Czechia kicks toll system can down the road

Czechia kicks toll system can down the road
The Czech government has been tussling over the contract to operate the toll system.
By bne IntelliNews July 11, 2016

The Czech government approved on July 11 a three-year extension of a contract with Austria's Kapsch to operate an electronic road toll system for trucks, and will postpone a tender for a new operator until then.

The agreement will safeguard the CZK10bn (€370mn) per year the tolls currently raise but will anger rival bidders that had claimed to be able to operate the tolls more cheaply.

The tender had become the centre of a bitter fight between the coalition parties, illustrating the opposing forces pulling at the disparate parties making up the government, the unrestrained influence of powerful local business figures, and the economic risks those issues present.

Transport Minister Dan Tok of the junior coalition Ano party announced that with Kapsch’s existing 10-year contract set to expire at the end of 2016, the government has approved a three-year extension to give itself time to prepare a new tender to select the next operator. Bidders in the new tender can also offer different technologies besides the microwave-based system that is currently used for toll collection in the country, he told CTK.

A consortium led by Slovakia's SkyToll, as well as Hungary’s state-owned toll company NUSZ, say they had already placed bids to operate the system, despite no tender having been launched. Tok insisted in March that the offers were unrealistic.

The Czech Republic introduced the e-toll collecting system in 2007. Currently, tolls are paid on 1,400km of motorways and high-speed roads. Toll collection amounted to CZK9.7bn in 2015. Since the launch of the system, the state has collected almost CZK70bn in tolls.

Thorn

The agreement to extend the Kapsch contract appears to put to bed, for the moment at least, the fighting between the senior coalition Social Democrat party and Ano.

Ano – a party run like a business by billionaire industrialist and finance minister Andrej Babis - has clearly stood in the incumbent's corner. That's despite the fact that SkyToll claims to be ready to save the state CZK500mn per year by charging CZK1.5bn in operation costs.

Tok was forced at the meeting, however, to fight hard to justify the deal, and in particular the lack of competition. The transport minister insists that the contract with Kapsch simply made the implementation of an alternative impossible by the start of next year, because the Austrian company was not obliged to share technical information. Tok has pledged to organize a full and proper tender by 2019.

However, Babis has had trouble controlling his ministers. A regular thorn in the side of the controversial finance minister, Regional Development Minister Karla Slechtova has sided with the CSSD in objecting to retaining Kapsch.

Specifically, she has insisted that a public tender should be held. Her office is in charge of public procurement. The CSSD said ahead of the meeting on July 11 that it would not support Tok's official proposal to extend the contract unless Slechtova signed off on the plan.

Perhaps under instruction – although from whom it is not clear - Slechtova appears to have backed off due to the risk that the Czech Republic might be left without any system to collect road tolls next year. Tok, meanwhile, claims to have won impressive concessions from the current operator.

The transport minister announced Kapsch will sign an annex to the existing deal that will envisage a reduction in operating costs. Prague will seek a significant improvement of the current terms, he insisted. The annex should be signed in the autumn. The Austrian company will also be obliged to cooperate with any third party operator.

Too close

Two government offices had earlier criticized the lack of a competition. That is a point that Prime Minister Bohuslav Sobotka and several other CSSD officials have regularly mentioned in the run up to the decision.  

However, the key for critics of the CSSD is the identity of the rival SkyToll. The operator of the system next door in Slovakia is owned by closely-held financial group J&T. The Slovak company bought SkyToll CZ in March from Petr Kellner.

The richest Czech owns, via his PPF group, the satellite systems and mobile networks on which SkyToll operates. Hence the importance of Tok's note on the expansion of the admissible technology of the system.

SkyToll has been busy behind the scenes lobbying hard for the contract. It has also spoken more than once of potential legal action should a tender not be held. Eyes will now turn to that threat, with billions of koruna potentially at risk, although the technical change could suggest a backroom deal has been reached.

Tok insists that the Czech government is within the law. However, should he be wrong, the government – already in the midst of negotiating a new coalition agreement due to the increasing frequency of spats between the CSSD and Ano  – may face yet another challenge to its survival.

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