Erste, Deloitte, Wolf Theiss Chosen Motorway Concession Consultants; HAC Management Board Sacked!

Last week, after the completion of a public tender (5 Sep), the Ministry of Maritime Affairs, Transport and Infrastructure chose a motorway concession consultant for the state-owned motorway companies Croatian Motorways (HAC) and the Rijeka- Zagreb Motorway (ARZ).  The Austrian Erste Group Bank is to advise the ministry on a plan to lease out the operation of its motorways and help its state-run road companies repay their debts.  The Erste Bank-led bid is in partnership with the financial audit and consultancy firm Deloitte and Austria-based law firm Wolf Theiss.  The eight bidders included some international financial heavyweights like Goldman Sachs JP Morgan and Macquarie.  However, the ministry final choice was the Erste Group and Partners bid (€6.5 million), which also happened to be the lowest financial bid.

The two main motorway companies have debts worth approximately €4 billion, part of which matures in 2013.  The possible concession winner, expected to be decided upon in late 2013, is likely to operate the motorways for 30-35 years.  According to some assessments from the potential advisers, the concession could bring the government up to €3 billion. The government’s decision to offer the motorways under concession will be dependent upon the final analysis and assessment by the consultants.

As the ministry was progressing with its plan to privatise its motorway operations, Minister Sinisa Hajdas Doncic (SDP) simultaneously made a decision to sack the 4-man management board of HAC; the same management board members were appointed by the Croatian government on 1 March.  Doncic stated that his decision was based upon their poor and inefficient work, especially regarding the sluggish progress of HAC’s restructuring, which includes the layoffs of 200 to 600 employees.  However, it is widely speculated that the decision was political, given that the Chairman of the Board, Drazen Gustin, was closely associated with the recently resigned Deputy Prime Minister Radimir Cacic (HNS) and other board members were loyal to the Finance Minister Slavko Linic (SDP).  In order to take full control, Doncic has sacked the whole board and replaced them with a temporary 2-man board with little management experience, including motorway management experience.

This drastic and significant political decision is poor business timing, since the board members’ experience and knowledge will be crucial and strategic during the concession consultant’s assessment in the coming months.

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