Croatia considering IPO in place of motorway concession tender

By bne IntelliNews March 15, 2015

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The Croatian government will give up its plan to lease out the country’s motorways and will instead opt for an initial public offering (IPO) to pension funds and citizens, public broadcaster HRT quoted Prime Minister Zoran Milanovic as saying on March 13.

The transport ministry said in December that it had received non-binding bids in the tender to award the concession of the management and maintenance of its motorways but did not give details about the number or the name of the bidders. However, local media has speculated that offers were expected from three bidders: a consortium made up of Goldman Sachs and Croatian pension funds; the Austrian company Strabag; and Australia’s Macquarie Group.

The negotiation process was expected to last four months and in the first half of April investors should have been invited to submit binding bids.

The Croatian government had adopted in July 2013 a monetisation model for the public debt of the national motorway operators HAC and Autoceste Rijeka-Zagreb (ARZ) - which had accumulated a debt exceeding €4bn - in which it planned to issue concessions for the management and maintenance of the motorways for a period of 30 to 50 years. Finance minister Boris Lalovac has estimated the monetisation could generate about €3bn. 

However, the tender was opposed by trade unions and civic groups in the country which started to collect signatures to organise a referendum on the topic.

Milanovic did not give any further information about the plans. However, amid concerns about public opposition to a concession model, government officials have previously put forward the alternative of holding an IPO.

Earlier this month, Maritime Affairs, Transport and Infrastructure Minister Siniša Hajdaš Dončić told Croatian daily Jutarnji list that if a referendum was used to block the concession plan, Zagreb would instead hold an IPO of 51% of the Croatian Motorways Maintenance and Tolling agency, which is jointly owned by HAC and ARZ.

The IPO could raise €1.2bn, Dončić added - a figure well below the €4bn needed to pay off HAC and ARZ’s debts.

The government’s decision to cancel the motorways concession comes in a year when it is trying to gain support ahead of the parliamentary elections which will be organised later this year. Presidential elections, which took place at the end of last year and in January 2015, were won by a representative of HDZ, the main opposition party, and confirmed the falling support for the ruling SDP following a six-year long recession.

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