An inspection of the design and construction of the Balkan Stream gas pipeline, commissioned by Petkov’s office in early June this year, has found dozens of violations under the Public Procurement Act, the Environmental Protection Act, financial irregularities and violations of labor legislation. DANS has found the text of the missing “road map” signed with Gazprom, but it is an unofficial copy. The irregularities surrounding the project were investigated by the Specialized Prosecutor’s Office, which, however, covered the investigation, a check by the BRRD found.

On June 2, 2022, by order of Prime Minister Kiril Petkov, two interdepartmental working groups were established to check the administrative procedures and public procurement related to the project to expand Bulgargaz’s gas transmission network, known as Balkan Stream.

Despite the vague name, in essence this project is a continuation through Bulgarian territory of the Turkish Stream gas pipeline, transiting Russian gas to Serbia and Hungary.

The report with the conclusions of the inspection was prepared at the end of July 2022 and contains striking data on numerous violations under the Public Procurement Act, violations in the financing of the project, violation of environmental legislation and labor legislation.

It becomes clear that as early as 2020, the Specialized Prosecutor’s Office has opened a file related to the project, requesting a report from PFIA, which was prepared and sent in March this year. 2285 of 2020. was assigned to a prosecutor on July 20, 2022, the report says. To date, however, this file is undetectable in the system of online checks on the status of the prosecution’s files.

It can be concluded that the state institutions have turned a blind eye to serious violations of the legislation in the process of construction of the gas pipeline, mostly related to ecology, but not only. Therefore, the summary report and its annexes were sent by competence to the State Agency for National Security.

The Balkan Stream project was implemented by the government of Boyko Borisov in a very short time and financed with BGN 3 billion by Bulgarian taxpayers, and its purpose was to serve mostly Russian economic interests. Prime Minister Borissov was personally involved in the timely completion of the construction and often inspected the construction works on site.

A brand new construction equipment purchased with European funds for completely different purposes appeared on the site, an investigation by DG BOETS and BRRD showed. The European Public Prosecutor’s Office is currently working on the case.

Military logistics units were also involved in the passage through the Vit River, which happened with a drastic violation of environmental legislation, an investigation by the BRRD found.

After a long battle under the APIA, DG BOETS managed to obtain the building permits for the site, which can be read here.

In the end, the Russian pipe was built on time, at the expense of the interconnector with Greece, which stalled and was completed only under the previous government.

Bulgaria does not receive and is unable to receive gas from the Balkan-Turkish-Russian Stream, which supplies Serbia and Hungary. The project also has geostrategic importance for Putin’s regime, which became especially evident after the attack on Ukraine in February this year.

We are publishing the full text of the report, which was prepared by three experts of the General Inspectorate at the Council of Ministers. In a separate appendix prepared by the BRRD team, we give more detailed information about the companies and consortia cited in the report.

VERIFICATION OF THE ADMINISTRATIVE PROCEDURES FOR DESIGN, CONSTRUCTION AND COMMISSIONING OF THE EXPANSION OF THE BALKAN SKI STREAM GAS TRANSMISSION INFRASTRUCTURE

ACCORDING TO AN ORDER OF THE

THE PRIME MINISTER No R-92 OF 02 JUNE 2022

Content:

1 Information from the Ministry of Energy 4

1.1 Roadmap 4

1.2 Working Group 6

2 Information from the Ministry of Regional Development and Public Works 6

2.1 Structure of the activities related to the design, construction and commissioning of the expansion of the gas transmission infrastructure between the Bulgarian-Turkish and the Bulgarian-Serbian borders 6

2.2 Approval of investment projects and authorization of construction 8

2.3 Construction of the construction 8

2.4 Commissioning 9

3 Information from the Ministry of Environment and Water 9

4 Information from the Public Financial Inspection Agency 11

4.1 Financing of the project activities: “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD from the Bulgarian-Turkish to the Bulgarian-Serbian border”. 11

4.2 Verified public procurements under the Public Procurement Act (PPA) conducted in connection with the implementation of the project activities. 13

4.3 Actions taken by Bulgartransgaz EAD to conclude a contract with DZZD 16 Consortium ARCAD

5 Information from the Public Procurement Agency 20

5.1 Public procurement in connection with the project “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border” – stages “Linear part” and “CS “Rasovo” and CS “Nova Provadia” 20

6 Information from the General Labour Inspectorate Executive Agency 23

7 Conclusions: 26

7.1 Violation when registering and reporting the availability of a roadmap: 26

7.2 Infringements of environmental legislation: 26

7.3 Violations in the financing of the activities under the project “Expansions of the Gas Transmission Infrastructure of Bulgartransgaz EAD from the Bulgarian-Turkish to the Bulgarian-Serbian border”: 27

7.4 Procurement violations conducted in connection with the implementation of the project: 27

7.5 Procurement offences 28

7.6 Violations of labour law 29

8 GENERAL PROPOSALS: 30

• By Order No P-92 of 02.06.2022, the Prime Minister of two interdepartmental working groups (items 1 and 3 of the order) was assigned to carry out an inspection of:
  1. the administrative procedures for the design, construction and commissioning of the expansion of the gas transmission infrastructure between the Bulgarian-Turkish and Bulgarian-Serbian borders (“Balkan Stream”), carried out by the state institutions (under item 1 of the order);
  2. the public procurements conducted by Bulgartransgaz EAD in connection with the design and construction of the Balkan Stream gas pipeline and the supply and commissioning of Rasovo and Nova Provadia compressor stations, as well as the implementation of the concluded public procurement contracts (under item 2 of the order).
• This report reflects a summary of the information on the results of the checks carried out by the members of the two interministerial working groups (Annexes Nos 1 to 6 of the summary report).

1 Information from the Ministry of Energy (Appendix No. 1)

2 Road map

• According to the information presented by the Ministry of Energy, on June 3, 2017, within the St. Petersburg International Economic Forum, the Minister of Energy Mrs. Temenuzhka Petkova and Mr. Alexei Miller, Chairman of the Management Board of Public Joint Stock Company Gazprom (PAD Gazprom), signed a “Roadmap for studying the possibilities for expanding the gas transmission system of the Republic of Bulgaria”, taking into account the rules of the European Union. From the data contained in the documents and information submitted, it is evident:
• The signing of the Roadmap was initiated by an invitation on May 30, 2017 to the Minister of Energy Mrs. Temenuzhka Petkova to hold a meeting with the Chairman of the Management Board of Gazprom AD and sign the “Roadmap for the Development of Gas Infrastructure on the Territory of Bulgaria”.
• With a report dated 31 May 2017 to the Prime Minister, the Minister of Energy Ms. Temenuzhka Petkova has proposed to be seconded to the town of Smolyan. St. Petersburg with the aim of holding a meeting with Mr. Alexander Miller and signing a “Roadmap for the implementation of a project for expansion of the gas transmission system on the territory of the Republic of Bulgaria from the border with the Republic of Turkey to the border with the Republic of Serbia and, if necessary, with other neighboring countries of the Republic of Bulgaria”.
• A report dated 31 May 2017 by the Minister of Energy to the Prime Minister states that the Roadmap provides for the establishment of a Bulgarian interdepartmental working group, the designation by the Bulgarian side of an authorized company responsible for the implementation of the project activities, the establishment of a joint Bulgarian-Russian working group to analyze the possibilities for using existing gas transmission capacities on the territory of Bulgaria in compliance with European Union (EU) rules, analysis of the possibilities for using the activities carried out on other works, as well as analysis of the possibilities for using the works performed on other gas pipeline projects on the territory of the country (project documentation; environmental impact assessment, building permit; contracts with contractors).
• By order of June 1, 2017, the Prime Minister has seconded the Minister of Energy to the town of Smolyan. St. Petersburg in order to hold a meeting with the Chairman of the Management Board of Gazprom Mr. Alexander Miller.
• With a report dated 16 June 2017, the Minister of Energy Mrs. Temenuzhka Petkova informed the Prime Minister of the held in the town of Smolyan. St. Petersburg met with Alexander Miller and the signing of a “Roadmap for exploring the possibilities for expansion of the gas transmission system of the Republic of Bulgaria”.
• The Roadmap signed by the Minister of Energy is not registered in the registry of the Ministry of Energy and is not stored in the archives of the Ministry. With letters of the caretaker Minister of Energy, the Roadmap was requested by Bulgartransgaz EAD, Bulgarian Energy Holding and the Council of Ministers (given the fact that other documents related to the Roadmap refer to them as related institutions). In the archives of Bulgartransgaz EAD, the Bulgarian Energy Holding and the Council of Ministers the roadmap is not found.
• By letter of the caretaker Minister of Energy to the Ministry of Interior (MoI) and the State Agency for National Security (SANS), an inspection was requested to establish the location of the missing Roadmap.
• So far, the Ministry of Energy has not received information from the Ministry of Interior and the State Agency for National Security (DANS) about the results of the inspection to establish the location of the storage of the Road Map.
• At the initiative of the members of the Energy and Climate Committee of the 46th National Assembly and following an order of the Minister of Energy to Bulgartransgaz EAD, the company has requested from Gazprom a copy of the Roadmap.
• Despite the reminder sent in January 2022, no response has been received from Gazprom with a copy of the roadmap attached.
• In view of the response of the Minister of Energy and in order to fulfill the task assigned by the Prime Minister, the interdepartmental working group (under item 1 of the order) requested from the administration of the Council of Ministers and from the State Agency for National Security information about the availability of the Roadmap and its presentation in case such is available to them.
• In response, the administration of the Council of Ministers clarified that such a document is not available in the archives of the institution, and that the Minister of Energy has responded to a similar request.
• With a letter of the Chairman of SANS (unclassified) to the attention of the interdepartmental working group were presented copies of:
  1. “Roadmap for the implementation of projects expansion of the gas transmission system on the territory of the Republic of Bulgaria from the border with the Republic of Turkey to the border with the Republic of Serbia and, if necessary, with other neighboring countries of the Republic of Bulgaria (in Russian), not classified;
  2. Road map for the implementation of the project for the construction of the gas pipeline on the territory of the Republic of Serbia from the border with the Republic of Bulgaria to the border of the Republic of Hungary and, if necessary, with other neighboring countries of the Republic of Serbia (in Russian), not classified;

• Roadmap for the construction of a gas infrastructure project of the Republic of Hungary from the Republic of Serbia to the Republic of Austria (in English), unclassified.

