By the end of the year the Romanian State and Austria’s Strabag AG will sign the contract for building the Bucharest-Ploiesti section of highway under a public-private partnership. The contract is worth about 320 million euros, sources close to the deal say.
The funding will come from several banks, with Germany’s HVB Bank as the main lender, the quoted sources added.
Loans won’t be taken by the Romanian party with sovereign guarantees this time, as it happened in the so-called Bechtel deal worth $2.4bn for building the Brasov-Bors highway. It was Strabag that came with an offer to fund the project. The money will be repaid by the investor to the lending banks from the proceeds of project operations, as well as from other sources, budget included. The total value of the project funding stands at almost 700 million euros, banking market sources say.
Representatives from HVB Bank, Strabag and the Transport Ministry had not provided any comments by the time of going to print.
“The funding of the contract has been granted for approximately 15 years by HVB Bank and other banks,” the quoted sources stated.
Procedurally speaking, the deal is now at the stage where it is waiting for a Government decision to be issued, endorsing the conclusion of the deal with Strabag for the Bucharest-Ploiesti highway. The implications of the contract are far reaching. Considering this is the first public-private partnership with a foreign investor in the highway construction sector, the contract with Strabag is expected to shape all other future public-private partnerships.
Public-private partnerships target major projects like motorways and entail sharing the funding and risk between the investor and the contracting party.
The start of the works on the Bucharest-Ploiesti highway, the first section of the Bucharest-Brasov motorway, is scheduled for next year; the project should be completed in four years from that moment. This section will be 65 km long and have two lanes in each direction.
The quoted sources say Strabag and the Romanian party will set up a joint venture to operate the project. The lease for the construction, operation and maintenance of the Bucharest-Ploiesti highway section will extend over 30 years.
Romania is currently one of Europe’s laggards in terms of highway infrastructure. Investments in the motorway programme are estimated at approximately $7.5bn over the next few years and require a tremendous funding effort, which the State is unable to bear. This is what brought about the public-private partnership mechanism, enabling the State and the investors to share the costs of the project.
adrian.mirsanu@zf.ro