BAE considering big defense construction deal in Bulgaria

SOFIA – Britain’s largest defense company, BAE Systems, said on Wednesday that it was seeking to win a helicopter upgrade deal worth over $100 million in Bulgaria as a stepping stone to a long-term presence as the country moves to join NATO. A senior company official told Reuters that BAE Systems was ready to partially or fully fund what would be the first offset deal in the post-communist Balkan state, which is striving to revamp its army and meet the Western military alliance’s standards. «We are thinking with at least 10- to 20-year vision. The helicopter deal will be only the start, laying the ground for a longstanding presence in Bulgaria,» said Mark Stevens, BAE systems director for Bulgaria, Romania and Hungary. Bulgaria has said it will award a contract for modernizing its aging fleet of some 30 Soviet-made MI helicopters later this year to either BAE or European aerospace firm EADS as part of the country’s first offset deal. «If the Bulgarian government chooses to do business with us, we will do business with Bulgaria – developing a niche capability, partnerships with local companies, and seeking to make Bulgaria attractive to exports,» Stevens said. Industry analysts have said defense majors are mainly lured by the fact that Bulgaria will have to spend over $1 billion in the next several years to buy new military hardware and upgrade existing equipment to comply with NATO requirements. Under offset deals, major government contracts are linked to obligations for the winning bidder to invest in the country. Such deals have already been implemented in central European states that joined NATO in the first round of its eastward expansion in 1999. Funding the deal Stevens said BAE Systems was discussing options with the government in Sofia to fund the helicopter deal. «We are working with the Finance Ministry on different options for financing the deal and will choose the one which is best for the (Bulgarian) government,» he said. The Defense Ministry has said it will announce the winner of the offset deal in September. But sources close to the situation say Sofia may delay a decision due to the time-consuming procedure of coordinating between government bodies. Stevens said BAE Systems was interested in business opportunities in a number of different sectors in Bulgaria, but its future investment would be determined by Sofia’s requirements under the possible offset deal. BAE was also considering setting up a joint venture with a local company to carry out a significant part of the helicopter upgrade if awarded the project, Stevens said. He said BAE officials had visited two state-owned military repair plants – Letetz in Sofia and Benkovski in the southern Bulgarian city of Plovdiv – in regard to the helicopter deal. BAE has also looked at the Vamo diesel engine manufacturer and the Cherno More radar maker, both in the Black Sea town of Varna, in view of «wider business opportunities,» Stevens said. The defense company has also looked at a number of software companies in Bulgaria to support the helicopter deal, he added. Industry sources have said BAE Systems in addition is interested in the ongoing privatization of Bulgaria’s biggest Varna shipyard. Stevens said BAE was looking at business opportunities in other would-be NATO members in the Balkans, but did not elaborate. Last year Bulgaria, along with Balkan neighbor Romania and five other ex-communist Eastern and Central European countries, won invitations to join the 19-member defense alliance in 2004.