Case Studies: Central Greece Motorway (E65), Greece

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Project Overview
Figure 1: Central Greece Motorway map
Central Greece Motorway (E65) Greece
Project Type: Both
Contract Duration: 30 years including design/construction period
Estimated Budget: EUR 1,600 M (nominal prices) including Design & Construction, Financing Costs and Construction period operation expenses.
Project Time Line
Project Conceived: N/A – studies were initiated prior to 1998
Tender Call: 2001
Contract Award: 31 May 2007
Start of construction: 2008
Other Important Dates (contract revision and amendment)
Contract ratified by the Greek Parliament: 25 July 2007
Works halted due to a draw stop imposed by the Lenders. All stakeholders enter renegotiation talks: 31 January 2010
Government announces agreement between all parties on basic renegotiation terms: 12 April 2013
Final agreement on renegotiation terms announced. Recommencement of construction works: 29 November 2013


E65 is a toll motorway concession project of approximately 174 km in length, located in Western Greece. The project also includes 57 km of brown field sections already constructed by the Greek state under a traditional public works procurement scheme; these sections are tolled and the revenues are used to fund the construction of the new alignment.

The new motorway is designed to allow journey speed of 120 km/h and its typical cross section consists of a dual carriageway of two lanes and an emergency lane, divided by a new jersey barrier. The project includes over 25 interchanges and over 12km of tunnels.

The project includes the following parts:

Section Length (km) Comments

(E65 motorway)

174 New motorway section
Skarfia - Raches

(PATHE motorway section)

57 This is a motorway section

that will be built by the state, to be operated by the SPV.

The project was originally conceived and tendered (phase A – prequalification) in 2001 by the (then governing) PASOK party. However, the phase B of the project (final tender) was completed by the New Democracy party in late 2006, 5 years after the completion of the prequalification phase. Out of the four consortia that were prequalified in the final phase of the tender, only two submitted offers for the project.

The project was part of a ‘bundle’ of motorway concession projects titled ‘axes of development’. Each and every one of these projects’ concession agreements was ratified by the Greek Parliament and became a Greek law. Hence, any amendment or alteration of the concession agreement for this project would have to be ratified again by the Greek Parliament. It must also be noted that these motorways are part of the EU TEN-T network and were partially financed by EU funds. The project’s construction is funded by debt and equity capital, Greek state and EU funds. The project’s financing structure is as follows:

  • Shareholders Equity: EUR 155 M
  • Debt Capital: EUR 1,000 M
  • National / EU Funds: EUR 520 M

The Contracting Authority (Public Party)

The Greek State is the de facto owner of the project; the Ministry of Public Works acts as the awarding authority, while any amendment on the concession agreement would have to be approved by the Greek Parliament.

The Greek State is also considered as a financier of the project, as it is obligated to contribute circa EUR 260 M during the construction period (at the time of signing, the EUR 520 M of EU/Greek State funds were considered to be paid on a 50/50 basis – this was reduced to a 95/5 in 2011 as part of Greece’s economic bailout package). User toll fees paid throughout the concession period should also be considered as public funds.

The Concessionaire (Private Party)

Kentriki Odos S.A. is a project company established in 2007 for the financing, construction and operation of the E65 project. The Construction J/V (Euroionia) is composed by the construction subsidiaries of the Shareholders on a similar percentage structure. Relations are shown in figure 2.

The project’s shareholder structure is as follows:

Shareholder Share
Ferrovial 33.34%
ACS 33.33%

The Consortium was one of the four that were qualified during the prequalification phase of the project in 2001 and was the highest bidder during the final stage of the tender in 2006. Both the Concession and Construction SPV’s are owned by the respective Sponsors. Both Ferrovial and ACS are major international players in the construction/concession market; GEKTERNA is a major infrastructure group based in Greece.

Whereas Ferrovial and ACS have been actively involved in concession projects outside Greece in the past, GEKTERNA had limited experience with concession motorways prior to this project, and was primarily active in motorway construction under the traditional procurement scheme.


Users of the motorway are mainly motorists, cars and trucks. Both leisure travellers and workers use the motorway to either travel around Greece or commute to the industrial areas where they work. Since this is a national motorway, it serves as an axis of transport between several EU countries in the region and attracts international leisure and business traffic.

Figure 2: E65 Motorway Stakeholder structure
Source: Aythors

Key Purpose for PPP Model Selection

The main reason to choose a PPP/concession scheme was the willingness to transfer financing and traffic risk to the private sector and procure the project without increasing the country’s sovereign debt. Quality of service and time limitations were also decisive factors favouring the concession scheme as opposed to traditional procurement.

