State road companies to repay €5 billion debt by 2033

NEWS 29.03.2018 11:47
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Source: Ilustracija

The government's restructuring model for the road management sector will allow the motorways to remain Croatian-owned, and will also achieve long-term sustainability of the road system, ministers for finance and transport, Zdravko Marić and Oleg Butković, told reporters at a joint news conference on Thursday.

Transport Minister, Oleg Butković, said that last year’s bond issue and today’s government guarantee for a new 1.8 billion loan, would allow the roads to remain “in Croatian hands”.

“We opted for restructuring, instead of monetisation or sale, so we can say we have succeeded in keeping motorways in the hands of citizens, and also, the system will be made sustainable and profitable through reforms,” Butković said.

He added that road company’s debt is “becoming sustainable” and added that in 15 years it would be repaid in full. Last year’s euro bond issue and today’s guarantee will save at least 350 million kuna (47 million) per year, he said.

“Multiplied by 12 (years), that’s an amount equivalent to the price of (building) the Pelješac Bridge,” Butković said.

On Thursday, the government agreed to issue a 1.8 billion loan guarantee to three state-owned road companies for new bank loans, including 1.14 billion for Hrvatske Autoceste (HAC), 467 million for Hrvatske Ceste (HC) and 202 million for Autocesta Rijeka Zagreb (ARZ).

The loans will mature on March 31, 2030, at an effective interest rate of 2.05 percent. For the first three years the loans would be paid in biennial instalments amounting to 5 percent of the principal. The remaining 95 percent would be repaid through the next 18 half-year instalments.

Finance Minister Zdravko Marić said these transactions would not increase Croatia’s public debt, in which road companies account for about 13 percent of the total.

“Road management companies will be able to pay back that debt on their own, and we expect them to repay their debt in 15 years,” Marić said.

“We are managing public debt well and transparently, we are restructuring existing debt, we have made significant savings in interest (payments), and in that way we are opening additional (maneuvering) space, not only for these three companies but also for the state’s budget,” he added.

Last year’s euro bond issue and the new more favourable loans will refinance some 3.1 billion of debt of the three road management companies, out of their total 5 billion debt, and will achieve savings of at least 50 million per year, Marić said.

He announced refinancing of a further 400 million of debt in 2019, which would leave only 1.5 billion remaining to be paid through regular loan instalments.

Compared to this, monetising roads by issuing long-term concessions would take care of about 2.5 billion of debt, and to finance the rest, state companies would be forced to get into new debt.

(1 = 7.44 Croatian kuna)

“Some of our predecessors had determined that there was no alternative to monetisation or sale (of roads), but our solution is to improve operational results of road companies, and reduce the burden of financial obligations, especially interest rates,” Marić told reporters.