• The letter of SANS explicitly states “… It should be borne in mind that the documents were acquired in SANS unofficially and there is no official confirmation of their authenticity. Only copies of the above documents are available in SANS, and there is no information on where the originals are stored.”.

3 Working Group

• On June 12, 2017, by order of the Prime Minister, an interdepartmental working group was established to coordinate the actions of the competent state authorities and accelerate the processes of coordination, approval and issuance of the relevant permit documents in connection with spatial planning, investment design and authorization of the construction of infrastructure projects implemented by Bulgartransgaz EAD, including the implementation of the concept for the construction of a gas distribution system. and the projects for the expansion of the gas transmission network on the territory of the Republic of Bulgaria. Chairman of the working group is the Minister of Energy and members – heads / representatives of the competent institutions for the issuance of the necessary permits and documents, including a representative of Bulgartransgaz EAD.
• The Working Group was established on the proposal of Bulgartransgaz EAD (letter dated 06 June 2017) and at the initiative of the Minister of Energy Ms. Temenuzhka Petkova (report of 09 June 2017). The Interministerial Working Group held only one meeting, which was of an organizational nature and no minutes were drawn up for it.

4 Information from the Ministry of Regional Development and Public Works (Appendix No 2)

5 Structure of the activities related to the design, construction and commissioning of the expansion of the gas transmission infrastructure between the Bulgarian-Turkish and Bulgarian-Serbian borders

• The expansion of the gas transmission network of Bulgartransgaz EAD from the Bulgarian-Turkish border to the Bulgarian-Serbian border includes the following sites and stages:

1. Project: “Expansion of the gas transmission network in the section from the Bulgarian-Turkish border to compressor station “Strandzha”, including:
   • stage Strandja Gas Metering Station;
   • stage “Transmission gas pipeline from the Bulgarian-Turkish border to Compressor station “Strandzha”.
2. Project: “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border”, including:
   • stage “Linear part”;
   • stage “Compressor station “Rasovo” (CS “Rasovo”);
   • stage “Compressor station “Nova Provadia” (CS “Nova Provadia”).

• By Decision No 312 of 10 May 2018 of the Council of Ministers, the two sites were declared sites of national importance within the meaning of § 5, item 62 of the Additional Provisions (DR) of the Spatial Planning Act (SDA) and national sites within the meaning of § 1 of the Additional Provisions of the State Property Act.
• By letter ex. No E-26-B-21 dated 26.01.2018 of the Minister of Energy Bulgartransgaz EAD was informed that the shareholders of South Stream Bulgaria AD – BEH EAD and PAD Gazprom have adopted a decision to terminate the activities under the South Stream project on the territory of the Republic of Bulgaria.
• On June 16, 2018, Bulgartransgaz EAD signed a contract for the purchase of assets and land owned by South Stream Bulgaria AD. The assets include an environmental impact assessment report, detailed development plans (DDP) – parcel plans (PP) and development plans (SE), technical designs and documents issued in connection with their coordination and approval, geotechnical and geological surveys, archaeological studies, established building right and others.
• In the period 03 May 2018 – 14 June 2018, all final contracts for the transfer of ownership rights, the right to build and easement rights for the properties were signed.
• On May 10, 2012, the Ministry of Regional Development and Public Works was authorized to produce a detailed development plan for the South Stream gas pipeline on the territory of the Republic of Bulgaria, and by a letter dated January 25, 2013, the permit was supplemented by admission for the elaboration of the Detailed Development Plan.
• On September 27, 2018, by letter of the Ministry of Regional Development and Public Works, Bulgartransgaz EAD was instructed on the necessary actions to be taken after the transfer of the assets of South Stream Bulgaria AD, namely: before submitting for consideration of developed DDP projects, they should be revised on current excerpts from the cadastral map and Bulgartransgaz EAD should be reflected as the contracting authority, as well as to enter the new name of the project according to Decision No 312 of 10.05.2018 of the Council of Ministers. It is indicated that the coordination and permit documents, which set a deadline and have expired, should be updated.
• With regard to the intention of Bulgartransgaz EAD to build only the main line of the South Stream gas pipeline without the construction of a duplicating pipe, as previously envisaged, the Ministry of Regional Development and Public Works has expressed the opinion that partial implementation of the parcel plans for the route of the pipeline is permissible, in view of the lack of a legal obstacle to this.

6 Approval of investment projects and authorization of construction

• The applications submitted by Bulgartransgaz EAD for approval of investment projects and issuance of building permits for the relevant stages of the construction of the gas pipeline are accompanied by complex reports for assessing the compliance of the project documentation with the basic requirements for the constructions, prepared by Bul Control DZZD and Stroyconsult – GN 99 EOOD, as well as all other documents required by law.
• For the construction of the site “Expansion of the gas transmission infrastructure of Bulgartransgaz” EAD between the Bulgarian-Turkish and Bulgarian-Serbian borders (“Balkan Stream”)” 29 (twenty-nine) building permits were issued by the Minister of Regional Development and Public Works and 18 (eighteen) orders for their completion under Art. 154 of the Spatial Development Act, including the building permits of CS “Rasovo”, CS “Nova Provadia” and Compressor Station “Strandzha”.
• For the sites there are approved detailed development plans, expropriation procedures have been carried out and easements for the use of agricultural land, municipal land and other properties through which the route of the gas pipeline passes have been established. The building permits are issued within the statutory deadlines, with preliminary implementation, given the presence of sites of national importance.
• All building permits issued for the pipeline and the orders to supplement them have been published in the State Gazette. Within the statutory period, building permits have not been appealed and have entered into force.

7 Construction of the construction

• During the execution of the construction of the gas pipeline, checks were carried out on the route of the gas pipeline in terms of the construction works and the readiness for commissioning of the construction. The inspections were carried out by employees of regional directorates for national construction control (RDNCC) – Varna, Shumen, Razgrad, Targovishte, Ruse, Veliko Tarnovo, Lovech, Pleven, Vratsa, Montana and Vidin, for the territory of the respective RDNCC. For the results of the inspections, protocols of findings have been drawn up, to which photographs are attached.
• During the on-site inspections carried out by the authorities of the National Construction Control Directorate (NCSD) on the route of the gas pipeline, no significant violations in the execution of the construction were found and no administrative or administrative penal proceedings were initiated.

8 Commissioning

• For all stages of the construction, construction supervision was carried out by DZZD “Gin Consortium”, with the exception of CS “Rasovo”, for which the construction supervision was carried out by DZZD “Stroyconsult – MDI”.
• The requests received by Bulgartransgaz EAD for the introduction of the construction into operation are accompanied by the required by law documents. For the adoption of all stages of the construction of the pipeline, state acceptance commissions have been appointed, which have completed work with the preparation of the mandatory Protocols rev. 16, containing a proposal that the relevant stage of construction be put into operation.
• For the construction “Expansion of the gas transmission infrastructure between the Bulgarian-Turkish and Bulgarian-Serbian borders (“Balkan Stream”)” 5 permits for use have been issued by the head of NCSD, which have entered into force.

