The Bulgarian-Portuguese consortium that was suppose dto build the last remaining sections of the Trakiya highway between Sofia and Bourgas has sent an e-mail to Regional Development Minister Assen Gagaouzov that it failed to raise the necessary funds for it, Gagaouzov told Parliament on May 16 2008.

The Cabinet would make an official decision to cancel the concession within a few days, Gagaouzov sad, as quoted by Bulgarian news agency Focus.

That would pave the way for the National Road Infrastructure Fund to organise a new tender for the concession. "I think that construction works can start within three months," Gagaouzov said.

With the rising costs of construction cited as one of the reasons for the consortium to lose interest in the project, Gagaouzov would not comment on what price the Government would accept, saying that making the figure public would influence the public tenders. He did confirm, however, that the Cabinet had a figure in mind.

There was an approximate price per km that the Government had in mind he said but refused further comment on it because he did not want to influence the tender procedures.

The section that needs to be completed is between Stara Zagora and Karnobat. It is 107km long and would be divided into four lots. It is due for completion in two years' time.

Gagaouzov also noted that the ministry was thinking of Bulgaria's major construction companies to finish the works, but would not bar foreign companies from taking part as well. "The winning company must have the assets to do the job," he said.

This last statement narrowed the list of Bulgarian companies that could take part in the tender to three companies - Trace Group Hold, Moststroy and Glavbolgarstroy. The same companies were the ones the minister suggested earlier as subcontractors to the Bulgarian-Portuguese consortium. All of them are involved in other major road infrastructure projects.

Trace Group Hold is based in Stara Zagora and has already won a tender for construction of Stara Zagora-Orizovo section of Trakiya highway that was opened in 2007. The cost of the deal was 104.7 million leva. According to media publications, the holding is owned by Nikolai Mihailov's company Galini-N. The section on the holding's website that refers to shareholding structure currently contains no data.

Vassil Bozhkov, believed to be Bulgaria's richest man, although best known for his gambling business interests, owns shares in Moststroy company. Moststroy, which has more than 35 years of history behind it, is currently involved in building road sections throughout Bulgaria.

Glavbolgarstroy has earned itself the image of the biggest company in Bulgaria's construction sector. The company works in all segments of the market starting from residential projects to infrastructure and industrial ones. It built the first shopping mall in the country Sofia City Centre and has a number of projects abroad. It also built the new US embassy building in Sofia's Lozenets borough.

If the Government manages to complete the tender procedure and start building the highway in three months this would put an end to a saga that started six years ago, when Bulgaria's former monarch Simeon Saxe-Coburg was prime minister. Currently, his party in part of the ruling coalition.

Awarded in 2004, the concession deal was signed two years later, but had to be amended last year, after the European Commission said it breached European Union state aid rules. The EC gave its approval for the amended contract in January, after which the consortium had 120 days to secure financing.

Saxe-Coburg's government selected Bulgarian-Portuguese tie-up comprising Portugal's Lena Engenharia e Construcoes S.A., Moniz Da Maia Serra & Fortunato-Empreiteiros (MSF) and Somague, along with Bulgaria's Technoexportstroy.

Gagaouzov told private broadcaster bTV on May 15 2008 that should the concession be annuled the state could begin building the highway section on its own. He said he would extend the necessary sum by using financial reserves. Bulgarian-language Kapital weekly said on May 9 2008 that the Portuguese firms lost interest in the project due to its rising costs.

The delays with the signing of the contract, which drew criticism from the EC for the non-transparent way in which it was awarded, has further put off the Portuguese firms, prompting them to look for investment opportunities elsewhere, Kapital said.

In the meantime, Bulgarian authorities have attempted to force the consortium's hand on the issue which local companies would be picked as subcontractors, further straining relations with the consortium.