Public consultation in Bulgaria on the ordinance for the financial-economic aspects of concessions

According to the new Bulgarian Concessions Act, the government shall adopt an ordinance that outlines the requirements for determining the financial-economic aspects of concessions.

On 1 March 2018, the Bulgarian government published a bill for this ordinance and initiated a public consultation. Statements on the bill can be submitted until the end of March 2018. (The bill, a summary of its objectives, and contact information for submission of statements can be accessed here: http://www.strategy.bg/PublicConsultations/View.aspx?lang=bg-BG&Id=3341)

The bill lists the financial-economic aspects of concessions, which include the following points in the case of works or services concessions:

• The estimated and the final values of the concession (“value” means the concessionaire’s total turnover for the concession period, received from operating the construction or the provision of services)
• The economic balance of the concession and the distribution of risks between the concession grantor and the concessionaire
• The income of the concessionaire
• The payments, if any, from the concession grantor to the concessionaire
• The concession remuneration, if any, due to the concession grantor from the concessionaire, and
• The concession period.

In the case of a concession for using state or municipal property, the financial-economic aspects of the concession include:

• The concession remuneration due to the concession grantor from the concessionaire
• The concession period, and
• The investment programme for maintaining the subject of the concession in operational conditions.

Each of the above points is detailed in the bill, which regulates when and how these aspects will be determined. Among these points, the value of the concession is of great importance. The estimated value shall be determined by the concession grantor when preparing the tender procedure. The final value of the concession is determined by the offer of the winning bidder.

According to the bill, the estimated value and the final value of the concession is determined by using a discounted cash flow analysis. The full amount of the expected income of the concessionaire for the period of the concession will be discounted at a rate of 4%. The concessionaire’s income will consist of all income, including those from potential extensions or amendments of the concession contract, which will be based on an existing review clause.

This bill further regulates rules, which apply to public authorities when exercising their powers for concessions, including rules for preparing action plans for state and municipal concessions.

As mentioned above, stakeholders can submit statements on the bill until the end of March 2018.

For further information, please contact Angel Bangachev.