Infrastructure finance in Europe is experiencing an unprecedented boom as the sector’s stable cash flows attract investors and financiers. Further growth is predicted as European countries construct facilities to meet renewable energy targets and upgrade transport and social infrastructure. Central and Eastern Europe (CEE) and the Balkans region expect significant growth for infrastructure financing as their governments seek to redress years of under-investment in transport, utilities, schools and hospitals. There is a huge need for funding, and many countries have chosen to establish public-private partnership (PPP) initiatives to support development.

The Current Position

The various countries of the CEE and Balkans region are at different stages of maturity in relation to PPPs. For example, Greece is building on its experience with projects such as the Attiki Odos toll road PPP. In 2001, the government launched a €7 billion nationwide PPP programme to build new motorways and upgrade existing motorways to EU standards. To date, financing documentation has been signed for six projects under that programme, with financial close being achieved on the first (the Thessaloniki Submerged Tunnel) in August 2007. In 2005, the Greek Parliament passed legislation known as the PPP Law, setting the framework for future smaller scale Greek PPPs.

The PPP market in many countries, however, is not so well-developed. Romania, for example, has little experience of successful PPPs. Over the past 10 years, the Romanian government has abandoned three separate attempts to build new roads by PPPs, and confidence among potential investors is low. However, Romania has now joined the European Union, and the Romanian Government has created a new body to promote PPPs. It has announced that more than half of its 1,300 kilometres of planned new motorways will be built by PPP.


Given that many CEE and Balkans PPP markets are still developing, there are various potential pitfalls for players, including the following:

  • High political risk levels
  • Uncertain or unsophisticated legal frameworks
  • Compliance with local and EU procurement laws and directives, including those related to State aid
  • Quirks of local law, e.g., implied warranties and interest rate caps
  • Inexperienced local professionals and conceding authorities
  • Requirements of multilateral institutions such as the European Investment Bank and the European Bank for Reconstruction and Development
  • Local resistance to paying tolls Issues such as these are time consuming and add to the complexity of any PPP.

The Way Forward

Despite the additional risks for investors and financiers and the various difficulties along the road to maturity of a project, for many investors and international banks already involved in the CEE and Balkans region the economic rewards have proven more than worthwhile. With a multitude of new infrastructure projects and PPP programmes planned across the CEE and Balkans, there are opportunities for potential players who have patience, know-how and the benefit of experienced advisers to help navigate past the potential pitfalls.