Банкеръ Weekly


Assen Gagaouzov, Minister of Regional Development and Public Works: WE SHOULD CONVINCE THE PUBLIC THAT THE CONTRACT IS ADVANTAGEOUS

Mr. Gagaouzov, what is the future of the concession on the Trakiya motorway?
- Now, since the concession has been acknowledged as legal by the Supreme Administrative Court, the Government should make a decision. We have two possibilities. The first one is to reconsider the contract and seek improvement of its parameters. If that doesn't happen, the Cabinet will have to invite a new procedure.
If the Bulgarian-Portugese consortium, which has been chosen concessionaire of the Trakiya motorway accepts out terms, the negotiations between the Bulgarian Government and the consortium might be over within three or four months. The concessionaire, on its part, could finish the motorway within two or three years. Thus the road could be ready towards 2009.
If the concessionaire rejects the Bulgarian Cabinet's terms, the talks could be closed much faster. Then we'll have to invite a new procedure which would take up a year and two or four months. The motorway's construction might begin only after that.
Therefore, I believe that the choice should be more pragmatic.
And who will make that choice?
- The Government.
Who will be holding the negotiations? According to information in some media, that might not be you.
- As early as next week I'll propose to the Council of Ministers to set up a working panel, headed by me, for holding the negotiations with the Portugese concessionaire. It will include representatives of various ministries - of finance, of transport, and officers from the Council of Ministers' administration.
I want to stress that all negotiations will be transparent this time. We should convince the public that the contract is advantageous. And that is so because 80% of all proceeds from the motorway will go to the State.
What in particular are you trying to renegotiate with the Bulgarian-Portugese consortium?
- The concession on the Trakiya motorway is not bad as a scheme, but it's not so good as a realization. Therefore, all parameters of the contract that could be improved will be improved, both from a financial point of view and from the point of view of traffic. There are possibilities for that, even from a purely formal aspect, i.e. the signed contract is not a conclusive one, therefore everything could be renegotiated. And we'll use in the negotiations all arguments, even those contained in the audit made by Price Waterhouse, with the single aim of drafting such a contract that would be accepted by both parties. At the same time, our aim is to succeed guarantee to the State security that the motorway would be implemented just as negotiated without any losses or sanctions for our country.
I think we may also use in the negotiations the experience of the European Investment Bank in the construction of motorways 5 and 6 in Hungary. The conditions in both cases are quite similar with the exception that the Hungarian concession was not made in the secret according to the Bulgarian practice which amazes everybody in Europe. It was neither based on the principle that the investor would start making profits right away. The usual practice is to invest some money, construct the facility, begin to operate it, and recover the investments made by the proceeds from operation.
However, the signed contract includes an option that the State would be paying a compensation to the concessionaire in case of reduced traffic along the motorway.
- It's not just like that. It shall not be a compensation, but a credit which the State will extend to the concessionaire, at that with an interest rate equal to the interest on its loan funds. I would like to specify as well that we are setting a term within which we'll be crediting the motorway's construction. And it won't be a long one, but two or three years at the most. The amount we'll loan to the concessionaire within that period will be equal to the non-collected money in case of a lower daily traffic. Moreover, it will be written that the credit shall be returned to the State, at that with the interest on it.
Last Friday we measured the traffic along the route of the motorway near Stara Zagora. In a single day some 45,000 vehicles passed along (according to unofficial information, the minimum number of vehicles as per the signed contract is 19,500/day - editor's note). Moreover, according to European practice, traffic increases considerably along the route after a motorway has been built.
Will you demand information about the shareholders in the consortium?
- We are not interested in the shareholders, but in the motorway's construction.

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