Bulgarian cabinet terminates concession procedure for Sofia Airport

Bulgarian cabinet terminates concession procedure for Sofia Airport
By bne IntelliNews April 5, 2017

Bulgaria’s caretaker cabinet has cancelled the concession procedure for Sofia Airport, as the process to award a concession for nearby Belgrade airport surges ahead. 

According to the motives for terminating the concession procedure published by the transport ministry on its website, the main problem is the ongoing procedure for awarding a concession for Belgrade’s Nikola Tesla Airport, which has parameters similar to those of Sofia Airport.

The tender invitation for Belgrade airport stipulates that no suitors that operate airports within a 450km radius of the airport can participate. This clause limits the number of potential investors in Sofia Airport, as well as the Bulgarian state’s chances of receiving the best offer, the ministry commented.

A total of 27 candidates expressed interest in the Serbian airport, and 25 have been allowed to move to the second phase of the procedure. So far, interest in the Bulgarian facility has been modest, with just four potential participants.

On March 21, caretaker Transport Minister Hristo Alexiev told a press conference that the concession procedure for Sofia airport must be terminated because it allegedly does not protect the interest of the state. The minister’s opinion was based on an analysis of the terms of the concession.

The previous government led by the centre-right Citizens for European Development of Bulgaria (GERB) launched the tender procedure on June 2, 2016. It hoped to cash in around BGN1.2bn (€614mn) from the 35-year concession, including an upfront payment of at least BGN550mn (VAT excluded). 

Sofia Airport, Bulgaria’s largest, needs investments in infrastructure, including capacity expansion, Capital Daily commented previously. The number of passengers at the airport increased 22% to 4.98mn in 2016, a record figure. The company posted a profit of BGN5.6mn on revenues of BGN115.6mn in 2015. 

However, the Bulgarian Socialist Party (BSP) has demanded that the procedure be terminated.

Bulgaria is currently ruled by a caretaker government, the main task of which was to prepare the early general elections that were held on March 26. The elections were won by GERB and talks on forming a new government have begun.

In January, the GERB-led government extended the bidding deadline until May 19, based on expectations that the country will have a new regular government by that time. This was the fourth extension of the tender, the original deadline of which had been October 20.

Meanwhile, the Bulgarian transport ministry has recommended reducing the size of the upfront payment and increasing the annual concession payments to improve the balance of the concession. Another recommendation is to attract established international and technical advisors for a future new procedure for Sofia Airport.

 

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