9 Information from the Ministry of Environment and Water (Appendix No. 3)

• The competent environmental authority – the Ministry of Environment and Water (MOEW) has ruled with Decision No 7-5 of 2013, approving the implementation of the investment proposal (IP) “Construction of the South Stream gas pipeline”. With regard to the newly requested II “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border”, the competent environmental authority pronounces in a letter to the contracting authority in 2019 that the II thus requested does not constitute an extension or amendment that would lead to a significant negative impact on the environment within the meaning of Art. 93, para. 1, item 3 of the Environmental Protection Act (EPA). The above decision on environmental impact assessment (EIA) was issued on 30.08.2013, but was appealed and entered into force at a later stage – 11.2015.
• According to Art. 99, para. 12 of the EPA the EIA decision loses legal effect if within 5 years from the date of its issuance the implementation of the investment project has not started, which is established by an inspection by the environmental control bodies. It is noteworthy that when “coordinating” by the competent authority (MOEW) of the newly requested investment proposal (IP “Expansion of the gas transmission infrastructure of Bulgartransgaz” EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border), it did not take into account changes in some of the circumstances in which Decision No 7-5 of 2013 was issued (e.g.: changes in the conservation status of natural habitats, habitats and populations of species subject to conservation in the protected areas crossed by the route of the National Ecological Network part of the pan-European ecological network NATURA 2000; changes in the state of the environment; changes in land use, spatial planning, etc.).
• With the 2019 letter to the contracting authority, the competent authority (MOEW) specifies that the contracting authority’s obligation to comply with the conditions and measures set out in EIA Decision No 7-5 of 2013 of the Ministry of Environment and Water for the South Stream gas pipeline on the territory of the Republic of Bulgaria is not waived. The same applies only to the parameters requested in letter ent. No 6 EIA – 59 of 24.08.2018 of Bulgartransgaz EAD, which gives a contradictory interpretation of the commitments undertaken. In the final act itself (Decision No 7-5 of 2013) it is expressly stated in the grounds (paragraph 5) that ‘… According to the assessment, the implementation of the alternative route under Option 1, which should be implemented using the technology proposed by the contracting authority, has the least negative impact on the subject and conservation objectives of the NATURA 2000 sites. That is, according to the proposed method of trenchless crossing (inclined directional drilling) of rivers in protected areas.
• At the construction stage, a violation of the environmental legislation was allowed – a change in the method of crossing the major rivers in the construction of the linear part of the Bulgartransgaz EAD “Extension of the gas transmission infrastructure of Bulgartransgaz EAD in parallel with the northern (main) gas pipeline to the Bulgarian-Serbian border”. The competent authority (MOEW) has been informed by the contracting authority that during the activities of crossing the Vit River by trenchless method (directed drilling) the drilling stops due to peculiarities in geology and it becomes impossible to continue it, which makes it necessary to switch to the other alternative method – trench crossing through the water body (trench passage). The drilling wells for drinking water supply of the town are also affected. Pleven.
• In response, the competent authority (MOEW), instead of conducting the mandatory procedures for environmental and human health impact assessment, sends a response to the contracting authority with a letter that the change in the method has been assessed within the EIA of the South Stream Gas Pipeline and that this significant amendment of the II and the investment project within the meaning of the Spatial Development Act, not assessable.
• A violation of the environmental legislation has been committed, and without an EIA decision has been issued and entered into force, the construction of CC “Nova Provadia” (II “Design and construction of compressor station KS “Nova Provadia”) has been launched – input output trains, road access and external connections – electrical power supply (main and backup), water supply and sewerage related to stage “CS “Nova Provadia” to site: “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border”. In confirmation of this finding, satellite images from the Sentinel 2 satellite, freely available through the Sentinel EO Browser and Sentinel Playground platform, show that the construction of the Constitutional Court “Nova Provadia” began in October 2020 with preparatory activities to shape the site before the issuance of a final act under the EPA.

10 Information from the Public Financial Inspection Agency (Appendix No 4)

• The authorities of the Public Financial Inspection Agency (PFIA) carried out a financial inspection of Bulgartransgaz EAD, the results of which are reflected in report No DID2-SF-40 of 18.03.2022. According to the information contained in a letter of the Director of PFIA, the financial inspection report is presented to:
  21. Bulgartransgaz EAD (on 21.03.2022);
  22. Bulgarian Energy Holding EAD (on 28.04.2022);

• Public Procurement Agency (on 28.04.2022);

11. SANS (in connection with a letter of the President of the Agency from 11.04.2022);
12. The Specialized Prosecutor’s Office on 07.04.2022 (in connection with a letter of the Specialized Prosecutor’s Office on the occasion of the opening of prosecutor’s file No 2285 of 2020). A reference made on the official website of the Prosecutor’s Office of the Republic of Bulgaria shows that Case No 2285 of 2020 was allocated for decision to a prosecutor on 20.07.2022.

11 Financing of the project activities: “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD from the Bulgarian-Turkish to the Bulgarian-Serbian border”.

• The project costs are financed by Bulgartransgaz EAD’s own funds, as well as by credit agreements concluded. According to Protocol No. 450 of 02.06.2020, the Management Board of Bulgartransgaz EAD has decided to approve the launch and conduct of a procedure for the selection of contractors for bank financing in the form of a loan to finance operating and investment costs of the company, as well as basic parameters. In connection with the decision taken, the Board has instructed the Executive Director to organize the opening and conduct of the procedure under the terms of an attached draft invitation. The decision of the Management Board to launch and conduct a procedure for selection of contractors for bank financing has been approved by the Supervisory Board (NA) of the company, according to Protocol No22 of 05.06.2020.
• The subject of the procedure includes the selection of contractors for bank financing in the form of a loan to finance operational and investment costs of Bulgartransgaz EAD, including the investment costs under contract No 4156 of 18.09.2019 for: “Supply of the necessary materials and equipment, investment design – detailed design phase, construction and commissioning of the site: Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border stage: “Linear part” and Contract No 4183 of 03.10.2019 with subject: “Investment design, supply of the necessary materials and equipment, construction and commissioning of stage CS “Rasovo” and stage CS “Nova Provadia” to site: “Expansion of the gas pipeline infrastructure of Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border”. The amount of funding should be up to EUR 400 million. the repayment period should be 5 years from the expiry of the grace period, the grace period on the principal should be 1 year from the date of the utilization of the first loan and the interest rate should be a set of 1-month EURIBOR + margin, and the proposed margin should not exceed 3,5% on an annual basis for each individual year and should include all fees and commissions.
• A total of 10 offers were received during the deadline. By order of the Executive Director of Bulgartransgaz, a commission was appointed to conduct the procedure. By a report of 8 July 2020, the Commission notified the Executive Director of the results of the review and evaluation of the tenders, proposing to increase the amount of the requested credit resource and to reach a final amount of EUR 512 million. EUR 60 million. left. The proposed increase in the amount of the requested credit resource has been approved by the Management Board, according to Protocol No 460 of 08.07.2020, as well as by the National Assembly, according to Protocol No27/09.07.2020.
• As a result of the procedure, Bulgartransgaz EAD concluded a total of 6 contracts with various credit institutions, with which the provision of credit resources totaling up to EUR 385 million was agreed. EUR to be used to finance operational and investment costs, including investment costs under contracts No 4156 of 18.09.2019 and No 4183 of 03.10.2019.
• A procedure for the selection of contractors for the financial service “Revolving Working Capital Loan for payment of VAT, due in connection with investment expenses incurred by Bulgartransgaz EAD, according to two invitations from 04.09.2020 and from 04.12.2020” has been carried out. The loan parameters include an amount of up to EUR 120 million. a minimum amount of credit allocated by each participant of EUR 30 million. repayment period until 15.03.2021, interest should be due only on the utilized part of the provided financing from the date of withdrawal of each amount to the date of its repayment, as well as the interest rate on the drawn down loan funds should include all fees and commissions of the bank. As a result of the conducted procedures, a bank loan agreement BTG No 4730 of 28.09.2020 was signed with UniCredit Bulbank AD, with the loan amount being up to EUR 120 million. euro. On 04.01.2021, Annex No 1 to the contract was concluded, under which the authorized loan amount is increased to EUR 240 million. euro. Before the described actions are carried out, the relevant approval decisions have been taken by the Board and the National Assembly.
• A procedure for the selection of contractors for the financial service “Financing” was carried out according to an invitation. The launch of the procedure has been approved by the Board and the National Assembly, which is also reflected in the relevant minutes of the meetings. The loan amount should be up to EUR 115 million. the repayment period – up to 5 years from the expiry of the grace period, the grace period on the principal is 1 year from the date of utilization of the first loan, and the fixed interest rate should not exceed 2.5% on an annual basis for each year, including all fees and commissions. A total of 10 offers were received within the deadline. By order of the Executive Director, a commission was appointed to review and evaluate the offers. With a report, the Commission informed the Executive Director of the results of its work and proposed to increase the amount of the requested credit resource to EUR 216 million. euro. The proposal for an increase has been approved by the Board and the National Assembly, which is also evident from the relevant minutes of the meetings. As a result of the procedure, a total of 4 contracts for financing costs under contract No 4156 of 18.09.2019 have been concluded between Bulgartransgaz EAD and various credit institutions.
• The inspection of PFIA, reflected in report No DID2-SF-40 of 18.03.2022, found no violations of the financing of the project: “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD from the Bulgarian-Turkish to the Bulgarian-Serbian border”.
• By order of 05.04.2021, issued by the Chairman of the Energy and Water Regulatory Commission (EWRC), it was ordered to inspect Bulgartransgaz EAD on the methods of financing used in the implementation of: “Project for development and expansion of the gas transmission system of Bulgartransgaz EAD”. The inspection revealed administrative violations of art. 21, para. 1, item 23, proposal second of the Energy Act (EA), for which 21 acts for establishment of administrative violations (AWAN) have been drawn up.
• According to Art. 21, para. 1, item 23 of the Energy Act, EWRC authorizes the disposal of property with which licensed activity is exercised in the cases provided for by law, as well as other transactions that lead or may lead to a violation of the security of supply as a result of indebtedness of the energy company. According to the regulator, the conditions under which the contracts with the contractors for the project and with the credit institutions that have provided the financing are concluded make it necessary to assess whether the conclusion of the contracts leads or may lead to a violation of the security of supply due to indebtedness of Bulgartransgaz EAD. The contracts were concluded without obtaining the appropriate permission from EWRC before the date of their conclusion. The Chairman of EWRC has issued a total of 21 penalty decrees (NP), which imposed property sanctions on Bulgartransgaz EAD totaling BGN 427,413.00. Currently, the penal decrees are being appealed before the Sofia District Court (SRS), and in report No DID2-SF-40 of 8.03.2022 it is reflected that three of the NP have been repealed by the SSD.