Project Timing

The need for the project was identified prior to 1999, when traffic and feasibility studies were launched. In 2001, the governing party (PASOK) launched a prequalification tender that attracted attention from both local and international players, who submitted expressions of interest. Four consortia were prequalified at the time, but the tendering process moved slowly until 2005 when the governing party (New Democracy) launched the tender to award the project. Two bidders submitted offers and the project was awarded to the Hellenic Autopistas group, which included GEKTERNA, Ferrovial and ACS, each at a 33% stake. The concession agreement was signed in 2007 and works started in 2008.

In early 2010, citing the severe downgrade of Greece’s sovereign debt and the decrease of traffic projections, the project’s Lenders imposed a draw stop. Construction works were halted and the project’s stakeholders, including banks, shareholders and the Greek State, entered renegotiation discussions. A solution was reached in November 2013, and the project’s construction was restarted.

Project Locality and Market Geography

Even though Central Greece is not isolated in terms of access to the national road network, the roads connecting it are lacking in modern standards. A modern motorway would make access to the economic centers (i.e. Athens and Thessaloniki) as well as international borders and ports a lot easier and would help foster economic growth in the region.

Procurement and Contractual Structure


The project was originally conceived and tendered (phase A – prequalification) in 2001 by the (then governing) PASOK party. However, the phase B of the project (final tender) was completed by the New Democracy party in late 2006, 5 years after the completion of the prequalification phase. Out of the four consortia that were prequalified in the final phase of the tender, only two submitted offers for the project.

The project was awarded and signed in late 2006 to an international consortium composed of 3 construction companies.

Contract Structure

User fees are the primary source of revenue for the Concession company throughout the 30 years concession period. These funds are used to partially cover operating and maintenance costs, debt and equity repayment, along with the operation subsidy described above. The Greek State also undertakes to repay the Lenders under any termination scenario, as well as the shareholders in case there is a state default in the project. As the contract reflects a typical concession scheme, under the DBFO structure, the project will be returned to the Greek state upon expiration of the concession period.

Tariff increases are linked to construction milestone achievements, while maximum real value of tariff was set in the contract at EUR 0.04/km. Contract Termination clauses include full compensation of Lenders’ exposure regardless of termination default being attributed to the SPV or the State. Lastly, the contract includes an operating subsidy of up to EUR 1,600 M paid by the state to the SPV during the operation period, if traffic falls below a threshold of EUR 2,600 M. The subsidy as well as the traffic threshold were a major part of the awarding formula for the project.

In 2010, the Lenders imposed a draw stop on the project, causing construction works to be halted. Reasons cited include the worsening of the Greek financial crisis, as well as the reduction of motorway traffic. All involved parties entered renegotiation discussions with the aim to restart the project at the minimal cost. The renegotiation process lasted more than three years.

There are no explicit renegotiation clauses in the contract – even in Force Majeure events, there are provisions to terminate the contract rather than renegotiate. Renegotiation efforts were made on a good faith basis, and in a political support context, as strict application of the concession agreement would lead to a termination of the contract. Notably, any amendments to the contract need to be ratified by the Greek parliament.

The delay in reaching a consensus in the renegotiation process was mainly attributable to the political turmoil in Greece during the financial crisis: the Public Works ministry’s leadership changed five times during the renegotiation: twice during the governing party’s ruling, once due to the creation of a coalition government and twice following elections and a new government formation. Also, as a result of Greece’s economic bailout regime, EU officials were also assigned to oversee the restructuring process, adding another layer of complexity to the decision making process on the Greek State’s side.

In 2013, a consensus was reached and a restructuring solution was announced. The new contractual structure included, among other terms:

  • Postponement of construction of the motorway’s northern alignment (Trikala - Grevena). This change in scope reduces significantly the construction cost and the funds needed to finance the project.
  • Payment of an additional EUR 214 M by the State in order to fund the remaining construction works.
  • The operating subsidy will be linked to the excess traffic revenues of the Ionia Odos motorway project. Ionia Odos is a new concession motorway project that includes a brown-field motorway section particularly rich in toll revenues; its SPV shareholder structure is identical to the one in the E65 motorway.
  • Shareholder returns are capped to the initial bid’s base case level (8.45% IRR). Any excess revenues are returned to the Greek State via a revenue sharing mechanism.

Risk Allocation

Even though the transfer of traffic risk was one of the key drivers behind choosing a concession scheme in order to procure the project, this risk was one of the major issues that drove the renegotiation process of the project. The Greek financial crisis and associated recession have had an increased impact on the project’s revenues, indicating that there was an imbalance of the risks shared between the public and private sector; this was coupled with the inability to make accurate traffic forecasts, as the traffic trend during the renegotiation phase showed a decrease exceeding 50% of the initial traffic envisaged.

