Study on State asset management in the EU...437 (14.3%) 1 Control 99 (3.2%) 97 2 Fully public 2,318 (75.7%) 2,318 Total 3,063 (100%) 3,057 6 0 Minority Listed Unlisted Country fiches

Written by KPMG and Bocconi University February 2018

Study on State asset management in the EU

Final study report for Pillar 1 – Bulgaria

Contract: ECFIN/187/2016/740792

EUROPEAN COMMISSION

Directorate-General for Economic and Financial Affairs Directorate Fiscal policy and policy mix and Directorate Investment, growth and structural reforms European Commission B-1049 Brussels

Bulgaria

1. PSHS IN THE BULGARIAN ECONOMY

This Country fiche presents a quantitative overview of the mix of equity owned by the

Bulgarian General Government.

The Bulgarian Government has stakes in 3,063 firms1. Overall, the Government has

very tight control of these firms, as more than three quarters of them operate as fully

enterprises (100% owned by the State).

The contribution to the Bulgarian economy is about 4.9% of total weighted assets of the

country. In the Financial sector, the Government is also involved, with a weighted quota

of Shareholders’ funds equal to 16% of the Economy.

Figure 1 Breakdown of PSHs by level of ownership, 2015

Source: KPMG and Bocconi University calculations on Orbis (BvD) database.

1 For Bulgaria, the promotional bank Bulgarian Development Bank was considered for this Study but since it is an entity fully owned by the public administration of the Member State; and Orbis reported consolidated accounts, its holdings were treated as separate PSHs and the promotional bank itself excluded from the sample. See Methodological Notes for more details.

156

436

2,000

2,500

3,000

3,500

1,500

1,000

500

0

n°

of PSH

s

Level of ownership

NO DATA on shareholders

stakes

50(1.6%)

50

159(5.2%)

3

Influential

437(14.3%)

1

Control

99(3.2%)

97 2

Fully public

2,318(75.7%)

2,318

Total

3,063(100%)

3,057

6

0

Minority

UnlistedListed

Country fiches

Bulgaria

4

Figure 2 Breakdown of PSHs with no ownership data by sector, 2015


Figure 3 Breakdown of PSHs’ total assets by level of ownership, 2015, weighted


(1) Values have been weighted by stake(s) owned by the Public sector into PSHs.

Figure 4 Non-financial PSHs contribution to the Bulgarian economy, 2015, weighted

0

1

2

3

4

5

6

7

8

9Nr

20

396

5,000

1,000

3,000

7,000

9,000

11,000

2,000

8,000

6,000

10,000

0

4,000

20(0.2%)

223

Control Influential

557(5.2%)

139

Fully public

10,792(100.0%)

7,793

9,939(92.1%)

22

7,361

2,578

Total

2,976

276(2.6%)

273

Minority

Level of ownership

Weig

hte

dassets

(Mn E

ur)

Non-financial unlistedNon-financial listed Financial unlistedFinancial listed

132,092

8,548

1,538

68

94.1% 5.9%

EmployeesEmployees (% economy)

7,361

161

273

20

95.1% 4.9%

Total assets (Mn Eur)

Total assets (% economy)

Country fiches

Bulgaria

5

Source: KPMG and Bocconi University calculations on Orbis (BvD) database; Eurostat. (1) Values have been weighted by stake(s) owned by the Public sector into PSHs. Value added has been

scaled by GDP (GDP data retrivied from Eurostat). (2) Market capitalization is considered only for listed companies while shareholders’ funds are considered only

for unlisted companies. (3) Market capitalization is reported as of 6th March 2017. (4) For some countries, with respect to the variables “Employees” and “Value added”, the coverage provided

by our Source (Orbis) might not be comprehensive. Furthermore, possible discrepancies between our data and other studies with respect to these specific variables are also likely to be originated by the fact that these variables are presented in this Study on an ownership-weighted basis.

