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Bulgaria: Pre-election Rush For Port Concessions At Heavily Discounted Prices

Bulgaria: Pre-election rush for port concessions at heavily discounted prices

Varna, Bulgaria (PortSEurope) February 19, 2021 – Eight concessions for large and smaller ports in Bulgaria are to be announced in 2021, according to a new action plan of the government, which suddenly decided to speed-up a process stalled for years, only two months before leaving office. Interestingly, the concession fees announced for the new action plan are significantly lower than the ones published two
years ago. The government surprisingly updated the action plan adopted only three weeks ago for state concessions in the period 2021-2027. The new version includes port concessions which were missing in the first version of the plan but were included in the plan announced in February 2019. The total revenue for a period of 35 years, expected from such a public-private partnership is estimated at over BGN 53 million (€27 million). However, this amount does not include the one-time fees that the government intends to demand from future concessionaires against the right to offer cargo handling and build sites on the territories of state ports. For 2022, the government planes to start a concession procedure for the intermodal terminal (dry port) in Dragoman, which was the only transport infrastructure for concession in the original version of the plan. Dragoman terminal is 10 km from the border with Serbia and 30 km west of the capital Sofia. All port concessions will be for 35 years and are of two types – for construction of facilities, including expansion or modernisation of terminals, and for the provision of services such as loading, unloading, storage, repackaging and inland port transport. Most of the money, BGN 20 million, is expected for the concession period of the two terminals of the Port of Varna, Bulgaria’s largest. Varna-East is in the Varna Bay, only a kilometre from the ideal city centre, and Varna-West is on the west shore of Lake Beloslav, 30 km from Varna. Currently, the two canals of the port are being deepened by BGN 350 million from the state budget in order to be able to accommodate larger and ships. The project is allegedly designed to help the private port of the honorary chairman of the predominantly ethnic Turkish party Movement for Rights and Freedoms Ahmed Dogan, TPP Varna near the village of Ezerovo, which is being transformed into a terminal for grain cargo and containers. The real question is whether there is going to be business left for Varna East, after TPP Varna port becomes a fully-fledged container and bulk cargo terminal. For private management will also be given Ferry Terminal Varna with projected revenues from concession fees (excluding the initial one) of BGN 8.3 million for the entire 35-year term. The cargo port terminal in the second largest Bulgarian Black Sea port, Burgas-East 1, will also be offered for concession, from which over BGN 6.8 million for 35 years are expected as concession fees, excluding the one-time fee. Kiril and Georgi Domuschiev, whose company BMF Port operates the Burgas-East 2 and Burgas-West terminals, are expected to show interest in this concession. A concession for construction will be given for the terminals in the largest Bulgaria’s Danube port – Ruse-West and a second (joint one) for Ruse-East 1 and Ruse-East 2. Terminal Ruse-West was given to the former owner of the bankrupt CCB (Corporate Commercial Bank) Tsvetan Vassilev, but the contract with his company, which at that time also owned the Ruse Shipyard, was terminated by the state in 2015. The expected revenues from such a future contract are BGN 2.68 million. Revenues of BGN 14.7 million are projected from the other two terminals of the port of Ruse (Russe, Rouse), which will be tendered together. In Ruse, a concession for completion and use will be given for Zimovnik Russe that has been unfinished for years due to lack of money. About BGN 20 million was invested in it from the pre-accession program PHARE and from the state budget, and years ago it was announced that the site will be given for completion to a concessionaire. Zimovnik Russe port must provide a year-round safe docking space for 26 vessels and yachts, including at times of low water levels on the Danube. The state is expected to receive BGN 167,000 from the contract in five years. A construction concession will also be announced for the Port Terminal Vidin-Center on the Danube, from which at least BGN 597,000 is expected. The ill-fated Dragoman Intermodal Terminal, which was deserted for many years and only at the end of last test accepted cargo for unloading, is planned to be announced on concession in 2022. The adjacent railway infrastructure and parking lots will be given to a private owner. Expected revenues are BGN 2.1 million. Concessions for roads, water supply and waste management are not envisaged