"Investor of Year 2009" in Bulgaria - ABB

Automation & RoboticsInterviewSouth-East European INDUSTRIAL Мarket - issue 1/2010

"Investor of Year 2009" in Bulgaria - ABB: We’ll become more aggressive in gaining a bigger market share in Bulgaria

Dear Mr. Simon, ABB was awarded "Investor of Year 2009" in Bulgaria for its investment in a new factory at Rakovski industry zone, near to the town of Plovdiv. Could you please inform SEEIM readers more about the new production site?

The factory for low-voltage products in Rakovsky was not an easy decision, because it is our fourth site in Bulgaria. We are present in Sofia, Petrich, Sevlievo and now in Rakovsky. Normally the companies are concentrated at one place. Even it was not an easy decision, the new production facility has many advantages.
We started the construction of the new factory in Rakovsky in the middle of 2008. It took two years from the planning of the production site to now. At the moment we have 200 employees and at the end of this year they will be 400 or 500. It depends on how the world market will develop. The main export of this plant is for ABB factories in Italy.
We appreciate the award "Investor of Year 2009". The country considers that it is a good investment and it’s a good sign to other investors. This will be helpful for the improvement of Bulgaria’s image among the other Western companies who would invest in Bulgaria. If other companies plan to invest and work here, they will be more attracted.

What were the main reasons to choose Bulgaria and Rakovsky?
The main reasons were the logistics, the tax advantages and the low labor cost. Also because the land for the new production site was ready for construction- a good infrastructure existed: electricity, water, gas and etc. This advantage reflected in shorter implementation time. Everything needed was there and we could start immediately. The building of the factory pointed a record time. We signed the land contract in December 2007. Then in a short time we started the construction process.

Do you import any components for the production in Rakovsky?
Most of the parts and materials are imported, but the strategy is to find local suppliers for these materials. The components we produce in Rakovski are exported to ABB factories in Italy, France, Norway, Switzerland.

What will be the production volumes of the new factory?
Concerning the pieces produced in the factory, it could not be numbered. The value of the parts is not measured here, only the added value. Normally, we measure the production in hours and people, not in pieces because here we don’t make ready products, only parts which go to Italy where they are assembled.
In Petrich we have a similar production, but mainly for Germany, Switzerland and Czech Republic. ABB is outsourcing most of the production processes. Sevlievo production site is completely different not only as products compared to Rakovsky and Petrich. In Sevlievo we make products for the power industry, which we sell directly to the market in Romania, Hungary, etc.

How is ABB minimizing the environmental impact of the manufacturing processes in Rakovsky?
We care very much about the environment. For example in the factory we have a very environmental friendly system for cooling and heating. We do not have air-conditioning in the whole unit. We use some coils and the cold water is going through them and bring these cooled air down to the working places. We’re also thinking to put photovoltaic collectors on the roof to produce energy, 20 000 sq. m. is a nice place for this purpose.
The environmental friendly systems are standard for our company. For example, to print our marketing materials as calendars, we have to prove that the paper was made out of wood, which is specially planted for paper production.

Could you please tell us more about the management of the factory in Rakovsky?
Something worth mentioning is that within the management team of the new factory there are young Bulgarian professionals who were recruited locally. They were educated in the University in Plovdiv and have been for 6 months in Italy for education. This is something special from the Human Resources point of view.

What is the place of ABB in the power field of Bulgaria?
There are three areas in the power field - production of electricity, transmission and distribution to the final consumers. These are three different fields for ABB, too. The good side that I see in Bulgaria is that after the start of the privatization in this sector all the distribution is privatized, the production not yet, but it has started. I think that we need to attract more investors in power generation. Because there are not so many generation capacities built in the last years. To build one takes five or six years - from the decision making to running the unit. Also you have to make your power plants environmentally friendly and to reduce emissions. And in parallel, you have to start up a new power generation. About the transportation of electricity - maybe something has to be done for connections to other countries and for maintenance of the network.
Now the people start talking about the green energy. I think that the most important is not to use so much electricity, but to be more efficient. The most valuable energy resource is the sun, that is clear and we have to start using it more efficiently. But the question is not only to increase the production from renewable energy sources, but also to reduce the consumption. This is the point where the Government and all of us still have to educate people.

How do you consider the ABB business in the power industry?
We divide the ABB products portfolio in this business area as high voltage, medium voltage and low voltage. ABB is not only products provider but also a project and solutions specialist and all of these products are included in the turn-key projects. When I came to Bulgaria ABB was more involved in production of such a products, but then we started making projects. We have competence for this, we use engineering group, specialized companies for projects, etc. And now the biggest part of our energy business in Bulgaria are the projects. We are good, strong and we are a market leader. We could provide everything including the commissioning and the complete service.
In Romania we started these projects very successfully, but then the market changed and now we are selling more products, then projects as volume. Our customers there say "I’ll buy the components from you, but I’ll make the project by myself". I see this trend in other countries, too - the companies want to run the projects by themselves and during the project time they develop their "know-how". But then they recognize that they haven’t done any research in their activities, and they say "New technologies are coming, we don’t know them". Also they don’t have experience to make these projects. While companies like Siemens and ABB have much more experience and make less mistakes.

What is the impact of the financial crisis over ABB’s business?
In the energy field there is no impact from the crisis, but as much as we have business in the residential building - yes, we feel it. In industry we feel that the investments are more seriously calculated. But many companies think that now it is time to invest in low-cost countries such as Bulgaria. It is a good time for restructuring the companies. They should be ready for the time after the recession.
This is a difficult time for everybody, but it depends on the market share. If you have a market share of 80% and the market changed, you will be very affected. But if you have a market share of only 10% and the market goes down there is still a lot of market that you can get. Maybe it will be difficult, the competition will be bigger, but the market is here. This is the business.
In the energy business in Bulgaria in this field we are above last year, as in industry and residential sector we are below. We plan in a short time to change our organization, to be more aggressive on the market and to take more market share.

About ABB
ABB is a global leader of power and automation technologies. The company manufactures power products and systems, discrete automation, low voltage products and process automation. The ABB Group of companies operates in around 100 countries. The factory in Rakovsky is ABB’s third production unit in Bulgaria after it bought two factories in the country in 1996. ABB owns a low voltage products factory in Petrich and Avangard plant for high voltage products in Sevlievo, Central Bulgaria. ABB Avangard is the only manufacturer in Europe of ABB disconnectors.
It exports disconnectors to Romania, Greece, Albania, Croatia, Macedonia, Hungary, Sweden, Norway, Denmark, Iran, Iraq, Israel, and Nigeria. In recent years the company directed its efforts to the markets of ex-Soviet republics. The first break-throughs are in Georgia, Ukraine, Armenia and Azerbaijan. In Bulgaria its major customer are NEK, Maritsa East Mines and the TPP, Lukoil Neftochim, Railways, etc.