The €928 million Ionia Odos PPP project - the pathfinder deal in a programme of five toll road transactions tendered by the Greek government - has reached commercial close

Greece in October 2005 enacted legislation to permit public-private partnerships, overhauling the existing framework and bringing the country's procurement law in line with EU directives while at the same time drawing on experience from other markets.

The Greek government in 2001 launched its €8 billion programme to replace road infrastructure, with the Ionia Odos toll road chosen to lead the charge as it was expected to be the easiest to bring to commercial close - however, it was anything but easy.

Since launch, the programme has made slow progress, moving slowly past a number of bidder challenges. At one stage the losing bidders filed a suit against the Cintra/ACS consortium.

Slow government approval procedures has also proved to be a bone of contention and impacted directly on the Ionian Odos project which - at one point - was rumoured to be on the verge of being scrapped by the public works ministry.

The Ionia Odos project has finally made it to commercial close with the project company - Nea Odos - working towards financial close with four European banks.

But for all the problems this deal faced, the road has reached the next vital landmark and will bolster the confidence of other parties to compete for deals in the country, which is expecially important as Greece is embarking on a wider social infrastructure investment agenda.

The Project

The toll road involves the construction, financing and operation of two roads that together amount to 370km. Of this total sum of roads, 196km will be new build. The operating concession runs for 30 years.

The project includes work on two separate toll roads:

• the first runs from Athens to Thessaloniki, Greece's second-largest city which serves as the main connection between Athens and north Greece
• the second road runs parallel to the coast of the Ionian Sea, between the Gulf of Patras and north Greece

The consortium - Hellenic Autopista - was selected as preferred bidder in 2006.

It includes:

• Cintra - 33.34 per cent
• ACS - 33.33 per cent
• Gek - 33.33 per cent

Soon after the Autopistas consortium was selected preferred bidder, it bagged another road project in the country - the €1.5 billion Central Greece toll road (E65).

The contract had to be ratified by the Greek government and, in addition to this approval, it had to be endorsed by the European Commission which is part-subsidising the project.

The project ran into problems when the losing bidders filed a suit against the consortium, but this challenge was seen off in court and preferred bidder status was confirmed shortly after that.

Scott Wilson - in a joint venture woth OMEK Consulting Engineers - acted as design checker and independent engineer to the consortium.

Financing

Four banks worked with the consortium on the financing of the €928 million (US$1.2bn) toll road project, these included:

• Banco Bilboa Vizcaya Argentaria (BBVA)
• Grupo Santander
• EFG Telesis Finance
• Fortis Bank

The 30-year concession is being supported by a €330 million (US$427m) investment by the Greek government - half of which came from the European Union.

Total debt for the project is €405.80 million (US$525m) and the equity is €192.23 million (US$248m) , providing a debt:equity ration of 85:15.

The four banks put in an equal underwritten value of €102.13 million (US$132.11m).

The senior tranches set up are €408 million (US$531m) and €76 million (US$99m) with a term loan of 25 years priced at Libor + 95-115bp.

Conclusion

The Greek transport market is on the move with contracts awarded or due soon - the Ionia Odos project is the first off the blocks and it is a successful deal despite its slow progress.

The Hellenic Autopista consortium is doing well having bagged another road in December 2006, giving it a strong position in the Greek market.

The second project - the E65 Central Greece toll road - is valued at €1.5 billion and, as luck would have it, it ended up being a one horse race for the Cintra/ACS consortium after the rival consortium withdrew.

The Central Greece toll road - which is part of the E65 European corridor - will link Lamia to Via Egnatia.

The three other Greek toll roads that were launched in this pilot programme are:

• Maliakos-Klieidi - awarded to Vinci, Elliniki Technodomiki, J&P Avax, Aegek and Athena
• Korinthos-Tripoli-Kalamata - awarded to Elliniki Technodomiki, Impregilo, Pantechniki
• Elefsina-Corinth-Patra-Tsakona - still in procurement

The Greek government appears to be making solid progress with its PPP agenda, with several projects under procurement in sectors beyond transport, moving into wider social infrastructure. This will see project progressing in sectors including: education, health, fire stations and prisons.

With a pipline of projects now moving forward, all that remains to be done is for Greece to continue its commitment to the market and it will continue to flourish - as rival bnaks and construction outfits compete for work and pricing plummets.

The project at a glance