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FRAPORT HAS INCREASED TO 19.2% THE ROYALTY TO THE STATE

The Government-picked concessionaire of the coastal ports in Varna and Bourgas - the consortium between Germany's Fraport and Bulgaria's BM Star - has raised the size of the annual royalty it will be paying to the State (proposed in the offer) from 16.8% to 19.2 per cent. It will be calculated on the basis of the higher of the two amounts - the total revenues from the airports' operation or the aggregate proceeds from airport taxes and from the activities of their operator. That becomes clear from the Cabinet's decision, published in the Official Gazette on June 20. According to the Transport Ministry, the amendment was made in May when the new tender commission established that only Fraport satisfied the requirements for experience in the operation of two international airports in different countries.
The concessionaire will make a payment of EUR3MN, projected in the tender procedure for the choice of private operator. However, the deposit made by the concessionaire will be deducted from it.
The second rating was made after the Supreme Administrative Court rejected the choice of the Danish Copenhagen Airports AS and returned the procedure to the beginning. The deal was challenged by the consortium between Fraport AG and BM Star, which was ranked second after Copenhagen Airports which had offered the royalty to the State to be 30% of all revenues of the airports. The German-Bulgarian offer stood at 16.8% royalty to the State. The consortium between Vinci Concessions and Vinci Airports was ranked third although it had offered a 21% royalty. The final result of the ranking was as follows: 9.15 points for Copenhagen Airports AS, 7.95 points for Fraport/BM Star, and just 7.36 points for the two French companies.
The concession agreement is for 35 years. The projected investment within that period for development and modernization of the airports is EUR403MN, of which EUR215MN is for the Bourgas Airport, and EUR188MN for the Varna Airport, the Council of Ministers press service recalled. And Fraport insiders specified that when updated with the rate of inflation growth the investments would reach EUR563MN.
The improvement of the offer is due to the positive trends in Bulgaria's development, the increased political stability, and the country's future EU membership, Fraport said on the very same day. According to the press release, another reason is that the traffic at the two airports has exceeded the projections from a year ago. The German operator commented on the increased royalty as a sign of the confidence we have in Bulgaria and its political and economic development.
The German company is a majority owner with a 60% participation in the consortium with Bulgaria's BM Star, it becomes clear from the announcement in the Official Gazette. And Fraport specified they would be controlling Fraport Twin Star Airport Management AD - the future company with which the concession contract would be signed. The German participant will assume the management of all operations and the main planning of the two airports, as well as the construction of modern passenger terminals, company insiders said.
Fraport Twin Star Airport Management AD will be granted management rights over 2,231,467 sq. m of the Varna Airport and 2,531,795 sq. m of the Bourgas Airport, as well as the future equipment, to be built by the private operator. There is a possibility for including the two airports' extensions which the State is currently making with its own funds. Due to the delayed concessioning of the airports the Transport Ministry was forced to invest in order to increase the terminals' capacity. However, the facilities of the Air Traffic Control Service won't be included in the concession.
The legality of the Cabinet's decision may be litigated within a 7-day term after its promulgation on June 20. According to the lawyer of Copenhagen Airports, the Danish were not intending to appeal against the procedure but were hurt from the outcome. The French candidate Vinci Concessions/Vinci Airports refuses to comment for the time being, but according to pundits, they will probably litigate the Government's decision. However, the court won't be asked to revoke the Cabinet's decision. The French consortium will appeal against its elimination by the new tender commission.
If the French candidate gives up the appeal, the Minister of Transport Peter Mutafchiev should hold the negotiations for the deal's finalization and the signing of the concession contract which will be enforced two months afterwards. Thus, it is completely possible that the German-Bulgarian consortium enters the two coastal airports in October.
In 2005 each of them welcomed about 1.6 million passengers, mainly from Germany, Great Britain and Scandinavia. According to the forecasts of the concessionaire, in the end of the contract period - the year 2041 - the two airports will be servicing about 5 million passengers a year.

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