12 Verified public procurements under the Public Procurement Act (PPA), conducted in connection with the implementation of the project activities.

• The team that carried out the financial inspection checked on a sample basis a total of 10 public procurements conducted in connection with the project, with a total estimated value of BGN 2 645 581 597.46 excluding VAT and the implementation of the concluded total of 9 contracts, with a total of 8 administrative violations, for which a total of 8 AWAN were established.
• The public procurement with subject: “Supply of the necessary materials and equipment, investment design – phase detailed design, construction and commissioning of the project: “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border, stage: “Linear part”, estimated value – BGN 2 286 000 000,00 excluding VAT. Contract No 4156 of 18.09.2019 was signed with the Consortium Arkad, Sofia. Sofia, worth EUR 1 546 487 166,13 including VAT (EUR 1 288 739 305,11 excluding VAT). The verified value of the contract (on a sample basis) is BGN 1 810 762 017,86 including VAT.
• It was established that after entering data in the random selection system (SSE) of the Public Procurement Agency (PPA) for exercising control under art. 232, para. 1 of the PPA, the procedure is not selected for control within the period under art. 121, para. 4 of the PPP.
  16. A violation of Article 112 para. 1, item 2 in connection with art. 58, para. 1, item 1, item 2 and item 3 of the Public Procurement Act – upon signing the contract, the appointed contractor has not submitted documents under art. 58, para. 1, items 1 – 3 of the PPA. AWAN No 11-01-227 of 16.03.2022 was drawn up and awarded against Lyubomir Simeonov Krastev – Head of the Public Procurement Award Department (IOP) and proxy of the Executive Director on the grounds of Art. 7, para. 1 of the PPA;
  17. A violation of Article 27 has been found in conjunction with art. 36, para. 1, p. 3 of the Public Procurement Act – the notice for amendment of the public procurement contract (State Contract 2 of 11.11.2020) has not been sent for publication in the Public Procurement Register (ROP) within the statutory period. AWAN No 11-01-203 of 10.03.2022 was drawn up and awarded against Lyubomir Simeonov Krastev – Head of the Public Prosecutor’s Office Department and proxy of the Executive Director on the grounds of Art. 7, para. 1 of the PPP.
• The public procurement with subject: “Investment design, supply of the necessary materials and equipment, construction and commissioning of stage CS “Rasovo” and stage CS “Nova Provadia” to the project “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border”, estimated value – BGN 351 635 657,46 excluding VAT. Contract No 4183 of 03.10.2019 was signed with DZZD “Ferroshtal Balkangaz”, Sofia. Sofia, up to EUR 179 377 777,00 excluding VAT.
• The verified value of the contract (on a sample basis) is BGN 322,161,047.97 including VAT.
  18. A violation of Art. 27 in relation to art. 36, para. 1, p. 3 of the Public Procurement Act – the notice of amendment of the public procurement contract (State Security 1 of 18.12.2020) has not been sent for publication in the ROP within the statutory period. AWAN No 11-01-205 of 10.03.2022 was drawn up and handed over against Lyubomir Simeonov Krastev – Head of the Public Prosecutor’s Office Department and proxy of the Executive Director on the grounds of Art. 7, para. 1 of the PPP.
• The public procurement with subject: “Exercise of consulting activities under art. 166, para. 1 of the Spatial Development Act for the project: “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border”, stage “Linear part”, estimated value – BGN 2 500 000.00. excluding VAT. Contract No 4138 of 01 09.2019 was signed with DZZD “GIN Consortium” totaling BGN 5 827 200,00 with VAT (BGN 4 856 000,00 excluding VAT). The performance of the contract worth BGN 3 008 773,48 including VAT has been checked.
  28. A violation of Art. 27, in conjunction with art. 36, para. 1, p. 3 of the Public Procurement Act – the notice for amendment of the public procurement contract (State Security No 1 of 28.09.2020) has not been sent for publication in the Public Procurement Act within the statutory period. AWAN No 11-01-204 of 10.03.2022 was drawn up and awarded against Lyubomir Simeonov Krastev – Head of the Public Prosecutor’s Office Department and proxy of the Executive Director on the grounds of Art. 7, para. 1 of the PPP.
• Subject of the public procurement: “Preparation of a Report on Environmental Impact Assessment and Assessment of the Degree of Impact of the Investment Proposal on the Protected Areas for the Stage “CC “New Provadia” at the site: “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD in parallel with the northern (main) gas pipeline to the Bulgarian-Serbian border”, estimated value – BGN 200 000.00 excluding VAT. Contract No 4467 of 13.03 was concluded. 2020 with the Association “CS Nova Provadia”, Sofia. Sofia, worth BGN 234 000,00 with VAT (BGN 195 000,00 excluding VAT). The performance of the contract worth BGN 234 000.00 including VAT has been checked.
  16. Violations of Article 112, paragraph 1, item 2 in conjunction with art. 58, para 1, item 2 and item 3 of the Public Procurement Act – upon signing the contract the appointed contractor has not submitted documents under art. 58, para. 1, item 2 and item 3 of the PPA. AWAN No 11-01-228 of 16.03.2022 was drawn up and awarded against Lyubomir Simeonov Krastev – Head of the Public Prosecutor’s Office Department and proxy of the Executive Director on the grounds of Art. 7, para 1 of the PPA.
  17. Violations of Article 29 para. 3 in relation to Sec. 29, para. 1, item 1, in connection with art. 36, para. 1, item 6 of the Public Procurement Act – the notice for termination of the contract has not been sent for publication in the ROP within the statutory period. AWAN No 11-01-1010 of 15 12 2021 was drawn up and awarded against Lyubomir Simeonov Krastev – Head of the Public Prosecutor’s Office Department and proxy of the Executive Director on the grounds of Art. 7, para. 1 of the PPP.
• There are 2 unconducted public procurements totaling BGN 109,888.60. excluding VAT as follows:
  15. subject of the public procurement – “Supplies of office furniture and office equipment” for BGN 52 528,60 excluding VAT (BGN 63 034,32 including VAT). The provision of Art. 17, para. 1 in connection with art. 20, para, 3, item 2 and with art. 3, para. 1, item 2 of the Public Procurement Act – the contracting authority has not complied with the procedure for public procurement provided for in the Public Procurement Act, when there are grounds for this. AWAN No 11-01-1008 of 15.12.2021 was drawn up and awarded against Lyubomir Simeonov Krastev – Head of the Voca Department and proxy of the Executive Director on the grounds of Art. 7, para 1 of the PPA.
  16. subject of the public procurement – “Preparation of a design and construction of a control and measurement system for monitoring the intensity of landslide processes on landslide RSE 04.05133.04 in the land village of Lom Cherkovna, municipality of Lom Cherkovna. White, general. Ruse” for BGN 57,360.00 without VAT (BGN 68 832,00 including VAT). The provision of Art. 17, para. 1 in connection with art. 20, para 3, item 2 and art. 3, para. 1, item 3 of the Public Procurement Act – the contracting authority has not complied with the procedure for public procurement provided for in the Public Procurement Act, where there are grounds for this. AUAN No 11-01-1009 of 15.12.2021 was drawn up and awarded against Lyubomir Simeonov Krastev – Head of the Voca Department and proxy of the Executive Director on the grounds of Art. 7, para. 1 of the PPP.

