Feboran SPLTD - - Short Company profile

In the last few years, Neochim has had difficulty connecting with a modern fertilizer manufacturer. Since the end of 2022, individual installations at the enterprise have periodically broken down and stopped working. That is why the decision of its far more successful competitor Agropolychim to enter the Dimitrovgrad plant as a shareholder through its subsidiary Rhea Ventures seems strange at first glance. However, the company is convinced that Neochim has its place in the market, and it can help with technological know-how, as well as solutions for reducing carbon emissions, which will have an increasing weight in the cost of production. This is the reason for the agreement concluded last fall with the Czech Agrofert, according to which Rhea Ventures acquires its Bulgarian company Feboran, which in turn holds 20.3% of the shares in Neochim. The deal was approved by the Commission for the Protection of Competition (CPC) at the end of December and is being finalized this week. "Feboran" is headed by Dimitar Leksin, who is the financial director and board member of "Agropolychim" and executive director of "Reya Ventures". Together with the minority stake acquired in the meantime on the Bulgarian Stock Exchange, "Reya Ventures"'s total stake in "Neochim" reaches 24.03%. "Feboran" became the property of Agrofert in mid-2023, when the Czech company acquired the nitrogen business of the Austrian chemical concern Borealis. Along with production assets, a sales and distribution network, the package also included the Bulgarian company. A few months later, they received indications from "Agropolychim" that Agrofert was interested in selling "Feboran" (and its stake in "Neochim" accordingly). After the approval of the deal by the CPC and the expiration of the appeal period, the sale was practically completed immediately. The modernization of the Dimitrovgrad plant will require significant investments - in the order of several tens of millions of euros, according to the new shareholder. And this will mean that the company will have to stop paying dividends for several years. However, Agropolychim can help on the path of technological renewal. The plant in Devnya has been practically transformed after privatization, with over 600 million leva invested in it so far. Back in 2005, catalysts were introduced in the nitric acid plant, which significantly reduce emissions of nitrous oxide - a gas with a very high greenhouse potential. The company is currently working on an ambitious project to double the capacity of the nitric acid plant by building a new line. Agropolychim may be useful in solving another challenge - the tightening requirements for carbon emissions. Neochim continues to use natural gas to produce ammonia - one of the intermediate products for the production of ammonium nitrate, but over time, free allowances under the European Emissions Trading Scheme are gradually decreasing. At the same time, the Renewable Energy Directive (RED III) will come into force in 2030, requiring at least 42% of raw materials to be of inorganic origin - the so-called green ammonia. However, since it is 2-3 times more expensive than traditional "grey" ammonia and there is no way to compensate for it along the supply chain to the final product, the expectations are that this requirement will be relaxed and the use of "blue" ammonia will be allowed - it is also made from natural gas, but carbon emissions are captured and stored. Years ago, Agropolychim began importing ammonia instead of producing it itself from natural gas, for which it built a terminal at the port in Devnya. More recently, it has turned to "blue" ammonia, which allows it to produce ammonium nitrate with a reduced carbon footprint and remain competitive in the market. Now, ammonia distribution is emerging as a new business segment that the company will develop in parallel with its main activity. The company plans to buy 100 railway tankers for transporting ammonia, which should arrive from the fall of this year to the spring of 2026. It is also investing in improving the internal railway infrastructure, which will increase its capacity for handling rail freight. Whether the Dimitrovgrad plant will take advantage of these opportunities and completely switch off natural gas again depends on the company's management. In a market like the Bulgarian one, where the two main players have a combined 70-80% market share, the exit of one will create a market vacuum. Therefore, Agropolychim aims to keep the plant in Dimitrovgrad operating at its full production capacity.