Financing Transport Infrastructure in the Western Balkans and SEE


Our inaugural conference on Financing Transport Infrastructure in the Western Balkans and Southeast Europe took place in the luxurious surroundings of the 5-star Dubrovnik Palace Hotel in Dubrovnik, Croatia (24-25 October 2012). Bringing together over 70 international decision makers from over 20 countries, the event provided a platform for the public and private sector to discuss the viability of upcoming projects from across the region.

Government representatives from Croatia, Montenegro, Bosnia and Herzegovina, Macedonia, Bulgaria and Kosovo presented their experiences of delivering transport infrastructure, in addition to offering a pipeline of upcoming projects. The event was sponsored by Steer Davies Gleave, Deloitte and RBconsult, who all provided excellent contributions to this international forum.

The conference opened with addresses by Deputy Minister Zdenko Antesic (Ministry of Maritime Affairs, Transport and Infrastructure – Croatia), Minister Nedeljko Cubrilovic (Minister of Transport and Communications – Republic of Srpska, Bosnia and Herzegovina) and Advisor to the Minister Angelina Zivkovic (Ministry of Transport and Maritime Affairs – Montenegro). Each showcasing the crucial need for transport infrastructure investments in their respective countries, highlighting the fundamental role transport infrastructure plays in economic development. They outlined ambitious project pipelines in the Road, Rail, Airport and Seaport sectors, however Road projects dominated their portfolios.


Pavlo Grabovets (Transport Sector Leader for the Balkans and SEE – IFC) followed with a detailed analysis of the role the IFC plays in financing projects in the region and elsewhere, providing an engaging presentation on how to deliver projects in SEE. Following in a similar vein, Andy Carty (Special Advisor – EPEC/EIB) compared the SEE market to other European countries, offering a discussion of the role EPEC/EIB and other European funds play in financing projects. Andy also highlighted the critical need for capacity building and political will in ensuring projects are delivered. Strong political will and adequate capacity were regular themes throughout the conference. Damir Juricic (Director – Croatian Agency for Public Private Partnerships (AJPP)) then presented on the new PPP Act in Croatia, offering a detailed review of the legal and regulatory framework for PPPs in Croatia. This framework model was well received by the audience, who also stressed the need for other regional countries to adopt a similar agency and system. However, warning that it is not just ‘one size fits all’, with each country requiring a detailed review prior to implementing any law. This session on ‘Building capacity and an effective legal and regulatory framework’ was closed with a panel discussion moderated by the conference chairman Tony Smith (UNECE PPP Expert), including participation from Pavlo (IFC), Andy (EIB), Damir (AJPP), Richard Dyton (Partner – Simmons and Simmons) and Nora Bakalli (Advisor in the Ministry of Finance, PPP Unit – Republic of Kosovo). The panel outlined the crucial need for political will, effective public sector capacity, a strong and transparent legal framework, and an open bidding process.

The first session closed with a networking refreshment break on the sun terrace overlooking the glittering Adriatic Sea, providing a well needed opportunity for the delegates to mingle and exchange business cards and ideas on the conference topics.

The second session of the conference was focused on analysing ‘Opportunities to enhance the projects’ pipeline and accelerate the deal flow’, chaired by Darryl Murphy (Head of EMEA, Global Infrastructure, KPMG). Darryl provided a much applauded presentation on how to overcome obstacles in emerging markets, notably how they can be identified and overcome early in the project process. Critical issues were discussed further in the panel session with contributions from Tony Stratfold (Former CEO of Intertoll Europe), Manuel Cary (Partner – Transport Infrastructure Investment Company, TIIC), Pavle Kavran (Founding Partner – Citadel Finance Advisors) and Richard (Simmons and Simmons). Tony (Intertoll), who offers over 20 years of experience in delivering PPP/PFI projects in the road sector across the world, provided a lively contribution, stressing the crucial need for political support which exceeds the 4-year term of elected government representatives. A sentiment echoed by all panellists and a recurrent theme throughout the conference. Manuel (TIIC) and Pavle (Citadel) represented the views of international investors, both noting the impact of the financial crisis and ongoing Eurozone crisis as affecting their decisions to invest in particular projects. However, also stating that ‘good’ and ‘strong’ projects would still be financed if the argument was strong enough.

Lunch followed in the 7th floor restaurant with views across the bay, offering a relaxed environment for further networking and debates on the crucial role of political will.

Chaired by Branko Bajatovic (Director - Avistum), the final session of Day 1 provided the audience with examples of real-life ‘Success stories and neglected nightmares’. Case study presentations were provided by Robert Bain (Managing Director - RBconsult Limited), Dimitrios Gatsonis (CEO – Aegean Motorway S.A., Andrea Gebbeken (CEO – Tirana International Airport) and Angelina Zivkovic (Montenegro). Robert’s presentation showcased the risks of accepting overly optimistic traffic forecasts, drawing examples from underperforming toll-based projects in Australia. His presentation was well-received and traffic forecasts were hotly debated throughout the conference. Dimitrios discussed the impact of the financial crisis on transport infrastructure projects, stating the critical link between economic growth and road usage; as well as discussing current projects in Greece. Tirana Airport is a glowing example of a successful PPP concession in the region and Andrea provided a succinct presentation, offering best practice for other regional airports. Angelina discussed the ongoing Bar-Boljare Motorway Project, connecting the port of Bar to border with Serbia, notably showcasing the ‘priority’ route Smokovac-Mateshevo. The project was keenly debated in the conference as it is perceived the Montenegrin government was overly optimistic in attempting to deliver such a large project in a PPP format. The ensuing panel session headed by Branko allowed further debate on the key topics, offering a practical application of many topics discussed throughout the day.


