profiteering regarding your company’s de- enemy but a mediator in this model. The velopment? state, the financial regulator in particular, should accept that its role is one Our philosophy is to set realistic goals, of a caring parent who has to educate, define short and long-term measures for control and make sure that the mar- their achievement and do our best as far ket is in a healthy state and should put as the environment allows it. We have aside their formal thinking. They should grounds to believe that we will keep up stop shirking responsibility and should the sustainable growth pace that we had ditch the role of a punishing supervisor in the past years and we will be among the with the stick who imposes sanctions top five general insurance companies, as post factum, acting from a position of our focus is shifting to diversity and acces- strength. I hope that there is enough sibility of the products that we offer, high common sense left and that cheap pop- quality of services and customer care. 41

SEE companies’ revenue CAPITAPER per capita rises, Slovenian companies dominate ranking

by Radomir Ralev

Slovenian companies TOP 20 PER CAPITA in euro SEE TOP No. Company name Country Per capita 2018 Per capita 2017 continued to dominate 100 No. the SEE TOP 100 per 1 2 Petrol d.d. Slovenia 2 111 1,835 capita ranking in 2018. 2 9 GEN-I d.o.o. Slovenia 1 158 1,189 Slovenia, an EU–mem- 3 16 Revoz d.d. Slovenia 859.20 771.63 North S ber state of some two 4 17 Johnson Matthey DOOEL 843.74 715.11 million, and the only eu- Macedonia rozone member state in SEE, had seven 5 25 Holding Slovenske Elektrarne d.o.o. Slovenia 734.61 802.32 entrants in the top 10 of the ranking, as 6 7 INA d.d. Croatia 721.60 589.75 many as in the previous year. Compa- 7 34 Krka d.d. Slovenia 597.47 582.11 nies based in Slovenia took four of the 8 37 Poslovni Sistem Mercator d.d. Slovenia 575.90 580.59 top five spots, including the no. 1 seat. 9 42 Lek d.d. Slovenia 527.22 467.18 10 191 Elektroprivreda Crne Gore A.D. Montenegro 522.94 443.38 The average revenue per capita of the 11 200 China Road & Bridge Corporation D.O.O. Montenegro 471.90 463.38 top 20 companies in the ranking grew 12 6 Lukoil Neftochim Burgas AD Bulgaria 429.03 419.44 to 623.3 euro in 2018 from 585.7 euro. 13 58 Gorenje d.d. Slovenia 405.75 398.34 14 61 OMV Slovenija d.o.o. Slovenia 388.07 301.00 Slovenian energy company Petrol led 15 62 IMPOL d.o.o. Slovenia 387.21 363.78 the ranking for the twelfth consecutive 16 263 Voli Trade D.O.O. Montenegro 369.68 335.54 year with per capita revenue of 2,111 17 8 Aurubis Bulgaria AD Bulgaria 367.42 373.63 euro, up 15% year-on-year, followed by 18 10 JP Elektroprivreda Srbije Serbia 339.76 329.46 electricity and gas trader GEN-I, which 19 82 Telekom Slovenije d.d. Slovenia 329.39 320.70 saw a 2.6% drop to 1,158 euro. Slove- 20 83 Interenergo d.o.o. Slovenia 324.91 432.63 nian car maker Revoz, a unit of France's Renault, ranked third with 859.2 euro (CRBC) D.O.O. was Montenegro’s sec- in the ranking, occupied the 18th place, revenue per capita, a significant increase ond best performer, ranking 11th with the same as in 2017, although its revenue from 771.6 euro the previous year when 471.9 euro, edging up from 463.4 euro per capita went up slightly to 339.8 euro it ranked fourth. The top 10 list features in 2017. The company lost two positions from 329.5 euro. a single entrant from Croatia, North from the ninth spot in last year's rank- Macedonia and Montenegro each. ing. Wholesaler and retailer Voli Trade In a breakdown by sectors, energy compa- gained one position to the 16th spot. nies dominate the SEE TOP 100 per capita North Macedonia’s entry, the local sub- ranking in 2018, mirroring the situation in sidiary of UK chemicals specialist John- With two companies on the list, Bulgaria the SEE TOP 100 companies ranking. son Matthey, gained one position to the occupied the third place. At number 12, fourth place, as its per capita revenue Lukoil Neftochim was the best Bulgarian Notably, Romania, the region’s biggest increased 18% to 843.7 euro from 715.1 performer in the ranking, with 429 euro economy and most populated country euro. OMV Slovenija, the Slovenian unit revenue per capita, up from 419.4 euro. with 20 million people, had no entries in of Austria's OMV, leapt by six spots to The company was sixth in terms of total the top 20 per capita ranking. take the 14th position as its revenue per revenue in the SEE TOP 100 companies capita grew 28.9% to 388.1 euro. ranking. Aurubis Bulgaria ranked 17th, with revenue per capita of 367.4 euro, Montenegro, a country of about down from 373.6 euro. METHODOLOGY 600,000 people, had the second-biggest SEE TOP 100 per capita is a ranking based number of entrants in the per capita Croatia and Serbia had one participant on the same pool of 2,900 companies as in ranking - three, as many as a year ear- in the top 20 ranking each. Oil and gas SEE TOP 100. The ranking is compiled by lier. Power utility Elektroprivreda Crne company INA was the Croatian rep- dividing the total revenue in euro of each Gore (EPCG) ranked tenth with 522.9 resentative in the top 20 ranking with company by the population estimate in the euro in revenue per capita in 2018, 721.6 euro in revenue per capita in 2018, country of registration. This benchmark versus 443.4 euro in the previous year. up from 589.8 euro from the previous indicates the importance of individual EPCG gained one spot in the rank- year. Power utility Elektroprivreda Sr- companies for the local economies. ing. China Road & Bridge Corporation bije (EPS), the Serbian representative 42

Aerodrom Nikola Tesla leads revenue gainers

MOST DYNAMIC MOST after pocketing hefty concession fee

By Mario Tanev

Serbia’s Aerodrom Nikola MOST DYNAMIC COMPANIES SEE TOP 100 Y/Y Change in Tesla joined this year’s edi- No Company name Country Industry No revenue 2018 tion of the SEE TOP 100 1 95 Aerodrom Nikola Tesla AD Serbia Transportation 625.83% Serbia Zijin Bor Copper DOO ranking following a sevenfold 2 29 Serbia Metals 295.40% increase of revenue. The ma- (former RTB Bor DOO) jority state-owned company 3 13 Ford Romania SA Romania Automobiles 111.82% S 4 53 Saksa OOD Bulgaria Petroleum/Natural Gas 57.09% whose main asset is Belgrade 5 56 Cofco International Romania SRL Romania Agriculture 50.72% Airport, took the 95th spot in the SEE Bosnia and 6 94 Holdina d.o.o. Sarajevo Petroleum/Natural Gas 38.04% TOP 100 ranking with revenue of 592.7 Herzegovina million euro in 2018. Aerodrom Nikola 7 74 Crodux Derivati Dva d.o.o. Croatia Petroleum/Natural Gas 36.68% 8 66 Fildas Trading SRL Romania Wholesale/Retail 35.16% Tesla also posted the third biggest profit 9 27 Petrotel - Lukoil SA Romania Petroleum/Natural Gas 34.45% among all of the 100 companies – 451.1 10 52 Renault Commercial Roumanie SRL Romania Automobiles 33.22% million euro, and the best return on revenue - 76.11%.This stellar financial performance can be attributed mainly to ing of revenue gainers with a hefty rise of Bulgarian fuel trader Saksa ranks high- the 25-year concession contract to run 111.82% to 2.29 billion euro in 2018. est among its industrial peers, taking Belgrade Airport, which France's Vinci the fourth place with a revenue rise of Airports landed in March 2018. As part The company’s solid financial perfor- 57.09%, to 869.2 million euro. of the deal, Vinci Airports agreed to pay mance hardly comes as a surprise, as 501 million euro for the concession and its U.S.-based parent Ford Motor Com- Only one of the members of last year’s pledged to subsequently invest 732 mil- pany has invested over 1.5 billion euro edition of the revenue gainers ranking lion euro over its term. since taking over the Romanian factory has retained its place among the region’s in 2008. And it seems the investment is ten most dynamic companies – Cofco Another major revenue gainer in this paying off - Ford Romania calebrated the International Romania. The company year’s ranking is Serbia Zijin Bor Cop- production of the 1 millionth Ford 1.0 now ranks fifth, same as in the previous per, previously RTB Bor. The copper EcoBoost engine at its factory in Craiova edition, after posting a 50.72% rise in mining and smelting company bagged a since it started their production in 2012. revenue to 850.9 million euro in 2018. 295.4% annual rise in revenue to 1.32 bil- In 2017, the company achieved a massive lion euro in 2018, climbing 13 places in A big boost to the company’s perfor- 103.59% rise in revenue. the SEE TOP 100 ranking. mance in 2018 was the production of the EcoSport SUV model. The Craiova Five out of the top ten revenue gainers Serbia Zijin Bor Copper also booked plant launched production of the model in this year’s edition of the ranking come the second highest profit and return on in the last quarter of 2017 following in- from Romania. Serbia follows with two revenue among the top 100 companies, vestment of some 200 million euro. members, while Bulgaria, Croatia and of 764.2 million euro and 58.06%, re- Bosnia and Herzegovina have one each. spectively. The company looks poised for further growth after Ford announced that it will The company benefited from a capital in- start production of the Puma model at jection of $350 million by Chinese heavy- the Craiova plant by the end of 2019 fol- METHODOLOGY weight Zijin Mining Group, which took lowing investment of a further 200 mil- Most dynamic companies is a ranking control of a 63% stake and pledged to in- lion euro. of the top 10 companies with the highest vest a further $1.26 billion in its Serbian change in revenue in SEE TOP 100. subsidiary. A notable trend in this year’s edition Change in revenue is calculated as a year- of the revenue gainers list is the strong on-year change of total revenue, calculated Car and car parts manufacturer Ford Ro- presence of companies from the oil and in local currencies. mania claimed the third place in the rank- gas industry – four out of the top ten. www.seenews.com

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Serbian companies lift transport, metals to INDUSTRIES top of most profitable TOP TOP industries ranking

By Mario Tanev

The transport sector SEE INDUSTRIAL RANKING 2018 companies in the SEE TOP 100 ranking soared seven places to Industry Return on revenue 2018 was positively affected by Croatian heav- the top of this year’s edi- 1 Transportation 23.13% yweight Hrvatski Telekom and Telekom tion of the profitability 2 Metals 13.09% Srbija, which posted return on revenue ranking of Southeast Eu- 3 Pharmaceuticals 12.04% of 16.0% and 11.0%, respectively. T rope’s industries, mainly 4 Telecommunications 6.93% backed by a new entrant 5 Chemicals 5.58% At the other end of the ranking were Ro- to the SEE TOP 100 list – Serbia’s Aero- 6 Petroleum/Natural Gas 4.33% manian telecommunications companies, drom Nikola Tesla. 7 Rubber/Rubber Products 4.23% which recorded below-average profita- 8 Automobiles 3.33% bility. Orange Romania posted the lower The majority state-owned company 9 Wholesale/Retail 3.07% return-on-revenue among the telecom- whose main asset is Belgrade Airport, 10 Electronics 1.94% munications companies in the ranking, of joined this year’s SEE TOP 100 ranking 3.28%. Two more Romanian companies at 95th place with revenue of 592.7 mil- – RCS & RDS and Vodafone Romania, lion euro. Despite ranking low in terms injected $350 million in the company’s followed with ratios of 3.72% and 4.49%. of revenue, Aerodrom Nikola Tesla capital. The Chinese owner pledged to posted the third biggest profit among the invest $1.26 billion to improve the pro- The chemicals sector, which led last 100 companies –451.1 million euro. This duction operations of RTB Bor, open year’s edition of the ranking, sunk to fifth translated into an impressive return on new mines and increase efficiency. place, largely hurt by the dropping of Ser- revenue of 76.11% - the best among all bian state-run petrochemicals producer members of the SEE TOP 100 ranking. The top three group was wrapped up HIP Petrohemija. The sector’s return on by the pharmaceutical sector, which revenue fell to 5.58% from 20.72% in the The company’s financial performance retained its place from the last year’s previous edition of the ranking. benefited heavily from a large upfront edition of the ranking. The sector was payment by France's Vinci Airports, represented by two Slovenian members The chemicals sector has a single repre- which won a 25-year concession con- of the SEE TOP 100 – Krka and Lek. The sentative in this year’s edition of the SEE tract to run Belgrade Airport in March larger of the two – Krka, also posted TOP 100 ranking – North Macedonia’s 2018. As part of the deal, Vinci Airports a better return on revenue – 13.22%, Johnson Matthey. The sector’s perfor- agreed to pay 501 million euro for the compared to 10.70% recorded by Lek. mance in the 2018 edition of the ranking concession. The telecommunications sector also was heavily backed by HIP Petrohemija, kept its place, ranking fourth. The aver- which posted the highest return on rev- The metals sector claimed the second age profitability of telecommunications enue, 53.83%. place in terms of return on revenue, backed by another Serbian company.

