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Deal Expanded: Interview with CMS on 2020 DOTY for the Czech Republic

Deal Expanded: Interview with CMS on 2020 DOTY for the Czech Republic

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CMS’s Lukas Janicek and Robert Gray Talk About The Deal of the Year in The Czech Republic.

CEELM: Can you describe the deal for us, and the CMS’s role in making it happen?

Janicek: We advised on the CZK 17.8 billion public-private partnership project based on a concession agreement between the Czech Republic and our client, the consortium of Vinci and Meridiam. Under the agreement, the consortium will build a new, 32-kilometer section of the D4 highway, which will connect Prague and South Bohemia, and will also upgrade an existing 16-kilometer section of the highway. The construction work is supposed to be completed in 2024. The consortium has been granted rights to operate the highway for 24 years following its completion and shall be paid only if the highway is indeed available to the public. So, the consortium is financially motivated to construct and maintain the highway in a way that keeps periods in which the highway is not fully available to a minimum.

In a nutshell, through this project, the Czech state is not only buying construction of the highway, but also the service of having the highway available for drivers in a defined quality over the entire term of the agreement. After the end of the concession period, the highway will remain in the ownership of the Czech Republic.

This was the first PPP of its kind in the Czech Republic. I can see two main drivers for implementing the project by the Czech government: the need to find alternative financing sources for infrastructure projects other than EU funds and the fact that this type of project is proven to be an efficient way in providing services to the general public in various other countries in Europe, including some countries in CEE such as Slovakia or Poland.

CEELM: How and at what stage did the firm get involved in the PPP?

Gray: We have been following the project, through several stages, since its inception. In fact, we have a long-standing relationship with all the members of the consortium and have advised them on various projects around Europe. Naturally, we offered our advisory services for this project as well. This was a great opportunity to further develop our relationship with Vinci and Meridiam.

CEELM: What was the most complex aspect of the project?

Gray: I think that the COVID-19 pandemic and related travel restrictions were the main obstacles to overcome. We were well prepared, nonetheless, as was the government and its legal advisors.

Janicek: Also, soon after the pandemic broke out, the bidders in the tender had to get commitment from the banks to finance the construction of the project and it turned out to be a challenge for everyone, as the financial institutions were very hesitant to commit to placing investments in such uncertain times. However, as all involved stakeholders were keen to find a way to make the project happen, the consortium negotiated with the banks and managed to overcome this issue.

CEELM: In contrast, what, from your perspective, went particularly smoothly and what do you believe contributed to it?

Gray: These projects are very document-heavy and complex, not to mention the travel restrictions. Things tend not to go smooth when bidders are not well prepared for the tender. Luckily, that was not the case with this project.

Janicek: Taking into account that this is the first project of its kind in the Czech Republic, and that two Czech ministries and a number of other institutions were involved on the side of the Czech state, the project took a bit more time than would be perhaps common in other countries. Despite that, it went fairly smoothly in my view. That was, in large part, thanks to experienced legal advisors both on the side of the government and the side of the consortium and the other bidders.

CEELM: Looking back at the whole process, would you do anything differently if you had a second go at it?

Gray: Nothing is ever perfect, but the project provides a good basis for the Czech Republic to pursue other similar public-private partnerships.

Janicek: In fact, the Czech government already has a new project in the pipeline, which is the development of the D35 highway.

This Article was originally published in Issue 8.7 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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