Slovakia’s elections in March 2016 unseated the former ministers for transport and health. At a recent PPP conference held in Bratislava, the new health minister’s position on PPP remained uncertain, while the new transport minister spoke of a commitment to bring private sector capital to infrastructure.

Elections on 5 March led to the incumbent Robert Fico of the Direction-Social Democracy (SMER-SD) party retaining his position as prime minister, but his party lost its majority in parliament. New transport and health ministers have risen to office taking on responsibility for major PPPs in advanced procurement, and hopefully for the bidders continue.

The Slovak PPP Association and its founding members Skanska, DLA Piper, Wolf Theiss, Granvia, Slovenska Sporitelna and Ružička Czekes/CMS hosted the conference on 21 April 2016, the “Slovak PPP & Infrastructure Forum 2016”.

Mega highway nears signing

The new Minister for Transport, Construction and Regional Development, Roman Brecely, was in attendance.

Brecely has now completed his own evaluation study which he commissioned at the start of April for the country’s major transport PPP at preferred bidder stage: the greenfield 59km D4/R7.  While the take-away from the conference was that he would sign the concession “in the next few days”, he hasn’t yet.  

A consortium of Spanish developer Cintra, Australian investor Macquarie and Austrian developer Porr has been the preferred bidders since December. To finance the project cost of €1.01 billion, the Bypass Zero consortium are due to close on about €700 million of debt at the end of May.

The European Investment Bank though the €21 billion European Fund for Strategic Development has committed, and the European Bank for Reconstruction and Development is appraising debt. Alongside commercial senior bank debt, the quasi-sovereign fund Slovak Investment Holding is due to provide mezzanine debt to the project. The fund was established in 2014, and its shareholder is the Slovak Guarantee and Development Bank.

The Bypass Zero bid was so far below even second place that a certain banker told IJGlobal they turned away from lending as they wouldn’t have got it past their credit committee. The successful Bypass Zero consortium bid €997.5 million net present value and €56.7 million annual availability payments. The closest of four final offers was from Vinci and Meridiam, with a €1.19 billion net present value and €69 million of annual payments, while third place has a net present value of €1.33 billion.

Uncertain priorities in healthcare

The second milestone PPP project for Slovakia is the new Bratislava University Hospital PPP, though it stalled during the elections and whether this project will proceed remains unclear.

The new Minister for Health Tomas Drucker was general director of the state postal service before taking up this position.  

Michaela Stessl, Slovakia country managing partner at DLA Piper, says: “The new Minister for Health wishes to reorganise and restructure the healthcare system in Slovakia and it is not clear yet if he views this project as a priority.”

Whether the hospital project is in a financeable form came under debate at the conference.

Stessl says, “This is quite a unique project, uncommon even in other countries, as it includes not only building the hospital but also the concessionaire would provide medical services and doctors. That may be a problem for this project as it is so complex and everyone in the market is a little afraid how to structure it in the best way….”

Five bidders entered the dialogue stage, though haven’t submitted an initial bid since expressions of interest 12 months ago:

• Ribera Salud Infraestructuras/InterHealth Canada/Metrostav
• Agel/Assuta Medical Centers
• Rizzani De Eccher/Policlinico San Donato
• Pessina Costruzioni/Dúha, a. s.
• Credinvest International Slovakia

The capital cost of the project is due to be €200-250 million. Procuring equipment for medical and non-medical equipment and ICT would cost €30 million the government estimated at project tender in April 2015. The concessionaire will receive its demand-based revenues from the insurance companies, of which the largest is state-owned.

In need of a new model

Eurostat’s European Standards for Accounting 2010 (ESA10) regulation enacted last year is weighing heavily on the PPP model across Europe.

“Also the new regulations from Eurostat were discussed and whether this will impact our future projects. In the current [transport PPP] model the concessionaire is not responsible or affected by whether the new highway experiences huge demand or no demand. With the new rules perhaps some risk will be transferred to the concessionaire so the state pays depending on how much the asset is used. There are some new methods and models to discuss,” Stessl said.

Changing the availability-based format for the advanced D4/R7 was not discussed at the event, nor is it imaginable at such a late stage Stessl added.

Next projects

The Minister for Transport did not announce a pipeline of new projects at the conference. Lobbyists continue to pitch.

The D1 Turany-Hubova motorway (13.5km) with an €800 million approximate cost, and a connection of the R1 and D1 from Banka Bystrica to Ruzomberok (50km) are at preliminary planning stages. The PPP Association has also reported discussions in the market about the Orava Expressway R3.

Stessl concluded that based on the discussions at the event, “There is no doubting now that PPP will have an important role in the next couple of years, more than in the past.”