13 Actions taken by Bulgartransgaz EAD to conclude a contract with DZZD Consortium ARKAD

• By decision No BTG-RD-07-76B dated 03.04.2019, the Head of the Bar Department (as an assignor) has appointed as a contractor for the public procurement the Consortium Arkad and has ranked second DZZD Consortium “Gas Development and Expansion in Bulgaria” (GRRB).
• On 17.04.2019, by letter of the Deputy Executive Director of Bulgartransgaz EAD, the necessary documents for the conclusion of the contract were requested from Consortium Arkad.
• In the period 17 April 2019 – 16 May 2019 (one month) correspondence was held between Bulgartransgaz EAD and JV Consortium Arkad regarding the required documents for the conclusion of the contract. In letter ent. No 24-00-1009 of 16.05.2019, Bulgartransgaz EAD informs Consortium Arkad that it provides an additional opportunity to submit the documents no later than 17.00 on 22.05.2019 and to ensure the presence of their representative to sign the contract on 23.05.2019. It is specified that in case of failure to submit the documents within the specified deadline or that on the specific date there is no representative of Bulgartransgaz EAD, they will accept, that on the part of the Consortium Arkad Association there is a refusal to conclude the contract.
• On 17 May 2019, the Executive Director of Bulgartransgaz EAD reported to the Management Board on the actions for concluding the contract. On the same day, decisions were taken by the Board (protocol No 354 of 17.05.2019), which: confirmed the actions of the Executive Director to give an additional deadline for the submission of the documents from JV “Consortium Arkad” – no later than 23.05.2019; the Executive Director to acquaint the National Assembly with the decisions adopted at the meeting.
• On May 17, 2019, Bulgartransgaz EAD received a letter from DZZD Consortium “Gas Development and Expansion in Bulgaria”, informing them that they were not aware of any public information about concluding a contract with the first ranked participant, which is why they confirm the validity of their offer.
• By letter dated 22 May 2019 from the Consortium Arkad of Bulgartransgaz EAD, some of the requested documents were submitted.
• With a report of the Executive Director of Bulgartransgaz from EAD dated 28 May 2019, information on the status of the public procurement and the letters received by DZZD Consortium “Gas Development and Expansion in Bulgaria” with a view to making decisions and taking specific actions was presented to the Board.
• On 28 May 2019, decisions were taken by the Board (minutes No 357 of 28.05.2019) instructing the Executive Director:
  1. to notify the Minister of Energy and the Deputy Prime Minister about the circumstances of the public procurement;
  2. to ask the Minister of Energy for permission to proceed with the issuance of a decision to amend the decision in the part of the designation of a contractor, by designating DZZD Consortium “Gas Development and Expansion in Bulgaria” as a contractor; instructs the Executive Director, after obtaining permission from the Minister of Energy, to proceed with the issuance of a decision to amend the decision on the appointment of a contractor, and after the entry into force of the decision to proceed with the conclusion of a contract with DZZD Consortium “Gas Development and Expansion in Bulgaria”.
• On the same day (28 May 2019) an extraordinary meeting of the National Assembly was held (minutes No 16 of 28.05.2019), at which a report by the Executive Director of the company was reviewed and a decision was taken to approve the decisions of the Board (minutes No 357 of 28.05.2019).
• On the same day (28 May 2019) a reply was received from the Minister of Energy (letter ent. No BT G04-04-30 of 28 May 2019), which instructed to proceed with the necessary actions for the timely assignment of the activities subject to the public procurement.
• On the same day (May 28, 2019), by Decision No BTG-RD-07-76V of 28 May 2019, a decision was issued for designation as a contractor for the public procurement – the second-ranked DZZD Consortium “Gas Development and Expansion in Bulgaria”, detailing the reasons that led to the appointment of a new contractor. The decision was received by hand from a representative of DZZD “Gas Development and Enlarged Bulgaria”.
• On June 6, 2019, Bulgartransgaz EAD registered a complaint by Consortium Arkad JV, addressed to the Commission for Protection of Competition (CPC), with a copy to Bulgartransgaz EAD against decision No BTG-RD-07-76V of 28 May 2019 on the appointment of a new contractor for the public procurement.
• By letter of the CPC dated June 13, 2019, the company was informed that proceedings had been initiated in the Commission in connection with a galba received from the Consortium Arkad against a decision to select a contractor in the part of determining a contractor in the open tender procedure.
• On June 20, 2019, the CPC informed the Company that a ruling had been issued disregarding the request for admission of preliminary enforcement of a decision for classification and appointment of a contractor.
• As can be seen from the minutes of 24 May 2019, the National Assembly of Bulgartransgaz EAD has approved a decision of the Management Board agreeing not to appeal the CPC’s ruling, given the fact that the ruling is not illegal.
• On 28 June 2019, the CPC informed Bulgartransgaz EAD that a decision had been prepared revoking Decision No BTG-RD-07-76V of 28 May 2019 of the Head of the Public Prosecutor’s Office Department at Bulgartransgaz EAD amending Decision No BTG-RD-07-76B of 03.04.2019 for the selection of a contractor in the part of determining a contractor in an open tender procedure. The CPC returns the file to the contracting authority for continuation of the assignment actions, according to the law and the instructions given in the grounds of the decision.
• On July 5, 2019, the Supreme Administrative Court (SAC) informed Bulgartransgaz EAD that a private complaint had been filed against the CPC’s ruling filed on behalf of the Gas Development and Expansion in Bulgaria Consortium, which pointed out that the ruling was incorrect and unfounded and did not correspond to the factual situation, procedural and substantive law. In response to the private complaint (letter ex. No BTG 24-01-77(7) dated 08.07.2019) The Head of the Public Prosecutor’s Office has informed the Supreme Administrative Court that by Decision No 741 of 27.06.2019, the CPC has ruled on the merits of the dispute by repealing as unlawful Decision No BTG-RD-07-76V of 28.05. 2019 year
• It is evident from the minutes of the National Assembly No 21 of 11.07.2019 from an extraordinary attendance meeting at which a decision on the minutes of the Board No 372 of 10.07.2019, taken on the report of 10.07.2019 of the Executive Director of the company, was approved not to appeal against Decision No 741 of 27.06 2019 of the CPC before the Supreme Administrative Court. The reasons are that the same is not null and void, it is not inadmissible and it cannot be concluded categorically that it is incorrect due to significant violations of the rules of judicial procedure, violation of the substantive law or unreasonableness (NYC). No BTG 24-00-3358(12) dated 10.07.2019 of the Executive Director of the company).
• On September 13, 2019, by an authorized representative of Compliance Development S.A.R.L. – Bulgaria Branch, participating in DZZD Consortium “Gas Development and Expansion in Bulgaria” informed Bulgartransgaz EAD that an application has been submitted to the Supreme Administrative Court concerning: the complaint against Decision No 741 of 27.06.2019 of the CPC is not maintained; the existence of a refusal to challenge that decision in cassation.
• By order of the Supreme Administrative Court No 12299 of 16.09.2019, the complaint was left without consideration and the cassation proceedings were terminated.
• By letter ex. No BTG 24-00-1009 dated 03.09.2019 the Executive Director of Bulgartransgaz EAD has informed the representative Association “Consortium Arkad” that all the required documents for the conclusion of a contract for the execution of the public procurement have been submitted from the association. The Executive Director noted that by Decision No 741 of 27.06.2019 of the CPC, it returned the contracting authority to the last lawful action, namely Decision No BTG-RD-07-76B of 03.04.2019, in which the consortium was appointed as a contractor, is subject to appeal by the second ranked participant before the Supreme Administrative Court. In this regard, after the company is notified of the resolution of the dispute by the Supreme Administrative Court and in the event that the court has ruled in favor of the association, a representative of the latter will immediately be invited to conclude the contract.
• On September 16, 2019, a meeting of the Management Board of Bulgartransgaz EAD was held, and a report of the Executive Director was considered, as a result of which the following decisions were taken: a letter was approved inviting Consortium Arkad to sign a contract on 18.09.2019; It is entrusted to the Executive Director to notify the Minister of Energy of the circumstances set out in the report ex. No 24-00-3358-(13) dated 16.09.2019 and to request confirmation of the performed actions and permission to proceed to the conclusion of a contract with JV “Consortium Arkad” under the parameters set out in Decision No BTG-RD-07- 76B of 03 April 2019; It is assigned to the Executive Director or a person authorized by him, after receiving the confirmation and permission from the Minister of Energy and after receiving the confirmation and approval of the National Assembly, to proceed to the conclusion of a contract with the Consortium Arkad.
• On September 17, 2019, a meeting of the National Assembly was held, at which a decision was taken to confirm the actions in implementation of the decisions of the Board of 16.09.2019.
• On September 16, 2019, a letter from Bulgartransgaz EAD to the Minister of Energy set out the actions related to the appeal of Decision No 741 of 27.06.2019 of the CPC, as well as that the Consortium Arkad JV submitted the necessary documents for the conclusion of a contract, with the exception of the original of the performance guarantee, which should be presented at the conclusion of the contract. A request has been made for confirmation of the actions carried out by the company to send an invitation to the association, as well as for permission to conclude a contract for the award of a public procurement.
• On September 16, 2019, Bulgartransgaz EAD sent a letter to the Consortium Arkad JV, inviting it on the grounds of Art. 68, para. 1 of the PPPP for the conclusion of the contract – 09.30 am on September 18, 2019 in the building of the company.
• On September 17, 2019, a response was received from the union that they confirmed the invitation to conclude a contract. In connection with point 21.1.3. A performance guarantee is provided from the instructions for preparation of the offer – insurance policy No 1500-130-2019-00967, issue date 12.09.2019, with a limit of liability / insurance amount of EUR 64 436 965,26, equivalent to 5% of the offered price excluding VAT (EUR 1 288 739 305,11 excluding VAT). Insurer is ZAD “OZK-Insurance” AD, insurer is Association “Consortium Arkad” and insured – “Bulgartransgaz” EAD. The insurance period is for 330 days, starting from 18 September 2019 – 12 August 2020. Thus, the insurance meets the requirement of the contracting authority to have a validity period of not less than 330 calendar days from the date of conclusion of the contract. A copy of the statement for payment of the insurance premium in the amount of EUR 602 485.62 was also presented.
• On September 17, 2019, the Minister of Energy received a letter ent. No BTG 24-00-3356, by which the Executive Director of the company is informed that “In order to ensure the protection of particularly important state and public interests related to the strategic importance of the project “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border” in terms of ensuring the supply of natural gas and the development of a competitive national natural gas market, you should take the necessary actions to implement the measures set out in the Energy Strategy of the Republic of Bulgaria until 2020 for the implementation of the project as soon as possible, incl. conclusion of a contract for the award of a public procurement contract with the candidate designated as a contractor – JV “Consortium Arkad”.
• On September 18, 2019, contract No 4156 was signed between Bulgartransgaz EAD and Consortium Arkad.
• During the inspection carried out by PFIA (report No DID2-SF-4 dated 18.03.2022), it was found that on September 18, 2019, Bulgartnasgaz EAD had signed a contract with the Consortium Arkad JV without fulfilling the condition that upon signing the contract the appointed contractor had submitted documents certifying the lack of grounds for exclusion from the procedure, as well as compliance with the selection criteria set, namely documents under art. 58, para. 1, items 1 – 3 of the Public Procurement Act (the criminal record certificate of a member of the Board of Directors of “ARKAD – ABB S p.A”, Italy – a company participating in the consortium, a certificate from the revenue authorities and a certificate from the municipality at the seat of the contracting authority and the participant Association “Consortium Arkad” – a contractor, a certificate from the bodies of the Executive Agency “General Labour Inspectorate” for Association “Consortium Arkad” – contractor).
• For the established violation by PFIA was issued AWAN No 11-01-227 of 16.03.2022.

