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Rossen Jeliazkov: The concession of Sofia Airport has lots of advantages and no disadvantages

Rossen Jeliazkov: The concession of Sofia Airport has lots of advantages and no disadvantages
24.02.2021

The concession of Sofia Airport has lots of advantages and no disadvantages, stated the Minister of Transport, Information Technology and Communications Rossen Jeliazkov from the rostrum of the National Assembly. He specified that currently the concessionaire has fulfilled most of the preliminary requirements and the Concession Agreement is publicly available and has been published in the National Concession Register. Under the Agreement the final date for fulfillment of the preliminary requirements, including the Upfront Concession Fee, is up to 12 months after the entry into force of the Concession Agreement, i.e. July 22, 2021.

Minister Rossen Jeliazkov presented the state of the aviation sector, pointing out that as a result of the COVID-19 pandemic significant changes have occurred in the aviation sector, which have seriously and negatively affected airports, air carriers and air navigation service providers. According to the latest information as of February 12, 2021, announced by Airports Council International (ACI Europe), the number of passengers served by European airports in 2020 decreased by 70.4 percent and fell to its level since 1995. The airports in the European Union are most severely affected, as their traffic has shrunk by 73 percent in a year and the traffic at Sofia Airport is at the level of 2.9 million passengers served in 2020 compared to 7.1 million passengers served in 2019.

"On October 27, 2020, the concessionaire made a proposal to restore the economic balance of the concession. The proposal includes deferment of the payment of the Annual Concession Fees due for the first 10 years of the concession period until the last 10 years of the concession period. The deferment of payments until the recovery of travel levels from 2019 is a measure to preserve the balance of the concession because of the the impact of the pandemic. It is temporary and does not change the net effects of the concessionaire's obligations. The proposal also includes an increase in investment from EUR 608 million to EUR 624 million. The concessionaire confirmed its commitment to pay in advance to the state budget the amount of BGN 660 million, VAT included, the construction of a new Terminal 3 by the 10th year of the concession", said Minister Rossen Jeliazkov.

The Minister reminded that the project is financed by the European Bank for Reconstruction and Development, the Black Sea Trade and Development Bank, the International Finance Corporation, part of the World Bank Group, as the European Investment Bank is expected to be involved too. "These are international financial institutions in which the Bulgarian state is a full shareholder and their participation gives us, as a state, sufficient guarantees and security in the viability of this project", said Minister Rossen Jeliazkov.

"The Concessionaire's proposal was brought to the attention of the Directorate-General for Competition. The Directorate-General for Competition of the European Commission is currently examining the proposal and we are expecting its decision. Only then will I submit a report to the Council of Ministers with the relevant proposal, which will be aimed at restoring the economic balance of the concession", said Minister Rossen Jeliazkov. He pointed out that in case of a positive decision by the European Commission, there are two approaches: accepting the concessionaire's proposal or rejecting it.

Minister Rossen Jeliazkov pointed out to the MPs what are the dangers for the state if the concessionaire's proposal is not accepted. "We will not receive the Upfront Concession Fee of BGN 660 million, VAT included, this year. The direct financial revenue from the upfront payment will significantly exceed the direct budget revenue from the current airport operator. For the last 20 years the state operator of Sofia Airport has paid to the state in the form of a dividend an amount of EUR 88 million in total, which, distributed for 20 years is EUR 4.5 million per year. Divided into 35 years, only the amount of the Upfront Concession Fee paid in advance means that the state will receive about EUR 8.18 million a year, even paid in advance. That is almost twice as much, on an annual basis. The annual payments of 32% of the revenues will not be received either, but not less than EUR 24 542 010", added the Minister. He pointed out as a negative development that if the proposal is not accepted, there will be no Annual Concession Payment and airport infrastructure investment of EUR 624 million but will probably rely on external debt or government guarantees. At the same time, Sofia Airport will continue to be managed politically, regardless of the ruling political party, he also added.