Figure 5 PSHs contribution to the national financial sector, 2015, weighted

2,232

106

31

3

98.2% 1.8%

Revenues (Mn Eur)

Revenues (% economy)

988

5619

1

97.7% 2.3%

Value added (Mn Eur)

Value added (% economy)

699.8% 0.2%

Market cap (Mn Eur)

Market cap (% economy)

3,062

74

199

7

94.6% 5.4%

Shareholders' funds (Mn Eur)

Shareholders' funds (% economy)

169

603

22

98.7% 1.3%

EmployeesEmployees

(% economy)

2,578

396

3

94.5% 5.5%

Total assets (Mn Eur)

Total assets(% economy)

3

17

0.43

99.5% 0.5%

Revenues (Mn Eur)

Revenues(% economy)

1,924

38

2

83.3% 16.7%

Shareholders' fund (Mn Eur)

Shareholders' fund (% economy)

Rest of the Economy PSHs Fully public Control Influential Minority

Rest of the Economy PSHs Fully public Control Influential Minority

Country fiches

Bulgaria

6

Source: KPMG and Bocconi University calculations on Orbis (BvD) database; Eurostat (1) Values have been weighted by stake(s) owned by the Public sector into PSHs. Market capitalization is

reported as of March, 6, 2017. (2) Market capitalization is considered only for listed companies while shareholders’ funds are considered only

for unlisted companies. (3) Market capitalization is reported as of 6th March 2017.

1.1. Distribution of Non-financial PSHs by sector

The most relevant sectors across most measures of economic impact are Transportation

and storage (H), Human health and social work activities (Q). The Water supply and

waste management sector (E), although smaller than the two aforementioned sectors

in terms of weighted assets, represents almost 35% of the entire Industry. Additionally,

this sector generates 40% of the Value added in the Industry as a whole.

Figure 6 Distribution of Non-financial PSHs by sector, 2015, unweighted

0

10

20

30

40

50

60

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

% of industryMn EurTotal assets

PSHs Share of PSHs in the industry

0

10

20

30

40

50

60

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

% of industryNr Number of employees


0

10

20

30

40

50

60

0

100

200

300

400

500

600

700

800

900

% of industryMn EurOperating revenues


Country fiches

Bulgaria

7

Source: KPMG and Bocconi University calculations on Orbis (BvD) database. (1) A - Agriculture, forestry and fishing; B - Mining and quarrying; C – Manufacturing; D - Electricity, gas,

steam and air conditioning supply; E - Water supply, sewerage, waste management and remediation activities; F – Construction; G - Wholesale and retail trade, repair of motor vehicles and motorcycles; H - Transportation and storage; I - Accommodation and food service activities; J - Information and communication; L - Real estate activities; M - Professional, scientific and technical activities; N - Administrative and support service activities; O - Public administration and defence, compulsory social security; P – Education; Q - Human health and social work activities; R - Arts, entertainment and recreation; S - Other service activities; T - Activities of households as employers, undifferentiated goods- and services-producing activities of households for own use; U - Activities of extraterritorial organisations and bodies

(2) Some sectors are not represented in the graphs above, because of two different, mutually excluding reasons; either because no data on those particular sectors are available in our database; or because there are no PSHs operating in those particular sectors in this country.

(3) Values have been weighted by stake of public ownership of the PSHs.

2. FINANCIAL PERFORMANCE OF PSHS AND MARKET ATTRACTIVENESS

2.1. Non-financial PSHs

At a broader level, Bulgarian PSHs exhibit lower and negative profitability than their

Industry peers, measured in terms of ROA, together with a higher level of Labour costs

as compared to Revenues. Moreover, they exhibit a lower degree of financial leverage

than the Industry.

In terms of market attractiveness, the Transportation (H) sector and Water supply (E)

sector exhibit a positive level of profitability; however, sector E shows a negative growth

rate in Revenues. Please note that for the sector Human health and social work activities

(Q) no reliable historical data are available.

