HOCHTIEF - DIF consortium reaches FC for A7 in Schleswig-Holstein and Hamburg

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HOCHTIEF - DIF consortium reaches FC for A7 in Schleswig-Holstein and Hamburg

A consortium formed by HochtiefDIF Infrastructure and KEMNA BAU has reached financial close for the A7 Bordesholm-Hamburg motorway PPP project in Germany.

The European Investment Bank (EIB) is providing some €170 million (US$224 million) for the project, which is being financed by means of a project bondFirstly, the EIB is providing a subordinated financing tranche (Project Bond Credit Enhancement) under its Project Bond Initiative, which has considerably improved the risk profile for capital market investors in the project.

The EIB is providing a subordinated loan of around €90 million for the project, representing about 20% of the volume of the senior debt through the issuance of capital market instruments

The EIB has also invested together with institutional investors in bonds issued by contractors.

The consortium was selected as the preferred bidder for the project in late June 2014. The total project investment is estimated at €$600 million.

EIB Vice-President Wilhelm Molterer stated:

The repeated successful implementation of the principle of PPPs in motorway construction (A-model) in Germany guarantees the competitive integration of the construction industry and financing banks. By optimising the financing cost, the EIB has always played an important role in PPP projects. However, the A7 is unique in this respect insofar as the project company can finance itself directly on the capital markets with the support of the EU Project Bond Initiative, which benefits centralised infrastructure projects by improving the rating of the project companies. Institutional investors looking for long-term, reliable and attractive investment opportunities also benefit.

The construction project is part of a renewal of the A7 between the interchange Hamburg-East and home field in the direction of Flensburg. The project involves the upgrading a 65km stretch of the A7 between Bordesholm and Hamburg to six lanes and it also involves the maintenance of the 59km stretch between Hamburg-West & North-Neumünster for a period of 30 years.

The project will be developed on a design, build, finance, operation and maintenance. The project company is paid on the basis of the infrastructure's availability (availability model). The fee therefore depends chiefly on the extent and quality of the road section made available for use by motorists. Compliance with the contractual requirements ensures that the contractor receives the full availability payment as agreed; in the event of non-compliance, a deduction is made.

Construction is scheduled to start before the end of the year and the road is expected to be operational by 2018. The construction work, which will be handled by a joint venture between HOCHTIEF Infrastructure, KEMNA BAU and KEMNA subsidiary, Tesch Straßenbau GmbH & Co. KG, will take around four years.

This financing operation concerns the main road link between Denmark and Germany. As part of the trans-European road network (TEN-T) the A7 is a key component of Europe's transport network. This is one of thepilot projects for credit enhancement under the EU's 2020 Project Bond Initiative.

Nikolaus Graf von Matuschka, a member of the Executive Board of HOCHTIEF Aktiengesellschaft:

"We are delighted that the federal government has once again entered into a public-private partnership with us in the area of highway construction. It is also a confirmation that we did and continue to do good work on our two 'A' models, the A4 in Thuringia and the A8 in Baden-Württemberg and Bavaria. Furthermore, this new contract reinforces our strategy of offering our competencies and experience in the areas of PPP and Infrastructure as a single package for important projects such as this one while, at the same time, strengthening the local medium-sized business sector through the integration of regional companies."

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