Slovakia is placing a lot of hope in its public-private partnership (PPP) projects to build highways. Not only are these intended finally to link the east and west of the country with an unbroken multi-lane highway and hence bring new business opportunities eastwards, but they should also provide orders for construction companies, thus helping to keep them afloat and their workers employed. However, the economic crisis has slowed down and complicated the whole process.

“Slovakia undertook preparation for highway PPP projects as early as 2007, when intensive preparation of public procurement for concessionaires for three PPP packages started,” Irma Chmelová, executive director of the PPP Association, told The Slovak Spectator. “The financial crisis, which has significantly changed conditions for provision of loans on the market, has complicated the situation.”

Of the three PPP packages for highway construction in Slovakia, the so-called second package was the first to achieve financial close, in August 2009. The project covers financing, construction, operation and maintenance of sections of the R1 dual-carriageway, specifically Nitra-Selenec, Selenec-Beladice, Beladice-Tekovské Nemce and the northern bypass around Banská Bystrica. The financial structure of the PPP contract, which will continue for more than 30 years, represents a total value of over €1.7 billion. Shareholders in Granvia, the consortium awarded the contract, will contribute €149 million, the European Bank for Reconstruction and Development is contributing €200 million and the rest is being provided by 12 banks. Under this project, the consortium will build a total of 52 kilometres of the dual-carriageway. Based on the concession contract with Granvia, the state will pay the consortium for construction of the sections and, after completion, their operation and maintenance for the following 30 years.

Construction work started in September 2009 and the individual sections should gradually be put into operation during 2011 and 2012. They are scheduled to be completely approved for public use by the end of January 2013.

According to Chmelová, the project also won a prestigious award from PFI magazine, the PFI Award in the category Infrastructure Deal of the Year in Europe, where it succeeded despite stiff competition.

“Compared with the pre-crisis situation banks are more cautious, they are lending less, for a shorter period of time and at higher interest,” Chmelová told The Slovak Spectator. “On the other hand, PPP projects’ contracts contain a provision on refinancing based on which, in case conditions for financing improve in the future, the more expensive financing will be replaced by cheaper [financing].”

The financial crisis has also resulted in stronger involvement by international financial institutions such as the European Investment Bank and the European Bank for Reconstruction and Development in PPP projects, according to Chmelová.

“Even though there are signals that the situation in financial markets is improving, it is necessary to wait for confirmation of these indications in real transactions,” she said.

After a number of postponements the next deadline for the financial close of another PPP package, this one known as the first PPP package, is the end of April. This is because the concessionaire, Slovenské Diaľnice, has so far failed to obtain financing for the project to construct 75 kilometres of the D1 highway, from Dubná Skala (near Vrútky) to Svinia (Prešov district), according to the SITA newswire. However, preparatory work on the sections has already started and will continue.

“Certain complications have occurred in negotiation over some problems and provisions with the European Commission and subsequently the European Investment Bank,” said Minister of Transport, Postal Services and Telecommunications Ľubomír Vážny, as quoted by SITA, after a March 3 cabinet session which agreed to the postponement of the financial close until the end of April.

The postponement relates to environmental issues arising from revision of the Environmental Impact Assessment Act.

The Slovak parliament adopted the revision, into which the Environment Ministry incorporated comments from the European Commission, which had objected to discrimination against private persons expressing their views on the environmental impact of large construction projects, on March 9.

Based on this revision, the public will have more space for participation in the approval process of some public and private projects. After the revision becomes effective, some private individuals, corporate entities, civil initiatives and associations and organisations supporting environmental protection will be able to have a say in environmental projects, something which was previously partially restricted. However, environmental organisations complain that within the amending proposals, parliament approved a provision cancelling completely the right of the public to obtain information about approval of nuclear power plants and equipment, according to SITA.

The European Investment Bank is supposed to provide €1 billion for the first PPP highway project, while an additional €2.5 billion is needed from private banks, according to the Pravda daily.

Transport Minister Vážny signed the concession agreement with representatives of the Slovenské Diaľnice consortium, led by French company Bouygues Travaux Publics SA, in April 2009. The project’s sections of the D1 highway, connecting Bratislava with Košice via the so-called northern route, should be put into trial operation by July 2013.

The concession agreement for construction of other D1 sections via the third PPP package was signed on January 22 between the Transport Ministry and representatives of Žilinská Diaľnica.

Under this project, which is regarded as the most technically demanding, highway sections between Hričovské Podhradie and Lietavská Lúčka, Lietavská Lúčka and Višňové, Višňové and Dubná Skala, and Lietavská Lúčka and Žilina totalling 29 kilometres should be completed during the autumn of 2014, the ministry states on its website. An eight-kilometre-long tunnel between Višňové and Dubná Skala is part of the project. The target date for the financial close is May 2010, according to SITA.