in the next seven years. Two years ago, Bulgaria’s government announced that Bulgaria will launch concession tenders for its largest Black Sea and Danube River ports by the end of 2020 with the most lucrative ones being the projects for the development of Varna-East and Varna-West ports. All ports concessions will be with duration of 35 years with an option for extension of 11.5 years. The concessions fees in 2019 were dramatically higher: Development of the Black Sea Varna East port terminal for all types of cargo with a territory of 343,027 m² and development of Varna West port terminal for all types of cargo with a territory of 1,826,799 m². Concession payment for both terminals of BGN 420 million (€215 million). Development of the Black Sea ferry terminal Varna with a territory of 1,007,000 m². The concession payment is BGN 49 million (€25 million). Development of the Black Sea Burgas East 1 port terminal for all types of cargo with a territory of m². The concession payment is BGN 52 million (€27 million). Development of the Danube River Zimovnik Russe (Ruse, Rousse) port terminal for all types of cargo with a territory of 32,734 m². The concession payment is BGN 88,212 (€45,000). Development of the Danube River Russe East 1 port terminal for all types of cargo with a territory of 333,057 m². The concession payment is BGN 8.158 million (€4.171 million). Development of the Danube River Russe East 2 port terminal for all types of cargo with a territory of 355,132 m². The concession payment is BGN 14.621 million (€7.477 million). Development of the Danube River Russe West port terminal for all types of cargo with a territory of 117,003 m². The concession payment is BGN 6.302 million (€3.223 million). Development of the Danube River Vidin Center port terminal for all types of cargo with a territory of 18,261 m². The concession payment is BGN 863,000 (€441,000). The development of Varna East and Varna West port terminals in Bulgaria’s third largest city is expected to boost the expanding industrial zone around Varna and to facilitate exports/imports with Russia, the Caucasus and China (the new Silk Road project, part of the Belt and Road initiative also known as One Belt, One Road, or OBOR). The same is valid for the southern Black Sea port of Burgas. The development of the Danube River ports of Russe and Vidin is in accordance with the EU Strategy for the Danube Region (EUSDR). The largest industrial zone in Northern Bulgaria will be built near the Port of Varna, Ivan Portnih, mayor of Varna said in early February. By the end of March, the final version of the general development plan of Aksakovo municipality is expected to be finalised, which will give the green light for the development of the new area, which covers an area of ​​over 900 hectares. The new zone is very close to the soon to be finished Hemus highway, connecting Varna to the capital Sofia as well as to the railway station and the Varna International Airport. The mayor of Varna said that feasibility studies are currently being developed for light urban railways, which will lead to the new industrial zone as well as an expansion of an existing boulevard in the direction of the airport with an exit of the highway to the industrial zone. In recent years, KBC Group has opened a Shared Services Center in Varna, and Coca-Cola is investing in Financial Services Center. Large IT and outsourcing companies have expanded their activities and opened offices in Varna, Portnih said. ScaleFosus has opened a new, larger office PaySafe Group and Pontica Solutions have chosen the sea capital as their first office outside Sofia. The Municipality of Varna continues to promote the idea for the ​​creation of a technology park in the Ostrova area, which is also close to the port and to the planned industrial zone. The scope of the future zone has been expanded with new territory around the Center for Hydro- and Aerodynamics. There, the state provided land to Varna universities for the development of campuses and research centers. The newly appointed (in February) Executive Director of the state-controlled Port of Varna, Petar Seferov inherits a controversial project for the dredging of the two main access canals of Port of Varna to a depth of up to 13.5 metres (currently 11 m) in order to attract larger ships and improve the access to Varna West Port. The dredging works are under way and are expected to be completed before the end of the year. The Varna lake part of the port and the turnaround channel will also be dredged as part of the BGN 350 million (€179 million) government-funded project, which aims to attract cargo from the China’s new Silk Road project and the new trans-Caspian transport corridors. Some eight million tonnes of material will be dredged from the channels and lake bottoms, with which the canals’ banks will be fortified. Increasing canal (channel) depth might be a major step towards a future concession of the port. Port of Varna (Pristanishte