Across key sectors of PSHs activity, a pattern of general underperformance of PSHs

emerges, as compared to the Industry or in the best-case scenario, a performance in-

line with the Industry. In the most relevant sectors and across ownership clusters,

higher costs of Labour (compared, in relative terms, to Revenues) are observed. By

contrast, looking at the degree of leverage, PSHs tend to display levels either

comparable or above the Industry peers.

-10

0

10

20

30

40

50

60

-50

0

50

100

150

200

250

300

350

400

450

% of industryMn EurValue added


Country fiches

Bulgaria

8

Figure 7 Performance indicators of Non-financial PSHs in comparison to the national

economy, 2011–2015, yearly averages

Source: KPMG and Bocconi University calculations on Orbis (BvD) database

Figure 8 National market attractiveness of Non-financial PSHs, 2015

Source: KPMG and Bocconi University calculations on Orbis (BvD) database, 2015 [downloaded in December 2016]. (1) The Figure shows only the top 5 markets with the largest contribution to the Gross Domestic Product in

terms of Value Added generated by PSHs. Values of Value Added have been weighted by stake(s) owned by the Public sector into PSHs.

0

4

8

12

16

20

2011 2012 2013 2014 2015

% EBITDA Margin (%)

-10

-5

0

5

10

2011 2012 2013 2014 2015

% ROA (%)

0

15

30

45

60

2011 2012 2013 2014 2015

%Labour costs as % of

operating revenues

10

20

30

40

50

60

70

2011 2012 2013 2014 2015

% Debt to Equity ratio (%)

Whole economyPSHs with stake ≤ 50% PSHs with stake > 50%

-20,0 -15,0 -10,0 -5,0 0,0 5,0 10,0 15,0 20,0

25

20

0

-10

-5

E - Water supply; sewerage, waste management and remediation activities

H - Transportation and storage

EBITDA margin Industry (%)

CAGR Revenues 2011-2015 (%)

Positive GrowthHigh profitability

Positive GrowthLow profitability

Negative GrowthLow profitability

Negative GrowthHigh profitability The size of the bubbles shows weighted value added

generated by PSHs scaled by GDP

Country fiches

Bulgaria

9

(2) The right upper quadrant identifies sectors with high profitability and positive growth, whereas the sectors with low profitability and negative growth tend to be located further down in the left lower quadrant.

(3) Revenue growth rates have been calculated using the Compound Annual Growth Rate of 2011-2015 values; for Value Added and EBITDA margin the value of 2015. For Revenue growth rates estimation, only companies with turnover higher than 50 Mn € are considered.

(4) Please note that sectors Q, L and A are not shown in Figure 6, as data necessarily to calculate Revenues CAGRs is not available.

Figure 9 Profitability profile of Non-financial PSHs by sector and level of ownership,

2015, unweighted

Source: KPMG and Bocconi University calculations on Orbis (BvD) database, 2015 [downloaded in December 2016]. (1) Some PSHs clusters may not be represented in the graphs above, because of two different, mutually excluding reasons; either because no data on those particular clusters are available in our database; or because there are no PSHs belonging to those particular PSHs clusters

Figure 10 Operating efficiency of Non-financial PSHs, 2015, unweighted

Source: KPMG and Bocconi University calculations on Orbis (BvD) database, 2015 [downloaded in December 2016]. (1) Some PSHs clusters may not be represented in the graphs above, because of two different, mutually excluding reasons; either because no data on those particular clusters are available in our database; or because there are no PSHs belonging to those particular PSHs clusters

-10

-5

0

5

10

15

20

25

30

H -Transportationand storage

Q - Humanhealth and socialwork activities

E - Water supply;sewerage, wastemanagement and

remediationactivities

L - Real estateactivities

A - Agriculture,forestry and

fishing

% EBITDA Margin (%)

Fully public Control Influential Minority Industry

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8



E - Watersupply;

sewerage, wastemanagement and




fishing

%ROA (%)