14 Information from the Public Procurement Agency (Appendix No 5)

15 Public procurement in connection with the project “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border” – stages “Linear part” and “CS “Rasovo” and CS “Nova Provadia”

• The Public Procurement Register maintained by PPA contains information on 9 public procurements announced in connection with the implementation of the project “Expansion of the gas transmission infrastructure of Bulgartransgaz EAD parallel to the northern (main) gas pipeline to the Bulgarian-Serbian border” – stages “Linear part” and “CS “Rasovo” and “Nova Provadia”.
• These public procurements are united around the two main construction contracts – those for the “Linear part” stage and for the stage CS “Rasovo” and CS “Nova Provadia”, which are respectively related to the contracts for construction supervision, for the exercise of author’s supervision during construction, as well as for updating the project documentation, and for the preparation of an environmental impact assessment report.
• All public contracts are awarded in accordance with their subject matter and value, namely: for construction and construction supervision – through open procedures; for the author’s supervision (where the only possible contractor is the person author of the respective project part) – by negotiation without a prior invitation for participation; for updating project documentation; for research and design, and for environmental impact assessment, given their value – through a public competition.
• The formal requirements for carrying out the relevant type of procedures are met in respect of:
  1. the publicity required under the Public Procurement Act for announcement (publication in the ROP, and for open procedures for construction and construction supervision – in the Official Journal of the EU);
  2. time limits for the submission of tenders;

• internal deadlines in the conduct of procedures;

1. communication with stakeholders/participants at the relevant stage, incl. questions and clarifications;
2. preparation of the documents provided for in the law under the procedure and their publication in the ROP and the buyer profile in accordance with the applicable provisions of the Public Procurement Act.

• The contracts were conducted and awarded in competitive conditions. More than 2 offers have been submitted and no less than two candidates have been admitted to the ranking.
• Two of the procedures (for the construction – for the stage “Linear part” and stage “CS “Rasovo” and CS “Nova Provadia”) complaints have been filed.
• For stage “Linear part”: production No CPC 156/2019 on a complaint of “Atomenergoremont” AD against clarification on the public procurement. The proceedings were terminated due to withdrawal of the complaint; Procedure No CPC/501/2019 on a complaint of DZZD JV “Consortium ARKAD” against a decision to amend and appoint a contractor for the second ranked participant – DZZD Consortium “Gas Development and Expansion in Bulgaria”. The appeal was held to be well founded, and the judgment of the contracting officer reversed. The decision of the CPC was appealed to the Supreme Administrative Court by the interested party – the second designated contractor Consortium “Gas Development and Expansion in Bulgaria”, but the complaint was withdrawn by a participant in the association, which is why there is no ruling.
• For stage “CS “Rasovo” and stage “CS “Nova Provadia”: production No CPC 500/2019 on the complaint of “J. Christoph E&P Services SRL against clarification on the public procurement. The complaint was dismissed.
• With regard to the appeal under the public procurement stage “Linear part” – the decision for ranking and designation of a contractor has been amended, and the new decision has designated as a contractor the second ranked participant – DZZD Consortium “Gas Development and Expansion in Bulgaria”, for which the contracting authority “Bulgartransgaz” EAD gives very detailed reasons, including quoted correspondence with the first ranked – DZZD Association “Consortium Arkad”.
• An appeal was filed against the second decision by DZZD JV “Consortium Arkad”, as a result of which it was annulled by the CPC.
• The decision of the CPC was appealed to the Supreme Administrative Court by DZZD Consortium “Gas Development and Expansion in Bulgaria”, appointed as a contractor by the second decision, in his capacity as an interested party.
• The contracting authority Bulgartransgaz EAD has not appealed to the Supreme Administrative Court against the Supreme Administrative Court, but has submitted a detailed opinion with motives in the proceedings initiated on the complaint of the Consortium “Gas Development and Expansion in Bulgaria”. The proceedings before the Supreme Administrative Court were terminated (Order 12299/2019) due to an explicit statement of withdrawal of the appeal against the CPC’s decision by a consortium participant, as a result of which Arkad remained the contractor.
• Although the right to appeal is a matter of discretion, given the importance of the project and the financial interests, the lack of appeal by the contracting authority, respectively the withdrawal of the complaint by the interested party, is contrary to the natural market and economic logic, which could be seen as an indication of the influence of external factors. When the information in the public registers of the CPC and the Supreme Administrative Court is consulted, it is clear that for the time for which there is data in the CPC register (from 01.01.2009), the complaints on public procurement of Bulgartransgaz EAD, for which there is a ruling (until 01.06.2022), are a total of 107 pieces. Of these, a total of 94 were left without respect, refused or terminated. There are 13 accepted as justified. Of these, 9 have been appealed by Bulgartransgaz EAD to the Supreme Administrative Court. These data show that in the usual practice of the contracting authority Bulgartransgaz EAD, as a rule, the revocatory decisions of the CPC are appealed, which supports the assumption of the influence of other factors.
• When applying the methodology for random selection of procedures to be carried out by the PPA, the public procurement contracts of the contracting authority Bulgartransgaz EAD have not been withdrawn from the Random Selection System, although they have been submitted to it due to the requirements of the current regulations. In this regard, changes in the legislative framework have been proposed. In a Bill on Amendment and Supplement to the Public Procurement Act, published on 08.06.2022 on the Public Consultation Portal, among other amendments, changes related to the external control carried out by the PPA have been proposed, providing for the introduction of mandatory preliminary control of all public procurement procedures worth over BGN 5,000,000. The aim is to cover all significant public contracts in respect of which there is a high public interest, given the significant financial resources spent with them and the higher level of risk of distortions in detection. This will prevent the risk of non-implementation of preliminary control of high-value public procurements if they are not selected by the Random Selection System.

