Building Motorways

Economic News

22 Jul 2010
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Many projects are underway to improve Bulgaria's road network, with motorways planned or under construction across the country. However, completion will only become a reality in the medium term, while one of the major projects is currently suspended due to tense contractual wrangling.



The country's road infrastructure is not of the standard that it should be to exploit the country's links to Central Europe, the Balkans, Turkey and the energy-rich Black Sea region.



The negotiations on the construction of a large part of the Trakiya Motorway, Bulgaria's foremost road project, are on the verge of collapse. Savin Kovachev, the deputy regional development minister, warned that unreasonable demands made by the Bulgarian-Portuguese consortium contracted to build the motorway risked derailing the 715m euro ($949m) project.



Kovachev said that the negotiations closed on October 10 and that the Council of Ministers is now considering whether to agree to give the project the green light or change the concession deal.



The 443km motorway, which will lead from the western capital, Sofia, to the Black Sea port City of Burgas, has been a source of controversy since its inception. The previous government awarded the 30-year build-and-operate concession without tender in March 2005. The current Socialist-led government came to power promising to review the deal.



The consortium consists of Portuguese construction companies Lena-Engenharia e Construcoes, Moniz Da Maia Serra & Fortunato-Empreiteiros (MSF) and Somague, and Bulgarian state-owned construction firms Technoexportstroi and Avtomagistrali.



Last year, the European Investment Bank (EIB) pulled out of the project due to the lack of tender.



Current talks are about amending the concession agreement for pursuing construction of the motorway, of which 182km is currently operational at both ends. The remaining unconstructed section is from Stara Zagora to Karnobat. The consortium have asked for an increase in the agreed price from 2.7m to 3.5m euros ($3.58m to $4.54m) per-kilometre and for guarantees from the state in the event that traffic levels are lower than expected.



Assen Gagauzov, the regional development minister said that the government will demand lower per-kilometre prices.



Legal action has been taken against the deal twice, in March and June. The prosecution claimed that the consortium lacked the turnover needed to complete the project, but the case was rejected by the Supreme Administrative Court.



The Trakiya Motorway will become a key part of the EU transport corridor leading across the Balkans from the Adriatic to the Bulgarian coast, connecting by road and sea route the southern Italian ports of Bari and Brindisi with the energy-rich Black Sea region.



As part of a transportation network that links Western Europe, Russia, Asia Minor, the Adriatic, Aegean and Black Seas, the country shows potential as a transport hub and distribution centre, after decades of government neglect and underinvestment.



In summer 2006, the Bulgarian government announced that they needed to spend more than 2bn euros ($2.65bn) over the next decade on the construction of four new motorways, including the Trakiya. The government's strategy is to develop 720km of new motorways in this period.



Other key projects include the 114km, 360m euro ($478m) Maritsa motorway, which leads to Turkey, and should be completed in 2009, the Struma to Greece and Hemus and from Sofia to the Black Sea City of Varna. The Struma feasibility study has been finalised and construction costs are estimated at 600m euros ($796m) for the 172-km road.



With a cost estimated at 1bn euros ($1.33bn), the Hemus highway and will link the capital with Varna, which is increasingly being recognised as Bulgaria's second business centre along with being a key port. Varna will also be connected to Burgas via an upgraded 95km long motorway.



The road-building drive is also expected to ease considerable traffic congestion in the capital. Sofia's traffic is a favourite topic of conversation for the city's citizens, the common (and not entirely inaccurate) adage being that "it grows worse by the day".



Turkish consortium Mapa Cengiz recently signed a 137.4m euro ($182.3m) contract for the construction of the Lyulin motorway near the capital. The 19km section should remove a bottleneck from the Black Sea-Adriatic route, and will receive 75% of its funding from the EU.

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