The Cabinet has selected German company Fraport to be granted the concession for operating the Black Sea airports of Varna and Bourgas.

The decision, which had been widely speculated lately in the local media, became official after it was promulgated in the State Gazette.

The move follows a year-long litigation.

Last June, the Government first signed a 526 million euro deal allowing Copenhagen Airports (CPH) to operate the airports. But a court cancelled the contract following appeals from Fraport (which is in a consortium with Bulgarian company BM Star) and a tie-up of France’s Vinci Airports and Vinci Concession, which had ranked second and third in the tender, respectively.

Their objection was based on the tendering commission, headed by former transport and communications minister Nikolai Vassilev, not having applied the initial criteria when choosing the successful candidate.

The Danish company pledged 526 million euro in investments in the two airports for the term of the 35-year concession. CPH offered to pay the state 30 per cent of either annual total revenues or airport fees, whichever is higher, in exchange for the concession. The Transport Ministry estimated the total concession fee at 1.2 billion euro for the entire 35-year period.

The plaintiffs said that the offer by the first successful candidate had not been signed by an authorised representative of the company. When the tender commission noted this, the offer was re-submitted, three days after the deadline. There was also a delay in the payment of the fee to participate in the tender.

The tendering commission had admitted a candidate that did not meet the qualifying requirements to enter the bidding procedure.

CPH was allowed seven days to correct irregularities committed when submitting the application, but failed to do so within the time limit. Moreover, the Danish company did not meet the requirement to manage at least two airports because it manages only the airport in Copenhagen.

In addition, the Danes do not satisfy the financial requirements of the competitive bidding procedure.

Other points in Fraport and Vinci’s appeal that were not accepted by the court were that initially, participants were told that during the evaluation phase, 40 points would be scored for the investment plan, 30 for the business plan and 40 for the concession fee to be paid to the state. However, when announcing the winner, Vassilev said that the Danish offer had been preferable because of the concession fee of 30 per cent of the revenues that they had offered to pay to the state. The applicants against the decision said that this had turned the concession contract into a management contract, which in terms of the concession was not permissible.

The preliminary contract signed with CPH, the plaintiffs said, differed from the candidate’s initial offer. It also included the interest rates on the bank loans that the winner would take. Furthermore, the ratio between the capital to be invested by CPH and additional funding was changed from 50/50 to 20/80 per cent.

The 35-year concession contract with Fraport/BM star now should be signed a month after the Government’s decision takes effect.

Fraport-controlled Fraport Twin Star Airports Management will take over complete operations and master planning for both airports, as well as development of modern passenger terminals.

The planned investment volume over the entire concession period will reach 403 million euro for building new terminal facilities, expanding apron areas, and acquiring airport vehicles and equipment.

The concessionaire will pay one-off three million euro and will be required to remit on an annual basis 19.2 per cent of either the operating revenues or the airport charges, whichever of the two amounts is bigger.

Meanwhile, a June 19 article in Bulgarian-language daily newspaper Standart News said that the development on the airport concession deal could lead to a serious rift between Bulgaria and Denmark.

Quoted un-named governmental sources, Standart said that Copenhagen had postponed the decision on the ratification of Bulgaria’s accession treaty with the European Union.

Standart said that a day before the Cabinet decided to select Fraport, a message had come from the Danish foreign ministry, announcing the postponement to October of the ratification decision.

“The Danes have not openly stated that the reason is in the shift on the concession deal, nor they would ever say it. However, their governmental circles have commented that Bulgaria’s judicial system is not working,” Standart quoted its un-named source as saying.

A statement at the end of 2005 by the Danish ambassador in Sofia, Svend Boje Madsen, said the failure of the deal with CPH might threaten the future of Danish investment in Bulgaria.

Madsen said Danish investors might consider withdrawing their projects from Bulgaria. In his view, however, such a development would not endanger long-term relations between the two countries.