site.btaDeputy PM Karadjov Urges Sofia Airport Concessionaire to Resume Full Concession Payments

Bulgaria's Ministry of Transport and Communications insists that the concessionaire of Vasil Levski Sofia Airport, SOF Connect, to start paying the concession fee due as from January 1, 2026. The Ministry broke the news in a press release Thursday. The amount due for 2025 approximates EUR 40 million before VAT.

In April 2021, on account of the COVID 19 pandemic, the Boyko Borisov cabinet gave SOF Connnect a deferral of the annual concession payments for the first ten years of the concession term, adding up to some EUR 250 million. Rosen Zhelyazkov, who was then Transport Minister and is now Prime Minister, emphasized at that time that these amounts were not written off or reduced but were only moved to the last 10 years of the 35-year concession, i.e. they would start to be paid in 2046. 

During a meeting with SOF Connect CEO Jesus Caballero and company executives on an unspecified date, Deputy Prime Minister and Transport and Communications Minister Grozdan Karadjov was quoted in Thursday's press release as arguing that the passenger traffic had recovered fully and outran the pre-pandemic levels. The operating profit before tax in real terms exceeded the projection under the COVID scenario, and in 2024 overvalued the scenario in the deferral proposal. In practice, the airport is in a better condition then the concessionaire itself forecast when asking for the deferral.

SOF Connect countered that the conditions for resumption of the concession payments had not been fulfilled and offered to pay EUR 9 million instead of EUR 40 million and would like the deferral to stand until 2031. The concessionaire believes that the financials should be viewed on an accrual basis, i.e. for the entire 35-year period of the concession. It claimed that the COVID-induced losses persisted despite the recovery of the traffic levels.  

Karadjov dismissed these arguments as "number twisting" that are not provided for either in the concession agreement or in the Concessions Act. He appreciated SOF Connect's reluctance to pay a concession fee for as long as possible but pointed out that the agreement and the annex to it clearly state that the deferral applies until the economic balance has been redressed. "This is a provisional anti-crisis measure granted in an emergency situation and not a perpetual tax holiday. The requirement is clear: once the market is back, payments are back, too. The facts show that the COVID crisis and its effects are a thing of the past. At this point, the concession balance is tipped to the detriment of the State, which is inadmissible because of the losses sustained by the Exchequer and the risk of Bulgaria incurring sanctions for inadmissible State aid," the Deputy PM asserted. 

He also found "odd" the concessionaire's insistence on obtaining EUR 70-80 million compensation from the State for a forthcoming repair of the runway to meet the requirements of the European Union Aviation Safety Agency (EASA). The agreement does contain a clause on compensation of the concessionaire, but only when a "qualifying legislative amendment" has occurred after the date of the agreement and it necessitates unplanned capital costs.

"The EASA requirements do not meet these criteria: they arise from the ICAO standards that were adopted and communicated with Bulgaria back in March 2020, i.e. before the effective date of the concession agreement. Maintaining the runway in a serviceable condition and up to aviation requirements is an essential contractual obligation of the concessionaire. The airports in the EU which are operated on concession terms carry out such repairs without being compensated by the State. This is part of the operator's normal capital programme. Runway repairs are a responsibility of the concessionaire and not of the Bulgarian State," Karadjov argued.

He therefore expects a new annex to SOF Connect's concession agreement to be signed presently, providing for a resumption of the annual concession payments in full as from January 1, 2026. The concessionaire will also be expected to present clear parameters and a timeframe for the implementation of its investment programme for a repair of the runway in line with EASA requirements and the faster construction of Terminal 3.