Serbia Zijin Bor Copper booked the sec- METHODOLOGY ond highest return on revenue among all The SEE industrial ranking pools together the revenue generated by all companies in SEE companies in the ranking, of 58.06%. The TOP 100 and ranks sectors by cumulative revenue. Year-on-year changes in the sectors’ total company also posted the second highest revenue have been calculated using the figures in euro. The comparative figures for 2017 are profit among the top companies in the revised to allow a fair comparison. The sub-ranking of the industries with the highest return region in 2018, of 764.2 million euro. on revenue was calculated by dividing the cumulative net profit/loss within each industry by the cumulative revenue. We have based our rankings on an industry classification which The copper mining and smelting com- treats filling station operators and gas trading/distribution companies as Petroleum/Natural pany, previously named RTB Bor, was Gas companies, pharmacies and pharmaceutical distributors as Wholesale/Retail, and taken over by Chinese giant Zijin Min- automotive and car parts manufacturers, and sellers as Automobiles. ing Group in 2018, which subsequently

TOP INDUSTRIES/interview establishment. its since and Zlatitsa marked years 60 Pirdop near plant copper policy. social the year Last employer active and runs companythe main is the also region of Srednogorie, where facilities are located in the production The growth. GDP the to contributing exporter Bulgarian major and largestthe taxpayer Group. company The is Aurubisof German the part producer, copper Aurubis 2014. in Bulgaria in his presenttaking position before Logistics, Corporate Manager and President Vice including Group Innovation managingvarious positions, AG) where he held in 2006 (present Aurubis Affinerie Norddeutsche joined He Supplyand Director. Chain Logistics Manager Division later continued in Numico as in Unileverhis career and started Commerce. Kurth Chamber of and Industry of the German-Bulgarian Bulgaria and President of Aurubis Officer Executive Tim Kurth is ChiefKurth Bulgaria is a

Tim Kurth, investment programme 132 euro mln out new carrying Aurubis Bulgaria CEO of Aurubis Bulgaria 46

47 TOP INDUSTRIES In late 2018 Aurubis an- last fiscal year according to also an irreversible trend. Low carbon nounced plans to invest 132 the Group’s interim reports. economy requires metals and the de- million euro in the Pirdop What is your projection? mand will be increasing for wind tur- plant. How is this project pro- bines and solar panels, energy stor- gressing? We are in a period when а variety of age facilities, energy networks. As I factors act together. The net results already mentioned, we are investing We named it “Aurubis Bulgaria 2022” are influenced by the market condi- in technologies enabling the circular since the investment is mid-term, tions for our throughput materials, economy in our sector. The share of planned for four years. We launched the metal prices, the so called treat- recycling will be getting higher. That /interview the programme and it is going as ment and refining charges. The vol- way we will simultaneously contrib- planned. This investment will secure umes are planned to be lower com- ute to the carbon-neutral economy our long-term operations. We have pared to last year also due to the and help its development through our started modernising the entire plant maintenance shutdown in May-June products. infrastructure: road and railroad net- that will have its one-off effect over works, pipelines, drainage system, the figures. Unlike the temporary ups communications, some of the build- and downs, the energy prices may im- ings will be completely renovated. pact expenditures over a long period Оur production facilities are spread of time. That is why we are working over an area of four sq. km. and the hard on efficiency through modernisa- programme is fairly ambitious. The tion. We built a solid ground in Bul- activities for modernisation of the garia throughout the years and keep internal energy infrastructure are on investing. It makes us optimists for currently underway. We aim for ef- the future. ficiency, cost optimisation and easier maintenance. The effect of the In what ways are you cooper- four-year programme, when accom- ating with other units of the plished, will be for decades ahead. It Aurubis Group in order to is not an exception, our investments boost growth? are with a long time horizon. We are here to stay. Aurubis is becoming an integrated network of smelters and other pro- In what other areas are you duction facilities, this process is a planning investments in Bul- pillar in the long-term strategy. We garia in the long term? are jointly developing our source and customer markets, plan investments For us investing is a continuous pro- for the different sites. The Bulgar- cess and part of the profit is regu- ian plant supplies our entities within larly redirected for capital expendi- the Group, mainly in Italy and Bel- tures. Last year we started extension gium, so Aurubis AG itself is an im- We are investing in of the iron silicate depot. We have portant market for us. A key part of also launched a new process for slag this process of acting as one body is technologies enabling cooling, the project is continuing. In the know-how exchange and closer the spring this year we went through cooperation between our R&D units. the circular economy a planned repair for three weeks, a Development and implementation of in our sector routine upgrade that is carried out technologies for processing of com- between two main shutdowns. We plex materials, for generating less spent 25 million euro, mainly for waste through more efficient extrac- Our investments improvements in our smelter and tion will boost our competitiveness are with a long time acid plant, including modification of for the future. a blend air lift system aimed at ad- horizon. We are here ditional dust emission reduction. As What are your projections to stay you know, Aurubis Bulgaria is among for the developments of the the Top 5 most environment-friendly global metals market and how copper smelters in the world and will Aurubis respond? Becoming an continuous investment in that field is a permanent priority. About 30 This year’s weaker demands from the integrated network companies from the Srednogorie, the automotive industry or the cable sec- of smelters and other country and abroad were involved in tor are due to an economic cycle, not the repair. to a trend. Our end products, the production facilities is non-ferrous metals, are source ma- a pillar in the Aurubis The company booked low- terials for e-mobility and digitalisa- er results compared to the tion. Moving to renewable energy is group strategy 48

Electric vehicles

/interview to make up to 10% of Speedy fleet by 2025 INDUSTRIES TOP TOP

Bulgarian logistics company Rapido Express and Logistics was established in 2001. In 2017 it became a partner for Bulgaria of Germany's DHL Parcel, part of Deutsche Post and in 2018 it signed a strategic partnership deal with local peer D&D Express. At the end of 2018 local peer Speedy completed the acquisition of 100% in the company.

Radoslav Krumov, Rapido Express and Logistics CEO

Did the acquisition of Rapido facto one department now. The same the field of customer service and cross- Express and Logistics by local can be said about the information sys- border deliveries. peer Speedy create the expect- tems’ integration. There are different ed synergies and help improve functionalities and features for which we Can you tell us more about the company’s efficiency? could not find an option for 100% repli- Rapido and Speedy’s new plat- cation in both systems. form – Market Connect? Yes, the goals in this direction were met to a high extent. Regarding the merger It should be noted that a significant This platform is an example of the in- of operations, it can be considered en- synergy was achieved between the op- novation approaches applied in Rapido tirely completed. The operations de- erational capabilities of Speedy and the and how they can be included into the partments of the two companies are de experience of Rapido in innovations in operational capabilities of Speedy. 49 TOP INDUSTRIES The idea of the platform emerged after ies to Central and Eastern Europe with reversing the direction of the process, we noticed the serious interest of Bul- 24-hour transit time is a service that, in i.e. providing foreign traders with the garian e-commerce companies towards our opinion, has no analogue not only in opportunity to sell in marketplaces in cross-border sales, for us deliveries, re- Bulgaria, but in Europe as a whole. Bulgaria or third countries. spectively. Unfortunately, sales abroad are an exercise demanding serious or- In brief, the platform is a free and au- Which are the main markets of ganizational and marketing resources, as tomated way for traders to offer their Rapido and Speedy and where well as human potential. This definitely products outside Bulgaria.

do you see the biggest growth /interview makes them unviable for smaller traders. potential? Which marketplace operators So, we decided we have to support and fa- have already joined the plat- Currently, the largest market for the cilitate them by creating the MarketCon- form, and which ones are you companies is Bulgaria with the tradition- nect platform. It can be accessed at www. currently in talks with? al business of parcel delivery. In terms sellin.eu and www.marketconnect.bg of largest growth potential, this unde- We launched the platform a month ago niably is the cross-border trade and its The platform provides a solution for the and currently the only fully integrated servicing. It should be taken into account following tasks: trader is eMag for the four markets it that even without MarketConnect, the operates on – Bulgaria, Romania, Hun- cross-border deliveries of Speedy and l It eliminates the problem related to gary and Poland. Currently, we are in the Rapido exceed 200,000 per month. the necessary marketing resources by process of completing the integration of listing the products of the traders at any Allegro in Poland and we have started What green initiatives are marketplace in Europe connected to the the integration of eBay Germany. Next Rapido and Speedy pursuing platform. Thus, the trader pays a com- are Vida XL, Spartoo and, hopefully, as they increase investment in mission to the marketplace only when within a year we will have all major mar- their car fleets? the sale is completed. ketplaces in Europe integrated. This is another very important sub- l It standardizes and automates the It would be interesting for the clients ject for Speedy. We have as a strategic process of synchronizing the informa- to know that we have tax registration partner the DPD company, part of La tion on Internet sites with each market- in Germany, where traders will be able Poste – the French Post Office. The place. Meaning, that clients' products are under certain conditions to use our reg- subject of corporate social responsibil- visible in every marketplace through one istration to sell their products. ity towards nature is becoming increas- access point, with a single integration. I ingly important to all big companies, want to emphasize that this is done au- In the long term, how much of and our two companies are cooperat- tomatically for the clients, without them the two companies’ revenue is ing for different initiatives, possibilities having the IT resources needed for in- expected to be formed by the and projects. tegration. Market Connect platform? Environment protection in cities has l It converts into a variety of curren- It’s hard to come up with a prediction always been a priority for Speedy. For cies, taking into account the day-to-day for this. The main reason is that, as I more than 10 years the company has movements of exchange rates, and this said, we are talking about not just a embraced the green ideas as its mission process is also fully automated. new product but one that has no prec- and is making efforts to find new ways edent, which makes it relatively hard to promote it. That is why we are striv- l It translates product titles and de- to communicate to traders. From my ing towards solutions for synchronisa- scriptions into the respective language. experience I can say that some of them tion between the nature and its inhabit- The process is free of charge for up to cannot even understand the concept ants, and not just cost optimisation. 1,000 products for the client, and trans- behind the platform and many of them lations are made by native speakers are reluctant after hearing that the use Currently, the company is working on through another platform that we have of a product is totally free. And it re- two projects – use of electric tricycles created ourselves. ally is. The only “catch” is that using the specially designed for deliveries in the platforms is related to deliveries being central parts of large cities, and pilot l It automates the delivery process. made by Speedy/Rapido. introduction of specialized electric cars The platform is fully integrated with the for urban deliveries made in Norway. courier company and the generation, In the longer term, I hope we see a large tracking and payment of cash on delivery increase of traders, including through We already have our first tricycle on is fully automated. the streets of Sofia, and as part of the pilot project we will have a total of five l The process of paying marketplace We are working on electric cars operating in the capital, in commissions and invoicing is also fully Varna and Plovdiv. automated. urban deliveries by Speedy will also invest incrementally in All of the above, together with the lo- electric tricycles, diversifying its fleet, as electric vehicles gistical capabilities of Speedy for deliver- electric cars. will account for up to 10% of it by 2025. 50

Is Southeast Europe catching up with the global rise of corporate renewable energy TOP INDUSTRIES TOP procurement

By Mariyana Yaneva, Managing Editor, Renewables Now

Ten years ago, investing Last year saw corporate PPAs truly take off, more than doubling in renewable energy was the capacity signed in 2017 economical only when 14 backed by some kind of 12 subsidies, as in the case of T Southeast Europe (SEE) 10 they were either in the 8 form of feed-in tariffs or green bonuses 6 and long-term power purchase agree- 4 ments (PPAs). 2 0.2 0.3 0.1 0.3 0.3 4.2 0 1 2.2 4.6 6.1 13.4 Today, things look different. In just a 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 decade, the cost of wind power fell by Source: Bloomberg New Energy Finance 69% while that of photovoltaics (PV) plunged by 88%.1 Lazard’s latest Lev- are ready and willing to switch to clean industrials, as well as a cool climate and elized Cost of Energy (“LCOE”) analysis power sources rather than rely on elec- abundant power supply that makes the (dated November 2018) shows that un- tricity generated by fossil-fuel-fired pow- area perfect for data centres. Since last subsidized utility-scale wind and photo- er stations. As a result, the global corpo- year, however, the European corporate voltaic projects are already the cheapest rate PPA market grew from a mere 200 PPA market has started to diversify geo- source of electrical energy out there. MW of deals signed in 2008 to over 13.4 graphically with the first such contracts In other words, subsidies provided the GW contracted in 2018, according to being signed in the south of the conti- boost the industry needed to get the data from BloombergNEF’s (BNEF). nent. Portugal, Spain and Italy lead the market going but now the rapid reduc- way and the unexpected first mover in tion in the price of renewables is shifting The U.S. is still by far the largest corpo- Central Europe was Poland. So where the economics of renewable uptake to- rate PPA market accounting for 69% of does SEE stand in this trend? wards business models that do not rely the 8.6 GW deals that were signed glob- on state subsidies. ally from January to July 2019. Europe, How ready is SEE? the Middle East and Africa (EMEA) col- Major players in the industry share There are two main challenges that un- lectively form the second largest market their views on the imminent market subsidised wind and solar PV projects for renewable corporate PPAs, with development need to overcome. The first is volume companies in these regions settling 950 risk - the inherent variability of wind MW of clean energy purchase agree- The region is yet to announce its first and solar irradiance, and the other is ments over the same period, according corporate PPA deal but conditions seem price risk. Corporate PPAs, if properly to BNEF’s recently published, 2H 2019 to improve for such deals to appear in structured, can be the answer to both Corporate Energy Market Outlook. the very near future. This summer, Re- of these challenges. newables Now surveyed leading project In Europe, the Nordics historically lead developers, finance and legal consult- As social pressure on companies to re- the corporate PPA market due to a ants, energy traders, as well as potential spond to climate change concerns grows favourable regulatory backdrop, inte- industrial buyers in the region for their and the price of green energy has be- grated regional wholesale power mar- take on the market development. come more than affordable, many firms ket, a concentration of creditworthy Not surprisingly, many of them have