Varna) is the largest seaport complex in Bulgaria. Located on the Black Sea’s west coast on Varna Bay, along Lake Varna and Lake Beloslav, it also comprises the outlying port of Balchik. It has a significant further development potential with 44 km of sheltered inland waterfront on the lakes alone, easily accessible by road and railroad and adjacent to Varna International Airport. But Bulgaria’s independent media insists that the whole project is to benefit a private port (Port TPP Ezerovo), majority owned by Ahmed Dogan, honorary chairman of the predominantly ethnic Turkish Movement for Rights and Freedoms (MRF). Dogan is controversial local politician, linked in media publications to the communist-era political police. He is also described as a conduit of Russia’s interests in Bulgaria. After the implementation of the dredging project, Port TPP Ezerovo is expected to take over the grain and containers currently handled by the state-owned Varna port terminal that is close to the city centre. This move was already in plan in 2017, when the mayor of Varna, Ivan Portnih, announced that the big ships now loading grain and scrap near the city centre in the state port must move to the quays of TPP Varna near the village of Ezerovo. TPP is a very large coal-fired thermal power plant. Dogan’s private port will most likely take over the processing of cereals cargo and containers, which are now served by the state Port of Varna, which generates from this some BGN 60 million (€30.6 million) per year in income. After 2021, this revenue will pass into the hands of the honorary leader of the MRF, according to leading local business newspaper Capital weekly. The project envisages Canal 1, which connects the Black Sea with Varna Lake and has a length of 3.8 km, to be dredged to a depth of 12.78 metres with a width of the bottom in the straight sections 103 metres, and in the curves – 178 metres. Canal 2 is located between Varna and Beloslav lakes and reaches Port Varna-West. The channel was completed in 1976-1978. Its total length is 10.2 km, its width is 106-130 metres with a depth of 12 metres. Theoretically, the forthcoming deepening of the waterway through the Varna and Beloslav lakes should be good news for the state port of Varna West in Devnya. It serves several of the large industrial plants located there – Agropolychim, Solvay Sodi and Devnya Cement, as well as the ferries, whose terminal is located in Beloslav. The distance from Varna Bay to Varna West is about 25 km, and the waterway passes under the Asparuhov Bridge and via two canals, which are periodically blocked by silt. The need for additional depth for the Port of Varna West has been under discussion for decades, but without any results. The topic has been repeatedly put on the agenda by the owners of Agropolychim, who want to provide access to the port of Varna West to up to 60,000 tonne-ships, and not just the 30,000 tonnes vessels currently docking there. This is what, according to opposition politicians and the independent Bulgarian media, raises suspicions about the government’s sudden decision in 2020 to allocate money for the deepening of the waterway under the Asparuhov Bridge to Varna Lake exactly when Dogan started the implementation of his project for the new TPP Varna Port. The intentions announced by the Sigda company, in which Dogan is the majority owner, are to extend the quay of the existing Port of TPP Varna, to increase the number of its berths, as well as its depth to 12.50 metres. The renovated port will be able to handle up to 8 million tonnes of cargo per year. For comparison, the state-owned Port of Varna currently processes about 10 million tonnes annually. After the construction of new container infrastructure, the Port of TPP Varna will have a capacity of about 200,000 TEU per year and will become the biggest container terminal in Bulgaria. It is expected that the Port of TPP Varna will soon make the existence of the state-owned Varna–East meaningless. How this will happen became clear in the autumn of 2019, when the traditional queue of grain trucks in front of the state port, waiting to be unloaded on export ships, moved to the port of Varna TPP. The operator of Bulgarian state-owned Port of Varna, located on the Black Sea coast, said that it turned to a net loss of 926,000 levs ($514,000/473,000 euro) in the first quarter of 2020 from a net profit of 852,000 levs in the same period of 2019. Operating revenue dropped 16.2% year-on-year to 12.8 million levs in the January-March period of 2020, the company said in an interim financial statement. The volume of cargo handled decreased 5.7% to 1.82 million tonnes in the first three months of 2020. More details about Port of Varna can be found in PortSEurope story Bulgarian government pays to hand over business of its biggest Black Sea port to a controversial local politician. Copyright (C) PortSEurope. All Rights Reserved. 2021.

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