Brussels has warned Bulgaria's biggest steel producer Kremikovtzi that the pollution caused by the factory has to be considerably decreased each and every year up to 2014.

In addition, every year Sofia has to give an account to the European Commission (EC) of the results achieved.

The plant has not been keeping to all requirements, on the basis of action previously taken.

The steel producer might be closed down in 2014 if this condition is not met, Bulgarian-language Dnevnik daily reported on September 4. This was said by Georgos Kremlis, who heads the Cohesion Policy and Environmental Protection and Impact directorate of the EC office.

"The fact that the installation is going through a transition period does not mean that no other directives should be followed, such as the one concerning refuse waters," Kremlis said. In addition, the obligation to gradually decrease refuse dumped is part of Bulgaria's EU accession treaty. If this is not honoured, Brussels can penalise Bulgaria.

During the first week of September, EC inspectors observed problems in the steel factory itself. On August 16 2007, the EC requested the Bulgarian Ministry of Environment and Water Affairs to provide information about the factory's impact on the environment and about what Kremikovtzi management was doing to decrease contamination.

"The previous period is not a blank cheque and this does not mean that the factory can keep on polluting without any control," Kremlis said. He said if the steel producer wanted to keep operating after 2014, its management should change some filters.

Moreover, Kremlis criticised the concessionaire of Sofiyska Voda (Sofia Water). He said that according to the European directive, all providers are obliged to supply clean drinking water no matter whether this is expressly mentioned in their contracts with the relevant municipality.

"When Sofiyska Voda was signing the privatisation contract, the company knew that Bulgaria is going to join the EU and the EU legislation will apply to the country, therefore they have no excuse not to follow it," Kremlis said.

According to him the construction of cleaning installations and the relevant infrastructure is an investment that depends on the supplier. He said that if Sofiyska Voda does not resolve the water quality problem, Sofia municipality could break the contract, which was concluded in 2000 for a period of 25 years.

On September 4, Sofia mayor Boiko Borissov spoke about breaking the contract with Sofiyska Voda. He met the National Committee for Water Supply Improvement, which promised Borissov free-of-charge consultancy assistance if a decision is to be taken on revoking Sofiyska Voda's contract. Recently an appendix within the contract was signed, according to which the concessionaire promised more investments and its services improvement.

Meanwhile, the former owner of Kremikovtzi Valentin Zahariev is planning a huge investment in a new metallurgy complex. Plans are for this to be built near the steel producer.

In the coming three years, on the site of the existing Inter Pipe steel pipe factory near Yana station, the Cold Stretch Factory will be built, with three separate units for sheet iron production. This is Zahariev's second investment in metallurgy, after he invested in the Kurdjali lead-zinc factory.

About 110 million euro will go into doubling production at the metallurgy plant.

The rest of the investments amount to 93.8 million euro, 25 million euro of which will be provided by Zahariev's Intertrust Holding BG (IHBG).

IHBG operational director Petur Leshtarov said that Bulgarian and international financial institutions were expected to support the investors.

On September 5, the Investment Agency (IA) gave the metallurgy entrepreneurs a first class investment certificate, committing itself to support the projects' development. The state will provide not only permits for the activities but also will assist with communication with state companies, such as the National Electricity Company, Bulgargaz and Bulgarian State Railways during the construction of a new co-station, a gas pipeline and other needed infrastructure.

IA head Stoyan Stalev said that the changes in the Investments Encouragement Act envisaged serious preferences for industrial and energy projects. For this reason, in 2008 the IA budget will include financial support for such activities.