Tony Smith had competently chaired the conference throughout the day, providing expert analysis of critical issues and offering comparisons to other infrastructure markets, such as Mongolia, Australia, United Kingdom, South Asia and the Middle East.

Day 1 finished with an afternoon cocktail reception on the sun terrace, watching the sun set over the Adriatic; providing an excellent opportunity to digest the day’s arguments and hand out more business cards. The early finish also provided delegates the chance to enjoy a leisurely evening in Dubrovnik, exploring the restaurants of this historic coastal town.


Day 2 opened with an overview of the key issues explored in Day 1 from the conference chairman Tony Smith, then swiftly moved into another Ministerial Address with contributions from Elena Kuzmanovska (State Secretary of the Ministry of Transport and Communications – Macedonia), Dimitar Savov (Director of National Transport Policy, Ministry of Transport, Information Technology and Communications (MITITC) – Bulgaria) and Nora Bakalli (Advisor in the Ministry of Finance, PPP Unit – Republic of Kosovo). The representatives provided a detailed overview of upcoming projects, including their respective legal frameworks and PPP acts, in addition to other supporting government systems.

Following the debate on traffic and political risk from Day 1, the first session of Day 2 provided a dedicated discussion on ‘Risk allocation’, headed by Branko Bajatovic and with presentation contributions by Lucia Manzi (Associate – Steer Davies Gleave) and John Nicholson (Partner – Deloitte). Lucia discussed ‘PPP demand risk’ and how to manage expectations, with particular focus on understanding traffic studies from the view of the sponsor and lender, as well as assessing demand risk in developing and emerging economies. John went further and looked at ‘What a sponsor must do to get a PPP moving in the region’, focusing on risk allocation, traffic risk and current banking practices. These two presentations provided the backdrop for the proceeding panel discussion, with further contributions from Manuel Cary (TIIC), Thomas Frankl (Managing Partner – Airport Development Partners S.A.) and Elitza Iordanova (Executive Director Project Finance, Head of PPP and Infrastructure – BNP Paribas). The debate centred on which risks the public and private sectors should carry, interestingly, a common consensus was that despite the inherent risks for stakeholders, the private sector should carry traffic risk as it provides a greater incentive to deliver projects on budget, maximising efficiencies. However, the debate noted that unacceptable risk taking would put off many investors and perhaps a joint risk allocation with state guarantees would be an applicable notion moving forward.

Following a well-earned break for coffee, the final session of the conference discussed ‘Financing transport infrastructure projects’ in the Western Balkans and SEE. Ana Simecki (Transport Planning Manager – Southeast Europe Transport Observatory, SEETO) opened the session showcasing SEETO’s recent report on the viability of upcoming projects in SEE. The overview of project investments was well-received by the audience and SEETO provided a talking point for all delegates. This was followed by Werner Weihs-Raabl (Head of Group Infrastructure Finance – Erste Bank Group), who discussed the role of the banking sector in financing projects in SEE. Notably, Werner outlined why banks invest in the region, stating that Erste will continue to finance projects that meet their criteria. Additionally, Werner discussed the potential of hybrid financing, where EU funds can be blended with private sector financing, in order to meet financial requirements of projects. Josip Vukovic (Senior Banker – EBRD, Croatia) followed with a review of EBRD activities in the region, outlining their continued support for projects in the Western Balkans and SEE. These topics were discussed further by the following panel with additional comments from Michael Dedieu (Managing Director – Marguerite Advisor) and Pavlo (IFC), moderated by Branko (Avistum). The panel outlined the financing requirements of each of their respective institutions, offering an interesting comparison. Fundamentally, private sector financiers and investors are willing to finance projects, however, they do not want to be responsible for helping the public sector prepare and plan the projects.

It is evident the region is in chronic need of new transport infrastructure and that this infrastructure is fundamental to the future economic development of the Western Balkans and SEE. However, the public sector is often preoccupied with pushing forward ‘flagship’ projects which are often unbankable. This is an especially pertinent issue when discussing the viability of PPP projects. The public sector needs to have a clear strategic plan in place for projects, including political will and adequate administrative capacity, which exceeds the 4-year term of ministerial appointments. The development of PPP Agencies and Frameworks will assist this transition and the Croatian market will provide key indicators for the success of these models in this region. International and regional financiers are willing to be involved, however, risk needs to be appropriately allocated and project preparation at an internationally agreed level.

EEL Events Limited provides a range of infrastructure financing and delivery conferences across the emerging markets of Eastern Europe, if you interested in being involved in a future forum, please contact investment@eelevents.co.uk or call +44 (0)207 275 8020.

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