16 Information from the General Labour Inspectorate Executive Agency (Appendix No 6)

• The control bodies of the General Labour Inspectorate Executive Agency (EA GLI) have carried out 36 inspections on compliance with labor legislation of companies, contractors under contracts for construction and commissioning of sites of the Balkan Stream gas transmission infrastructure. The enterprises “Arkad Engineering and Construction Company” – Bulgaria Branch, ARKAD S.p.A. – Bulgaria Branch, OJSC Beltruboprovodstroy – Bulgaria Branch, Infrastructure Development and Construction – Bulgaria Branch, Ralitsa Trade 20 EOOD, FEROSHTAL BALKANGAZ, Kenpipe Industries International Inc. – Bulgaria Branch, Sitjemi S.R.L., EOS CORP EOOD, OILTECH SUPPORT SERVICES EOOD, G.I GROUP EOOD, Sichilsaldo S.p.A. – Branch Bjgaria, ZAKNEFTEGAZSTROYSTROY-PROMETHEI OOD – Bulgaria Branch, “VEMAK BULGARIA” EOOD, ASSOCIATION “AMS TEAM-INTEGRAL CONSTRUCTIONS” DZZD, “GLOBUS” EOOD, “FOUNDATION INVEST GROUP” EOOD, “VITAL – 2003” EOOD, “SPK WEST” OOD, “SPEDSTROY” EOOD, “TRANSMAR 57” EOOD, “ANTONIONI 55” EOOD, “BONATI S.P.A.” – Bulgaria Branch.
• The signals for violations of labor legislation received by EA GLI are two, respectively in July 2020 and September 2020.
• For the 158 violations established during the control, protocols have been drawn up, with which mandatory prescriptions for elimination of the violations have been given. Most of the inspections have revealed violations of the requirements to ensure healthy and safe working conditions.
• The most frequently found violations are: failure to conduct instruction at the workplace, as well as initial, daily, periodic and extraordinary instruction on safety and health at work; failure to document in accordance with the established procedure the instructions on safety and health at work carried out to workers; a small number of employers have not supplemented the risk assessment of the risk of possible infection in relation to the new risk of spreading coronavirus for workers; programmes with planned risk prevention and mitigation measures specifying the deadlines for their implementation and the persons responsible for them have not been approved; workers of other undertakings carrying out work on the territory of the undertaking concerned are not aware of the necessary information on the risks to their health and safety and of the measures taken to eliminate and reduce or control those risks; Workers without work clothes and personal protective equipment are allowed to work – shoes and protective helmets; The safety standards of work equipment and technological processes have not been observed.
• During the inspections carried out on compliance with the labor legislation, the following violations were most often found: in the employment contracts concluded with the persons do not contain all mandatory requisites under art. 66, para. 1 of the Labour Code (LC), as the place of work, the duration of the employment contract, etc.; in the employment contracts concluded with persons occupying the position “driver of a heavy goods vehicle (over 12 tons)” it is not agreed to use additional paid annual leave not less than 5 working days for work under specific conditions and risks to life and health; employers do not keep at the disposal of the control bodies in the enterprises (sites and work sites, as well as in other places where hired labor is done), a copy of the internal labor regulations and documents related to the distribution of working time and the organization of work – nominal work schedules for the period for which the aggregated calculation of the working time has been established; no officials have been designated in writing in the enterprise, in its divisions, sites and work sites, as well as in other places where salaried work is performed, to represent the employer before the control bodies of the labor inspectorate; non-compliance with the provisions regulating the distribution and reporting of working time – the nominal work schedules for the period for which the aggregated calculation of the working time has been established are not approved by the employer.
• In the field of labour mobility and employment, it has been found that employers do not fulfil their obligation to declare electronically through the single national website under art. 10, para. 1 of the Ordinance on the terms and conditions for posting and sending of workers and employees within the framework of the provision of services (NURIRSRPPU) data on posted workers on the territory of the Republic of Bulgaria.
• As a result of the control, a total of 16 AWAs were compiled: 7 of them were drawn up for violations related to the occurrence of employment relationships: 2 for established violations of Art. 62, para. 1 of the Labour Code (LC) – providing workforce without a written employment contract and 5 AWAN for violations of art. 63, para. 2 of the Labour Code – the employer shall not have the right to admit to work the worker or employee before providing him with a copy of the concluded employment contract and a copy of the notification under art. 62, para. 3 of the Labour Code, certified by the territorial directorate of the National Revenue Agency; 9 pieces are drawn up for violations related to labor mobility and employment: 4 pieces for established violations of art. 10, para. 3 of the Labor Migration and Labor Mobility Act – employers have not fulfilled their obligation within 7 days from the date of the actual start of work of a third-country national to notify EA GLI in writing; 5 for violations of art. 12, para. 2 of the NURRSRPPU – employers have not fulfilled their obligation to declare electronically through the single national website under art. 10, para. 1 of the NURKIRSRPU posted workers on the territory of the Republic of Bulgaria.
• For the established violations for issued 16 NP, with which the violators in their capacity of employers within the meaning of § 1, item 1. 1 of the Additional Labour Code, administrative penalties have been imposed – property sanctions.
• 13 of the served NPs were appealed under the procedure provided for in the Administrative Violations and Penalties Act. In this regard, court decisions have been issued, according to which: 4 of the WIP have been confirmed by enforceable decisions; 5 of the NP have been amended by enforceable court decisions.
• 3 NPs were revoked by effective court decisions.
• Four of the inspections carried out by “Infrastructure Development and Construction” – Bulgaria Branch, “BONATTI S.P.A.” – Bulgaria Branch, “Sichilsaldo S.p.A” – Bulgaria Branch and “Sighemi S.R.L.” are on the occasion of investigating accidents with workers (2 pieces) and car accidents (2 pieces).

17 Conclusions:

• During the inspections carried out by the members of the two interdepartmental working groups (according to Order No P-92 of June 2, 222 of the Prime Minister) the following violations were found:

18 Violation of registration and reporting of the availability of a roadmap:

• The provision of Art. 7, para. 1, p. 1 of the National Archives Fund Act, which establishes the requirement for registration and reporting of the availability of documents, as a result of which a Roadmap is not available in the registry registers of the Ministry of Energy;
• In view of the use of different names of the Roadmap in the submitted documents (“for development”, “for realization”, “for research”), as well as the lack of an original document created and stored by a Bulgarian state institution, it cannot be determined in a categorical way the nature of the document – whether by its nature and content it is an international treaty within the meaning of the International Treaties Act of the Republic of Bulgaria or a letter of intent;
• The copy of the Roadmap submitted by the State Agency for National Security does not give grounds for legal conclusions regarding its content as a type of document in accordance with the legislation in force.

19 Violations of environmental legislation:

• The competent authority (MOEW) has not taken into account the change in certain circumstances related to the conservation status of natural habitats, habitats and populations of protected species, protected areas of the National Ecological Network NATURA 2000, through which the route passes, the change in the state of the environment, land use change, spatial planning, etc., in the period between the issuance of Decision No 7-5 of 2013 or the positive opinion on the Environmental Impact Assessment of South Stream and the date of the start of the construction of the Bulgartransgaz EAD Extension of the Gas Transmission Infrastructure in parallel with the Northern (Main) Gas Pipeline to the Bulgarian-Serbian Border (Balkan Stream).
• The competent authority (MOEW) has not carried out the mandatory procedures assessing the need for an environmental and human health impact assessment, although it has been informed by the contracting authority of the need to change drilling activities by switching from a trenchless method (directed drilling) to another alternative method – excavation crossing through a water body (trench passage). In violation of Art. 93, para. 1, item 3 of the EPA the contracting authority was informed by a letter from the Ministry of Environment and Water that the change in the method of crossing large rivers has been assessed within the EIA of the Investment Proposal “Construction of the South Stream gas pipeline” and that the amendment of the investment proposal and the investment project within the meaning of the SPA is not subject to evaluation. Thus, the procedure under art. 93, para. 1, item 3 of the EPA – procedure for assessing the need for EIA.
• Notification of amendment of the investment project with entr. No EIA-5 of 09.09.2020 of Bulgartransgaz EAD for crossing the pipeline in the Vit River and the Tsibritsa Rivers, which fall within NATURA 2000 protected areas, has been agreed by the Deputy Minister of Environment and Water in the absence of reasons for significant negative impact within the meaning of Art. 93, para. 1, item 3 of the EPA.
• On behalf of the MOEW and the relevant basin directorates and regional environmental inspectorates, no follow-up control has been carried out on the spot in order to meet the conditions under the EIA decisions issued by the Minister of Environment and Water.
• Construction of CS “Nova Provadia” (II “Design and construction of compressor station CS “Nova Provadia”) has started before an EIA decision has been issued and entered into force.

20 Violations in the financing of the activities under the project “Extensions of the gas transmission infrastructure of Bulgartransgaz EAD from the Bulgarian-Turkish to the Bulgarian-Serbian border”:

• The contracts with the credit institutions for financing in the implementation of the project have been concluded without obtaining the relevant permission from the Energy and Water Regulatory Commission before the date of their conclusion;
• The conditions under which the contracts with the project contractors and with the credit institutions that have provided the financing are concluded make it necessary to assess whether the conclusion of the contracts leads or is likely to lead to a violation of the security of supply due to indebtedness of Bulgartransgaz EAD.

