Investment Opportunities in Sofia

“GROWS BUT NEVER AGES”

Top x: Templates for Board Presentations

Sofia: Investment OpportunitiesSpeaker: Minko Gerdjikov

Date: March 24th 2009

“GROWS BUT NEVER AGES”

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Quick Facts

• Produces 34% of Bulgaria’s GDP (€12.2 Bn as of 2008) Population 1.6MM (including suburbs and exurbs);

• 730K highly motivated, qualified and flexible workforce;

• Unemployment rate of 1,3%;

• Administrative, cultural, research and business center;

• Current mayor: Boyko Borisov.

About SofiaAbout Sofia

National Assembly Square National Gallery of Art

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Economic GrowthEconomic Growth

GDP Growth 2001-2010EUR Billions1

The Sofia region is the country’s most dynamic cluster of economic activity, characterised by high workforce productivity and GDP per capita levels, as well as impressive GDP growth.

1 Subject to rounding error 2 EUR Thousands

2001 200620042002 2003 2005 20092007 2008 2010

15.216.6

17.8

19.921.9

25.3

29.0

33.8

35.6

37.8

4.2 4.8 5.1 5.8 6.8 8.49.7 11.

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12.2

12.9

Sofia’s share of national GDP (%)

27.6 29.1 28.8 29.3`31.

033.3 33.4 33.8 34.1 34.2

Sofia’s GDP per capita 2 3.6 4.1 4.2 4.8 5.5 6.8 7.8 9.2 9.9 10.2

Highlights

• Sofia accounts for 16% of the country’s population but produces 34% of the national GDP

• Sofia’s GDP growth rate has consistently exceeded the national average; even within financial crisis conditions a growth of 2.5-3% is anticipated.

• Sofia’s GDP per capita is currently at 72% of EU average and expected to exceed 80% by 2015

GDP – Sofia

GDP – Rest of the Country

Forecast

11.011.8 12.6

14.1

15.1

16.919.3

22.4

23.5

24.9

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Economic ProfileEconomic Profile

GDP by Sector, 2008EUR Billions

Sofia’s a high-growth, services-oriented economy is driven primarily by the dynamic private sector.

Highlights

• Services account for 74% of Sofia’s GDP compared to the national average of 60%

• The private sector generates 94% of all services and 87% of other sales

• Small & Medium Size Enterprises (SMEs) generate 71% of all sales

• The construction, real estate, business services, transportation and telecoms sectors account for the largest share of growth in recent years and continue to attract investments

Trade & Repair

Processing

Transportation &Communications

Property Mgt & Business Services

Construction

ElectricityGas &Water

Hospitality & Catering

Other

TOTAL € 11.5

6.2

1.5

1.1

0.9

0.7

0.5

0.1

0.4

74% 25%Tertiary

Secondary

Primary

100% = € 11.5 Bn

= High-Growth Sector

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Sofia’s strategic location and broad talent pool makes it uniquely positioned to benefit foreign investors.

Human Capital

• Sofia’s 730K workforce is highly qualified, motivated, and flexible

• The capital hosts 20 of Bulgaria’s 42 universities (93,000 students and 12,800 faculties)

• Center of academic & applied research (including 58 institutes & laboratories affiliated with the Bulgarian Academy of Sciences)

• Average annual wage is €4 050 (€336 per month)

• Productivity of labor growing at 13-18% per year

• Unemployment rate of 1.3% (among the lowest in Europe)

• 65.2% of Sofia’s 1.6MM population are people of working age

Strategic Location

• Easy 2-hour flights from all Central European Capitals

• 295 regular flights per week, operated by 20 foreign and 6 Bulgarian airlines and flying to over 40 international destinations

• Located in the geographic center of the Balkan Peninsula and a natural entry point into the Middle East

• Unique intersection of three Pan-European transport corridors (Corridor IV, VIII, X)

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Sofia’s Unique Investor BenefitsSofia’s Unique Investor Benefits

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4710

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Sofia Bulgaria

Tertiary

Secondary

Primary

None

Sofia Bulgaria

43%25%

50%56%

18%5%

Workforce Education Levels

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In 2008, Sofia attracted 68% of all FDI in Bulgaria. The current level of FDI is expected to decline in the coming years, particularly in sectors such as financial infrastructure, real estate (industrial and commercial buildings, business parks), technology, and transportation infrastructure.FDI in Sofia by Source Country, 1996-2008EUR Billions

