PROJECT

Projects

Environmental & Social Review Summary

Project Number

25713

Company Name

SOF Connect AD

Date ESRS Disclosed

Nov 13, 2020

Country

Bulgaria

Region

Europe

Last Updated Date

Jun 3, 2021

Environmental Category

B - Limited

Status

Active

Previous Events

Approved : Jan 28, 2021
Signed : Jan 31, 2021
Invested : Apr 16, 2021

Sector

Other Support Activities for Transportation (Grain Terminals, Cargo Terminals, Airport Operations)

Industry

Infrastructure

Department

Regional Industry INF LAC & EUR

Project Description

 

The proposed investment involves providing financing to SOF Connect SPV (“SPV”) to support the privatization of the concession of Sofia International Airport (the “Airport”), which is located 10 km east of the center of Sofia, Bulgaria (the “Project”). Sofia Airport is the main international airport of Bulgaria and is the busiest seeing 7.1 million passengers in 2019. On 22 July 2020, the Government of Bulgaria (GoB) signed a Concession Agreement (CA) for 35 years with a consortium formed by Meridiam group companies (majority shareholder), and Strabag SE (“Sponsors” or “Concessionaire”). Munich Airport will act as the third party airport operator as allowed under the Concession Agreement.

The total investment cost of the project will be up to EUR 530 million. The proposed investment is an A loan in the amount of up to EUR 67 million, which will be used by the SPV to finance the upfront payment to the GoB due under the CA and support the concessionaire’s initial capital expenditures, which include refurbishment and upgrade or limited expansion works to the two existing terminals:

- Terminal 1 (T1), which was constructed in 1937, and was extended and refurbished in 2000.

- Terminal 2 (T2), which was opened in 2006 and extended in 2013. It was subject to an EIA in accordance with Bulgarian legislation prior to receiving consent.

As per CA, a new Terminal 3 (T3) is to be built within ten years of the Concession Commencement Date (CCD) and will be built inside the Concession site. The main contractors for the future refurbishment and limited expansion works is yet to be determined.

The airport operates one main runway (3,6 km in length), with a former runway used as a taxiway. Following an additional traffic analysis and if proved necessary, a new runway may be built in the future. Operational airport facilities include a cargo facility, with capacity to handle livestock, hazardous and radioactive substances; a fuel farm; vehicle maintenance area; an engine testing platform; two aircraft de-icing platforms; car parking facilities; a metro station located adjacent to Terminal 2; tenants’ hangars for aircraft servicing and maintenance. 

Towards the eastern end of the airfield, the runway crosses the River Iskar. This is one of the major rivers of Bulgaria. A bridge structure measuring 36m by 450m runs from the southern perimeter fence to the northern perimeter fence and accommodates the runway, the parallel taxiway and three airside roads.

The area surrounding the airport is a mixed-use area comprising residential, commercial and agricultural land uses, including residential buildings near the airport, as discussed below.

The airport is currently operated by Sofia Airport EAD (“Current Operator”), a commercial company with 100% involvement of the state in the share capital, and the Ministry of Transport, Information Technology and Communications being the sole owner.

Overview of IFC's Scope of Review

 

IFC’s environmental, health, safety and social (E&S) review was based on assessment of information received from the Sponsors, their E&S Advisor (Arup) and Human Resources (HR) Advisor (KPMG); and Lenders’ Technical Advisory report prepared by Mott MacDonald. Video conference meetings were held with the representatives of the Sponsors and their Advisors.

Key documents reviewed by IFC during appraisal were:

• E&S Annexes of the Concession Agreement;

• E&S Gap Analysis Assessment report, prepared by Waterman Infrastructure & Environment Limited, 2018, as part of tender documentation;

• Sofia Airport Environmental and Social Gap Analysis - Gap Analysis Report, Arup, September 2020;

• Sofia Airport Environmental and Social Gap Analysis – Environmental and Social Action Plan, Arup, September 2020;

• Sofia Airport Environmental and Social Due Diligence (ESDD) Report, Arup, November 2020;

• Desktop Study & Ground Investigation Design, Arup, October 2020;

• Stakeholder Engagement Plan, Denktstatt, September 2020;

• Sofia Airport Lenders’ Technical Advisory report, Mott MacDonald, October 2020.

• Annual Inventory Report on the GHG emissions from Sofia Airport, 2018.

• Environmental reports available at Sofia airport’s website: https://www.sofia-airport.bg/en/sofia-airport/company/environment

After COVID-19 related travel restrictions are removed and post-acquisition, IFC will visit the project, as part of the regular portfolio monitoring activities. The field activities will include a review of the implementation of stakeholder engagement practices and relations with the local communities and meetings with relevant stakeholders.

E & S Project Categorization and Applicable Standard

Environmental and Social Mitigation Measures

Stakeholder Engagement

Broad Community Support

Environmental & Social Action Plan