Russia's Mechel Acquires Bulgarian Heating Utility

Russian mining and steel conglomerate Mechel OAO has acquired another 51% stake in the heating and power plant in the Danube town of Russe, northern Bulgaria, boosting its interest to 100%.

The Moscow-based company said the move will strengthen its position in the power industry and create development opportunities.

Mechel paid EUR 52 M to boost its stake in the plant to 100% from 49% previously, the seller, Slovenia's Holding Slovenske Elektrarne (HSE), said on its website.

Consolidation of the plant was a strategic move for Mechel because it is "among the three largest foreign customers of Mechel's steam coal," Dmitry Smolin, an analyst at UralSib Capital in Moscow, commented.

In December 2007 the Russian company received green light to acquire a 49% stake in the company.

Earlier that year, Bulgaria sold its full stake in the utility, which owns and operates the power plant in the city, to Slovak power utility Slovenske Elektrarne for EUR 85,1 M.

Under the terms of the contract, Slovenske Elektrarne could not sell a majority stake in the company in the first three years after acquisition without the accord of the Bulgarian government.