Concessions can now be granted for a period of up to 35 years, following Parliament’s vote on July 18, when it passed on second reading amendments to the Concessions Act and put, for better or for worse, an end to a drawn-out controversy.

The exact period of a given concession are to be decided after the financial terms of the concession and the technical and/or technological specifics of the object of concession are considered, according to the amended law.

The longest period that a concession can be extended is up to 35 years after the date on which it is initially granted. The concession can be prolonged if the conditions included in the initial concession contract are met, Parliament decided.

To speed up proceedings, the process of granting a concession procedure can now be started at the request of an interested investor. Until now, concession tenders could only be launched at the initiative of the ministries that managed the object of concession or the executive entity that managed the state property.

Concession tenders that have already been launched, or are ready to be launched, will be carried out under the old regulations.

The concession and the sea
The concession law amendments have a direct impact on the Black Sea Coastline Act. The amendments increased the authority of the Regional Development and Public Works minister, who is already charged with finding managers for the less attractive beaches and giving them on concession for five years. Until now, regional authorities assigned the management of these beaches annually. After the amendments, the Regional Development Ministry will manage all beaches that have not been given on concession and are currently being managed by the municipalities. The minister will have the power to launch renting out procedures of the coastal beaches and to conclude the contracts for rent. Thirty per cent of the sum of the concession payment or the rent is to be paid to the budget of the municipality where the beach is located.

As consequence of the amendments, the concessionaires will be allowed to place umbrellas, lounges, mattresses and beach facilities on 50 per cent of the overall territory of the beach. Until now, they have been allowed to do so on only 20 per cent of the beach.

However, the maximum concession period of a beach remains 10 years.

It was the 10-year concession of the Black Sea beaches that caused a big to-do in the spring of 2008. At the beginning of 2008, it turned out that the concession contracts for some of the major beaches along the Black Sea coast were expiring and the Regional Development Ministry had not announced a tender for new concessionaires, supposedly waiting for amendments to the law on the Black Sea coast.

According to the Bulgarian-language media, the ministry was waiting for the law to rule that the beaches not given on concession to private investors would go to the ministry for management, as indeed it happened. To resolve the situation then, the Cabinet decided to extend the existing concession contracts until the end of 2008 and to postpone the new tenders for 2009. According to the Cabinet, by doing so, it avoided the announcement of a tender for new owners just a month before the beginning of the official summer season.

Among the main concerns that fanned the flame of the controversy in the spring were the amendments, which would allow state-owned or municipal companies to get a beach on concession without a tender if it entered a joint venture with a private investor. A tender would be held only for the selection of a private partner. Indeed, Parliament decided that “the concession could be granted to a newly created trade company, including the concessionaire and the state, state-owned or municipal company”, but this time the matter seem to have escaped media notice.

Playing give and take
In addition to land and beaches, the law on concession also includes concession of construction, services and mining. In 2007, Bulgaria gave on concession a total of 190 ore deposits. Having won a concession for extraction, however, does not guarantee the investor a bright future at all. The most indicative case is the one of the Canadian metals extraction company Dundee Precious Metals, which waited for more than two years for an approval from the Environment and Water Affairs Ministry to explore the Chelopech gold mine. In the end, in June 2008, Bulgaria and Dundee agreed to sign a memorandum for understanding and to found a joint venture that would operate the mine, in which the state would have a 25 per cent stake. Another project of the Canadian company in Kroumovgrad, however, is likely to remain frozen. One of the problems that have blocked works on the Kroumovgrad mine was the lack of an environmental impact assessment on the planned mine.

Investors should not forget that as the concession was given, it could be taken away. Such was the case with Trakiya Highway, which was given on concession to a Portuguese-Bulgarian consortium, but the concession arrangement was annulled after the consortium failed to file the necessary financing documentation by the May 15 deadline. Bulgaria, on the other hand, was beating about the bush on the provision of state subsidies in case of insufficient highway traffic.

Final calculation
Concession agreements seem to be quite a profitable business, as the state budget earned 18 million leva from concession fees of beaches in 2007. Since 1998, the state has earned 53 million leva from fees for the 95 beaches given on concession. In 2007, Bulgaria’s revenue from mining concessions amounted to 7.3 million leva, nearly twice the amount collected in 2006, the Council of Ministers announced on July 17.