1 Source: Lazard’s Levelized Cost of Energy (“LCOE”) analysis – Version 12.0, November 2018 51

been looking with interest into the cor- renewable energy producers and elec- Who gets to sign the TOP INDUSTRIES porate renewable energy procurement tricity consumers alike. So, what stands first SEE deal? market but most (68% of those sur- in the way? veyed, to be exact) believe that coun- If we are to make a forecast how the tries in SEE currently lack the political Our survey respondents identified the corporate PPA market in SEE will devel- will, proper regulatory framework and various administrative and regulatory op, we at Renewables Now bet on the the level of power market liberalisation barriers across the different jurisdic- pattern already observed in Spain and and regional energy trade integration tions as the single most important road- Italy where energy traders and utilities needed for such contracts to become block standing in the way of corporate were the first to enter into renewable common in the next three to five years. PPA proliferation in SEE. energy PPAs and then re-sell the con- Single, flagship deals, however, may be tracted volumes to C&I clients. announced sooner than expected. Bul- For example, in Romania it is mandatory garia and Romania, closely followed by that all power from renewable sources There were some good omens in that Croatia and Slovenia, are viewed as the is sold only via the Romanian Power direction. countries in SEE where corporate PPAs Exchange (OPCOM). Neighbouring Bul- are most likely to be signed in the next garia has the same rule. Similarly to most of the European mar- couple of years. kets, wholesale electricity prices in SEE “In Bulgaria, for example, the require- remain on an increasing trajectory. The Over 90% of the survey respondents be- ment to sell renewable power on the latest quarterly report of the DG En- lieve that solar PV will be the underlying exchange, although manageable, does ergy notes the baseload contract in SEE technology for corporate PPAs in SEE create some needless constraints. But for the first quarter of 2019 reached 67/ for new projects. the main obstacle is really lack of a well- MWh euro on average, up 35% com- developed forward market - there is no pared to the same quarter a year earlier. For legacy projects that were built under hedge available for buyers beyond 1-2 previous incentive schemes, wind ener- years,” Ken Lefkowitz, managing part- At the same time, the European Federa- gy producers are the ones more likely ner, New Europe Corporate Advisory, tion of Energy Traders (EFET) launched to be on the look for corporate deals commented. a standard corporate power purchase since their long-term power purchase agreement (CPPA) in June this year. The contracts are generally shorter than That brings us to the second major chal- contract allows for physical and financial those for PV. In Bulgaria, for example, lenge – lack of experience and capacity PPAs with an election sheet approach wind power producers signed feed-in among the commercial and industrial allowing for tailoring of the agreement. tariff contracts for 12 years, compared (C&I) buyers to negotiate such deals. It is supported by legal opinions in key to 20 years for PV power plants and the With the global market still relatively jurisdictions, and is translated from Eng- majority of the wind farms were built immature, each PPA is different and lish into other EU languages to encour- between 2010 and 2012, meaning most there is little standartisation in con- age uptake across Europe, EFET said. of these assets will have to sell at market tracts. This more or less limits the pool prices in three to five years. of eligible buyers to big, energy-hungry Also in June, the European Energy Ex- corporations with very strong credit change (EEX) announced it is expand- All survey respondents unanimously ratings and large energy procurement ing its financial futures products in SEE, point at the price stability (hedging departments, capable of managing vol- starting with new power futures for against market fluctuations) as the driv- ume and price risks of power purchases. Bulgaria, Serbia and Slovenia. Poland, ing force behind corporate renewable Smaller buyers generally need to aggre- Romania, the Czech Republic, Slovakia power deals in the region, although gate their consumption in order to ben- and Hungary are covered since 2017. about 20% also think that climate change efit from the same price levels as the Since then, EEX trading volumes for concerns and corporate sustainability big players. these markets have increased more than goals will also play a role in energy pro- three-fold, the exchange said. curement choices. “Most of the C&I sector in Europe, SEE included, do not have in-house energy Fingers crossed, we are likely to see the The right price for buyers seems to fall risk management capabilities or experi- first corporate renewable energy power in the 40-60/MWh euro range for both ence with renewable energy procure- purchase agreement in SEE as early as wind and solar PV power. ment. This makes it hard for them to next year. enter the long term PPA market (10-15 Producers generally have slightly higher years), due to lack of competence and expectations in the 60-80/MWh euro also no underlying need for hedging. range though a few solar project devel- In the Nordic region, for example, the Renewables Now is an independent opers said a price under 40/MWh euro C&I sector generally hedges more short one-stop shop for business news and market intelligence for the global could also be possible in some cases. term (1-3 years). Companies like Axpo renewable energy industry. can close this gap in both competence Keep up with the latest in the Roadblocks on the way and hedging need.” Domenico Franc- industry on renewablesnow.com or eschino, Head of Origination Eastern & contact us for bespoke research at In the context of rising electricity prices Western Europe at Switzerland-based [email protected] or throughout the region, corporate PPAs energy trading company Axpo, told Re- +359 (2) 80 12 622 provide a nice business opportunity for newables Now. 52

The more companies go regional, the greater chance /interview for W. Balkans' integration

Look at Abkons for instance. We start- ticular in the area of rule of law, are some ed as an Albanian company in 2006, but of the examples that will definitely help to

TOP INDUSTRIES TOP now we are a regional group. We have improve the business climate in the West- offices in Pristina, we are active in Mon- ern Balkans. The hope is that the more tenegro, North Macedonia, Bosnia and our economies integrate, the more com- Herzegovina, and Serbia. Just a decade panies go regional, the greater the chanc- ago that would have been unthinkable. es of creating an unstoppable momentum for the integration of the region. This means that investors interested in the Western Balkans can think in region- What do companies like Ab- al terms too. Individually our countries kons offer to investors? are small, but if, instead of Albania or Kosovo or Montenegro, your business Abkons is one of the leading companies plan extends to the region as a whole, in the region. We helped to implement suddenly the potential is far greater. some of the biggest regional infrastructure projects like the Trans Adriatic The Western Balkans has a lot of Pipeline and Devolli Hydropower. We untapped opportunities in tourism, are currently working with Shell. agriculture, energy and mining sectors, as well as the services. Compared to the We also actively support public admin- Besnik Leskaj EU, this region has a young and highly istrations in implementing reforms and CEO qualified population, while labour costs building capacities and share our knowl- and fiscal burden are but a fraction of edge and know-how. Abkons is a multinational management those in any EU country. consulting firm, committed to helping What makes us successful is our ability institutions make lasting improvements. What role can private compa- to combine local knowledge and global Partnering with prominent nies play? standards. Sometimes foreign investors international firms and organisations can find the Western Balkans a rather like TAP, Mott MacDonald, Deloitte, Private actors can be a leading and posi- difficult place to navigate. But to build Ramboll and the World Bank, Abkons tive driving force. Regional, central and local projects you need to understand is active throughout the entire Western local governments could benefit from the local context. And you can’t under- Balkans region. the experience of the private sector and stand the local context without under- should involve them in discussions on de- standing local people. signing legal framework for doing cross- Why do you think it is worth border business as early as possible. Unlike many large foreign contractors, investing in the Western Bal- we have no pre-fabricated roadmap or kans? One of the main problems in our region thinking. We look at the risks and miti- was that politicians approached cross- gation strategies for each project. We I believe there has never been a better border relations with a zero-sum game are agile, multi-functional and deeply time to invest in the Western Balkans attitude. But in business, we tend to embedded in local communities, and our than now. If you look at the region, it take a win-win approach and look for growth has been exponential. has never been more stable and there positive outcomes for ourselves, our has never been more cooperation and counterparts and communities whose Now we have embarked on a new ven- willingness to build bridges and relation- lives we might impact. That has allowed ture to expand to the entire region. We ships between the different countries. Of businesses in the Western Balkans to are replicating our model in Serbia, Ko- course, there are still some tensions, but cooperate with each other even in those sovo, North Macedonia, Montenegro the agreement over the name of North cases when the governments could not. and Bosnia and Herzegovina. Macedonia, its eventual accession to NATO, the progress of the EU integration The good news is that politicians across Of course, it is a big bet and it won’t process, these have all given a newfound the region are starting to acknowledge be easy. But I believe in our success and impetus to the desire of Western Balkan our way of thinking. Recent reforms in hope we will make our own contribu- countries and societies to work together. various countries of the region, in par- tion to the regional integration. 53

We deliver projects TOP INDUSTRIES with the support of local people /interview

impacts from land acquisition or re- strictions on affected persons’ use of We feel responsibility and access to assets and land by: (i) towards the region providing compensation for loss of assets at replacement cost; and (ii) ensuring that resettlement activities Land goes to the heart are implemented with appropriate disclosure of information, consulta- of the identity and tion and the informed participation welfare of a community of those affected; 2.Restore or, where possible, improve the livelihoods and standards of living Developers should of displaced persons to pre-displace- establish long-term ment levels; and 3.Improve living conditions among relationships with physically displaced persons through communities the provision of adequate housing, including security of tenure at resettlement sites. local community involvement at every step. TAP held a thorough consultation Redi Basha, Land acquisition is a complex exercise process, holding around 500 community Abkons partner involving developers, landowners and meetings and mapping out land ownership their dependents, local communities, through systematic procuring of legal doc- local government and national govern- uments. Sensitive local land uses, including Abkons sees itself as ment. A multi-faceted approach has to beekeeping and fishing, were addressed as more than a group of be taken to ensure this potentially vola- priorities. Abkons involved hundreds of consultants: we feel a tile web of relationships remains stable experienced and young professionals to sense of responsibil- and productive. Developers should es- complete the Land Acquisition for Albania ity towards the region tablish long-term, positive relationships section in time and with excellent quality. A in which we operate and with communities by minimising land No hotspots emerged in the section, with have developed an approach to drive impacts, consulting and involving local over 80% of interest-holders signing con- forward project effectiveness while, people, and harnessing local expertise to tracts with TAP. at every step, bringing local people on increase project effectiveness. Local gov- board. ernment is the likely target of complaints The approach Abkons infused in TAP has in development contexts, and so devel- been received warmly by the Govern- Land goes to the heart of the identity opers should liaise closely with municipal ment of Albania, which is now seeking to and welfare of any community, not least authorities to ease tension and address replicate this model in development pro- in an agricultural context. Projects af- concerns. Clear channels of communi- jects across the country. Abkons has been fecting use or ownership of land must cation must exist with national govern- a pioneer of a sensitive, progressive doc- tread with caution to mitigate the in- ment, which is typically responsible for trine of regional development – and one evitable social, political and legal obsta- the expropriation process, to ensure a that has proved highly effective. Abkons cles that emerge when land interests well-planned land acquisition process. continues to work across the region with are threatened. A preferable approach similar clients to implement this approach. encompasses goodwill, sensitivity to lo- Abkons has sought to put these principles cal needs and avoidance/minimising of into practice, most recently in the Alba- On paper, the formula seems simple: involuntary resettlement. EBRD per- nian section of the Trans Adriatic Pipeline trust, meaningful engagement and in- formance requirements and IFC perfor- (TAP). The pipeline risked creating obvi- tegrity at every step. In practice, this mance standards provide useful guides ous and numerous conflicts given its scale. approach often seems the hardest. Ab- of how this might be done, envisaging Advised by Abkons since the start of the kons has the intellectual commitment that an optimal project would: project’s implementation in 2008, TAP and operational capacity to successfully has adopted an effective stakeholder en- implement this approach, no matter 1.Mitigate adverse social and economic gagement process, founded on trust and how volatile the context. TOP INDUSTRIES SEE countries score poorly in the infra the in score poorly countries SEE with the economic growth of the coun the of growth economic the with correlation apositive has investment infrastructure that suggests (EIB) Bank Investment European by the A study region’sthe potential. economic growth restricts that infrastructure transport projects in the region attract foreign in foreign attract region the in projects EBRD, one of the largest institutional in institutional largest the of one EBRD, 69.9.a score of with bloc’s ranking the of bottom at the stands Bulgaria member EU 62.2. gro’s Montene and 60.7 Bosnia’s by followed 57.3score of Europe, in lowest the is 79.7, is states Albania’s Group while Visegrad the of index average The ness. competitive infrastructure of terms in states European Central the behind lag seems obvious (fig. 2).SEE also countries region’s 80.9,of the underdevelopment average EU an versus 68.9 score of ture nectivity. con airport poor and services seaport and train of efficiency limited roads, of low quality by the down dragged Index, nomic Forum’s Global Competitiveness World the of Eco segment structure projects. large of planning the for needed time long the to due 1% at around GDP, of stands probably still countries SEE in investments ture infrastruc of value (fig. However,the 1). China and EU the both from vestment region. SEE wider the as well as Balkans Western the of tries vestors in the region, is active in the field field the in active is region, the in vestors T 3 With an average infrastruc average an With an underdeveloped has still (SEE) rope Southeast Eu meet, Africa and Asia from routes trade where Europe of part tant impor strategically a in located Though 1 Infrastructure Infrastructure 2

and debt in -roads, SEE coal investmentChinese By Radomir Ralev Radomir By ------of urban sustainability, supports the in the supports sustainability, urban of The improvement of the quality of tradi of quality the of improvement The stressed. Ruhe capital,” investment for aneed certainly is there and portant im very is connectivity region, the “In May. in Sarajevo in Forum Business and Meeting Annual bank’s the of framework the in panel at adiscussion and Central for Ruhe, said Charlotte Europe, Southeast EBRD the of director ing manag the projects Bosnia, in Vc Corridor like infrastructure large finances also but incubators, and accelerators develops business, in women of clusion Global CompetitivenessIndex-infrastructuresegmen and energy as such infrastructure tional SEE 2013-2019inblneuro Chinese investmentin Bosnia Montenegro Slovenia Serbia an 9. d Herz N. 66 Montenegro Macedoni Ro Slov Moldov Bulgaria egovina Croa Bosnia Al N. Croa Serbia EU ma Macedoni bani SE enia ti 54 a -2 ni ti Source: ChinaGlobalInvestmentTracke E a 8 a a a a 2. 01 a 18

Bulgaria Moldov 02 1. 1. a 0. 79 12 0. 0. 0. 13 35 69 53 03 04 r - - - - transport is in the focus of two impor two of focus the in is transport in CESEE Chinese constructioninvestment tors, suppliers and workers and the use use the and workers and suppliers tors, contrac by Chinese works construction of execution the Bank, Central Austria’s to according Moreover, influence. litical po Beijing’s and China on dependence growing of fears as well as countries, some for burdens debt sustainable un of risks the about criticism over concerns draw projects BRI However, each. loans of euro billion 8 envisaging and (BRI), Initiative Belt Road China’s and (WBIF) Framework Investment Balkans Western European the -- initiatives investment regional tant 05 Source: WorldEconomicForum GlobalCompetitivenessReport2018 Montenegro Slovenia Serbia 06 52% 07 57 .3 60.7 62 Croa Bosnia Cz 64 65 t .2 ech Re 9% 2 08 ti 68 .5 a 69 .9 71 2% public Source: CGIT,RaiffeisenResearch 73 .9 .2 14% 09 76 76 4% 7% 6% .8 .9 80 5% Ro Po Hungar 1% .9 land ma 0 ni y a

- - - - 55 TOP INDUSTRIES

Project Mihajlovic and CRBC president Du Fei signing the MoU for the Pozega-Boljare motorway project; Source: Serbia's Infrastructure Ministry of Chinese materials may significantly According to Ruhe, the construction of the projects. But we see the news that reduce the economic benefits for the re- China-funded coal-fired power plants there will be a coal-fired power plant in gion. A study by The Vienna Institute for in SEE, like the one in Bosnia’s Tuzla, Tuzla and we ask if this is the best way International Economic Studies (WIIW) is not the best way to support the re- to power that part of Bosnia,” Ruhe said. shows that the most important contrac- gion, as it has serious problems with tor in the transport sector under BRI is air quality. In March, the Energy Com- DEBT BURDEN China Communications Construction munity Secretariat sent an open letter Company (CCCC). In the energy sector, to Bosnia expressing its concerns about In September 2018, Moody’s changed the the leading contractor is state-owned the compliance with state-aid rules of outlook on Montenegro's B1 long-term China National Machinery Industry Cor- a public guarantee granted to China's issuer and senior unsecured debt rat- poration known as Sinomach.2 Ex-Im Bank on a loan for the Tuzla TPP ings to positive from stable, but warned project. In August 2018, the government against the costs of the priority section ENVIRONMENT of Bosnia’s Federation entity decided of the Bar-Boljare highway in the coun- to provide a guarantee for a 614 mil- try being built by China Road and Bridge SEE is lagging behind Central and West- lion euro loan from the Chinese bank to Corporation (CRBC). The risks include ern Europe in the energy sector as well, Bosnian power utility EPBiH, to be used possible delays with cost overruns as though at a much lesser extent than in to finance the construction of a 450 well as foreign currency risks associ- the transport sector. In terms of elec- MW unit at the existing Tuzla TPP. The ated with the dollar-denominated loan tricity production per head the region’s loan will finance 85% of the total cost of from the Export-Import Bank of China countries are in the middle and lower the project. in 2014. The loan caused an increase of range of the distribution, as only Ser- Montenegro’s foreign debt and forced bia is close to the lead group of CESEE “This region has air quality issues, it has the government to raise taxes, partially countries. China is involved in energy some of the worst pollution in cities freeze public sector wages and end a investments in the region, but most on the planet in North Macedonia and benefit for mothers. The overall costs of projects are related to the construc- Kosovo. When we talk about climate those sections are roughly estimated at tion of coal-fired power plants, thereby change and the need to move away from around 1.2 billion euro, or 25% of GDP. counteracting energy-related EU pro- fossil fuels, renewables are a life-saving jects that are aiming to support the alternative and not just a nice thing to The currency risks associated with Chi- shift towards a low-carbon economy, have. We are working a lot on renewa- nese projects were among the concerns the WIIW said in a report in November bles, but we also need private investors expressed also by Guenter Deuber, 2018.2 and the government’s support to realise Head of Economics, Fixed Income and