CountryCumulative

Amount

Austria € 4.6

The Netherlands

3.6

Greece 2.9

Great Britain 2.7

Germany 1.9

Cyprus 1.5

Luxembourg 1.4

Hungary 1.2

USA 1.1

Italy 1.0

Switzerland 1.0

Ireland 0.9

Spain 0.9

Russia 0.8

Czech Republic

0.8

Others 3.5

Total € 29.8

FDI in Sofia by Sector, 2008EUR Billions

Financial Services

Real Estate & Business Services

Construction

Trade & Repair

Transport & Communication

Manufacturing Industry

Other

TOTAL € 5.41.7

1.4

1.0

0.7

0.3

0.2

0.1

0.05

Sofia = € 3.7

FDI – Sofia

FDI – Rest of the country

Foreign Investment FlowsForeign Investment Flows

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An Impressive Investor RosterAn Impressive Investor Roster

In the past few years, Sofia’s favorable business climate, strategic endowments, and favorable tax code have attracted a range of international business leaders, operating in attractive sectors such as telecommunications, financial services, utilities, electronics, and IT.

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Sofia’s predictable political environment, sound fiscal policy, and stable governance have helped it earn a credit rating of BB+/Positive (Standard & Poor’s 2007), one of the highest in the region. There has been a broad political consensus on the need to attract and support foreign investors, to which Sofia Municipality has been a reliable and efficient partner.

Municipal Governance & Policy PrioritiesMunicipal Governance & Policy Priorities

Municipal Budget GrowthEUR Millions

2005 2007 2009

240

323

516

Municipal Spending Priorities (2009)100% = € 516 MM

22%32%

CapitalExpenditures

Education

16%

30%

Other

Public Utilities

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Municipal Economic StrategyMunicipal Economic Strategy

Municipal Development Priorities

• Promotion of sustainable growth and knowledge-based economy

• Development and modernisation of the transportation services, public, and business infrastructures

• Improvement of the living conditions and the quality of the environment

Municipal Action Plans

• Integrated waste management system

• Project for the sewage sector: construction of sewage in the districts of “Ovcha kupel”, “Vitosha” etc.

• Extension of the underground, reconstruction, expansion and maintenance of the road network

• Construction of 2 schools, 8 kindergardens, construction and refurbishment of hospitals and other public facilities

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Forecoming tenders – part of the investment programme Forecoming tenders – part of the investment programme of Sofia Municipality for 2009of Sofia Municipality for 2009

Target Budget (BGN)

Construction of underground parking lots at Tube Stations 8 and 11 from the Metrodiameter 2

7 000 000

Metropoliten – Sofia, from Tube Stations 13 to 19 37 000 000

Implementing new street and traffic lighting 1 332 000

Construction and extensions to kindergardens (Poduiane, Krasno Selo, Ljulin, Oborishte, Ilinden, Ovcha Kupel, Pancharevo)

26 090 000

Design and construction of a waste-recycling plant 352 049 400

Installation and utilisation of waste gas from Suhodol depot1 500 000

Developing projects for equipment for treating the waste of Sofia

12 845 580

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“BKC centre” EAD 100%

The Company specialises in maintaining, repairs and reconstruction of buildings, public utilities, communal funds etc.

Pending tender scheduled for March 2009 /BGN 5.2 million/

“Obshtinska banka” AD

(Municipal Bank) 67%

The Bank has a long-term credit rating (BB-) and a short-term credit rating (B) /Standard & Poor’s 2008/. The maintenance of the rating of the Bank, minding the current financial situation, reflects its successful management and good financial standing.

“Sofiiski imoti” EAD

(Sofia Real Estate) 100%Management of municipal buildings & plots. The Company is able to provide for privatisation around 600 real estates.

“Metropoliten” EAD100%

Subway operations & infrastructure

Performs exploitation services of the underground in Sofia; tutors personnel and brings to operation the newly constructed sections; conducts control over the investment as well as the projecting and construction phases.

Target Share Description

Current & Pending Privatisation Tenders

Due to the shrinkage of the real estate market the municipal privatisation programme is limited. However, because of the need of income, this programme shall continue its fulfillment, with projected revenue realised by privatisation transactions of BGN 10.8 million.

Privatisation Tenders & Public CommissionsPrivatisation Tenders & Public Commissions

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“Sofinvest” EOOD 100%

Investment audit & engineering

Municipal company, which realises the investment functions of the Sofia Municipality, including the organisation of the research, the designing and construction, implementation of the investor’s control, engineering and social infrastructure of Sofia

“Ozeleniavane” EAD 100%

Landscaping; park maintenance

Specialises in planting, maintenance of green areas, parks, public and private plots in the capital.

