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EBRD approves ECU 139.5 million for Hungarian M5 motorway
The Board of Directors of the European Bank for Reconstruction and Development (EBRD) today approved ECU 139.5 million in loans and guarantees to Alföld-Koncessziós Autopalya Rt (AKA), a privately owned Hungarian concession company, to finance, build, operate and maintain the M5 toll motorway southward from Budapest.
Jacques de Larosière, President of the EBRD, said: “The EBRD has had considerable success in financing significant infrastructure projects in Hungary and emphasis will continue to be given to infrastructure projects financed on a commercial basis. The emerging appetite of the financial sector to provide long-term financing for well structured, viable infrastructure projects, and the preference of the Hungarian government not to provide sovereign guarantees, can be successfully combined to structure projects as private/public partnerships”.
This second transport sector Build-Operate-Transfer (BOT) project in Hungary comprises the upgrading and tolling of an existing 27 km motorway; the completion of a second carriageway parallel to 29 km of existing one-lane motorway; the construction of 40 km of a new dual two-lane motorway and the operating and maintenance of the motorway for the 35-year concession period. Shareholders of the concession company of the project are the French Bouygues Group and the Austrian Bau Holding Group, and the operator will be the South-African Intertoll Group. The total project cost is ECU 377 million.
The M5 will improve the safety and speed of road transport between Budapest and southern Hungary, and facilitate trade between Western Europe, Hungary and the Balkan region. The direct beneficiaries of the project will be the users, primarily through reduced vehicle operating costs, time savings and improved safety.
This major infrastructure project is being implemented without full recourse to the Government of Hungary, relying on a BOT scheme which finances it on a private basis. The Government of Hungary will provide a standby operating subsidy, limited in amount and availability. Structuring the financing of the project was made possible by the close co-operation between the shareholders of the concession company, the arrangers and the Motorway Directorate of the Ministry of Transport.
The EBRD’s role is critical to the project’s success and the EBRD will be the lender of record for a syndicated loan (B-Loan) of ECU 200.7 million, which will be syndicated this autumn. In addition, EBRD provides its own loan (A-Loan), a forint loan, a partial guarantee for a forint loan, and a subordinated loan, as well as a guarantee for the balloon payment under the B-Loan at the end of the loan life.
The first transport sector BOT project in Central and Eastern Europe, the M1-M15 motorway linking Vienna, Budapest and the Slovak border, was co-arranged by EBRD and BNP. At that time, the EBRD launched the first bond issue in Hungarian forint by an international financial institution, providing funds for onlendings projects in Hungary and financing part of the M1-M15.
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