The consortium led by the Themis private equity fund has won the concession for the construction and maintenance of motorways in Hungary for the next 35 years. 317 kilometres of new roads will be built by 2032, and there will be 265 kilometers of lane extensions in the first ten years of the concession, Antal Rogan, PM Orban's cabinet chief, said at a background discussion in Budapest on Friday.

The minister in charge of the concession announced that the consortium led by the Themis private equity fund has won the concession right for the construction and maintenance of motorways for the next 35 years. The procedure complies with EU standards in all respects, with a single tender for the construction and maintenance of new sections.

The construction of 317 kilometres of new roads must be completed by 2032, and lane extensions by 265 kilometres in the first ten years.

The cabinet minister mentioned the M1 sections between Bicske, Tatabanya and Komarom, the M7 sections between Szekesfehervar and Balatonvilagos, the M3 sections between Godollo, Bak, Gyongyos, Hatvan and Kerekharaszti, the M3 sections stretching as far as the eastern border, and parts of the M85. Under the contract, operation and maintenance will be carried out on a section of 1,044 kilometres during the entire 35 years of the concession period, with the works on all road sections classified as priority national investments, he said.

317 kilometres of new roads will be built by 2032, and there will be 265 kilometres of lane extensions in the first ten years

Speaking about the financial model of the project, Antal Rogan stressed that the state will pay an availability fee, covering the total amount spent on maintenance and construction over 35 years. The concession-holder has the obligation to cover borrowing costs incurred by taking out loans needed for the completion of the project. Tolls collected by the state must fully cover availability during the 35-year period, he explained.

He pointed out that

revenues available to the state will cover concession costs, emphasizing that the Hungarian state will not transfer toll collection rights.

Availability fee will amount to 96.2 million forints per kilometre annually. Existing motorways will remain state-owned and newly built roads will also be in state ownership, Antal Rogan noted.

The legal and financial analyses of contracts concluded by pre-2010 governments for the M5 and M6 motorways have revealed that these concession arrangements were extremely unfavourable for the state, said Marcell Biro, president of the Authority for the Supervision of Regulated Activities during the background discussion. He pointed out that for this reason, the Concession Council has recommended that the government renegotiate certain parts of these contracts.

He highlighted that the Concession Council operating as part of the authority evaluated the concession contracts signed between 1994 and 2008. The body concluded that the financial models of these concession contracts were not at all in line with international practice and included provisions unfavourable to the state, placing a heavy burden on the budget.

In their calculation, several billions of forints can be saved through the renegotiation of contracts.

He also said that calculating with the past euro-forint exchange rate, it would cause an estimated 880 billion forint (2.3 billion euros) addition expenditure to the state that the availability fee to be pad to concessors until the end of the concession periods is euro- rather than forint-based, with exchange rate risks to be exclusively borne by the state.

Antal Rogan policed out that due to the favourable change in the corporate tax rate, concession companies with a typically foreign background will realise an extra profit of approximately 23.5 billion forints by the end of the concession period, while the Hungarian state as a concessionaire will not benefit in any way from the favourable tax environment. The government has not yet discussed the report, after which it will decide on the council’s proposals, he said.

Zsolt Cseko, the President of the National Concession Office, announced at the event that the results of the concession procurement procedure were announced, and the bidders were also notified. The contract will be signed with the winner after a 10-day moratorium on contracting. Mr Cseko added that the decision affects the maintenance tasks of road maintenance company Magyar Kozut and its related division. The call for tenders stated that the winning bidder was required to purchase this division and assets of the company.