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Project to boost defence capabilities for Bulgaria and

Europe

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Rheinmetall has 51% stake, VMZ 49%, financed by European

loan

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Plant to create 1,000 jobs, enhance Bulgaria's defence

industry

SOFIA, Oct 28 (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 SAVE 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 ( LMT ).

($1 = 0.8575 euros)