Since the Greek state was contractually obliged to cover traffic risk via an operating subsidy structure, the main concern among the private sector stakeholders during the renegotiation process was the Greek State’s ability to fund the subsidy, especially considering the severity of the Greek financial crisis, Greece’s debt rating downgrade and the austerity measures that would have to be undertaken as part of the EU/IMF bailout. This risk, perceived much more favourably prior to the Greek financial crisis, was mitigated during the renegotiation phase by linking the operating subsidy’s payment profile to excess cash flows coming from the Ionia Odos project.

Design and construction risks are mainly undertaken by the SPV, based on the concession contract. However, since the project includes sections that are built under the responsibility of the Greek State, the latter bears a portion of the design & construction risk. O&M risks are borne by the SPV (Kentriki Odos).

Regulatory, Land Acquisition, Environmental and Force Majeure risks were borne by the Greek state. The contract includes typical ‘change in law’ provisions that indemnify the SPV for regulatory/legal changes that have material impact on the project.

Land Acquisition is a risk that caused significant problems to the project’s progress, as there were unrealistic expectations that the State would be able to acquire the required land for the project in a short time frame. In fact, delays due to land acquisition were a main source of claims against the State. Environmental claims have also caused significant problems to the project, as there were numerous claims against the project based on environmental grounds, some of which even managed to cause a works stop in certain project sections.

The project’s risk allocation matrix is presented in Figure 3.

Figure 3: Risk allocation


The Independent Engineer is responsible for evaluating construction performance, along with the Awarding Authority. The Awarding Authority is responsible for evaluating operation performance following the construction period.

No Key Performance Indicators (KPIs) are included in the contract. However, several key metrics are included in the financing agreements (annexes to the concession agreement). These metrics are used in the evaluation of the debt viability of the project and failure to meet them can be grounds for project default. Key metrics that are used to evaluate the project’s debt viability throughout the concession period include the debt service coverage ratio (DSCR) and the loan life coverage ratio (LLCR). It must be noted that both the DSCR and LLCR are calculated separately for each Loan Tranche.

The DSCR is calculated by dividing the cash flow available for debt service for a certain period of time (six months in this case) over the period’s debt service requirements (capital & interest). The indicator is calculated over both historical periods using available data, as well as for future periods (using projections). A DSCR that does not exceed 1.00 is equivalent of a project being unable to honor its debt obligations (i.e. is in default). If the KPI falls under a certain agreed level, then the Lenders have grounds to charge default interest and potentially stop the draws of funds.

The DSCR is an important performance indicator, as it is widely used to evaluate debt viability in debt markets. However, safe and realistic assumptions have to be made in order to calculate future values of this indicator. It is important to note that movements in debt service reserve accounts are not always taken into account when calculating the DSCR; this is often a point of contest when negotiating similar contracts.

In general, a financially healthy project typically has coverage ratios that exceed unity (i.e. are above 1.00). Current markets also use higher DSCR’s to size debt in certain revenue scenario to a requested loan tenor (i.e. the amount of debt provided to a project depends on the ability to repay said debt at ratios that exceed a certain sizing DSCR).

Similar to the calculation of the DSCR, the LLCR takes into account the entirety of the funds available for debt service throughout the rest of the project’s duration, over the total debt & interest repayment. An LLCR that does not exceed 1.00 is equivalent of a project being unable to honor its debt obligations at some point throughout its duration (i.e. is in default). As with the DSCR, certain levels of LLCR can provide Lenders with grounds for defaulting the project.

The LLCR can provide a clear view of a project’s debt viability over a long period of time. However, it must be noted that revenue projections in long term projects such as the concession in question can differ significantly from actual revenues. As such, a low LLCR should not normally be used as grounds on default without any other clear indicators that the project is in imminent financial risk.

The project’s restructuring was heavily structured around the existing contractual KPI’s, as healthy performance of the project and its debt were a common goal among Lenders, Shareholders and the Greek State. As of the restructuring base case model, average DSCR is 1.53x and average LLCR is 2.48x for all outstanding project loans.

Project Outcomes


  • E65 concession agreement and annexes.
  • Renegotiation results and new contractual structure as announced by the Greek Ministries of Transport and Finance
  • Various articles from the press, the content of which was confirmed by the authors.
  • E65 Motorway web page,
  • N. Nikolaidis, A.Roumboutsos, 2014, Central Greece Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8