1 Infrastructure Investment in the Western Balkans A First Analysis - https://www.eib.org/attachments/efs/infrastructure_investment_in_the_west- ern_balkans_en.pdf 2 Investment in the Western Balkans: New Directions and Financial Constraints in Infrastructure Investment - https://wiiw.ac.at/investment-in-the- western-balkans-dlp-4705.pdf 3 The Global Competitiveness Report 2018 - http://www3.weforum.org/docs/GCR2018/05FullReport/TheGlobalCompetitivenessReport2018.pdf TOP INDUSTRIES 6 5 4 not do countries SEE exports. as same the not is This market. import local the of share a decent getting is “China China. to exports their to comes it when countries SEE the to ply ap not does same the but BRI through markets SEE the on importance more gaining is Beijing Deuber, to According RISKS FINANCIAL AND TRADE or transport. energy in either are projects the of major ity vast The respectively. 2%, and 5% 9%, with Romania and Croatia Bosnia, a 14% by followed with share, vestments Slovenia second ranks billion. in terms of $1.1BRI in about to amounts project the of section Serbian the in vestment (see by 2023 2). Fig. in The completed be should which railway pest-Belgrade Buda the of billion modernisation $1.8 for project the to due chiefly CESEE, in sector construction the in ment invest 56% Chinese of absorbs Serbia meeting. Sarajevo at the said Deuber interaction,” of way adifferent we need ence on euro financing, so possibly here depend we larger haveregion a much the in Here financing. dollar US on ance reli aheavy is there successful, is China where world the of parts the In markets. help to local happy the access to companies Chinese definitely be would bank, a We, as table. the on has EU the what to close are numbers the countries some in and construction in concentrated “China’s in region the investments are tional. Interna Bank Raiffeisen at Research FX Bar-Boljare motorway the-western-balkans-a-highway-to-higher-income Public Infrastructure in the Western Balkans: A Highway to Higher Income - https://www.imf.org/en/News/Articles/2018/02/01/na020818-public-infrastructure-in- - Income Higher to Highway A Balkans: Western the in Infrastructure Public China Global Investment Tracker - https://www.aei.org/china-global-investment-tracker/ World - https://databank.worldbank.org/source/world-development-indicators Indicators Development 4, 5 4, ------and this puts the question to what ex what China to question the puts this and with deficits trade high running are countries SEE the of Most market. Chinese the on weight more much get The participation of Chinese contrac Chinese of participation The said. IMF the phase, construction the during economy home the on impact projects’ limit also can contractors Chinese on in the Western Balkans. Western the in infrastructure public on a report in said (IMF) Fund Monetary International the considerations, sustainability debt to attention full without Montenegro) in (as and procedures, procurement or es of the normal project process selection outside treated be to tended have also they financing, concessional with come to tended have projects Chinese While ances further,” Deuber noted. bal trade may deteriorate this as gion re the in China of engagement further much have to too sense makes it tent railway Budapest-Belgrade of section investmentChinese Serbian in $1.1 state-owned enterprises and banks. In In banks. and enterprises state-owned Chinese sector, through but private have through the channelled not been 2013, in investments Jinping Xi the as by project the of introduction the since have changed BRI about perceptions the opinion, his In Sarajevo. in said Romani, Mattia EBRD, the of Governance & cy Poli Economics, for director managing the underestimated, were initially which SEE in risks significant poses BRI in tors 56 bln 6 High reliance reliance High ------this way, the principles of openness, en openness, of way, principles this the efficient andprepa cost control project efficient without by doing learning of a culture in market, domestic the on experience have mostly companies sector. Chinese areinvestments in construction the of the most that fact the also simply But and environmental social standards. tion, crea job investment, the of ceptability ac social the to linked risks are “There mined. under have been countries cooperating for support sustainability, vironmental met,” Ruhe said in Sarajevo. in said Ruhe met,” are standards European those that sure projects on en we can so that do, to want they us that with work to makers policy Chinese the for possible when encourage would and we offer what is This rules. you European have follow to Europe, in work to you going are If ards. stand social and transparency certain meeting are projects those that ensure We to working are construction. the in people local employ and projects the prepare to capacity, that develop help to our are the resources using World Bank, and EBRD the at We, properly. it maintain not you do if investment best the not is world the in road best the “Building reinforced. be to needs jects pro infrastructure large maintain to countries SEE of capacity the while risk, major a poses BRI under projects of preparation the Ruhe, to According transparency, he added. and data of openness engagement, nity commu standards, investment with ing comply preparation, project also better but companies, and investors for chain value the across needed is management risk Astronger said. Romani ration,” Source: CRBC ------57

Why showcasing TOP INDUSTRIES success is key to attracting investment

By Andrew Wrobel, Founding Partner, Content and Strategy, Emerging Europe

It’s all about profit, isn’t says Olga Grygier-Siddons, former the initiative and do things for them- it? Companies, all of those CEO of PwC CEE. “However, the [in- selves in recent years, often in spite of included in this TOP 100 vestment promotion] agencies don’t the wishes of central governments. The report in particular, are appear to have addressed all the chal- reason is simple: these cities and the re- looking to make profit and lenges. Digital capabilities, for exam- gions in which they are found no longer expand. For governments ple, are not used everywhere. Inves- want to be held back by long, cumber- and investment promotion tors look for skills, especially digital some decision-making processes which I agencies (IPAs) — public skills, so the role of websites is crucial stifle initiative, innovation and hinder bodies whose main role is to attract and as they symbolise digital competen- foreign direct investment. facilitate investment in a specific country cies. More needs to be done here.” — that profit is measured by an increase Alongside the Investment Promotion in GDP or the number of jobs created. Enterprise Estonia, which represents Report 2019, Emerging Europe sur- one of the most advanced digital soci- veyed a panel of 25 global location ad- Michael Keroullé, CEO of GE Steam eties in the world, has led the way in visers and foreign direct investment Power, says that IPAs should focus on making use of automation in its enquiry experts who weighed up the various success stories. “There is a lot of talk handling process. “There are a lot of merits of the 75 cities of emerg- about how good the given country is, enquiries which need to be taken care ing Europe which are either capitals but they should offer a value story,” he of, and automation helps us with that,” or have a population of more than says. “They must offer value to the in- says Viljar Lubi, Estonia’s vice minister of 200,000 inhabitants. Sofia was among vestor.” economic affairs and communications. the top 10 cities in the brand subcat- “Around 85% of the enquiries we re- egory, and together with Ljubljana in In its annual Investment Promotion Re- ceive are now dealt with automatically.” the top best cities with an excellent port, Emerging Europe looks at how gov- business climate. Zagreb, Tirana and ernmental agencies embrace the needs Peter Stracar, former CEO of GE Europe Prishtina offered a great pool of tal- of investors to increase profits by com- also welcomes the progress that has ent. Ljubljana, together with Prague, municating the value proposition their been made but called on the region to do has the best quality of life across countries offer and handling enquiries more to promote its know-how. “There emerging Europe. Local authorities from potential foreign investors. From was a time when labour costs were the in both Ljubljana and Skopje offer the an emerging Europe perspective - with only thing that mattered,” he says. “Now best support in SEE. 23 countries taken into account - Lithu- things are different. Now is perhaps the ania, Estonia and the Czech Republic are time for the IPAs to start cooperating * * * the top performers, achieving a score of with research and development centres 62-73 points (out of 100). and universities to showcase know-how. Emerging Europe is a London-based news, intelligence and community platform with a This is very important in the region, this focus on 23 countries of Central, Eastern and Out of 11 Southheast European coun- is what the region wants.” Southeastern Europe that translates the region tries (the former Yugoslavia, Albania, to the world and the world to the region. Access Bulgaria, Romania and Moldova), Roma- Cooperating across the emerging Eu- to our unrivalled intelligence and global network of key individuals and organisations enable all nia and Slovenia ranked the highest with rope region could also help those IPAs those with a stake in the region to participate scores around 50 points. Invest Romania whose performance needs to improve. in shaping the prosperous future of the region. and Spirit Slovenia were also the only Haldun Firat Kokturk, global head of Each year, Emerging Europe releases an Invest- investment promotion agencies whose Limak Airports, suggests that more ment Promotion Report, which examines how investment promotion agencies communicate performance in 2019 was better than support could be offered to IPAs with their value proposition and handle enquiries from the previous year. limited experience, “especially in the potential investors. The publication of the report Balkans, and most of all in Kosovo.” is followed by a roundtable discussion attended “The quality has improved from last by heads of IPAs and business leaders who share best practices and create a road map of invest- year and it’s great to see that the pro- Interestingly, a large number of emerg- ment promotion standards for the emerging motion of our market is improving,” ing European cities have begun to take Europe region. 58

Regulatory trends in EU banking sector affecting SEE: Compliance, innovation,

REGULATIONS costs and consolidation

By Rebeka Kleytman, Attorney-at-law, Ernst & Young Law Partnership

2018 and 2019 have been marked by major compliance changes on EU level such as the entry into force of the EU General Data Pro- tection Regulation (GDPR) in May 2018 and the continuing implementation into national laws of the Fourth Anti-Money Laundering Directive (AML). The second payment services directive (PSD2) is another important milestone leading to the need for all EU member states to introduce legislative changes to address the new requirements including the new strong customer authentication (SCA) rules. Each of the above regulations has increased the banks’ costs for compliance considerably. In short, the new regulations aim at secure, easy, innovative, open and efficient environment which also prevents the risks of personal data breaches, money laundering and terrorist financing but at the same time fosters innovation and ensures safe and sound banking system – a task which is very challenging and even more costly. A number of additional challenges were placed on banks under the new IFRS 9 and are yet to come with the anticipated implementation of the Basel III framework - both affecting bank capital. Consolidation remained a solution to most of the above issues with a lot of acquisitions and exits taking place and more expected to take place in the future. The sale of old NPLs will unblock capital that is highly likely to be needed for compliance with the new capital requirements. Thus, further NPL sales are expected to take place.

GDPR after its first rules but also the means for compliance started imposing fines accounting for anniversary with principles. In general, the new reg- millions. Thus, being compliant will be ulation requires constant review of the an expensive, but still a much cheaper GDPR which entered into force in 2018 personal data, timely deletion, and ca- option than being fined. required a complete review of the poli- pacity to amend, delete or provide cop- cies of all companies controlling person- ies of the information upon request by AML – fighting money- al data. Banks control a large amount of the data subjects. Considering the huge laundering and terrorist personal data concerning their employ- amount of information to be handled by ees, but also all retail clients and indi- banks, the optimal solution for them is financing but also viduals representing corporate clients. to implement automated processes – slowing down business They had to introduce promptly new developed on their own or licensed for data processing procedures and tools. In use by the banks. Additional to the cost The AML derective put additional re- order to comply with the general princi- of compliance, GDPR introduced fines quirements on banks and prevented ples laid down by the GDPR such as data of up to 20 million euro (or 4% of the them from starting work with new cli- minimisation, data accuracy and storage global turnover - whichever is higher) ents before having completed success- limitation, banks had to introduce the and some of the supervising authorities fully all identification procedures pre- 59 REGULATIONS scribed by the AML. In order to keep possession (something only the user The identification clients happy, banks should also have possesses – e.g. mobile phone) and in- constant access to up-to-date reliable herence (something the user is – biom- of the ultimate data bases. Additional trainings of per- etric data). The EBA has put a stress on sonnel and introduction of multiple in- the necessity for the market players to beneficial ternal procedures had to be put in place, introduce customers to the new changes owners of large leading to additional costs and slowing so that customers can continue making down considerably client onboarding online payments. The implementation of corporations has procedures. The identification of the the new SCA rules, as well as the time ultimate beneficial owners of large cor- and expertise investment to educate turned out to be porations has turned out to be a huge consumers how to use the updated ser- a huge practical practical problem. Many corporations vices would naturally also be related to opted for the possibility under the di- additional costs for banks. problem rective to disclose senior managing officials as beneficial owners. It remains to Aiming to remain competitive and retain be seen whether this really serves the the payment services business, banks purpose of the directive. have reacted differently. Some of them NPL portfolios sale opted for internal development of Fin- may become more PSD2 – promotion of Tech. However, the majority decided to FinTech and request acquire or partner with FinTech compa- urgent in the light for additional safety nies and to support FinTech start-ups. of the new capital measures On the other hand, unlike AML and GDPR which primarily increase the requirements FinTech has been booming in the past costs for banks, FinTech enables them to years, usually under the title of enhanced develop smart solutions, optimize and customer experience. This boom led to automate processes and eventually re- the necessity for a detailed regulation. duce their day-to-day operational costs. Customers nowadays expect fast, user A benefit that is extremely valuable in from them, banks are now much more friendly, secure, offering full-scope ser- the current banking environment. cautious and risk averse when grant- vice, accessible from anywhere, fancy ing loans compared to 12 years ago. In payment solutions. One of the main Further capital order to continue the low NPL trend, purposes of PSD2 was to regulate all the requirements expected banks need to implement sound proce- innovations and new services. On the dures for credit risk rating when origi- other hand, the directive was intended On August 5, 2019 the EBA released its nating, granting and monitoring loans. to promote innovative solutions in the report to the European Commission on Aiming to address these issues, the EBA payment industry and to regulate access the implementation of the final Basel III has released draft guidelines on loan to the providers of such solutions to the framework. As per the press release of origination and monitoring which are market. FinTech companies started en- EBA, under conservative assumptions, still under review.3 However, since the tering the payment sector and becoming the full implementation of the Basel III sector was not emerging at a fast pace, major competitors of banks, thus endan- framework will increase the minimum banks were not pressed to get rid of the gering the banks’ revenues from stand- capital requirement by 24.4% on aver- NPLs. Therefore, in a number of coun- ard payment services. age. This increase in capital require- tries transfers of NPLs started slowly ments implies an aggregate shortfall in and are still to take place. Purchasers Amongst other issues regulated by the total capital of about 135.1 billion euro of NPLs have reported they face similar PSD2, the strong customer authenti- (91.1 billion euro in terms of common difficulties when preparing for acquisi- cation (SCA) seems to be one of the equity tier 1, CET1).2 tion of NPL portfolios. Reports indicate hottest topics. The European Bank- certain reluctance by banks to invest ad- ing Authority (EBA) published recently More NPL portfolios ditionally in NPLs by preparing them for its opinion with respect to the strong to be sold sale as they would do for an operating customer authentication rules under asset, which makes the due diligence and the PSD2 and, in particular, regulatory The non-performing loan (NPL) levels valuations very difficult. Selling the NPL technical standards which will apply as are still high and take a considerable part portfolios may become more urgent in of September 14, 2019.1 Under the SCA of the banks’ resources for provisions. the light of the new capital requirements rules any payment service will be ac- Banks have been working to actively and the general expectation is that the cessible by the users based on at least fight NPLs and as a general trend – the banking sector will become more and two elements categorised as knowledge NPL levels are indeed falling. Aiming to more active as the NPL sales would free (something only the user knows - PIN), avoid old mistakes and having learned some additional capital.

