The Challenge
In the context of EU membership, Greece had access to considerable funds to support new infrastructure investments which would have to be complemented by national funding schemes. However, at that time the national contribution would be hard to be secured in total by the Government and a different approach would have to be considered since the needs especially with respect to severely upgrading the road network infrastructure were significant.
The Approach
PLANET joined a consortium with BANK OF AMERICA and the Investment Banking arm of the NATIONAL BANK OF GREECE that studied the challenge and came up with an approach that was novel to Greece at that time.
Namely, it was recommended to use concession contracts with the private sector so that the private partner would undertake a specific highway construction, upgrade and financing, taking advantage also of European funding where available and in return would operate, maintain and collect tolls for a long period without any significant economic burden to the Greek state.
Ensuring the optimal “road” to finance, construct and upgrade the highway road network of Greece
In addition, this approach would optimize risk sharing between the state and the private party by allocating risks to the party best suited to undertake them (e.g. land expropriations undertaken by the state, but construction and market risk undertaken by the private party).
Considering that the legal framework for concessions was not yet at place, all concessions of that type had to be ratified as laws by the Greek parliament.
Results & Impact
The concession model was broadly implemented and is still so for the construction of new and upgrade of all major road networks in Greece since then.