“V i K” EAD 100%

Water & sewage (subsidiary activities)

Specialises in maintaining the sewage infrastructure

“Lozana” EAD 100%A company, which has experience in the production of metal products and recycling of plastics.

“Sportna Sofia 2000” EAD 100%Specialises in managing, development and renting out sporting equipment and property

“Galatea 2002” EAD 100%Granting for privatisation of sea and mountain recreation centres

“Pazari Iztok” EAD,

“Pazari Sever” EAD,

“Pazari Iug” EAD

100%Public companies, which run, maintain and rent out open and closed trading areas.

Target Share Description

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The financial role of the European Union. Projects The financial role of the European Union. Projects financed by EU funds and European Investment Bankfinanced by EU funds and European Investment Bank

Extension of the Underground Water and Sewage

• Construction of new segments: “Nadezhda” – Blvd. “Patriarch Evtimii” – Blvd. “Cherni Vrah” at a total amount of BGN 483.4 mln. /BGN 308 mln. from Operational Programme “Transport”/ - undergoing construction;

• Construction of new segments: “Mladost” – Blvd. “Tzarigradsko Shosse” – “Nadezhda” – “Obelia” at a total amount of BGN 220 mln. including a 50% co-financing with a loan from the European Investment Bank – first stage has started.

• Integrated project for the water sector of Sofia – it is financed under ISPA programme at a total amount of EUR 58.5 mln. /BGN 116 mln./ - undergoing construction;

• Construction of 4 main sewage collectors in the Ovcha Kupel district – BGN 10.5 mln. under Operational Programme “Okolna Sreda” /”Environment”/ – signed contract;

• Preparing a project for the construction of sewage network in “Manastirski Livadi – Iztok”, “Triadica”, “Gurdova Glava”, and “Vitosha” districts – preparation stage.

Waste management Others

• Construction and implementation of a system for treatment of waste at a total amount of EUR 183 mln. /BGN 360 mln./. It is expected to be financed by Operational Programme “Okolna Sreda”, loan from the European Investment Bank, municipal and national financing – under preparation;

• Closing and re-cultivating of a waste depot “Dolni Bogrov” – EUR 23 mln. /BGN 45 mln./ by OP “Okolna Sreda” and municipal financing – under preparation.

• Approved projects by OP “Human Resources”

• Prepared and submitted projects under OP “Regional Development” – for refurbishment of schools, public houses, municipal roads, subways, and areas between blocks of appartments;

• Prepared and submitted projects under OP “Administrative Capacity” for the e-management of the Municipality;

• Participation of the Sofia Municipality in projects under programme URBACT II, INTERREG IV C, SEE, 7th Framework Programme etc.

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Sofia Municipality’s Action Plan Concerning Mitigating Sofia Municipality’s Action Plan Concerning Mitigating the Negative Effects From the Financial Crisisthe Negative Effects From the Financial Crisis

Improving the activities of the Municipality, impacting on the local economy

•Improving the system of consent and licensing regimes, easing the procedures and shortening the technical time needed for servicing the investors and traders;

•Expanding, within the agreeable limits of the Guarantee Fund for SMEs programme;

•Speeding up and directing the investment programme of the Sofia Municipality and that of the Council for Management of the Municipal Guarantee Fund towards the infrastructural projects with the highest public significance;

•Improving the city’s surroundings, creating (both directly and indirectly) jobs and directing the regional construction industry’s work force towards specialised Municipal programmes;

•Expanding the scope of activities, subject of Public Private Partnership for development and management of important infrastructural projects;

•More and larger projects and programmes for co-financing of the structural funds of EU;

•Developing the potential for regional cooperation for the implementation of regional projects in the Southwest region (railway, roads, telecommunications etc.), which increase the attractiveness of the area for investors.

Fiscal Discipline and Administrative Capacity

•Packet of measures for increasing the effectiveness of collecting local fees and taxes;

•Increasing the effectiveness and the profitability of the municipal property, companies and trading units;

•Procedures for improving the administrative capacity, mainly of those municipal units responsible for public procurement procedures and EU programmes’ projects.

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Thank you for the attentionThank you for the attention!!

Minko GerdjikovDeputy Mayor of FinanceSofia Municipality

Тel: +359 2 987 70 79E-mail: mgerdjikov@sofia.bgWeb site: www.sofia.bg

“GROWS BUT NEVER AGES”