1 https://eba.europa.eu/-/eba-publishes-an-opinion-on-the-elements-of-strong-customer-authentication-under-psd2 2 https://eba.europa.eu/-/eba-advises-the-european-commission-on-the-implementation-of-the-final-basel-iii-framework 3 https://eba.europa.eu/-/eba-consults-on-draft-guidelines-on-loan-origination-and-monitoring 60

As a general trend in the banking sector, reported for Austria, Bulgaria, the Czech Republic, Hungary, Poland, Ser- bia, Slovakia and Slovenia,4 the growing household and consumer lending stands out. In this respect, M&A activity in the banking sector represents an ac- tual purchase of consumers who would otherwise be hesitant or even reluctant to change their bank. Reportedly, many European countries are still resolving issues related to foreign currency loans granted to consumers (e.g. Swiss franc loans, whereby the issues related to them partially date back from 2009) and floor rate clauses. To achieve lower de- fault levels when dealing with consumers, banks should further improve their procedures in order to educate consumers financially and be able to support them in assessing their own capacities and limitations.

Vanilla financing is still the main source of revenue for banks and of financing for companies. Capital markets are staying behind despite some regulatory and legislative efforts such as the introduction of simplified stock exchange access M&A activity. a risk increasing factor for them, thus rules for small and medium sized enter- Consolidation. contributing for higher NPL rates. At prises in countries such as Austria and the end of 2018 Erste Group was ranked Bulgaria. The low interest rates, the increased among the ten worst performers in the costs for compliance, the new capital banking sector in a Europe-wide stress It is also worth mentioning that Chinese requirements and the new competition test, meaning that it had to improve its presence in the region is still growing. are major drivers for M&A in the bank- capital adequacy. However, the implications of the China ing sector. Consolidation is a tool to – US trade war are still to be reviewed fight the increased cost and reduced Political landscape and assessed. BREXIT is also expected revenue issues but it also contributes to cause additional changes in the bank- to stability and better resilience to cri- Another major factor to impact the ing sector as UK banks would most sis. banking market is the political situation. probably seek entries back to the EU. Political uncertainty, naturally, has an ad- This would naturally depend on the ex- Greek banks are still selling their foreign verse impact on investments. act arrangements between the UK and subsidiaries. Societe Generale is selling the EU with respect to BREXIT which some of its foreign subsidiaries and is ap- have become even more uncertain re- parently refocusing on its home market. cently. In Bulgaria in recent years KBC acquired Low interest United Bulgarian Bank, Eurobank ac- * * * quired the local business of Piraeus. A rates, higher costs Rebeka Kleytman is a manager in number of countries in the region are Ernst & Young Law Partnership with dominated by the presence of large Eu- for compliance over 14 years of experience and focus ropean banking groups including Croa- on the banking and finance industry. tia, the Czech Republic and Slovakia, -major drivers of Repeatedly noted by the Legal 500, however, additional M&A is still expect- M&A. Presence of she has assisted a number of clients ed in the whole region. in respect of financing agreements, Austrian banks in structuring of the security package, UniCredit, Erste Bank and Raiffeisen are non-banking financial institutions, ranked among the biggest players on the CEE seen as risk consumer credits, banking regulatory regional market. KBC and OTP are ex- increasing factor and capital markets issues. She has panding. The presence of Austrian banks also worked extensively on M&A and on the CEE market is considered to be for them employment engagements.

4 The information is based on the FitchSolutions Q3 2019 Banking & Financial Services Reports country by country. изложения e xhibitions 61 2019 SOFIA, BULGARIA СЕпТЕМВРИ – ДЕКЕМВРИ SePTeMBeR – DeCeMBeR

europeA n tmt A renA sofiA bege iwc union expo o f motor r ex po A nnuA l contest beAuty show chA rity for young b A z AAr scientists 13 – 18 25 – 27 27 – 29 11 – 20 20 – 21 1

Текстил, Форум за автомоби- Игрална и Коледен машини, здраве, лен салон развлекателна благотвори- технологии красота и София индустрия телен базар Textile, Ma- естетика Aes- Sofia Motor Balkan enter- Christmas chinery, thetics, Cosmet- Show tainment Charity Technologies ics, SPA, Health, and Gaming Bazaar Hair, Nail, expo Makeup

Септември / September Октомври / October Ноември / November Декември / December Най-голямо- Събитие за печатни и Хлебо- то кариерно фенове рекламни производство Млекопрера- Хранително- събитие за на косплей, комуникации и сладкарство ботвателна вкусова българи с опит гейминг, Printing and Bakery and промишле- промишле- в чужбина The комикси и тв Advertising Confectionery ност ност largest career fair сериали Communications Dairy Industry Food Industry Ритейл for Bulgarians Festival for Cos- индустрия with international play, Gaming, Retail experience Comic Books and bulpek 6 – 9 Industry TV Series Месна Вино и промиш- t he спиртни interfood леност world напитки & drink 4 14 – 15 25 – 27 Meat wine and Industry of milk Spirits

c A reer A niventu r e hive c o m i c copis s A lo n #retA il 2019 con meAtmA niA du vin show

изложения buldentA l e xhibitions

Дентална bulmedicA техника, консумативи, 2020 оборудване Я Н уаРИ – Май Dental equipment, Медицина technics, materials, J ANu ARy – MA y Medicine consumables

Януари / January Февруари / February Март / March Aприл / April Май / May

Хотелско, рес- Енергое- Обзавеждане, Индустриални Дървообра- Дерматологич- торантско, ке- фективно, интериорен машини и тех- ботваща и на и естетична търинг и Спа екологично и текстил, аксе- нологии мебелна про- медицина оборудване функционално соари за дома industrial мишленост Dermatological Hotel, restaurant, строителство Furniture, interior machinery and woodworking and aesthetic catering and SPA energy efficient, textile and home technologies and furniture medicine equipment ecological and accessories industry functional construction 13 – 15

28–31 25 – 28 18– 21 6–9 27– 30

sihre ArchitecturA l world of m A chtech & dermA & building furniture innotech A esthetics week expo technomebel

www.iec.bg 62

M&A SEE poised for slowdown in M&A activity after record-high 2018 By Julian Gikov, Konstantin Ivanov, Richard Golden, Helena Simicevic and Simona Ciubotariu Mergers and acquisitions (M&A) activity in Southeast Europe (SEE) ac- celerated in 2018 for the fourth consecutive year, as total transactions value exceeded 13 billion euro, but the first half of 2019 showed signs of a slowdown. Robust GDP growth and privatisation initiatives put Serbia and Slovenia in a steady growth mode and they are catching up with the market leaders Bulgaria and Romania, contributing to a far more balanced regional M&A market. In Croatia, the negative impact of political volatility and the ongoing restructuring of the Agrokor conglomerate declines and overall investment climate is improving. In terms of industries, the fast-moving consumer goods (FMCG), the technology, media and telecom (TMT), the financial sector, infrastructure and real estate attracted highest investor interest and will remain on the investors’ radar in 2019. M&A activity in most SEE countries over the last year and a half reflects positive sentiment on the part of global and regional investors, their excessive cash positions, and easy financing availability. Going forward, strategic international investors with solid cash positions are screening the SEE market for consolidation opportunities, as their interest is primarily directed to national sector champions or high value-added niche product companies. At the same time improving Julian Gikov, consumer confidence is making domestic players increasingly active. M&A Director - In addition, with around 10.5 billion euro allocated for investments in SEE Region, RBI Central and Southeast Europe (CSEE) by private equity firms, bolstered by strong Chinese interest, the region is set to benefit from increasing fund raising. Furthermore, increased demand has resulted in financial sponsors facing a shortage of investment targets. The key deal drivers for the SEE region will remain regional and national consolidation processes, privatisation, and restructurings.

M&A DEALS IN SEE (2010-2019 YTD) 40 0 16 000

350 14 000

300 12 000

250 10 000

200 8 000

150 6 000

100 4 000

50 2 000

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019

Deal value (millions of euro) Source: Raiffaisen rearch and analys 63

VOLUME OF M&A TRANSACTIONS M&A Albania Bosnia Bulgaria Croatia Macedonia Moldova Montenegro Romania Serbia Slovenia TOTAL 2010 6 2 18 12 - 1 2 40 10 9 100 2011 1 3 20 20 3 2 1 32 18 14 114 2012 2 4 34 14 3 1 - 31 9 16 114 2013 3 2 27 16 - - 3 51 13 23 138 2014 1 5 21 18 2 1 2 44 9 20 123 2015 1 2 26 17 2 - 2 39 12 27 128 2016 7 3 28 23 1 - 2 62 13 23 162 2017 11 3 46 35 4 2 2 151 23 34 311 2018 5 3 30 53 4 3 4 150 38 44 334 YTD 2019 1 - 18 9 1 2 2- 45 7 10 95

M&A TRANSACTIONS TOTAL VALUE in millions of euro Albania Bosnia Bulgaria Croatia Macedonia Moldova Montenegro Romania Serbia Slovenia TOTAL 2010 57 11 920 592 - 12 18 455 145 659 2,869 2011 - - 1,650 290 78 7 20 410 1,506 375 4,336 2012 850 20 2,080 160 19 13 - 365 149 319 3,975 2013 4 - 1,360 285 - - 20 490 1,160 1,927 5,246 2014 100 79 820 584 4 - 65 1,480 224 770 4,126 2015 - 45 1,003 1,004 - - 47 3,074 715 1,038 6,926 2016 585 7 1,382 796 8 - 8 3,442 185 1,076 7,489 2017 112 46 2,235 510 65 - 124 4,000 886 589 8,567 2018 118 - 1,739 952 105 91 310 4,832 2,894 2,330 13,371 YTD 2019 50 - 656 263 53 141- 47 1,966 1,171 1,022 5,369

BULGARIA the sale of Piraeus Bank Bulgaria to Eu- in the software and fintech solutions robank Bulgaria, and the sale of Munici- segments. After M&A activity in Bulgaria peaked pal Bank to local private investors. in 2017, the following year and a half The potential acquisition of Czech saw a drop in the number of deals. Investors’ strong sentiment for real group CEZ’s assets in Bulgaria by Euro- Their average value, however, was estate materialised in several deals for hold, one of the largest regional finan- higher, supported by accelerating GDP commercial real estate over the past cial groups, promises to be one of the growth (expected to reach 3.3% in 18 months, including the acquisition of most interesting developments on the 2019) and shrinking unemployment Mall Sofia by Europa Capital and Mega- energy and industrial segments, along- (4.8% in 2018). The average transac- park Offices by a consortium led by side the Belene nuclear power plant tion value in 2018 and the first half of Universale International Realitaten and project, which the government recent- 2019 was close to 60 million euro. The CA Immo for 100 million euro. Com- ly decided to restart. The renewables upward trend is expected to continue, pared to 2017, the last 18 months saw a sector continues to attract interest on as a number of major transactions are drop in transactions in the sector. the secondary market as 2018 saw the due to close by the end of the year. largest brownfield transaction in Bul- The TMT sector continues to be per- garia todate, advised by Raiffeisen Bank The list of big M&A deals in Bulgaria ceived as highly attractive by foreign - Samsung’s disposal of its 43 MW PV during the past 18 months includes investors in Bulgaria. The acquisition portfolio to a consortium of German the purchase of Telenor Bulgaria, the of Telenor by PPF Group set the tone fund KGAL and Czech developer and country’s third largest telecom opera- in 2018, as opportunities for consolida- operator Micronix. The reforms in the tor, by Czech fund PPF and the sale of tion and convergence continue to drive sector are expected to further boost Nova Broadcasting Group to Advance the market. Later in the year Nova investment activity. Properties for a reported 176 million Broadcasting Group was acquired by euro. The most interesting develop- Advance Properties for a reported 176 CROATIA ments expected later in 2019 are the million euro. The last 18 months also long-delayed concession of Sofia Air- saw a series of small transactions, as After a slowdown in 2017 due to the port and the rumoured sale of telecom the most notable one was the acqui- Agrokor crisis, 2018 saw a significant operator Vivacom. The financial sector, sition of Imperia Online by Stillfront increase in M&A activity in the coun- energy, TMT and real estate attracted Group, a global group of gaming studi- try, as 53 deals with a total value close the highest investor interest. os. The list of major deals rumoured to to 1 billion euro were concluded. Po- happen by the end of 2019 includes the litical stability and the government’s However, following Societe Generale’s sale of Vivacom, the largest integrated positive intervention in Agrokor’s re- sale of its local business to Hungary’s telecom in Bulgaria, and the potential structuring impacted favourably the OTP for a reported 500 million euro in change in the ownership of BTV as part market. 2018, we have not seen much activity of CME’s package sale of assets in CEE. in the financial sector so far in 2019. A number of small to mid-sized trans- M&A activity in the Adriatic country Other noteworthy deals in 2018 were actions are expected to be wrapped up is historically driven by the private 64

