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European Bank approves ECU 129.1 million for Hungarian Motorway: First transport sector B-O-T project in East Europe
The Board of Directors of the European Bank for Reconstruction and Development on Tuesday, 27 July 1993 approved financing of ECU 129.1 million to Elso Magyar Koncesszios Autopalya Rt, a special purpose company, to build and operate sections of the M1 and M15 motorways linking Vienna, Budapest and the Slovak border.
Following the Build-Operate-Transfer (BOT) concept, the concession company will be responsible for construction and operation of the motorway and return it to the Hungarian Government at the end of a 35-year concession period. Financing of the project will be on a limited recourse basis, with providers of equity and loans assuming full commercial project risks. The source of repayment will be the toll revenues.
Mario Sarcinelli, Vice President of the European Bank, said: "This is the first transport sector BOT project in central and eastern Europe, and the first for the European Bank. The Bank's risk taking ability is critical to the financing. Commercial banks may be willing to take commercial risks, but not the political risk without our participation."
The project consists of a phased construction of two stretches of motorway: a 42.4km section between Gyor and the Austrian border (M1); and a 14.5km section between the M1 near Mosonmagyarovar and the Slovak border (M15). The proposed M1-M15 will form a key section of the Trans-European Motorway network. It should enjoy the highest traffic volumes among all the motorway projects under consideration in central and eastern Europe. The interconnection of the Austrian and Hungarian motorway systems will significantly improve speed, reliability and safety of travel. This will further the integration of the Hungarian economy and trading system with those of its neighbours.
Founder shareholders of the concession company include: Transroute International SA, Caisse des Depots et Consignations, Banque Nationale de Paris, National Savings and Commercial Bank (OTP Bank), Kereskedelmi Bank Rt (OKHB), Strabag Osterreich, Strabag Hungaria, MOL Rt and Hungarian Bank for Investment and Development. The European Bank will contribute its equity once total financing is committed. Banque Nationale de Paris has acted as financial advisor to the concession company.
In addition to provision of equity and a direct foreign currency loan, the European Bank will act as lender of record for loans in which a syndicate of international banks will participate. The project will raise a major portion of its financing in Hungarian Forints and, various elements of the Forint financing will be supported by the Bank. Syndication is scheduled for next autumn.
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