December 20 (SeeNews) - Bulgarian shipyard MTG Dolphin has withdrawn from the negotiations for construction of two multi-functional modular patrol ship for the country's Navy, due to a cut in the maximum allocation for the project, the defence ministry said on Wednesday.
As the main reason for its withdrawal, MTG Dolphin has indicated the 20% decrease of the originally announced project financing of 820 million levs resulting from the introduction of value added tax (VAT) on all defence procurement deals, in force from January 1, 2017, the defence ministry said in a statement.
Considering the payment of VAT, the estimated maximum value of the project actually decreases by 164 million levs ($99.3 million/83.8 million euro), which was the main reason why several foreign companies which initially interest towards the project decided to withdraw from the procurement procedure, the ministry added.
"At 9:00 am today a letter was submitted to the defence ministry, in which MTG Dolphin informs about its decision to withdraw from the negotiations for signing a contract," the ministry said.
On Tuesday, during its negotiations with MTG Dolphin, the government approved a change to the original payment schedule proposed by the company, under which an additional 170 million levs ($102.9 million/86.9 million euro) were to be provided to MTG Dolphin,
public radio broadcaster BNR quoted defence minister Krassimir Karakachanov as saying earlier on Wednesday.
The investment project for acquisition of two multi-functional modular patrol ships for the Bulgarian Navy should be completed over a period of five years. The project was endorsed by parliament in June 2016.
In November, the defence ministry said that MTG Dolphin met the technical and financial criteria for the implementation of the project.
The technical proposals submitted by MTG Dolphin meet and considerably exceed the set technical specifications of the project, the defence ministry said at the time. It added that the transfer of high technology is ensured by Dolphin's framework agreements with five leading companies, whose products are established brands on the world market.
The Bulgarian Navy needs to acquire a new type of multi-purpose modular patrol ship in order to be able to take part in a wide range of NATO and EU operations at sea, the ministry said.
(1 euro = 1.95583 levs)