sector and regional investors who re- The retail segment has also been ac- negative impact on growth, which is mained wary until the Agrokor situa- tive in terms of M&A, although the forecast to slow down to 3.5% in 2019 M&A tion showed signs of being resolved. deals’ price tags tend to be lower. and further to 3.0% in 2020. On the positive side, the country re- One of the largest Polish private eq- corded stable GDP growth of 2.6% in uity funds, Enterprise Investors, ac- In 2018 Romania continued to be an 2018, albeit lower than the 3% - 4% quired Studenac, the second largest attractive market for private equity posted by its regional peers. retail chain in Dalmatia and eighth and strategic investors alike with largest domestic player. The fund landmark transactions taking place in The real estate sector dominated the also bought sport gear chain Inter- TMT, real estate, the financial sector, country’s M&A market in 2018. The sport and the Pan Pek bakeries. In healthcare and agriculture. M&A deal list of recent deals includes the ac- 2019 Enterprise Investors continued value amounted to around 5 billion quisition of hotel chain HUP by Adris its expansion and bought the Istarske euro last year, generated in around Group for 223 million euro, and Hy- supermarkets to further consolidate 150 transactions. prop Investments’ 129 million euro the position of Studenac on the Cro- deal for City Center One trade cen- atian coast. Liberty Global Group’s divestment tres in Zagreb. In addition, Immofi- strategy in the region generated one nanz bought two retails parks in Croa- Electric car company Rimac Automo- of the largest transactions in the tia for a total of 18 million euro, and bili too continues to attract investor country - the sale of cable operator Jadran Plc. was acquired by Croatian interest, as Germany’s Porsche ac- UPC Romania to Vodafone estimated pension funds PBZ Croatia Osiguranje quired a 10% stake in the company in at around 2.9 billion euro. and Erste Plavi. 2018. In 2019, Hyundai Motor Group invested additional 80 million euro in In the IT sector, a major deal was the company. the acquisition of Softvision, a digital engineering and consulting company, Even though the majority of deals by U.S.-based Cognizant Technology bln euro involve foreign investors, Croatian Solutions in a deal worth almost 500 13 companies too are expanding their million euro. Meanwhile, UiPath, a business through acquisitions. FMCG provider of enterprise robotic pro- Total value of M&A deals distributor Orbico Group, which is cess automation, became the first in SEE in 2018 active in Poland and Belarus, bought Romanian unicorn with an enterprise Romanian Interbrands and became value exceeding 1 billion euro. In 2018 one of the top FMCG distributors in the second round of venture financ- Europe, and AD Plastik, the largest ing raised 234 million euro for a 9% Croatian manufacturer of plastic com- stake, bringing the company’s valua- ponents for the automotive industry, tion in excess of 2 billion euro. acquired Hungary-based Tisza Auto- motive. One of the biggest transactions in 2018 was the acquisition of Agricost bln euro At the same time in line with its pri- Braila, the largest agricultural produc- 5 vatisation strategy, the government er in Romania, by UAE-based invest- disposed of a stake in Petrokemija, ment fund Al Dahra Holding in a deal Total value of M&A deals in selling it to local group Prvo Plinar- worth 200-225 million euro. Romania in 2018 sko Drustvo (PPD) and state-owned INA. For a number of other state- Two large transactions took place owned companies the government is in the banking sector. Erste Group exploring privatisation options, as this bought a 6.3% stake in Banca Com- should further boost M&A activity in erciala Romana (BCR) from SIF Olte- 2019. The list includes troubled Croa- nia for 140.5 million euro, while UK- tia Airlines, which is highly dependent based Agro Group acquired Bank Strategic on government support, food pro- Leumi for around 100 million euro. ducer Podravka, electrical equipment international producer Koncar, port operator ACI, In the pharmaceutical sector, the larg- and Croatia Banka. est transaction was the acquisition investors eye of Farmexim and Help Net by Ger- national sector ROMANIA man group Phoenix for an estimated 100 million euro. Another landmark champions, high Although GDP growth eased in 2018, transaction was the sale of Sanofi’s Romania remains one of the fastest European generics business Zentiva, value-added growing economies in the EU, as its including its Romanian operations, niche product economy expanded by 4.1% in 2018, to private equity firm Advent Inter- driven by private consumption. Invest- national as part of its restructuring companies ment and net exports, however, had a strategy. 65 M&A In real estate, the owners of DIY re- Bor and the tender for the Belgrade sale attempts failed in 2017. Pharma- tailer Dedeman acquired The Bridge Airport concession were among the ceutical company Galenika was sold office project from local real estate M&A highlights last year. to Brazilian pharmaceutical group developers Forte Partners for an es- EMS for 25 million euro, while bus timated 150-200 million euro. Other China’s Zijin Mining Group, the new producer Ikarbus is in a sale talks with major real estate transactions were owner of RTB Bor, is obliged to invest China’s Yinlong and the deal expected the takeover of the Oregon Park pro- 1.23 billion dollars in the Serbian com- to close in 2019. ject by Lion’s Head Investment from pany and increase production three- Portland for around 140 million euro, four times within the next five years SLOVENIA and the sale of 100% of Militari Shop- while maintaining the number of em- ping Center to South-African fund ployees. Following the RTB deal, the The Slovenian market experienced a MAS Real Estate for 95 million euro. Chinese group extended its presence sharp rise in both deal volume and val- on the Serbian market with the acqui- ue in 2018, backed by strong economic Other high profile transactions driven sition of the Timok copper and gold activity. by private equity funds were the sale mine in 2019. of brick producer Brikstone by CEE- The TMT sector saw a couple of land- CAT Capital to Austria’s Leier Group, The Belgrade Airport concession was mark transactions in 2018. BC Part- and the sale of courier company Ur- awarded to France’s Vinci Airports, ners bought the largest Pay TV provid- gent Cargus by Abris Capital Partners which will manage the airport for the er, United Group, for a consideration to Mid Europa Partners. next 25 years. The deal included an of 661 million euro, while NXMH, a up-front concession fee of 501 million Belgium-based investment company, In the first half of 2019, the combined euro along with investment commit- acquired one of the oldest cryptocur- value of M&A deals in the country ments of 732 million euro. rency exchange desks in the world - amounted to almost 2 billion euro, Bitstamp - for 347 million euro. while transactions numbered 45, Meanwhile, the financial sector is ex- close to the levels achieved in the like pecting the privatisation of the largest In October 2018, China’s Hisense period a year earlier. The list includes Serbian bank - Komercijalna Banka - Group acquired Gorenje Group, the the acquisition of Banca Romaneasca which should become by the end of major European household appliance by Eximbank from the National Bank 2019. producer for close to 280 million euro. of Greece; the acquisition of Inter- Shortly after, Hisense Group sold brands Marketing & Distribution by The most notable deal in the private Gorenje’s waste processing subsidi- Orbico Group; the acquisition by sector was Telenor’s exit from CSEE, ary to its local peer Eko Surovina. As Blackstone of a minority stake worth which involved the sale of its assets in Hisense focuses on the core opera- 175 million euro in Superbet, the larg- Serbia, Hungary, Bulgaria and Monte- tions of Gorenje, i.e. household appli- est omni-channel sports betting and negro to the Czech PPF Group. The ances production, more disposals of gaming operator in Romania; the ac- total price consideration of 2.8 bil- non-core assets are expected. quisition of a portfolio of nine shop- lion euro makes this the largest tel- ping centres across the country by ecom transaction in the region for Slovenia’s financial industry consoli- MAS Real Estate in a deal worth 113 the past few years. The TMT sector dation, which began in 2016, slowed million euro; and the 50 million euro also saw Telekom Serbia’s acquisition down in 2018, as M&A activity took investment by Chinese private equity of Kopernikus Technology for 200 place mostly in the insurance sec- fund CEE Equity Partners in Brise million euro, and software developer tor. Save Re bought KBM Infond from Group, a Romanian grain trader. Nutanix’s purchase of Frame, a Serbi- NKBM, one of the largest banks in an-American startup, for 142 million Slovenia, for 25 million euro; Triglav SERBIA euro. Group acquired Alta Skladi for 21 million euro, and insurance provider As- Although a record-high number of In the industrial sector, Ireland- sicurazioni Generali bought insurance deals were concluded in 2018, the based corrugated packaging company and asset management company Adri- country’s M&A profile was largely de- Smurfit Kappa bought packaging pro- atic Slovenica for 245 million euro in fined by only a few large transactions ducers Fabrika Hartija and Avala Ada early 2019. privatisations and market exits. The for a total of 133 million euro. The launch of EU accession talks and ar- consumers’ goods sector saw Mid Eu- In November 2018, Slovenia sold 59.1% rangements with IMF, as well as the ropa sell biscuits producer Bambi to of lender NLB's issued share capital structural reforms initiated in 2015, Coca Cola HBC for a reported 260 in an IPO on the Ljubljana Stock Ex- have given a boost to the M&A pro- million euro, and a joint venture be- change in line with its commitments cess in the country. The increased tween Karlovarske Mineralni Vody to the European Commission taken in economic activity, with GDP growth and PepsiCo buy Knjaz Milos, a major 2013 when the bank was recapitalised. accelerating to 4% in 2018, is also sup- producer of mineral water and non- In the real estate sector, Austria-based portive of the market. alcoholic beverages. Supernova and Immofinanz acquired Mercator shopping centres for 117 mil- The successful privatisation of cop- Some smaller state-owned companies lion euro and bought three retail parks per mining and smelting complex RTB were finally privatised after the first for 29 million euro. 66

Brexit could M&A be good news for M&A scene in SEE

By Marin Drinov, Attorney-at-law, CMS Sofia For more than three acquisitions proved unfounded in the sions, it is normal to expect distur- years Brexit has re- 2016-2018 period, both on a local and on bance in M&A activity. As the acquisi- mained a hot topic a global scale. The SEE market witnessed tion market is governed by people, it not only from a po- an increase in overall deal value of more is understandable that at some points litical perspective, but than 10% in 2018 as compared to 2017 in time it may be highly volatile. In the also from a business whereas the deal volume remained flat current situation executives in charge one. The decision of with an insignificant decrease around of acquisitions may become too cau- F the United Kingdom 1%. As regards the SEE countries, the tious. However, a lot of tension has ac- to leave the European last three years were characterised by cumulated, particularly because of the Union breeds insecurity with respect stable market indicators with little fluc- leave vote and the current positions of to many issues, including trade flows, tuation in deal volume. Both M&A deals both the UK and the EU, and with the travel, working permits, state boarders, and greenfield investments have contin- appointment of the new PM it seems etc. A hard Brexit scenario fuels fears ued to spur economic growth across the that a mutually acceptable exit deal is of a recession, which in the environment region. less probable. of a globalised economy may not only spread over the European continent but But by getting closer to the ‘final exit’ If a balanced deal is reached, we could produce a ripple effect on an even bigger date there are some signs that the con- witness quick growth in M&A activity scale. It seems that no one can predict tinuous increase will be paused, at least in all regions of Europe. However, fol- the exact impact Brexit will have on the for a while. First-quarter data for 2019 lowing the election of Boris Johnson as business but the data accumulated since show a decrease by 23% in global deal prime minister, the Brexit puzzle could the referendum show that there could value and a 33% drop in volume. The take an even more hazardous turn as be surprisingly positive turnarounds, es- downward trend is not limited only to he is without doubt the most vigor- pecially for certain regions in Europe. specific regions such as SEE, but is com- ous defender of the leave vote. Con- mon for the whole of Europe. Deal sidering his political profile and rather The general rule is that political uncer- values and volumes declined across unconventional behaviour, Johnson tainty is bad for the business, yet when most regions and sectors, where cross- could easily become the catalyst for a speaking about merger and acquisition border deals reached their lowest an- no-deal exit on October 31. The fact activity, this may not necessarily be the nual level since 2009. The question now that he is threatening not to honour case. Actually, contrary to expectations, is whether the beginning of this year the payments due to the EU under the the widespread political tension did not marks a significant turning point or just withdrawal agreement and that no- deter the acquisitions in SEE countries a temporary dip before the next rise of deal hardliners are being promoted at during the past years. activity. his office will most probably lead to further deterioration of relations be- Surprisingly, 2018 showed growth in Of course, Brexit is not the only rea- tween the UK and the European Un- M&A deals in Europe and in the SEE re- son why the M&A market is losing ion, making the no-deal leave the more gion in particular. Worries that Brexit momentum. At a time of political tur- likely scenario. vote will affect in a negative way the bulence, economic slowdown, global investors’ appetite for risk with new protectionist policies and trade ten- In a worst-case scenario, the effect on 67

Worries that Brexit M&A vote will dampen investors’ risk appetite proved unfounded in 2016- 2018

A no-deal hard Brexit could be a golden opportunity for SEE

SEE could offer investors stability, the acquisition market in the UK will be which would be crucial for British com- easy access to the extremely negative, according to all but a panies trying to preserve their footprint handful of members of the Conservative on the European market. Furthermore, European market party in London. However, that could be US, Asian and Western European invest- a golden opportunity for the SEE region. ments could be diverted from the UK Any negative effects with respect to the to SEE countries. So far, foreign direct Cheap real estate, British economy have the potential to investment from EU to the UK have de- shift the focus of M&A activity towards creased by 11% and after Brexit the total low-cost labour countries in the Union. British compa- amount of foreign direct investments to nies planning their post-Brexit strategy the UK is estimated to decline by 22%. market, well- could start acquisitions in regions with developed transport relatively stable indicators such as SEE in All of the incentives mentioned above, order to better withstand the possible combined with additional benefits such links make SEE downturn. as cheap real estate and low-cost labour market, as well as well-developed a good choice for For UK companies considering moving transport links offered by SEE countries investors to continental Europe, the SEE region make the region a promising choice for is a logical choice. A number of British investors. During the past decade a ma- companies have already been operat- jor part of the foreign investments was ing in the region and are considering distributed among Central European Brexit should not be underestimated expanding their presence in Southеast countries, but as living standards rose, as a threat for the smooth economic European countries. In case of a no-deal the price of investing in that region also development of the SEE region. The Brexit, SEE countries could be a reas- went up. SEE countries may now grasp downturn trend in M&A transactions suring option for investors with the sta- this opportunity to attract some of the could continue due to accumulation bility and easy access to the European investments by providing similar quality, of concussions following the UK exit market that they offer. According to a yet at a better price. and negative effects of other interna- recent study by the London School of tional conflicts. However, considering Economics, British companies have al- On the downside, a hard Brexit is ex- the substantial amounts of free capital ready diverted more than 10 billion dol- pected to have a negative effect on currently available and the willingness lars of investment to EU countries due the GDP of SEE countries estimated of investors to get involved in other to Brexit (12% increase in new foreign at around 1%, as this could also impact parts of capital structure, such nega- direct investment projects in EU coun- M&A activity in the region. However, tive trend will probably result only in tries by UK companies). cheap financing due to low interest a temporary setback. Free capital with rates, the increased presence of private private equity and pension funds will In a number of regulated industries, the equity capital and the never-lasting de- not remain idle for long and as prob- acquisition of strategic targets in EU sire of big investors to search for new lems often create opportunities for member countries would facilitate busi- opportunities will most likely offset any quick and adaptive investors, mergers ness operations across the entire bloc, drop in GDP. should be getting in motion. 68

