Czech transport ministry looks to pilot PPP motorway project

Public Private Partnerships have had a short and not very glorious history in the Czech Republic as a means of financing major infrastructure projects. But so-called PPPs now appear back in fashion with the Ministry of Transport plotting the use of private capital to pave the way for one major highway.

Ministry of Transport in Prague, photo: Oleg Fetisov

Public Private Partnerships have been used in many West European countries. The model is back on private capital being used for construction of major infrastructure, whether it be roads, pipelines, or hospitals, and the state or users later paying rental or charges for its use.

The attraction is that the immediate burden on state finances is lightened early on and costs can be spread over the longer term. The disadvantage is that the state and public often appear to be paying over the odds for the construction and upkeep of the specific infrastructure compared with national authorities going it alone.

The Czech government last looked at PPPs around a decade and a half ago. But the deals initially signed, for example with the Israeli Housing and Construction group, were scrapped after misgivings about the eventual costs and terms surfaced.

But the Czech Ministry of Transport is now pushing down the same path again. It has earmarked a 32-kilometre stretch of the D4 highway between Prague and Písek as suitable for a PPP project. The timetable sees the required building permits being awarded by the end of 2019 and land purchases completed so that construction can proceed.

Legal and expert advice on how to frame the tender for a PPP provider was already decided by the ministry in November last year with the task awarded to legal company White & Case Obermeyer Helika and Česká Spořitelna. They had been given 26 million crowns to cover the preparations with the tender possibly launched in October this year with four finalists selected in the first phase. According to the ministry, around 100 firms, around four-fifths of them based abroad, have shown interest so far in taking part in the PPP tender.

Construction of the D4 highway between Prague and Písek, photo: Chmee2, CC BY-SA 3.0 Unported

It’s not the first time the transport ministry has looked to PPPs as an investment and construction model. Two highway projects were attempted in the past but they eventually ended up with the State Fund for Transport Infrastructure (STDI) stepping in as the investor.

One of the reasons for trying PPPs again is the prospect that European funds for infrastructure projects across the continent and especially in Central Europe will start to dry up in coming years as the overall EU budget tightens and other priorities are pushed forward. At the same time, the new ANO government and newly re-elected Czech president, Miloš Zeman, have made increased and more effective spending on infrastructure projects one of their main themes for the coming years.

Neighbouring Slovakia has already a much greater experience of using PPP projects for motorway construction with previous Czech governments trying to learn some of the lessons.