On 25 May 2016, the Bulgarian government approved a new draft Concessions Act. The draft remains to be adopted by the Bulgarian parliament. The new Concessions Act will replace the current Concessions Act in its entirety, and will revoke the existing Public-Private Partnership Act.
Previously, on 17 May 2016, the Bulgarian government had approved the granting of a concession for the operation of Sofia airport. The concession remains to be announced in the Official Journal of the European Union and the Bulgarian State Gazette, which will formally kick-off the tender process. The successful bidder is expected to commit to an advance payment on the concession of approx EUR 290 million which shall be used for restructuring the indebtedness of the State Railways.
New draft Concessions Act
The new draft Concessions Act approved by the Bulgarian government (Council of Ministers) covers the main principles and rules on the actions required for planning and preparing concession awards, for conducting and awarding concessions, for the implementation of concession contracts and the supervision of their performance. The draft is meant to transpose the requirements under Directive 2014/23/EU on the award of concession contracts, taking into account the specifics of national legislation and its rules regarding concessions, public-private partnerships, the management of and the disposal with state and municipal ownership, Bulgarian practice and existing experience with concessions.
The draft is still to be adopted by the Bulgarian Parliament in two rounds of readings before entering into force. Further amendments to the draft are therefore possible.
The new Concessions Act will replace the current Concessions Act and the Public-Private Partnership Act, and will amend a number of other acts containing concession related provisions.
According to the government (announcement of 25 May 2016; in Bulgarian), the new Concessions Act is expected to increase opportunities for use of a concession as a form of public-private partnership that creates public resources, high level benefits and services for the public and private sector, and for society as a whole. The new draft is further meant to contribute to the development of infrastructure and services, without financial exposure for, or with minimum financial participation by the state and municipalities, whereas the experience of the private sector is expected to be used for innovation and increased efficiency.
The purpose of the draft Concessions Act is to reach long-term benefits from concessions since the economic benefit of a concession is seen in terms of the benefit to society in the long run, rather than the direct current benefits (incomes). The supervision over the performance of concession contracts will be improved through the control powers vested in the Privatisation and Post-Privatisation Control Agency. Additional transparency shall be ensured through registration with the National Concession Register.
According to the information currently available, concessions approved by the relevant state or municipal body prior to the entry into force of the new Concessions Act, shall be awarded under the Concessions Act currently in force, ie, under the old regulatory regime.
Sofia Airport Concession
On 17 May 2016, shortly before the approval of the new draft Concessions Act, the Bulgarian government (Council of Ministers) adopted a formal resolution on the opening of the long awaited procedure for the 35-year concession of Sofia Airport. The concession will be awarded in an open tender.
The tender remains to be announced in the Official Journal of the European Union and the Bulgarian State Gazette and to be registered with the National Concession Register, following which complete tender documentation shall be uploaded on the website of the Ministry of Transport Information Technology and Communications (section 'Current Concessions').
Given that the concession of Sofia airport was approved by the government prior to the enforcement of the new Concessions Act, the award of the concession will likely be carried out under the Concessions Act which is currently in force, ie, under the old regulatory regime.
The concession of Sofia airport is part of the Strategy for the Development of the Transport Infrastructure in Bulgaria until 2020. It aims to attract private investors to enhance the development of the airport infrastructure in Bulgaria and the optimisation of air-flight services. The government expects that the concession will contribute to achieving the established international standards, to know-how transfer, traffic generation and development of commercial activities in the region.
The government has announced its intention to require an initial (advance) concession fee for Sofia airport of approx EUR 290 million. The State Budget Act of 2016 provided that this fee shall not be contributed to the state pension fund (which is financed, among others, with the fees collected from the concession of state ownership). Instead, according to the repeated statements of the Minister of Transport, the entire amount of the advance fee (approx EUR 290 million) shall be directed to the Ministry of Transport, and subsequently injected into the Bulgarian State Railways, Holding BDZ, for repayment of their debt towards – mainly international – creditors.
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