Country fiches

Bulgaria

10

Figure 11 The leverage of Non-financial PSHs, 2015, unweighted

Source: KPMG and Bocconi University calculations on Orbis (BvD) database, 2015 [downloaded in December 2016]. (1) Some PSHs clusters may not be represented in the graphs above, because of two different, mutually

excluding reasons; either because no data on those particular clusters are available in our database; or because there are no PSHs belonging to those particular PSHs clusters

2.2. Financial PSHs

Our dataset includes information only on one PSH in the banking sector, namely,

Municipal Bank Plc, three PSHs operating in the Insurance sector and 14 Other Financial

PSHs. Obviously, the limited coverage does not allow us to carry out any conclusive

benchmarking with respect to the financial and insurance sector as a whole. As far as

Municipal Bank is concerned, in 2015 it showed a higher ROE than the Industry as a

whole, but also a higher quota of Non-performing loans and smaller capitalization. As

far as the PSHs in the Insurance sector are concerned, no clear pattern is to be

identified.

Figure 12 Relevant KPIs for PSHs in the Banking sector in Bulgaria, 2015, unweighted

0

50

100

150

200

250



E - Water supply;sewerage, wastemanagement and




fishing

% Debt to Equity ratio (%)


Country fiches

Bulgaria

11


excluding reasons; either because no data on those particular clusters are available in our database; or because there are no PSHs belonging to those particular PSHs clusters.

Figure 13 Relevant KPIs for PSHs in the Insurance sector, 2015, unweighted,

unweighted



Figure 14 Relevant KPIs for Other financial PSHs, 2015, weighted



-20

-10

0

10

20

30% EBITDA Margin (%)

-8

-6

-4

-2

0

2

4% ROA (%)

0

10

20

30

40

50

60% Labor costs as % of Revenues (%)

0

20

40

60

80% Debt to Equity ratio (%)

IndustryFully public Control Influential Minority



Country fiches

Bulgaria

12

3. PUBLIC FINANCE EFFECTS OF PSHS

At an aggregate level, PSHs generate profits which are almost equal to losses. In 2015,

PSHs generated a slightly negative net income worth about 5 Mn Euro. Total assets

account for 28% of the size of the GDP, and the net financial position of PSHs is positive,

with more than 11 Bn Euro of net worth (about 9 Bn Euro considering the stake of public

ownership). The distributed dividends account for 0.2% of GDP, while outstanding

liabilities represent around 12% of the Bulgarian GDP.

Table 1 Public Finance Effects of PSHs, 2015, unweighted

Source: (a) Orbis data (values not weighted for stake of public ownership) and (c) Eurostat. Data retrieved on 19th September 2017. (b) Net Worth value has been weighted by stake(s) owned by the Public sector into PSHs. (d) Total outstanding liabilities of government controlled entities classified outside general government are

considered. (e) Figures in red represent negative numbers.

Country fiches

Bulgaria

Appendix I Bulgaria

Table A Breakdown of PSHs’ total assets by level of ownership, 2015, weighted

Source: KPMG and Bocconi University calculations on Orbis (BvD) database. (1) Values have been weighted by stake(s) owned by the Public sector into PSHs.

Table B Non-financial PSHs contribution to the Bulgarian economy, 2015, weighted

Source: KPMG and Bocconi University calculations on Orbis (BvD) database. (*) Absolute value. (1) Values have been weighted by stake(s) owned by the Public sector into PSHs. Value added has been

scaled by GDP (GDP data retrivied from Eurostat). (2) Market capitalization is considered only for listed companies while shareholders’ funds are considered only

for unlisted companies. Market capitalization is reported as of 6th March 2017. (3) It must be noted that the total number of PSHs (sum of Number of PSHs Table B and Table C) is lower

than the overall number of PSHs reported earlier in Figure 1, due to missing data on PSHs’ shareholders’ stakes.