21 Violations of public procurement conducted in connection with the implementation of the project:

• At the conclusion of Contract No 4156 of 18.09.2019 with JV “Consortium Arkad” the requirements of Art. 112, para. 1, item 2, in connection with art. 58, para. 1, items 1 – 3 of the Public Procurement Act – upon signing the contract, the appointed contractor has not submitted documents under art. 58, para. 1, item 1, items 1-3 of the PPA;
• At the conclusion of is a contract No 4156 dated 18.09.2019 with the Consortium Arkad, Sofia. Sofia has not met the requirements of art. 27 in relation to art. 36, para. 1, item 3 of the Public Procurement Act – the notice of amendment of the public procurement contract (State Security No 2 of 11.11.2020) has not been sent for publication by the ROP within the statutory period.
• At the conclusion of contract No 4183 of 03.10.2019 with DZZD “Feroshtal Balkangaz”, Sofia. Sophia, the requirements are not met. 27 in relation to art. 36, para. 1, item 3 of the Public Procurement Act – the notice of amendment of a public procurement contract (State Security No 1 of 18.12.2020) has not been sent for publication in the Public Procurement Act within the statutory period.
• Upon signing contract No 4138 of 01.09.2019 with DZZD “GIN Consortium” the requirements of Art. 27 in relation to art. 36, para. 1, item 3 of the Public Procurement Act – a notice for amendment of a public procurement contract (State Security No 1 of 28.09.2020) has not been sent for publication in the ROP within the statutory period.
• Upon signing contract No 4467 of 13.03.2020 with the Association “CS Nova Provadia”, Sofia. Sofia has not met the requirements of art. 112, para 1, item 2 in connection with art. 58, para 1, items 2 and 3 of the PPA – When signing the contract, the designated contractor has not submitted documents under art. 58, para. 1, items 2 and 3 of the PPA.
• Upon signing contract No 4467 of 13.03.2020 with the Association “CS Nova Provadia”, Sofia. Sofia has not met the requirements art. 29, para. 3 in relation to Sec. 29, para. 1, item 1 and with art. 36, para. 1, item 6 of the Public Procurement Act – a notice for termination of a contract has not been sent for publication in the ROP within the statutory period.
• Two public procurements have not been carried out under the Public Procurement Act, as a result of which the provision of Art. 17, para. 1 in connection with art. 20, para, 3, item 2 and art. 3, para. 1, item 2 of the Public Procurement Act – the contracting authority has not complied with the procedure for public procurement provided for in the Public Procurement Act, when there are grounds for this.
• Despite the additional period (more than one month) provided by Bulgartransgaz EAD for the submission of the documents necessary for concluding a contract with the selected contractor – DZZD JV “Consortium ARKAD”, during the financial inspection carried out by the authorities of the Public Financial Inspection Agency (March 18, 2022) it was found that upon conclusion of the contract (September 18, 2019) a violation of the Public Procurement Act was committed, the contractor has not submitted part of the required documents.

22 Infringements in public procurement

• In the process Upon selection of a contractor and conclusion of a contract with DZZD JV “Consortium ARKAD” intervention is allowed by the Minister of Energy (without the same being the sole owner of the capital of the company) by giving specific written instructions to the Executive Director of Bulgartransgaz EAD (sectoral contracting authority within the meaning of the PPA), which does not comply with the provision of Art. 5, para. 1 of the PPA – Contracting entities are responsible for the correct forecasting, planning, conducting, completion and reporting of procurement results.
• Although the right to appeal is a matter of discretion, given the importance of the project and the financial interests, the lack of appeal by the contracting authority, respectively the withdrawal of the appeal by an interested party, is contrary to natural market and economic logic, which could be seen as an indication of the influence of external factors.

23 Violations of labour law

• The concluded employment contracts do not contain all mandatory requisites under art. 66, para. 1 of the Labour Code (place of work, duration of the employment contract, etc.).
• The employment contracts concluded with persons occupying the position of “driver of a heavy goods vehicle (over 12 tons)“ do not agree on the use of additional sent annual leave.
• Employers do not keep at the disposal of the control bodies in enterprises a copy of the internal labor regulations and documents related to the distribution of working time and the organization of work.
• No officials in the enterprise have been designated in writing to represent the employer before the labour inspectorate control bodies.
• Employers have not fulfilled their obligation to declare electronically through the single national website under art. 10, para. 1 of the Ordinance on the terms and conditions for posting and sending of workers and employees within the framework of the provision of services, data on posted workers on the territory of the Republic of Bulgaria.

24 GENERAL PROPOSALS:

• In view of the established violations of the legislation in the field of environmental protection, the Minister of Environment and Water should assign a comprehensive inspection of compliance with the environmental legislation in the design, construction and commissioning of the expansion of the gas transmission infrastructure between the Bulgarian-Turkish and Bulgarian-Serbian borders (“Balkan Stream”).
• In view of the content of the documents collected in the course of the inspection and the statutory functions of the members of the two interdepartmental working groups (according to the order of the Prime Minister) for administrative control, the summary report, together with the annexes thereto, shall be sent by competence to the State Agency for National Security.
• To follow the movement of the opened prosecutor’s file No 2285 of 2020, with a view to sending Report No DID2-SF-40 of 18.03.2022 to the Public Financial Inspection Agency at the Specialized Prosecutor’s Office.

Application from the BRRD: Information on companies and consortia cited in the report

DZZD “Consortium Arkad“, BULSTAT code 177367106 https://tinyurl.com/bd6vpttm

88% – Arkad Engineering and Construction Company, SAUDI ARABIA

12% – Arkad – S.p.A., ITALY

Construction supervision

DZZD “Gin Consortium”, BULSTAT code 177384384 https://tinyurl.com/27k7dm3s

97% – “GEODET” EOOD https://bird.bg/tr/?v=view&guid=123523879

2% – “IVT CONSULT” Ltd. https://bird.bg/tr/?v=view&guid=131127235

1% – “NOVEL” Ltd. https://bird.bg/tr/?v=view&guid=119514155

DZZD “Stroyconsult – MDI”, BULSTAT code 177419819 https://tinyurl.com/yc3ufhcx

50% – “STROYCONSULT-GN 99” Ltd. https://bird.bg/tr/?v=view&guid=130007553

50% – “MDI Engineering” Ltd. https://bird.bg/tr/?v=view&guid=200657941

Inspected by the Labour Inspectorate

Branches of foreign traders:

“Infrastructure Development and Construction” – Bulgaria Branch – Deleted trader on 06.06.2022 ActualOwner: GAZPROM, RUSSIAN FEDERATION https://bird.bg/tr/?v=view&guid=205924583

“Arkad Engineering and Construction Company” – Bulgaria https://bird.bg/tr/?v=view&guid=205842488

“ARKAD S.p.A.” – Bulgaria Branch https://bird.bg/tr/?v=view&guid=205861403

“OAO BELTRUBOVODSTROY” – Bulgaria Branch https://bird.bg/tr/?v=view&guid=202787195

“Kenpipe Industries International Inc.” – Bulgaria Branch https://bird.bg/tr/?v=view&guid=205712815

“Sichilsaldo S.p.A” – branch Bölgaria https://bird.bg/tr/?v=view&guid=205867299

“ZKNEFTEGAZSTROY-PROMETHEUS” Ltd. – Bulgaria Branch https://bird.bg/tr/?v=view&guid=205949771

“BONATI S.P.A.” – Bulgaria Branch https://bird.bg/tr/?v=view&guid=205616884

DZZD associations:

DZZD “FERROSTHAL BALKANGAZ”, BULSTAT code 177392369 https://tinyurl.com/2p94xzdx

50% – Glavbolgarstroy International AD https://bird.bg/tr/?v=view&guid=175402074

40% – Glavbolgarstroy AD https://bird.bg/tr/?v=view&guid=831652485

10% – Feroshtal Industriallagen GmbH, GERMANY, not registered in Bulgaria

JV “Ams Theater – Integral Constructions”, 177428452 https://tinyurl.com/3e4jb8hk

50% – “AMS TEAM” Ltd. https://bird.bg/tr/?v=view&guid=205949629

50% – INTEGRAL CONSTRUCTIONS, SERBIA, not registered in Bulgaria

Bulgarian companies:

“FOUNDATION INVEST GROUP ” EOOD https://bird.bg/tr/?v=view&guid=205940555 -> DS, MP

“Ralitsa Trade 20” Ltd. https://bird.bg/tr/?v=view&guid=205993942 debts to the NRA

“SPK WEST ” Ltd. https://bird.bg/tr/?v=view&guid=205893529 Russian participation

EOS CORP EOOD https://bird.bg/tr/?v=view&guid=202940443

“OILTECH TRANSPORT SERVICES” EOOD https://bird.bg/tr/?v=view&guid=206050866

“GI GROUP” EOOD https://bird.bg/tr/?v=view&guid=131049402

“VEMAK BULGARIA” EOOD https://bird.bg/tr/?v=view&guid=205902743

“VITAL – 2003” Ltd. https://bird.bg/tr/?v=view&guid=127570310

SPEDSTROY Ltd. https://bird.bg/tr/?v=view&guid=148117306

“TRANSMAR 57” Ltd. https://bird.bg/tr/?v=view&guid=103957170

“ANTONIONI 55” Ltd. https://bird.bg/tr/?v=view&guid=102861977

Other:

“Sighemi S.R.L.” – probably foreign

“Globus” Ltd. – several possible with the same name

Other companies mentioned in the text:

UniCredit Bulbank AD (credit)

Bulgartransgaz EAD https://bird.bg/tr/?v=view&guid=175203478

DZZD “Bul-Control” (project documentation), BULSTAT 177336185 https://tinyurl.com/2p98zcnd

50% – “Bulstroy Control Engineering/BIA Engineering” AD https://bird.bg/tr/?v=view&guid=130188559

50% – “Control Engineering” AD https://bird.bg/tr/?v=view&guid=121911580

DZZD “CS Nova Provadia” (ecoassessment), Bulstat 177428114 https://tinyurl.com/4vjswp6s

50% – FCG POVVIK EAD https://bird.bg/tr/?v=view&guid=200766249

50% – “Chimcomplect Engineering” AD https://bird.bg/tr/?v=view&guid=000632345

***

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