Brexit in SEE media: Moldovan outlets muse over Dacia car sales in UK, Bosnian SEE LANDSCAPE worry about EUFOR’s future

By Petar Galev, Viktor Laskov, Perceptica

This analysis looks into the most popular words and phrases in Brexit-related articles in Southеast European media in March-August of 2019, which reflect the dominant attitudes in the respective countries and the region as a whole. The period covers some of the most turbulent chapters of the Brexit saga, including the multiple votes on Theresa May’s withdrawal bill, her resignation and the appointment of Boris Johnson as prime minister. Balkan media were mostly curious rather than worried about Brexit and its consequences for their countries’ economies or the rights of their citizens. News about every key development made the rounds in all major media outlets across the region. The vast majority, however, treated the issue more as a spectacle, each act proving to be more amusing than the previous. Unsurprisingly, media in the EU member states in SEE covered more extensively than non-members the expected impact of Brexit on the future of their citizens residing in the UK, as well as the overall influence of the UK’s depar- ture on their economies. While Brexit media coverage in different countries shared many common features, the degree of attention was different and some country specifics emerged. For Bosnian media, a possible withdrawal of the UK from EUFOR, the EU’s peacekeeping force in the country, was a major concern. Media in Moldova, a country with close historical and cultural ties to Romania, paid attention to the expected impact of Brexit on sales of Romanian car maker Dacia in the UK.

BULGARIA Given the amount of media coverage received, Brexit seemed more important than a lot of prominent national issues that unfolded during the six months under review. Although Theresa May and Boris Johnson were undoubtedly in the spotlight, Bulgarian media also turned a lot of attention to what other European leaders and institutions said on the matter. Media repeatedly published articles detailing the effects for Bulgarians working in the UK. With a hard Brexit looming, media outlets focused on projections that such an outcome would cost Bulgaria 18,000 jobs and a 0.38% drop in GDP. Statements that a no-deal Brexit would spell an end to the free movement of people were hardly mitigated by news that telecoms planned no price hikes for calls to the UK or that Bulgarian consumers might gain access to cheaper British goods. 69

CROATIA LANDSCAPE SEE Croatian media focused on Brexit developments unfolding within the UK. Media paid special attention to statements Boris Johnson made as prime minister, while their coverage of Theresa May was slightly less extensive. Key topics were the prospect of a no-deal Brexit, the calls for a new referendum and the heated debates in the UK Parliament. Media also focused on the potential impact of a no-deal Brexit on non-EU countries such as Russia and China. They emphasized that unlike the EU, which stands to lose from Brexit, Russia and China, as well as the U.S., may gain from it.

ROMANIA Romanian media generated a substantial amount of coverage with a no- deal Brexit portrayed as an unfavourable solution given the uncertainty about the personal and professional future of Roma- nian expats in the UK. Local journalists paid special attention not only to stakeholders in the UK, but also in the EU, closely following statements made my Angela Merkel, Jean-Claude Juncker and representatives of the European Commission. The most popular topics included news of UK-based companies relocating to other EU member states where the focus was on the opportunities for Romania to attract such companies and benefit from the Brexit. Surveys among UK citizens claiming that they want a Brexit “by any means necessary” also received substantial coverage.

ALBANIA Media coverage in Albania, a non-EU country, appeared to be impartial when it came to the Brexit process both in the UK and in the EU as a whole. With no-deal Brexit fast approaching, media reported that the EU is losing hope for a favourable outcome of the negotiations. Albanian media paid attention to the opinion of state leaders such as Emmanuel Macron and Angela SLOVENIA Merkel, focusing on Slovenian media were particularly active dur- Macron’s tough stance on ing Theresa May’s days as prime minister. The further amendments to the potential delay of Brexit was an important topic Brexit deal and Merkel’s that attracted great attention. Coverage included optimism that a solution can political proceedings, as well as articles on the be found no matter that Brexit implications for both the UK and the EU renegotiation of the deal is citizens. Slovenian media have also reported that no longer on the table. Britons are stockpiling food and other goods with the October 31 Brexit deadline approaching. In contrast to the stubborn Britons, EU officials were portrayed as a pro-active party in tack- ling the Brexit impasse in a flexible manner. In particular, the President of the European Council Donald Tusk received high media attention with his proposal for a 12-month delay to Brexit. Local media also emphasized that regardless of Brexit happening with or without a deal the UK will have certain obligations to fulfil. This referred to an estimated 39 - 43 billion British pounds of liabilities to the EU. 70

MOLDOVA Media coverage was dominated by Moldovan-language outlets, with Russian-language ones producing just a handful of articles during the period. Due to a large number of locals holding dual citizenships with Romania, local media were particularly interested in what Brexit would entail for Romanian citizens. Statistics on the number of EU nationals submitting documents for UK residency status were quoted, stressing that Romanians account for a sizeable part of all applications – 90,000 out of a total of 750,000. Besides EU and UK stakeholders, Moldovan media often quoted Romanian political fig- SEE LANDSCAPE ures, as President Klaus Iohannis was in the spotlight in reports about an EU summit to set a new Brexit deadline. Curiously, Moldovan media also focused on sales of Romanian car producer Dacia in the UK, reporting an 85% spike in sales volume before Brexit.

NORTH MACEDONIA As an EU candidate country, North Macedonia was not much worried about the potential implications of Brexit on its citizens. The topic did not make headlines over the past six months, nor was it heavily discussed by local politicians. The parliament in Skopje did look into the possible effects of Brexit on the national economy, but once again no big headlines or serious media discussion followed. Media seemed fascinated with the way British politicians swerved from a deal to a hard Brexit’ or second referendum and a no-deal situation. Some outlets went as far as describing the whole process as “Faux Brexit” and “telenovela” in their articles in mid-March when the British Parliament was gearing up for a third vote on May’s deal.

SERBIA Serbian media were not as active in following Brexit as outlets in other countries from the region. The fact that they rarely bothered to mention the exact day of a major event, reporting that it would take place in a certain month, showcases the general lack of interest in the topic. A possible explanation is that Serbia seems to have little stake in Brexit, as evidenced by the lack of any news mentioning a possible impact on the country or its citizens. Although Serbian businesses were barely mentioned in the media coverage, local media perceived as newsworthy plans by Russia’s Sberbank to avoid no-deal risks by opening branches of its Cypriot business in London . As a whole, Serbian media presented Brexit as a more or less chaotic and disorderly process. Some of them also criticized the British authorities for having sent military helicopters to the Estonian border with Russia at a time when they had a much more urgent issue at home.

BOSNIA AND HERZEGOVINA Understandably, Bosnian media were a lot more involved with Brexit than Serbian ones because of the potential impact of a UK withdrawal from the EU’s peacekeeping operation in Bosnia and Herzegovina, which could have significant ramifications for it. This made local outlets particularly wary of the growing prospects of a ‘chaotic’ no-deal exit. This is the only implication Brexit would have on Bosnia and Herzegovina, according to local media. Bosnian outlets also tended to focus on what European leaders and EU institutions said about Brexit. Merkel, in particular, was mentioned more often than May and almost as often as Johnson.

Perceptica (www.perceptica.com) is a team of professionals specialised in creating innovative in-depth reports based on online media analytics. Mapping brand perceptions among customers provides valuable insights for helping brands, individuals and organisations thrive. 71 SEE LANDSCAPE SEE Albania

TOP 10 in millions of euro SEE TOP Total revenue Y/Y change in Net profit/ Net profit/ No Company name Industry 100 No 2018 revenue loss 2018 loss 2017 1 120 Kastrati Sh.a. Petroleum/Natural Gas 500.4 41.73% 9.950 7.481 Operatori i Shperndarjes se Energjise Elektrike (OSHEE) 2 134 Electricity 459.0 -7.87% 14.829 14.647 Sh.a. 3 212 SPIECAPAG - Albania Branch Construction 279.5 17.46% 9.405 15.065

4 269 Bankers Petroleum Albania Ltd. Petroleum/Natural Gas 228.5 10.24% N/A 4.412

5 288 Kurum International Sh.a. Metals 211.4 30.19% 4.445 2.744

6 299 Korporata Elektroenergjitike Shqiptare Sh.a. (KESH) Electricity 195.8 115.52% 135.300 N/A

7 314 Genklaudis Sh.a. Petroleum/Natural Gas 185.6 10.50% 1.015 0.840

8 383 Europetrol Durres Albania Sh.a. Petroleum/Natural Gas 140.5 -20.27% N/A 0.783

9 401 Vodafone Albania Sh.a. Telecommunications 132.7 7.46% 10.178 7.859

10 410 Kastrati Sh.p.k. Petroleum/Natural Gas 130.7 11.71% 4.593 5.364

Source: National Registration Center Albania, Monitor magazine (www.monitor.al), Company annual reports

GDP and GVA FDI (in billions of Albanian leks) GDP GVA (in millions of euro) 1 600 000 1 100

1 400 000 1 050 1 200 000 1000 1 000 000

800 000 950

600 000 900 400 000 850 200 000

0 800 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 Source: Institute of Statistics Source: Bank of Albania

ALBANIA ECONOMY FORECAST UNEMPLOYMENT RATE FORECAST (y/y change in %) (% of total labour force)

Volume of imports of goods and services Gross domestic product, constant prices 13.8 Volume of exports of goods and services Inflation, average consumer prices 7 13.6

6 13.4 5 13.2 4

3 13 2 12.8 1

0 12.6 2019 2210 2021 2022 2023 2019 2020 2021 2022 2023 Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2019 Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2019 SEE LANDSCAPE BOSNIA ANDHERZEGOVINAECONOMYFORECAST (in billionsofBosnianmarka) Source: Ltd, LRCEngineering Sarajevo 10 TOP HerzegovinaBosnia and GDP andGVA (y/y changein%) 0 1 2 3 4 5 6 7 8 2019 No 10 10 000 9 8 7 6 5 4 3 2 1 15 000 20 000 25 000 30 000 35 000 5 000 Volume ofexportsgoodsandservices Volume ofimportsgoodsandservices 0 SEE TOP 100 No 239 234 227 225 218 162 132 108 101 94 2013 Boreas d.o.o. Kresevo HTlcm d.d.BH Telecom Petrol BHOilCompany d.o.o. Sarajevo Hifa-Oil d.o.o. Aluminij d.d. ArcelorMittal Zenicad.o.o. Optima Grupa d.o.o.Optima Grupa BanjaLuka JP Elektroprivreda BiHd.d. JP Elektroprivreda ig d.o.o. TuzlaBingo Holdina d.o.o. Sarajevo 2020 2014 Source: InternationalMonetary Fund(IMF)WorldEconomicOutlookDatabase–April 2018 Company name Company 2015 2021 2016 Inflation, averageconsumerprices Gross domesticproduct,constantprices Source: AgencyforStatisticsofBosniaandHerzegovin 2017 2022 Wholesale/Retail Telecommunications Petroleum/Natural Gas Petroleum/ Gas Natural Metals Metals Petroleum/Natural Gas Electricity Wholesale/Retail Petroleum/Natural Gas 2018 GD 72 P Industry 2023 GV A a (% UNEMPLOYMENT RATEFORECAST (in millionsofBosnianmarka) FDI Total revenue 40 45 50 55 60 65 70 75 80 85 10 12 14 16 18 20 of 0 2 4 6 8 0 0 0 0 0 0 0 0 0 0 tota Source: InternationalMonetary Fund(IMF)WorldEconomicOutlookDatabase-April 2019 250.1 255.9 264.9 267.0 276.1 384.4 469.8 542.3 568.7 603.0 2018 2013 2019 l labour forc 2014 Y/Y change in Y/Y change 2020 revenue e) 17.96% 50.60% 10.40% 22.34% 38.04% -3.23% -8.17% 6.49% 7.34% 6.94% 2015 2021 Source: CentralBankofBosniaandHerzegovin Net profit/ loss 2018 -36.008 -44.734 28.735 26.783 39.067 -1.693 2016 0.687 2.971 4.928 1.185 2022 in millions of euroin millions of 2017 Net profit/ loss 2017 -10.766 -30.543 32.269 37.040 -6.024 1.672 2.917 3.531 0.317 1.680 2023 2018 a 73 SEE LANDSCAPE SEE Bulgaria

TOP 10 in millions of euro SEE TOP Total revenue Y/Y change in Net profit/ Net profit/ No Company name Industry 100 No 2018 revenue loss 2018 loss 2017 1 6 Lukoil Neftochim Burgas AD Petroleum/Natural Gas 3 008 1.55% -130.0 155.4

2 8 Aurubis Bulgaria AD Metals 2 576 -2.37% 103.5 201.2

3 18 Lukoil-Bulgaria EOOD Petroleum/Natural Gas 1 704 23.91% 0.530 -3.1

4 20 Natsionalna Elektricheska Kompania EAD Electricity 1 650 2.76% -37.7 3.5

5 53 Saksa OOD Petroleum/Natural Gas 869.2 57.09% 8.1 5.7

6 60 Kaufland Bulgaria EOOD & Co KD Wholesale/Retail 803.1 5.22% 36.2 39.0

7 85 Bulgargaz EAD Petroleum/Natural Gas 666.7 15.70% -16.4 4.8

8 91 Express Logistic and Distribution EOOD Wholesale/Retail 626.7 14.66% 1.4 -5.2

9 93 Astra Bioplant EOOD Petroleum/Natural Gas 611.1 12.50% 6.6 1.0

10 97 AETs Kozloduy EAD Electricity 574.1 20.31% 83.6 60.3

GDP and GVA FDI (in billions of Bulgarian levs) GDP GVA (in billions of Bulgarian levs) 90 000 2.800

85 000 2.400

80 000 2.000

1.600 75 000 1.200 70 000 0.800

65 000 0.400

0 60 000 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 Source: Bulgarian National Bank Source: National Statistical Institute

