Bulgaria's Port Varna Gets Record Freight Traffic in August

Map by port-varna.bg

Bulgaria's Black Sea Port Varna registered a record amount of monthly freight traffic in August 2011, and a substantial increase in the first eight months of 2011.

In January-August 2011, the freight traffic at Port Varna increased by 10% year-on-year, reaching BGN 5.5 million metric tons, the Bulgarian Transport Ministry announced.

In August alone, Bulgaria's Port Varna processed a total of 1.014 million metric tons of trade items, which an absolute monthly record for the port.

The major share of the freight traffic in Port Varna has been generated by grain exports as well as the exports of the fertilizer plants in the industrial complex in Devnya.

Only on August 31, Port Varna-East processed 3000 trucks with 30 000 metric tons of grain, including wheat, corn, rapeseed, and barley).

The container traffic at Port Varna also saw an increase in January-August 2011 – it grew by 8% year-on-year reaching a total of 82 000 TEU.

Because of the increased grain trade, Port Varna-West, which is located 22 km inside the coast and is linked with the Black Sea through a canal via the Varna Lake and the Beloslav Lake, has also been fit for processing grain through a renovation of its storage and loading facilities.

Port Varna is working on its computerized system for the electronic processing of all goods that are not transported in containers, which is the last phase of its full-fledged electronic document system for the entire freight traffic expected to be completed in March 2012.

According to the Port Varna management, the port will have processed more than 8 million metric tons of freight in 2011.

In spite of the good news about the port's increased freight traffic, the past three years have been marked about the government's indecision about the expansion of Port Varna.

At the end of February 2011, Bulgaria's Cabinet decided to start talks with Japan to annual a low-interest loan previously deemed to be of crucial importance for the development of Bulgarian Black Sea ports Varna and Burgas.

The loan of a total of JPY 37 B, or BGN 640 M, from the Japan Bank for International Cooperation/Japan International Cooperation Agency negotiated in 2008 was supposed to be used for building two new container terminals at Port Varna and Port Burgas on the Black Sea.

"This would have been an investment that is very hard to repay, and it could not have been done with the funds of Port Varna," Port Varna CEO Danail Papazov said in June 2011 defending the Cabinet's decision to give up the Japanese loan.

Bulgaria's Borisov Cabinet has made it clear it decided to go for a termination of the Japanese loan for Port Varna because of the great hardship currently experienced by state company "Port Infrastructure" and Port Burgas Jsc with the repayment of a previous loan that Bulgaria got from Japan for the construction of a bulk cargo terminal.  

The brand new terminal at Port Burgas there was constructed with a USD 188 M (BGN 250 M) loan from the Japan Bank for International Cooperation, signed in 1998.

The terminal, however, was completed only in 2009 at a time when the formerly largest Bulgarian steel-maker Kremikovtzi located near Sofia, which previously accounted for over 50% of the turnover of the Burgas port, went bankrupt and is now set for liquidation. This left the new Burgas terminal almost empty and unused, while the state and the port authority are paying off the loan, a situation that even led to protests on part of the port employees.

The situation is exacerbated by the fact that the new Port Burgas terminal was built for bulk cargoes and is not fit for containers and container trade of goods.

Bulgaria negotiated the second low-interest development loan from Japan in the last moment in 2008 as it is no longer eligible for Japanese development aid after becoming an EU member. The loan has a seven-year grace period, and will go into repayment in 2015; its interest rate is 1.4%.

Most of the BGN 640 M loan – or about BGN 330 M (USD 226 M) were supposed to be invested in the expansion of Port Varna with a new container terminal.

However, the construction of the new terminals in Varna and Burgas never started, and the generous BGN 640 M loan from Japan at present remains unused.

The dire situation with the repayment of the first loan for the ill-conceived bulk cargo terminal built with Japanese money at Port Burgas is the major justification of the Bulgarian government to want to opt out of the second more massive loan from JBIC/JICA.

An analysis of the Transport Ministry adopted by the Borisov Cabinet in March has shown that Port Burgas and the Port Infrastructure company have hardly any way of repaying the already existing loan. Port Burgas has negative financial results, and has borrowed heavily in order to pay its dues to JBIC/JICA, while the Port Infrastructure company is projected to have negative annual balances until 2020 when the first loan will be repaid.

The state Port Infrastructure company is supposed to cover BGN 191 M of the loan, while Port Burgas will repay BGN 55.9 M.

Thus, back in March the Borisov Cabinet assigned the Ministers of Finance, Foreign Affairs, and Transport with the task to handle the talks with the Japanese for the termination of the otherwise favorable second loan.

In a desperate attempt to find some kind of use for the ill-fated bulk cargoes terminal in Port Burgas, in early February 2011, the government started a procedure to grant it on a concession, with the major requirement for the candidates being that the future operator cover the installments under the 1998 loan. It is still unclear how many bidders the procedure will attract even though the Transport Ministry claims that there is a huge interest on part of foreign investors.

In June 2010, Bulgaria's then Transport Minister Alexander Tsvetkov and Deputy Transport Minister Ivaylo Mosovski (who succeeded Tsvetkov in May 2011) suggested that the project for the new port container terminal in Varna has to be reconsidered because of the fate of the project in the other major Bulgarian Black Sea Port of Burgas.

Back then, Tsvetkov announced that the present Bulgarian government also approached the Japan Bank for International Cooperation with a request to consider funding with a loan the rehabilitation and the expansion of the railway line between the Black Sea Port of Varna and the Danube River Port of Ruse; the Japanese, however, were "lukewarm" to this idea.

Tsvetkov did point out that the Bulgarian state budget could not afford to fund the improvement of the Varna-Ruse rail line, and it was also not eligible for funding from the EU funds under the current financial framework expiring in 2013.

Port Varna consists of two parts - Port Varna-East, which is on the Black Sea coast very close to the city downtown and the central Varna railway station, and Port Varna-West, located in the Beloslav Lake some 22 km inside the land, near the industrial town of Devnya. Statements by Varna officials such as ex City Council head Gutsanov have indicated that Port Varna-East should be moved to open up the area for business and hotel developments, a proposal highly criticized by some Bulgarian scholars.   

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