CROATIAN MOTORWAYS: Croatian Government Approves Motorways Concession Tender

Last week, the government adopted a concession/privatisation model for the Croatian Motorways (HAC) and Rijeka-Zagreb Motorway (ARZ). The concession model involves the management and maintenance of motorways for a period of 30 to 50 years. The concessionaire would pay a lump sum estimated at €2.4 to €3.2 billion to the government, depending on the duration of the concession. The lump sum would be used to reduce the public debt, and would not be for current consumption.

Maritime Affairs, Transportation and Infrastructure Minister Sinisa Hajdas Doncic (HNS) said that initial discussions with potential concessionaires should be completed by the end of this year, after which a call for tenders will be issued. The entire procedure is scheduled to be finalised within 9 to 12 months, which appears to be an optimistic estimate for such a complex and encompassing concession tender. The ministry states that they have already received 47 responses from various investment and pension funds, as well as road management and construction companies. Some domestic pension funds have also expressed interest in competing for the concession.

According to the concession model, the investor would have to manage and maintain motorways, as well as retain all current employees of HAC/ARZ. Financial risks related to a possible traffic decrease would be distributed between the concessionaire and the state. The price of tolls would be determined by the concession contract, and one of the possibilities is to conduct indexation on par to the inflation rate minus 1%.

The concession would apply to the entire length of the motorway, i.e. 1,024 kilometres.  One of the fixed variables will be to retain the €0.08 excise tax per litre on petroleum products (i.e. commercial petrol pricing), which will then finance other infrastructure projects like the railways and state roads.Minister Doncic stated that the government decision could not have been avoided since HAC and ARZ have over €4 billion in debts which cannot be rescheduled.

All opposition political parties and HAC/ARZ unions have publicly expressed their opposition to the government’s intention to privatise motorways, going so far as accusing the government of “treason”.  Regarding the motorway management, even though public-private motorway concessions exist in Croatia (e.g. Bina-Istra, Zagreb-Macelj Motorway), this decision does mark a strategic policy shift by the government towards motorways  “liquidation”, which is the translation of the term “monetizacija” that the government uses for the privatisation of Croatia’s motorways.  Previous governments, both HDZ-led and SDP-led, have pursued a motorway development strategy that is based upon the expedited upgrading of the motorway infrastructure and maintaining state-owned management…

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