The European Commission (EC) launched a new probe into the concession contract for the Trakia motorway just a few days after the European Union (EU) statistical office Eurostat gave the green light to the project saying that the revised concession contract is in line with the EU legislation.
The probe was launched following a tip-off signed by the leader of the right-centrist GERB party, Boyko Borisov, and filed by MEP Nikolay Mladenov from GERB. They claim that the latest annex to the contract between the Bulgarian Government and the concessionaire envisages state aid that is in breach of EU legislation. Since its EU entry on January 1, 2007, Bulgaria has been obliged to inform Brussels of all the deals containing state aid.
The concession contract was inked on March 29, 2005. Then the antitrust watchdog ruled that the state guarantees to the concessionaire for low traffic intensity did not constitute state aid. However, on April 25, 2007 the government signed an annex to the concession agreement amending the deal to deny state aid to the concessionaire. According to the tip-off, the annex contract had not been submitted to the European Commission. The document, which is the bone of contention, has not been publicly announced.
What Does the Government Say
The previous government headed by Simeon Saxe-Coburg Gotha awarded the concession contract without a tender to a Portuguese-Bulgarian consortium, comprising the Bulgarian state-owned Avtomagistrali and Technoexportstroy and three Portuguese companies, MSF, Lena and Somag. The move triggered heated debates and delayed the implementation of the project.
Under data of the current government, a few major changes have been made to the contract after continuous talks. There are no state guarantees on the bank loans for the project. The state has trimmed the compensation for low traffic intensity to 13,000 vehicles a day from 25,650 vehicles. The construction costs have remained unchanged. The loan financing will be allotted up to three months after the contract takes effect. The concessionaire is to complete the motorway within 36 months, but it has to gradually open stretches of it.
All these facts are disputable because no one, apart from the ruling coalition, has read the document, which is ridiculous having in mind the fact that it concerns such an expensive ($590 mln) and crucial project.
Why Did the European Commission Start the Probe
The stumbling block to the implementation of the project is the issue about the state aid. According to the tip-off, the fact that the government awarded a contract without a tender proves that the state aid is inadmissible. Furthermore, under the deal the concessionaire will get state compensation for low traffic intensity. The regional development ministry asserted that it would only give a state loan, which does not constitute state aid and which the concessionaire has to repay with interest. But the size of the interest rate has not been specified yet.
Under the deal, after the concessionaire repays the loan financing, it will not be charged concession royalties for an indefinite period of time. So, it turns out that the concessionaire may never be charged concession royalties if it fails to repay the state compensation. Besides, the concessionaire will get compensation for trucks weighing over 12 tonnes that will use the motorway without paying toll fees. The consortium will not have to pay extra concession fees for the adjacent infrastructure.
Regional Minister, Asen Gagauzov, said that the government would not take a decision on the contract before the European Commission announced its stand. The Cabinet is ready to revise the deal if the European Commission finds inadmissible state aid in it. Another option is for the government to scrap the deal and complete the construction of the motorway with state funds or EU funds. All the stemming procedures will further delay the project by at least a year. Thus the government will not keep the deadline for the completion of the motorway by the end of 2010.
28/10-02/11/07, P25
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