Two years after the initial agreement, Bulgaria gave the go-ahead to the concession arrangement for Trakiya Highway with the eponymous Portuguese-Bulgarian tie-up.
The agreement came into force on January 16 with the signing of a second annex designed to stave off past criticism from the European Commission (EC).
The agreement covers the highway stretching from Kalotina, Bulgaria’s border checkpoint with Serbia, to Bourgas, on the seaside.
The coming into effect took place even though the EC is yet to pronounce on the arrangement on Eurostat that has been interpreted as unacceptable state assistance. The annex, though, is tailored to erase Eurostat concerns.
Specifically, it mends a clause that gave the consortium the opportunity to cover losses with state subsidies in the event of insufficient highway traffic. It also waives the possibility for state guarantees but still allows for a loan in case of losses because of low traffic volumes. The loan will be repayable with the relevant interest and will not exceed 10 million euro a year.
The annex also obliges the consortium comprising Portugal’s MSF, Lena Engenharias e Construcoes and Somag and Bulgaria’s Technoexportstroy and Avtomagistrali to assume the entire construction risk and to launch in phased-out fashion individual road sections.
Regional Development Minister Assen Gagaouzov told Bulgarian National Radio (BNR) on January 20 that the cost of the construction would remain at 715 million euro or 2.7 million euro a km. The highway should be entirely operational by 2011.
The concessionaire will also be given an extra month or 120 days to procure the necessary financing – or 590 million euro – for the highway construction and start construction work immediately thereafter. On default, the agreement will be terminated and the state will have to search for a new model to build and operate the highway.
Gagaouzov told BNR that eight international banks had expressed interest in financing the road infrastructure project. Of the pool, the consortium is believed to pick two at most drawing on the most favourable conditions.
To deal with EC concerns about state backing in the agreement, the state will also not issue a letter of support for the tie-up as it did, for example, with AES on the construction of extra facilities at Maritza Iztok II thermal power plant. With the state loan on losses pursuant to low traffic, however, the state gives the consortium the credential it would duly cover its loan instalments even if proceeds from toll collections are low, Gagauzov said.
First toll collections are expected in 2010. The toll will be 10 leva. The state and not the concessionaire will be entitled to designate the toll.
Meanwhile, in a letter to Economy and Energy Minister Petar Dimitrov, Gagaouzov requested that Technoexportstroy and Avtomagistrali be removed from the privatisation list for the year. Since both companies are in the tie-up and Technoexportstroy is also a stakeholder in the company to build the Bourgas-Alexandroupolis pipeline, their privatisation should be postponed until after the end of these projects to avert any default on owner swap and, respectively, a slide in the companies’ valuation, Gagaouzov said.