Table C PSHs contribution to the national financial sector, 2015, weighted

Source: KPMG and Bocconi University calculations on Orbis (BvD) database. (*) Absolute value. (1) Values have been weighted by stake(s) owned by the Public sector into PSHs. Market capitalization is

considered only for listed companies while shareholders’ funds are considered only for unlisted companies. (2) Market capitalization is reported as of 6th March 2017. (3) It must be noted that the total number of PSHs (sum of Number of PSHs Table B and Table C) is lower

than the overall number of PSHs reported earlier in Figure 1, due to missing data on PSHs’ shareholders’ stakes.

Data in Mn Eur

Ownership cluster Unlisted Listed Total Unlisted Listed Total

Fully Public 7,361 - 7,361 2,578 - 2,578

Control 139 22 161 396 - 396

Influential 273 0 273 3 - 3

Minority 20 0 20 0 0 0

Total 7,793 22 7,815 2,976 0 2,976

Non-financial Financial

Non-financial PSHsNumber

of PSHs

of which

listed

Employees

(%)

Total assets

(%)

Revenues

(%)

Value added

(%)

Market cap

(%)

Shareholders'

funds (%)

Fully Public 2,311 0 5.5 4.7 1.7 2.2 0.0 4.9

Control 96 2 0.4 0.1 0.1 0.1 0.2 0.1

Influential 432 1 0.1 0.2 0.0 0.0 0.0 0.3

Minority 156 2 0.0 0.0 0.0 0.0 0.0 0.0

PSHs' share to the total economy 2,995(*) 5(*) 5.9 4.9 1.8 2.3 0.2 5.4

Financial PSHsNumber

of PSHs

of which

listed

Employees

(%)

Total assets

(%)

Revenues

(%)

Market cap

(%)

Shareholders'

funds (%)

Fully Public 7 0 0.3 4.7 0.1 0.0 16.4

Control 3 0 1.0 0.7 0.4 0.0 0.3

Influential 5 0 0.0 0.0 0.0 0.0 0.0

Minority 3 1 0.0 0.0 0.0 0.0 0.0

PSHs' share to the total economy 18(*) 1(*) 1.3 5.5 0.5 0.0 16.7

Table D PSHs distribution by sector, 2015, weighted

Sector

Average

public

ownership

Total

Sector

Value

Added

Year 2015

of

which

listed

Average % Mn Eur% of

sectorNr

% of

sectorMn Eur

% of

sectorMn Eur

% of

sectorMn Eur

A - Agriculture, forestry and fishing 37 0 66.2 90 1.2 2,553 2.7 34 0.8 15 1.3 1,189

B - Mining and quarrying 10 0 54.3 12 0.4 197 0.6 3 0.2 1 0.1 840

C - Manufacturing 86 2 39.0 41 0.1 1,448 0.2 31 0.1 14 0.2 5,825

D - Electricity, gas, steam and air conditioning supply 19 0 45.1 546 3.3 2,440 6.9 278 3.4 11 1.0 1,128

E - Water supply; sewerage, waste management and remediation

activities74 0 89.5 499 34.3 16,185 45.4 272 30.9 144 40.5 357

F - Construction 37 0 58.1 122 1.1 2,693 1.5 86 0.9 -2 -0.1 1,624

G - Wholesale and retail trade; repair of motor vehicles and

motorcycles42 0 64.8 7 0.0 257 0.0 7 0.0 1 0.0 4,285

H - Transportation and storage 57 0 79.7 4,499 39.8 39,772 22.3 663 9.1 421 21.9 1,920

I - Accommodation and food service activities 37 1 66.3 94 1.9 3,226 2.0 31 1.5 10 1.7 599

J - Information and communication 26 0 65.9 181 2.9 212 0.2 6 0.1 9 0.5 1,745

L - Real estate activities 132 1 52.7 386 2.1 1,598 4.1 36 2.0 19 3.7 516

M - Professional, scientific and technical activities 36 0 77.6 304 3.4 1,096 1.0 41 1.2 11 1.2 930

N - Administrative and support service activities 51 1 77.1 119 3.6 1,464 1.1 11 0.6 4 0.8 543

