The Greek PPP market is taking off with deals in the transport sector leading the charge. With a healthy pipeline of deals working their way through the system, Greece is increasingy being seen as one of the next key European markets

The €1.28bn Maliakos-Kleidi toll motorway is the second deal in a programme of five transactions tendered by the Greek government to make it to commercial close.

The Greek government launched its €8 billion programme to replace road infrastructure in 2001 with the €928 million Ionia Odos toll road chosen to lead the charge as it was expected to be the easiest to close.

Howeever, Ionia Odos was anything but easy. Since launch, the programme made slow progress, negotiating a number of bidder challenges with a legal challenges at every turn.

Slow government approval procedure has also hampered the programme, but with one close in the bag and the second at commercial close, the market can take some comfort in the belief that there is light at the end of the tunnel and that deals shall start to progress faster.

The project

The 230km Maliakos-Kleidi project is part of the northern section of the PATHE highway access, that will link the Maliakos Bay area to the western outskirts of Thessaloniki[projects database].

Around 205km of the road has already been completed and toll revenues from this section will contribute €300 million (US$412m) towards the construction phase.

The project consists of the new-build of a 25km stretch of motorway as well as refurbishment and upgrade of the existing 205km section. The concession period is 30 years and the project is to be carried out on a DBFOM basis.

The contract also includes:

• 26 bridges
• 10 service stations
• 11km of tunnels

The project still requires ratification from the Greek government.

The investment volume is €1.28 billion, partly from EU-funded start-up financing, while more than two-thirds of the total comes from long-term bank loans and equity contributions. The loans and equity contributions will be recouped from toll charges and service station concession agreements.

Background

Greece first put two projects out to tender in May 2004, these were:

• Thessaloniki submerged tunnel
• Maliakos-Kleidi toll road

The bidding process for the PPP project was then delayed and final bid documents were released in early August. The project's stumbling block was caused by Greece's general elections.

Five consortia submitted bids for the motorway:

• Aegean Motorway Group - Hochtief, Bilfinger Berger, Aegek, Athena and Lamda Development - financial adviser Société Générale and legal adviser Norton Rose
• Bouygues consortium - Autoroute de Sud de la France, Alte and Archirodon
• Olympia Odopisis consortium - Mota Engil, Acciona, Nesco, Michaniki, Themeliodomi and Engil Sociedade - financial adviser BES
• Olympia Odos - Aktor, Hellas Group, Impregilo and Eteth - financial adviser HVB
• Olympian Roads - Hellenic Technodomiki, J&P Avax and Vinci

Bidding operations were stalled again in 2005 when a Hochtief-led consortium was selected as preferred bidder.

Olympian Roads promptly filed a law suit that held up the process for one year. The rival claimed that the decision to go with the Hochtief-led team was unfair.

As it transpired, Olympian Roads then opted to pitch in with Aegean Motorway Group and withdrew its objections to the decision. However, Bilfinger and Lamda pulled out of the project at that stage.

The decision to join forces - agreed before the court ruling - was announced to the press on 1 September 2006. The EU left the matter to the Greek ministry to decide on how the whole matter should be dealt with.

Aegean Motorways was confirmed preferred bidder with the revised consortium on 6 September 2006.

Financing

The Maliakos-Kleidi toll road has a project value of €1.28 billion (US$1.7bn) and construction is expected to take four years.

The MLAs on the deal were:

• Calyon
• Dexia
• ING Bank
• Piraeus Bank

Total equity for the project is €194 million (US$266m) including repayment of the equity bridge; the equity breakdown is as follows:

• base equity - €136 million (US$186m)
• standby facility - €60 million (US$82m)

The total senior debt is €601 million (US$819m) and the senior debt breakdown consists of the project facility which is €571 million (US$784m) and a standby facility of €30 million (US$40.8m)

The equity bridge facility is €121 million (US$166m) with the debt:equity ratio 80:20.

State contribution amounts to €287 million (US$394m).

Senior debt pricing is set at Libor + 95-115bp and the term Loan is for 25 years.

Norton Rose and TJ Koutalidis are acting as legal advisers to the Aegean Motorway group with Société Générale providing financial services.

Lovells and MP & Bernitsas Law Offices are advising the banking team and the National Bank of Greece is acting as financial adviser to the Greek government.

Mott MacDonald is the traffic and technical adviser.

Conclusion

It is hoped that 2007 will see the completion of the roads programme and the roll-out of non-transport infrastructure PPPs where a swathe of deals in schools, courts and prisons are teed up - though they will be procured on shorter concessions.

The development of the Greek PPP market has emerged steadily, though not without significant teething problems.

There is a lot of potential for this PPP market to develop and early movers on the Greek roads programme - including Cintra, Vinci and Hochtief as well as a number of local Greek firms - will have a head start on their competition.

Greece has signed the concession contract for the third toll road transaction - the Corinth-Patras  toll motorway with the Aegean motorway Group in which Vinci is the equity member leading the consortium [projects database].

Again this project needs ratification from the Greek government before it can go ahead.

Recent developments in the sector saw the Thessaloniki submerged Tunnel PPP launch syndication of the €150 million senior debt tranche [projects database].

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

The project at a glance