THREE DEALS: ONE CLOSED, ONE CANCELLED, ONE IN PROCESS

The current status of PPP highway projects

WHILE in power, the government of Robert Fico plunged into a mega-project to build a network of highways through public private partnership deals. The vision was to get private funds also involved in highway construction and thus to connect the more developed western part of Slovakia with the less developed central and eastern regions which potential investors often say lack a modern highway infrastructure. But the Fico government did not manage to wrap up all the required financial preparations before the June 2010 elections.

WHILE in power, the government of Robert Fico plunged into a mega-project to build a network of highways through public private partnership deals. The vision was to get private funds also involved in highway construction and thus to connect the more developed western part of Slovakia with the less developed central and eastern regions which potential investors often say lack a modern highway infrastructure. But the Fico government did not manage to wrap up all the required financial preparations before the June 2010 elections.

Now that a new government has taken the reigns, the future of Slovakia’s highway network is once again under construction planning.

There were originally three PPP projects drawn up for the construction of Slovakia’s highways.

Only the second of the three, a deal involving the construction of certain stretches of the R1 dual carriageway, has achieved financial closure.

The project, that was financially closed in August 2009, covers the financing, construction, operation and maintenance of the sections of the R1 highway from Nitra to Selenec, Selenec to Beladice, Beladice to Tekovské Nemce, and a northern bypass around Banská Bystrica.

Transport Minister Ján Figeľ decided to cancel the first of the three projects instead of again postponing the closure date, but the Slovak Public-Private Partnership Association, a non-profit organisation supporting PPP projects in Slovakia, told The Slovak Spectator that this move is not expected to have any adverse effects on the last remaining project.

“We don’t think Minister Figeľ’s decision will have any impact on further potential PPP projects,” said Michal Považan, the head of the Slovak Public-Private Partnership Association. “The association’s aim is to ensure that projects are carried out in Slovakia that satisfy both the private and public sectors and thus we respect the decision of Minister Figeľ not to postpone the deadline for the financial close of the first PPP package.”

Although the first PPP project has been cancelled completely, the third one remains in the game.

The third package, covering the construction and operation of four sections of the D1 highway, totalling 31 kilometres, between Hričovské Podhradie and Dubná Skala near the city of Žilina should reach financial closure by late October.

On September 7, Figeľ confirmed the latest deadline for the concessionaire Žilinská Diaľnica to secure funds from banks for the project at a discussion devoted to highway construction.

The discussion was organised by the HN Club, a discussion group under the auspices of the Hospodárske Noviny economic daily.

“The agreement on the third package is up-to-date, it is on the table,” said Figeľ. “The deadline for financial closure is late October. Talks with the concessionaire are ongoing, and the implementation of the project is also in the hands of the concessionaire since the final decision also covers the financial aspect."

Figeľ underscored the need for mutually beneficial agreements that reflect the current cost of financing and construction materials.

Žilinská Diaľnica won the tender for the third PPP package, with an initial design and construction price tag of €4 billion, not including VAT. In total, the state will pay the consortium €8.545 billion to design, construct, maintain, and operate the highway stretches for a period of 30 years.

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