(Corrects the name of EU mechanism to SAFE from SAVE in paragraph 3)
SOFIA (Reuters) -Bulgaria and European defence giant Rheinmetall on Tuesday sealed a deal worth more than 1 billion euros ($1.2 billion) to build a plant that will produce gunpowder and 155-mm artillery shells.
Officials said the project was important for Bulgaria and Europe as a whole, as the region looks to upgrade its defence capabilities following Russia’s invasion of Ukraine. Rheinmetall is a major beneficiary of the surge in military spending.
The project will be a joint venture between Rheinmetall and Bulgaria’s VMZ, in which the German company will hold a 51% stake and VMZ 49%. Bulgaria will finance its stake with a loan under Europe’s SAFE mechanism to boost defence investment.
The contract was signed by Rheinmetall’s CEO Armin Papperger and VMZ director Ivan Getsov at a ceremony at the Council of Ministers in the capital Sofia.
“With the signing of this contract, we mark the beginning of a strategic partnership between the Bulgarian state and the German technology concern, which will change the future of the Bulgarian defence industry,” Prime Minister Rosen Zhelyazkov said after the signing ceremony.
Papperger said that the plant would be built within 14 months, and that Bulgaria would contribute significantly to Europe’s and NATO’s needs for ammunition.
“Bulgaria’s speed is like never before,” Papperger said. “With our second meeting, we are creating one of the best factories in Europe.”
He was referring to an August meeting in Berlin between Rheinmetall and Boyko Borissov, leader of Bulgaria’s ruling centre-right GERB Party, at which the project was agreed.
The government said the project would create about 1,000 jobs and restore a key element of Bulgaria’s defence capacity. Production will include gunpowder, 155-mm artillery shells and the newest modular charging systems.
Rheinmetall is investing in several European countries to expand capacity and has alliances with other defence firms, including Italy’s Leonardo and U.S. group Lockheed Martin.
($1 = 0.8575 euros)
(Reporting by Stoyan Nenov. Writing by Daria Sito-Sucic. Editing by Mark Potter)
