ECONOMY

Highway projects to restart within this month

The Development Ministry expects the stalled highway construction projects to restart within this month, after signing agreements with the four contractors regarding their compensation from the state, amounting to over 350 million euros.

The signing of the agreements, announced on Friday by the ministry, paves the way for the preparation of the main construction work – a stage that leads to the immediate hiring of thousands of workers across the country. The main construction work is expected to restart by the summer, once the revised concession contracts clear Parliament, with the aim being the completion of the highways by end-2015 to prevent the loss of European Union subsidies.

“Following tough negotiations and efforts that have lasted many months, we have signed the contracts with the contractors, which provides for the immediate restart of the projects before Easter [on May 5] without delays,” said Minister Costis Hatzidakis.

The agreements concern compensation to the four consortiums for issues that the ministry is responsible for: delays due to town-planning issues, archaeological excavations etc. The revised concession contracts and the compensation agreements will be tabled in Parliament by the summer.

The ministry announced the sums that each consortium is set to receive as compensation for the delays to the highway projects. In total, the four contractors had asked for 719.9 million euros; independent engineers subsequently hired according to the contracts approved demands for 473.9 million, and, finally, it was agreed the state would pay Olympia Odos, Aegean Motorway, Nea Odos and Kentriki Odos the sum of 353.3 million euros. Alternate Development Minister Stavros Kaloyiannis explained that these funds will come from the Public Investment Program.

Part of the money will be paid immediately in return for the start of preparation for the main works in the summer. Sources say that the deposits add up to between 150 and 160 million euros.

For the government, restarting the preparations signals the start of works: “The restarting of the four highways symbolizes the restarting of the Greek economy, with the creation of 25,000 new jobs,” said Hatzidakis. “This is exceptionally positive news, particularly at the current juncture, and constitutes a vote of confidence in the Greek economy.”

The next step will be the agreement with the banks for the revision of the concession contracts. The banks consider the existing financing model of the projects to be unsustainable. The contractors are more than likely to accept an increase in their borrowing interest rate, with the state undertaking part of the extra cost using future revenues from tolls, for instance.

Ministry sources say the banks that are participating in the project funding have not yet clarified whether they will renew their participation – probably in an effort to secure the best benefits possible from the negotiations.

Once the deal with the banks is complete, which appears likely, then the Greek authorities will need to get the approval of the European Commission and the country’s international creditors.

Next, Parliament will vote for the amendment of the relevant legal clauses that had ratified the frozen concession contracts. Once this process is complete, the main construction work can restart immediately.