BULGARIA ECONOMY FORECAST UNEMPLOYMENT RATE FORECAST (y/y change in %) (% of total labour force) Volume of imports of goods and services Gross domestic product, constant prices 6 Volume of exports of goods and services Inflation, average consumer prices 6 5

5 4

4 3 3 2 2

1 1

0 0 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2018 Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2019 74 Croatia

TOP 10 in millions of euro SEE TOP Total revenue Y/Y change in Net profit/ Net profit/ SEE LANDSCAPE No Company name Industry 100 No 2018 revenue loss 2018 loss 2017 1 7 INA d.d. Petroleum/Natural Gas 2 956 19.25% 179.8 189.8

2 31 Hrvatska Elektroprivreda d.d. Electricity 1 269 6.69% 47.7 48.4

3 33 Konzum d.d. Wholesale/Retail 1 245 -0.51% -38.3 -525.2

4 41 Prvo Plinarsko Drustvo d.o.o. Petroleum/Natural Gas 1 101 5.74% 15.1 33.7

5 59 Hrvatski Telekom d.d. Telecommunications 835.0 -1.13% 133.6 111.9

6 72 Petrol d.o.o. Petroleum/Natural Gas 734.3 15.82% 12.0 8.1

7 74 Crodux Derivati Dva d.o.o. Petroleum/Natural Gas 721.6 36.68% 15.5 11.9

8 78 Lidl Hrvatska d.o.o. k.d. Wholesale/Retail 697.6 11.47% 37.9 35.6

9 100 Plodine d.d. Wholesale/Retail 569.0 -0.46% 16.0 14.7

10 104 Spar Hrvatska d.o.o. Wholesale/Retail 565.3 23.30% -5.5 -13.8

GDP and GVA FDI (in billions of Croatian kuna) GDP GVA (in billions of Croatian kuna) 370 2.5 360 2

350 1.5 340 1 330 320 0.5 310 0 300 -0.5 290 280 -1 270 -1.5 260 -2 250 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 Source: Croatian Bureau of Statistics Source: Croatian Bureau of Statistics

CROATIA ECONOMY FORECAST UNEMPLOYMENT RATE FORECAST (y/y change in %) (% of total labour force)

Volume of imports of goods and services Gross domestic product, constant prices 9.5 Volume of exports of goods and services Inflation, average consumer prices 8 9 7 8.5 6 8 5

4 7.5 3 7 2 1 6.5

0 6 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2018 Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2019 75 SEE LANDSCAPE SEE North Macedonia

TOP 10 in millions of euro SEE TOP Total revenue Y/Y change in Net profit/ Net profit/ No Company name Industry 100 No 2018 revenue loss 2018 loss 2017 1 17 Johnson Matthey DOOEL Chemicals 1 752 18.05% 97.8 96.8

2 137 Okta AD Petroleum/Natural Gas 448.2 18.97% -1.6 3.3

3 173 EVN Macedonija AD Electricity 370.0 -7.16% 17.2 27.6

4 179 Makpetrol AD Petroleum/Natural Gas 357.8 16.96% 12.7 4.9

5 273 Elektrani Makedonija AD Electricity 223.4 2.02% 27.2 8.6

6 275 Kromberg & Schubert Macedonia DOOEL Wholesale/Retail 223.1 47.30% 3.9 2.7

7 325 Van Hool Makedonija DOOEL Automobiles 179.2 32.16% 12.4 9.3

8 337 Makedonski Telekom AD Telecommunications 172.9 2.10% 23.1 22.5

9 376 GEN-I DOOEL Electricity 147.3 20.44% 0.347 0.302

10 387 EVN Elektrodistribucija DOOEL Electricity 139.5 -5.03% -7.6 4.7

Source: Company annual reports, SeeNews database

GDP and GVA FDI (in billions of Macedonian denars) GDP GVA (in millions of euro)

460 450

440 400 420 350 400

380 300

360 250 340 200 320

300 150 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 Source: State Statistical Office of the Republic of North Macedonia National Bank of the Republic of North Macedonia

NORTH MACEDONIA ECONOMY FORECAST UNEMPLOYMENT RATE FORECAST (y/y change in %) (% of total labour force)

Volume of imports of goods and services Gross domestic product, constant prices 19.5 Volume of exports of goods and services Inflation, average consumer prices 19 12 18.5 10 18 8 17.5 6 17 4 16.5 2 16

0 15.5 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2019 Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2019 76 Moldova

TOP 10 in millions of euro SEE TOP Total revenue Y/Y change in Net profit/ Net profit/ SEE LANDSCAPE No Company name Industry 100 No 2018 revenue loss 2018 loss 2017 1 189 Moldovagaz SA Petroleum/Natural Gas 332.8 -18.42% 9.8 94.4

2 308 Energocom SA Electricity 189.3 22.90% 1.1 0.289

3 392 Termoelectrica SA Electricity 137.0 7.41% 9.5 1.9

4 459 Orange Moldova SA Telecommunications 115.2 -22.46% N/A 21.3

5 528 Floarea Soarelui SA Food/Drinks/Tobacco 92.0 73.00% 0.102 1.7

6 531 Moldtelecom SA Telecommunications 91.7 -5.36% 3.0 3.0

7 604 Metalferos SA Waste management 74.2 12.20% 2.4 2.1

8 700 Supraten SA Building materials 56.8 -4.96% 1.9 2.8

9 729 Tirex-Petrol SA Petroleum/Natural Gas 53.4 5.04% 1.8 0.533

10 737 Moldcell SA Telecommunications 52.1 -25.10% N/A -13.8

GDP and GVA FDI (in billions of Moldovan lei) GDP GVA (in millions of US dollars)

200 350

180 300

160 250 140 200 120 150 100

80 100

60 50 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 National Bureau of Statistics of the Republic of Moldova Source: National Bank of Moldova

MOLDOVA ECONOMY FORECAST UNEMPLOYMENT RATE FORECAST (y/y change in %) (% of total labour force) 4.2 Volume of imports of goods and services Gross domestic product, constant prices Volume of exports of goods and services Inflation, average consumer prices 10 4.15 9

8 4.1 7

6 4.05 5

4 4 3

2 3.95 1 0 2019 2020 2021 2022 2023 3.9 2019 2020 2021 2022 2023 Source: International Monetary Fund (IMF) World Economic Outlook Database - April 2019 Source: International Monetary Fund (IMF) World Economic Outlook Database - April 2018 77 SEE LANDSCAPE SEE Montenegro

TOP 10 in millions of euro SEE TOP Total revenue Y/Y change in Net profit/ Net profit/ No Company name Industry 100 No 2018 revenue loss 2018 loss 2017 1 192 Elektroprivreda Crne Gore A.D. Electricity 326.3 18.13% 44.1 -0.948

2 201 China Road & Bridge Corporation D.O.O. Civil Engineering 294.5 2.00% -142.9 -127.1

3 264 Voli Trade D.O.O. Wholesale/Retail 230.7 10.35% 4.5 4.3

4 348 Jugopetrol A.D. Petroleum/Natural Gas 164.8 20.98% 6.8 7.6

5 371 Hard Discount Lakovic D.O.O. Wholesale/Retail 150.6 13.91% 3.7 3.0

6 439 Mercator-CG D.O.O. Wholesale/Retail 120.7 -3.60% 0.455 0.332

7 460 Bemax D.O.O. Metals 115.0 32.16% 13.3 20.7

8 543 Uniprom D.O.O. Transportation 88.1 -14.70% 0.910 0.154

9 557 Crnogorski Telekom A.D. Telecommunications 85.8 -0.70% 7.3 5.1

10 578 Montenegro Airlines A.D Transportation 80.2 13.91% -2.0 -15.9

GDP and GVA FDI (in billions of euro) GDP GVA (in millions of euro) 5 900 850 4.5 800 4 750 700 3.5 650 600 3 550 2.5 500 450 2 400 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 Source: Statistical Office of Montenegro Source: Central Bank of Montenegro

MONTENEGRO ECONOMY FORECAST IMPORTS, EXPORTS FORECAST (y/y change in %) (y/y change in %) 4 Gross domestic product, constant prices Inflation, average consumer prices 3 3.5 2 3

2.5 1

2 0 1.5 -1 1 imports -2 0.5 exports -3 0 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2019 Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2019 78 Romania

TOP 10 in millions of euro SEE TOP Total revenue Y/Y change in Net profit/ Net profit/ SEE LANDSCAPE No Company name Industry 100 No 2018 revenue loss 2018 loss 2017 1 1 Automobile-Dacia SA Automobiles 5 348 6.54% 161.3 115.7

2 3 OMV Petrom SA Petroleum/Natural Gas 4 121 20.92% 831.8 515.0

3 4 OMV Petrom Marketing SRL Petroleum/Natural Gas 3 864 18.50% 89.8 68.8

4 5 Rompetrol Rafinare SA Petroleum/Natural Gas 3 043 22.77% -49.4 89.8

5 11 Rompetrol Downstream SRL Petroleum/Natural Gas 2 362 21.71% 16.3 36.2

6 12 Kaufland Romania SCS Wholesale/Retail 2 349 8.00% 169.1 143.9

7 13 Ford Romania SA Automobiles 2 286 111.82% 37.8 20.5

8 15 British American Tobacco (Romania) Trading SRL Automobiles 2 078 8.30% 33.3 65.6

9 19 Lidl Discount SRL Wholesale/Retail 1 698 20.12% 88.4 75.7

10 21 Lukoil Romania SRL Petroleum/Natural Gas 1 615 26.03% 14.0 18.4

GDP and GVA FDI (in billions of Romanian lei) GDP GVA (in billions of euro) 170 5

160 4.5

150 4 140 3.5 130 3 120 2.5 110

100 2 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 Source: National Bank of Romania Source: National Institute of Statistics ROMANIA ECONOMY FORECAST UNEMPLOYMENT RATE FORECAST (y/y change in %) (% of total labour force) 5.05 Volume of imports of goods and services Gross domestic product, constant prices Volume of exports of goods and services Inflation, average consumer prices 5 10 9 4.95 8 4.9 7 6 4.85 5 4.8 4 3 4.75 2 4.7 1 0 4.65 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Source: International Monetary Fund (IMF) World Economic Outlook Database - April 2019 Source: International Monetary Fund (IMF) World Economic Outlook Database - April 2019 79 SEE LANDSCAPE SEE Serbia

TOP 10 in millions of euro SEE TOP Total revenue Y/Y change in Net profit/ Net profit/ No Company name Industry 100 No 2018 revenue loss 2018 loss 2017 1 10 JP Elektroprivreda Srbije Electricity 2 376 2.34% 13.5 28.8

2 14 Naftna Industrija Srbije AD Petroleum/Natural Gas 2 250 14.90% 221.2 235.3

3 29 Serbia Zijin Bor Copper DOO (former RTB Bor DOO) Metals 1 316 295.40% 764.2 8.3

4 46 HBIS Group Serbia Iron & Steel DOO Metals 907.1 30.16% 0.209 0.021

5 50 Delhaize Serbia DOO Wholesale/Retail 881.5 7.28% 22.6 36.1

6 65 Telekom Srbija AD Telecommunications 784.1 -1.51% 86.3 123.2

7 67 FCA Srbija DOO Automobiles 777.2 -21.91% 12.9 18.0

8 69 JP Srbijagas Petroleum/Natural Gas 744.9 -1.98% 49.3 141.6

9 71 Mercator-S DOO Wholesale/Retail 735.4 -6.89% -14.1 -58.0

10 73 EPS Distribucija DOO Electricity 723.3 -1.61% -21.1 19.7

GDP and GVA FDI (in millions of euro) (in billions of Serbian dinars) GDP GVA 3 800 3 000

3 600 2 500 3 400 2 000 3 200

3 000 1 500

2 800 1 000 2 600

2 400 500 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 Source: National Bank of Serbia Source: Statistical Office of the Republic of Serbia

SERBIA ECONOMY FORECAST UNEMPLOYMENT RATE FORECAST (y/y change in %) (% of total labour force)

Volume of imports of goods and services Gross domestic product, constant prices 13.6 Volume of exports of goods and services Inflation, average consumer prices 9 13.2 8 7 6 12.8 5 4 12.4 3

2 12 1 0 2019 2020 2021 2022 2023 11.6 2019 2020 2021 2022 2023 Source: International Monetary Fund (IMF) World Economic Outlook Database - April 2019 Source: International Monetary Fund (IMF) World Economic Outlook Database - April 2019 80 Slovenia

TOP 10 in millions of euro SEE TOP Total revenue Y/Y change in Net profit/ Net profit/ SEE LANDSCAPE No Company name Industry 100 No 2018 revenue loss 2018 loss 2017 1 2 Petrol d.d. Petroleum/Natural Gas 4 365 15.15% 100.6 64.3

2 9 GEN-I d.o.o. Electricity 2 396 -2.45% 13.0 13.5

3 16 Revoz d.d. Automobiles 1 777 11.46% 33.6 34.8

4 25 Holding Slovenske Elektrarne d.o.o. Electricity 1 519 -8.35% 9.5 19.7

5 34 Krka d.d. Pharmaceuticals 1 236 2.74% 163.3 153.7

6 37 Poslovni Sistem Mercator d.d. Wholesale/Retail 1 191 -0.71% -10.9 -203.7

7 42 Lek d.d. Pharmaceuticals 1 090 12.96% 116.7 83.2

8 58 Gorenje d.d. Electricity 839.1 1.96% -126.8 0.473

9 61 OMV Slovenija d.o.o. Petroleum/Natural Gas 802.5 29.05% 24.0 21.8

10 62 IMPOL d.o.o. Metals 800.7 6.54% 18.8 19.6

GDP and GVA FDI (in billions of euro) GDP GVA (in millions of euro) 45 1400

1200 40 1000

35 800

30 600

400 25 200

20 0 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018

Source: Statistical Office of the Republic of Slovenia Source: Bank of Slovenia

SLOVENIA ECONOMY FORECAST UNEMPLOYMENT RATE FORECAST (y/y change in %) (% of total labour force)

Volume of imports of goods and services Gross domestic product, constant prices 5.2 Volume of exports of goods and services Inflation, average consumer prices 10 5.1 9 5 8

7 4.9 6 5 4.8 4 4.7 3 2 4.6 1 0 4.5 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Source: International Monetary Fund (IMF) World Economic Outlook Database - April 2019 Source: International Monetary Fund (IMF) World Economic Outlook Database - April 2019 reklama tek SEE news 2019-1.pdf 1 28/08/2019 5:15:22 PM

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