Two long-awaited road financings from Greece's glacial PPP programme reached close in early March. They share a protracted path to close, and a sponsor, domestic construction and concessions player Elliniki Technodomiki. And both illustrate the solid – if less-than-spectacular – returns on offer in the Greek market.

The concession for the Korinthos-Tripoli-Kalamata (KTK) motorway and Leftkro-Sparti branch closed on 6 March, while Maliakos-Kleidi closed four days later. KTK represents the third wave of the Greek Government's current Eu7 billion ($11 billion) programme of infrastructure PPP projects. The KTK sponsors, Elliniki Technodomiki and Intracom Holdings, signed their concession and financing documentation in early 2007.

The total project cost is around Eu1.42 billion, of which Eu835 million is provided through commercial and European Investment Bank debt. The EIB is contributing Eu150 million. The commercial bank debt totals Eu685 million, which comprises a Eu375 million 25-year term loan priced at 115bp over Euribor, rising to 140bp, and a Eu266 million revolving bridge facility, which anticipates receipt of a state loan, priced at 105bp. The remaining Eu44 million is made up of overdraft and stand-by facilities. The project has a minimum average debt service coverage ratio (ADSCR) of 1.25x.

The state loan was increased from an original Eu330 million to Eu346 million to account for the increases in costs during the delay. This will be disbursed throughout construction, with the majority held back until the end of construction, which is due in four years.

Mandated lead arrangers HVB, BNP Paribas and Royal Bank of Scotland launched syndication of the debt in October 2007, and received commitments towards the end of January. But because of the delay in receiving EU Commission clearance for state aid to the project, which was eventually received in February, costs increased and the financing documentation had to be tweaked to both this and other minor technical details. Financial close was reached at the beginning of March, syndication closed mid-March and first drawdown occurred at the beginning of April.

The syndicate group comprises 12 banks: Alpha Bank, Piraeus Bank, Agricultural Bank of Greece, Attikis Bank, Bank of Ireland, Bayerische LB, EFG Eurobank, Emporiki Ban, Geniki Bank (SG), Millennium BCP, National Bank of Greece and WestLB.

The project consists of a 30-year concession for the design, construction, maintenance, financing and operation of a two-lane motorway. The motorway will improve the access to and from the Peleponnese from Athens and Northern Greece by connecting the capitals of the prefectures of Korinthos, Tripoli, Kalamata and Sparti. The motorway includes an existing 82.6km stretch of road to be upgraded and enhanced, plus new sections to be built and operated. Once completed, the motorway will have a total length of 205km.

Like Korinthos-Tripoli-Kalamata the Maliakos-Kleidi motorway had been held up by state aid clearance from the EU. Mandated lead arrangers Dexia, Calyon, ING and Piraeus Bank eventually brought in eight banks in a limited syndication in March, after launching syndication in September 2007 and despite hoping to sign by the end of that year.

The deal comprises debt of Eu1.004 billion and Eu296 million of equity, and has an ADSCR of 1.2x. The debt splits into a Eu571 million 25-year term loan priced at 90bp over Euribor, rising to 150bp, a Eu25 million standby facility priced at 90bp to 105bp, and a five-year Eu121 million equity bridge facility. The government is providing a Eu287 million loan.

The banks that came into the deal are: Alpha Bank, Depfa, EFG Eurobank, KBC, KfW, Mizuho, SG and National Bank of Greece. Banks are believed to have been offered a commitment fee of 36bp.
The motorway is a 230km long section of the most important Greek trunk road, between Athens and Thessalonica, and is a project within the European Union's Trans-European Network (TEN).

The project is a 30-year design-build-finance-operate real toll concession. Construction involves the building of a new 25-kilometre section of the motorway, including 26 bridges and ten service stations. Of this section 11km is tunnels. The consortium will also modernise and repair a further 205km of the existing toll route. New toll stations will enable toll charges to be collected either manually or electronically.

The concession company Aegean Motorway took over the operation of the motorway on 20 March, allowing the company to collect existing tolls from day one. The project is part-funded through existing tolls on 205km of the road that has already been completed. The section will contribute around Eu300 million towards the construction phase. Construction is scheduled to be complete within four years.

According to Elliniki Technodomiki, the second-largest shareholder in the concession after Hochtief, the project should provide a nominal internal rate of return of around 14%, which compares favourably with the constructor's expected 10% IRR on the Thessaloniki submerged tunnel and Korinthos-Tripoli-Kalamata.

This project follows the financial close of the Ionian Road, which also forms part of the main north-south arterial route. Its Eu400 million financing was through Fortis, BBVA, Eurobank and Santander and had a 25-year tenor and margins of between 95bp and 115bp.

Patience is a vital attribute for participants in Greek road projects, since each project needs Parliamentary approval and EU approval for state aid. The initial bid stage for the KTK project commenced in 2005.

Korinthos-Tripoli-Kalamata Motorway
Status: Financing and concession documents signed 31 January; closed 6 March 2008
Description: 30-year DBFO real toll motorway concession
Sponsors: Elliniki Technodomiki (73.34%), Intracom S.A. Holdings (13.33%), Pantechniki (13.33%)
Mandated lead arrangers: HVB, BNP Paribas and Royal Bank of Scotland
Financial advisers: Ernst & Young
Legal counsel to sponsors: McDermott Will & Emery
Legal counsel to commercial banks: Allen & Overy
Legal counsel to EIB: Lovells

Maliakos-Kleidi motorway
Status: Signed 10 March 2008
Description: 30-year DBFO real toll motorway concession
Sponsors: Hochtief (35%), Elliniki Technodomiki-TEV SA (20%), J&P Avax SA (16.25%), Vinci SA (13.75%), AEGEK (10%) and Athena ATE (5%)
Mandated lead arrangers: Dexia; Calyon; ING; Piraeus Bank
Financial adviser: Calyon
Legal counsel to sponsors: Norton Rose; Koutalides
Legal counsel to banks: Lovells; Bernitsas