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Hungary to buy out PPP contractors

The government found that the structure entails excessive and unnecessary costs for the treasury and is at the same time substantially boosting state debt.

Hungary’s National Development Ministry is near completing the review of some 100 deals which are deemed as the generators of unessential extra costs for the state, the ministry’s state secretary Sára Nemes-Hegmann told reporters. Consequently, the state will be looking to buy out the contractors from this arrangement, she said. The decision will involve, among others, the Palace of Arts cultural complex, as well as several public buildings.

Nemes-Hegmann noted that the PPP structure was highly popular under the previous socialist government, but its implementation was marred with legal and economic anomalies that actually led to municipalities taking on way more in expenses than they could handle.

Currently, financing the PPP projects costs the budget HUF 120 billion every year, a tally estimated to leap to HUF 3,000 billion over a longer term of 15 to 30 years. The ministry now calculates that with HUF 200 billion it could terminate these questioned deals and either shut down unnecessary developments or look for other sources of financing to realize them. For instance, EU grants in the case of school construction projects. The exact source of the necessary buyout budget has yet to be determined, but consultations are under way, the official said.

Hungary’s government is looking to renationalize water utilities, the daily Népszabadság reported, citing that the national water wealth is essentially state property. The measure would only affect three cities, Pécs, Budapest and Szeged, with RWE Suez having stakes in the waterworks of the former two and Veolia in the latter.

The only typical PPP-type investments that will not be prominently featured in the buy-back effort are motorways, albeit anomalies were found in these cases as well, Nemes-Hegmann said.