P - Education 5 0 54.6 0 0.1 60 0.4 1 0.5 0 1.1 43

Q - Human health and social work activities 363 0 96.7 731 48.9 63,870 54.4 857 51.6 396 54.5 727

R - Arts, entertainment and recreation 36 0 45.3 162 12.1 610 2.1 8 0.5 4 1.1 336

S - Other service activities 25 0 76.6 20 1.7 381 1.1 3 0.9 2 3.9 61

INDUSTRIAL 1,073 5 74.6 7,813 4.9 138,061 5.8 2,370 1.8 1,063 4.7 22,667

BANKS 1 0 77.7 396 0.7 603 1.0 17 0.4 n.a. n.a. n.a.

INSURANCE 3 0 65.3 0 0.0 0 0.0 0 0.0 n.a. n.a. n.a.

OTHER FINANCIAL INSTITUTIONS(a) 14 1 55.3 2,580 4.7 192 0.3 4 0.1 n.a. n.a. n.a.

Number of

PSHsTotal assets Number of employees Operating revenues Value added

15

Table E Top 20 PSHs by Total assets, 2015, weighted

Source: KPMG and Bocconi University calculations on Orbis (BvD) database (1) Values have been weighted by stake(s) owned by the Public sector into PSHs.

Company name Listed/Unlisted IndustryOwnership

stake (%)

Total assets

(Mn Eur)

BULGARIAN ENERGY HOLDING EAD Unlisted K - Financial and insurance activities 100.0 2,463

NATIONAL RAILWAY INFRASTRUCTURE

COMPANY DFUnlisted H - Transportation and storage 100.0 2,098

METROPOLITEN EAD Unlisted H - Transportation and storage 100.0 1,033

TOPLOFIKATSIA SOFIA EAD Unlisted D - Electricity, gas, steam and air conditioning supply 100.0 527

BULGARIAN PORTS INFRASTRUCTURE DF Unlisted H - Transportation and storage 100.0 487

MUNICIPAL BANK PLC Unlisted K - Financial and insurance activities 77.7 396

BULGARIAN STATE RAILWAYS HOLDING EAD Unlisted M - Professional, scientific and technical activities 100.0 219

STATE ENTERPRISE AIR TRAFFIC SERVICES

AUTHORITY DFUnlisted H - Transportation and storage 100.0 219

NATSIONALEN DVORETS NA KULTURATA

KONGRESEN TSENTAR SOFIA EADUnlisted L - Real estate activities 100.0 186

SOFIA AIRPORT EAD Unlisted H - Transportation and storage 100.0 136

STOLICHEN ELEKTROTRANSPORT EAD Unlisted H - Transportation and storage 100.0 127

NAVIGATION MARITIME BULGARE AD Unlisted J - Information and communication 30.0 120

STATE ENTERPRISE RADIOACTIVE WASTE DF UnlistedE - Water supply; sewerage, waste management and

remediation activities100.0 107

NATSIONALNA SPORTNA BAZA EAD Unlisted R - Arts, entertainment and recreation 100.0 100

NATSIONALEN GARANTSIONEN FOND EAD Unlisted K - Financial and insurance activities 100.0 97

TSENTAR ZA GRADSKA MOBILNOST EAD Unlisted H - Transportation and storage 100.0 88

BULGARIAN POSTS EAD Unlisted H - Transportation and storage 100.0 73

TEREM EAD Unlisted M - Professional, scientific and technical activities 100.0 68

SOFIA TEH PARK AD Unlisted N - Administrative and support service activities 100.0 67

GLAVNO UPRAVLENIE STROITELSTVO I

VAZSTANOVYAVANE EADUnlisted F - Construction 100.0 65

Documents

Study on State asset management in the EU...437 (14.3%) 1 Control 99 (3.2%) 97 2 Fully public 2,318 (75.7%) 2,318 Total 3,063 (100%) 3,057 6 0 Minority Listed Unlisted Country fiches