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Motorway PPP deals cause state to bleed billions yearly

Hungary will sacrifice about 7% of its current GDP, or approximately HUF 2.853 trillion until 2040, due to the decision to construct motorways M5 and M6 within the framework of public-private partnership (PPP) deals instead of taking out loans, news portal index.hu reports, citing economic news site G7.hu.

Last year only, the state paid some HUF 114 bln to the owners of the two motorways, making them the most expensive PPP concessions. This amounts to about one-third of the income generated by the e-road toll and e-vignette system (HUF 315 bln), the report notes.

The concession for the M5 was granted to Austrian company Bau Holding AG, and French firms Bouygues S.A. and Colas S.A. The motorway was introduced into the vignette system in 2004, with the state paying HUF 17 bln in exchange every year ever since.

Additionally, the state purchased a 40% stake in the M5 and had an option to buy the remainder for HUF 100 bln, the report recalls. Instead, the 40% stake was sold for a discount price of HUF 21 bln to the foreign owners. The state now pays HUF 35 bln per year as an "availability fee," G7.hu claims.

Index.hu describes motorway M6 as "perhaps the worst project of the MSzP-SzDSz governments," due to the low levels of traffic south of Szekszárd and its failure to stimulate the economies of Tolna and Baranya counties in the southwest of the country. According to G7.hu calculations, the PPP deal in the case of the M6 generates a loss of HUF 50 bln per year. The yearly amount would be enough to build a staggering 1,000 kilometers of new motorways until 2040, it claims.

The PPP setups were harshly criticized by the currently governing Fidesz party when it was in opposition, with promises of renegotiating these deals. Still, the only realized measure was paying a legal office HUF 17 million to analyze the contracts, with no follow-up measures, the portal notes.