Despite Objections, Government Approves 25-Year Deferral of Concession Royalties for Sofia Airport

Despite Objections, Government Approves 25-Year Deferral of Concession Royalties for Sofia Airport

April 7 (BTA) -Despite opposition from newcomers to the
next Bulgarian Parliament, the Council of Ministers Wednesday
adopted a decision on signing an annex to the concession
agreement for Sofia Airport giving the concessionaire a 25-year
deferral of the concession fees because of the pandemic crisis.
"Only a deferral of the annual [concession] fees can restore the
 balance of the Sofia Airport concession," Transport Minister
Rossen Jeliazkov said during the Cabinet meeting, quoted by the
Government Information Service.

He was adamant that the concession fees for the first ten years
are not written off or reduced but are only moved to the last 10
 years of the 35-year concession. 

The concession agreement for Sofia Airport was signed on July
22, 2020 with SOF Connect, a consortium including France's
Meridiam Eastern Europe Investments S.A.S. and Austria's
Strabag, with Munich Airport as airport operator. The concession
 is supposed to take effect 12 months after the signing of the
agreement, the exact date depending on the fulfillment of
conditions by both parties. It transpired in February 2021 that
the concessionaire had asked the Government in October 2020 to
defer the annual concession fees due for the first ten years of
the concession term while the amount of the initial investment
would be increased from 608 million to 624 million euro.
Furthermore, the concessionaire confirmed their commitment to
pay a 660 million leva upfront fee inclusive of VAT and to build
 a Terminal 3 by the tenth year of the concession term. In
March, the Government obtained the European Commission's
approval for such an arrangement.

The Socialists, who have opposed the Sofia Airport concession
deal right from the outset and blew the whistle about the
contemplated deferral, stepped up the pressure on Tuesday,
urging the anti-GERB newcomers to Parliament: There Is Such a
People, Democratic Bulgaria, and Rise Up! Thugs Out!, to pool
efforts against it.

Democratic Bulgaria have been waging their own battle against
the 25-year deferral of concession fees. In a video shot in
front of the Council of Ministers building and posted on
Facebook on Wednesday, Democratic Bulgaria co-leader Hristo
Ivanov and Yes, Bulgaria party member Ivaylo Mirchev vowed to go
 out of their way to stop the deal. They argued that by this
deal the Government is serving the interests of somebody in
their inner circle and not the Bulgarian people, and claimed
that they have documents showing that the Sofia Airport
concession is actually held by Kiril Domouschiev, a business
tycoon known to be close to the Borissov Cabinet.

To prove their point, they said that two other Bulgarian
airports with a foreign concessionaire, in Varna and Bourgas,
only got a one-year deferral of their concession fees due to the

"If there is any economic justification for the 25-year deferral
 for Sofia Airport, the Government has failed to explain it,"
Ivanov and Mirchev argued. 

At Wednesday's Cabinet meeting, Jeliazkov reiterated that it is
groundless to claim that the concession agreement amendment is
detrimental to the State. "Our opponents' only wish is to harm
or thwart this clean and transparent investment, which  is most
beneficial for the Bulgarian State," he insisted.

The Transport Minister said further that the European Commission
 took four months to check the deferral deal and that eight
banks have confirmed their readiness to finance the project and
they included four international financial institutions: the
European Bank for Reconstruction and Development, the European
Investment Bank, the Black Sea bank for Trade and Development,
and the World Bank Group. 

"We have a concession agreement which is valid and binding. All
these claims, the politicization and ideas about a moratorium is
 a legal nihilism and an arbitrary act by the State." He was
referring to an idea of the Socialist Party about a moratorium
on the Borissov Cabinet's last-minute deals. "Anybody in the
next government can go ahead and cancel the deal with all the
consequences this entails," said Jeliazkov.

He warned that if this happens the Government will lose a 660
million leva investment and jeopardize the State budget (where
this investment is factored in). Also, the biggest Bulgarian
Airport will miss a chance to be competitive with those in the
neighbouring countries, the Transport Minister said. 

He argued that the civil aviation sector has been hit hard by
the pandemic. "Without a concession, the management and
operation risk will remain with the state-owned airport
operator," he said, adding that in January and February 2021
alone, the losses from shrinking aircraft and passenger traffic
and fixed costs totalled 11 million leva. 

Jeliazkov pointed out in conclusion that annual monitoring by
the competent authorities will make sure that the payment of
annual concession fees will resume "if the economic balance is
restored" sooner than expected.

On March 12, SOD Connect said in a statement that the false
allegations aim to smear its image and the image of the partners
 in the consortium, which are "internationally recognized
economic and industrial operators in Europe", and that it is
exploring "legal options to correct these false allegations".

The concessionaire pointed out that "contrary to what is being
publicly claimed, the annual concession fees for the first ten
years of the concession term will not be waived but only
deferred", adding that this is necessary in order to preserve
the financial sustainability of the airport, to pay the upfront
concession fee and to execute the planned investment programme,
including a new Terminal 3, despite the unprecedented decline in
 air traffic. RY/LN, LG


Source: Sofia