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The Court of Accounts has audited the compliance of the concession of the assets of the S.E. “Chisinau International Airport”

January 24, 2020 views 1989

 

On the 24th of January this year, the Court of Accounts of the Republic of Moldova has examined the Report on the audit of the compliance of the conclusion and execution of the provisions within the public-private partnership Contract of concession of the assets of the S.E. “Chisinau International Airport” (S.E. “CIA”).

The S.E. “Chisinau International Airport” was created in 1995. Since July 2009 until now the founder of the S.E. “CIA” is the Public Property Agency (PPA). According to the entity’s statute the social capital of the company is 186,7 mil. lei. As it is stated by the legal framework, the Management of the S.E. “CIA” consists of the Administration Council that has 7 members (since 2014 – only 3 members) and the Administrator of the entity.

The main activity of the Chisinau International Airport consists of servicing the air carrying of passengers, cargo and mail, maintaining the aircrafts when on the ground, maintaining the runway and landing strips, assuring the safe take-off and landing of the aircrafts and providing aeronautic security on the airport’s territory, as well as providing the security of the flights.

The audit mission’s target was to provide a reasonable assurance of the compliance of the public-private partnership within the concession of the assets of the S.E. “Chisinau International Airport”.

The compliance audit mission over the concession of the assets of the S.E. “CIA” was carried on by respecting the legal framework regarding the public property administration according to the principles of efficiency, lawfulness and transparency.

Generalizing the findings and conclusions, the audit mission has revealed the next aspects:

  • In order to assure the modernization of the infrastructure of the Chisinau International Airport, in December 2008 the S.E. “CIA” has borrowed over 47 mill. Euro from the European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB) and the European Union (EU).

According to the contract’s arrangements the borrowed financial resources had to be used for: renovation of the runway-landing strip, of the road surfaces, the platform, including the ground illuminating; modernizing of the passengers’ terminal (enlargement with over 4500m2); investing in equipment; drafting of a general developing plan (Master plan); re-financing the debt that the entity has towards the Economy Bank of Moldova; assistance in implementing the project and supervising the works.

  • The S.E. “CIA” has paid in advance for the credits contracted from (EBRD) and (EIB) on the 23rd of October 2013 and solicited the loan contracts that were finalized to be taken into consideration, to confirm the fact that the debts towards this banks were fully paid and to be able to use the financial resources without any restrictions. These confirmations were sent by EBRD and BEI in October 2013.
  • On the 31st of October 2013 the balance of the financial resources of S.E. “CIA” were 168,5 mil. lei, that were formed mostly from the modernizing taxes that were not used during 2008-2013.

The suggestion of submitting the capital goods of the S.E. “CIA” was given by the administration of the Airport and was examined during the meeting of the Administration Council on the 8th of September 2011. During this meeting was enacted the “Concept of attracting capital and strategic investments for the development of the Chisinau International Airport”.

On the 19th of June 2012, taking into account the provisions of the Government’s Decision nr.438, in order to attract capital investments for the S.E. “CIA” it was decided “to include the S.E. “CIA” into a project of public-private partnership by concession, in order to develop the infrastructure and the quality of the services provided”.

The Government’s Decision nr.321 from 30.05.2013 has approved the organization and holding of the private-public partnership of concession by arranging a closed contest.

The Contest Committee has selected 7 companies that were able to take part in the contest within the concession of the assets of the S.E. “CIA”. The process of selecting the private partner was incoherent and non-transparent:

  • The Selecting Committee has submitted some of its obligations of selecting the private partner to the S.E. “CIA”, which was against regulations;
  • Accepting the participation at the contest of private partners that did not have the necessary financial means to support the investments in the Chisinau International Airport’s infrastructure, as well as signing the concession contract with only one associate of the winner of the contest, while there were three associates overall.

On the 15th of August 2013 the Contest Committee has stated that the first offer did not fulfill the Contest’s participating requests as it was presented only in English, so the offer given by the Association of Legal Entities “Avia-Invest” was declared to have won the contest.

On the 30th of August 2013, the PPA as a concession provider and LLC “Avia-Invest” as a concession-holder have signed a contract of concession of all assets held by “S.E. “Chisinau International Airport” and the terrains that are linked to it.

According to the concession contract, the concession-holder should invest in stages at least 244,2 mil. euro in accordance with the increasing of the number of passengers using the airport:

I stage – 45,1 mil. euro, in 2 years after the signing of the concession contract;

II stage – 115,2 mil. euro, in 2 years after reaching a number of over 2,6 mil. passengers annually;

III stage – 83,9 mil. euro, in 2 years after reaching a number of over 3,2 mil. passengers annually;

According to the Concession Contract the PPA has created a Committee responsible for monitoring the concession. The Committee included representatives from the PPA, the Ministry of Transport and Road Infrastructure (MTRI), the Civil Aviation Authority (CAA), the State Building Inspection, the State Chancellery, the Ministry of Finance (MF), the Ministry of Economy and Infrastructure (MEI) and the S.E. “CIA”.

The Committee responsible for monitoring the concession did not display its opinion over the fact that in 2017 the number of passengers reached 2,6 mil., so in December 2017 the second stage of the modernizing of the Airport should have started and subsequently 115,5 mil. euro should have been invested. In this context, the building works of the new terminal were due to start on the 31st of December 2018 and end until the 31st of December 2022.

The audit has discovered that in most of the cases, the estimate documents of the investment objects were missing or were not verified at the moment the contracts with the entrepreneurs were signed. A part of the performed works did not have any necessary reports.

It should be mentioned that until august 2019 the Technical Supervising Agency did not held the control of the volume and costs of the building work made by LLC “Avia-Invest”, even though it is the only public institution allowed to undertake this activity.

It was not until September 2019 that the Monitoring Committee, via the Letter of the Public Property Agency, has solicited the Technical Supervising Agency to check the investing works that were held by LLC “Avia-Invest” until the end of the 2018.

The audit mission has revealed that the monitoring of the implementation of the PPP contract was merely formal as it was based only on the data given by the private partner.

The lack of actions of the concession provider (PPA) during the investment in the infrastructure of the Chisinau International Airport have led to the execution of the investment program by the private partner in non-transparent circumstances and by failing to respect the special regulatory documentation in the building domain. As a result, it was not possible to completely evaluate the plenitude of the investments and the increasing of their price might be influenced.

Although the Concession Contract has aimed the development of the Airport’s infrastructure and of the quality of the services, the increase of the economic efficiency and of the incomes (aeronautical and non-aeronautical ones), the audit mission has discovered non-compliance in: (1) the level and the substantiation of the airport taxes; (2) determining taxes by renting public property assets; (3) collecting taxes for the usage of the Chisinau International Airport’s infrastructure.

For using the infrastructure, the airlines and/or passengers have to pay airport taxes, the minimal cost being fixed by the Concession Contract.

The public patrimony that was received in concession and the financial resources gained from its administration (1,58 milliards of lei) have been used by the private partner to finance the doubtful activity of certain linked to the partner persons.

Following the concession of the assets of S.E. “Chisinau International Airport” the PPA did not determine the target and activity terms of the S.E “CIA” and did not ensure the existence or lack of financial resources of the entity in order to continue its activity. As it is stated in the concession contract, the main activity of the S.E. “CIA” was to manage the debts and obligations that were not given into concession as well as to make operational the current assets and to forward them to the concession-holder for usage.

Regarding the findings and conclusions of the audit mission, there were submitted recommendations that should redress and minimize the risks identified during the audit mission.