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PPP IN SLOVAKIA

Compared to surrounding countries, such as the Czech Republic or Hungary, the Slovak Republic is slightly “behind“ in the field of PPP. However, Slovakia can now boast the first concluded PPP project for project design, construction, financing, operation and maintenance of the R1 speedway. This method only actually began to be used in 2007 during the preparation of motorway PPP projects (even though PPP plans emerged earlier).

The institutional environment also began crystallising no earlier, with the department of partner projects initially being established at the Slovak Ministry of Finance in 2007 and subsequently the PPP Association being established as a representative of the private sector. The aforementioned department issued several methodologies and began to provide financial and advisory support for PPP project intentions, which are financed from European resources. An important step taken recently was the preparation of a complex analysis of the PPP legislative environment, on the basis of which Slovak legislation will be amended during the forthcoming months so that PPP projects are not forced to overcome unnecessary obstacles and their simpler regulation is simultaneously enabled. The PPP Association takes part in commenting on all PPP documents by the Ministry and actively works on promoting the PPP method.

The motorway PPP projects were divided into three so-called PPP packages. The 2nd package has currently progressed the furthest, with a concession agreement with a private partner being concluded at the beginning of 2009 while so-called financial closure of the project took place at the end of August. Financial closure was shown to be a complicated task during the current financial situation, it was also necessary to amend the Act on Public Assurance or introduce new contractual provisions on refinancing in the case of lower interest rates. In the end this project was successfully concluded and construction began full force. The next in line should be the 1st package, in which a concession agreement was also concluded, while financial closure is expected by February 15, 2009, with the extensive participation of EIB. One bid was submitted in the 3rd package, which is now waiting to be evaluated.

Utilisation of PPP in the field of health care is being considered more and more in the Slovak Republic recently. The first project sponsored by the Ministry of Health will be the health care facility at the Institute of Nuclear and Molecular Medicine in Košice, where a concessionaire is already being sought and the Faculty Hospital Rázsochy in Bratislava will probably follow. Other projects in this field include the project for modernisation of the Central Military Hospital SNP in Ružomberk, which has obtained financial support from the Ministry of Finance for covering a feasibility study, preparation of which will begin soon. Municipalities are also considering involvement of a strategic partner in reconstruction and operation of hospitals.

However, probably the first Slovak PPP project is the reconstruction and maintenance of 2nd and 3rd class roads in the Košice Region, where the private partner has assured reconstruction and renewal of roads for many years to come, while assuring project financing and assuming a significant part of the risks. More Slovak towns and regions are considering such use of PPP today. The Košice self-administration region is also considering construction of an administrative complex for public offices in the form of PPP. Proposal for construction of a “government“ town in the form of PPP has also appeared in the field of administrative buildings. The project of the so-called media complex for Slovak Television and Slovak Radio has progressed the furthest in this sphere, and should be constructed in Bratislava. Feasibility studies were approved by the government and the project is currently waiting to be launched. According to the Ministry of Culture it is not suitable for Slovak Television and Slovak Radio to remain in their current buildings, the buildings are expensive to operate and are outdated. The public contract for construction of a media complex was approximately 25 percent more advantageous then Slovak Television and Slovak Radio remaining in their current premises and according to advisors PPP is at least 2 percent more advantageous than the form of traditional contract. The private partners should operate the media complex for 28 years and will be rewarded for provision of a public service in the form of availability payments. Other project can also be considered PPP projects, for instance public lighting projects in many towns in Slovakia. Proposals for PPP projects are also appearing the field of sport and culture. Realisation of a hockey hall, which should be constructed in Bratislava for the purpose of the 2011 World Championships, was originally considered in the form of PPP, as well as construction and operation of a sports complex in the form of PPP in Žilina. These projects have begun to be realised using classic methods. Multi-storey car parks and garages also represent an interesting field. The first PPP project in this field could originate in Košice.

The ring road around Bratislava, the so-called D4, is frequently mentioned in connection to PPP projects and could also be realised in the form of direct collection of fees, or toll, during which time construction should start in 2012 at the earliest.

Another complex PPP project in the field of transport is electronic toll collection, which is realised in the form of DBFO. Toll collection should be introduced for vehicles exceeding 3,5 tons on motorways, speedways and on some 1st class roads of a length of approx. 2 400 kilometres from January 2010. After a lengthy selection of a private partner a contract was concluded with a supplier at the beginning of 2009 for the period of 13 years with the option of extension by another five years.

The first PPP project has also appeared in the field of railways transport. The private partner should assure revitalisation of 4 railway stations and will receive long-term rights for use of commercial areas within the revitalised stations as a reward. If this project is successful it could be expanded to other stations.

The global financial crisis has naturally negatively influenced Slovak PPP projects. However, conclusion of the first pilot motorway PPP project provided clear evidence of the fact that even today PPP provides an interesting alternative to the classic method of assuring public services.

October 2009

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Members of the PPP Association