EY ROMANIA

 | 

ROXANA TODIROAE

  |  2014-12-16

2014 considerations for the Romanian construction of land and air infrastructure

Infrastructure has perspectives to enjoy a faster growth compared with the non-infrastructure construction sector

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EY Romania


ROXANA TODIROAE

ROXANA TODIROAE

SENIOR CONSULTANT TRANSACTION ADVISORY at EY ROMANIA

This is based on the fact that infrastructure has access to different sources of funding compared with other construction investments including state budget funding, EU funding for the EU 2012-2020 programming period and funding under a concession or PPP framework, whereby the first successful projects are still expected.

 

Forecast year on year change – construction of roads and bridges, airports

The infrastructure sector is forecast to increase 1.8% (BMI, Q4 2014) year on year in 2014. This is below the 2.2% GDP forecast for Romania for 2014 (source: IMF, April 2014 reading).

 

 

Components of transport infrastructure

As of Q4 2014, roads and bridges sector continues to be the most important transport infrastructure area (85%), followed by water infrastructure (12%) and rail (3%), with the airports investments lagging behind.

 

 

Roads and bridges

This is the largest and fastest growing local infrastructure sector. Yet, 2014 has been a rather slow year. In addition to the fact that different authorities govern the procurement of construction contracts for national roads and bridges (i.e. the Department for Infrastructure, Foreign Investments and Exports Promotion – DPIISPex – controls the National Company for National Roads and Motorways that administers all national roads, highways and expressways, while AMPOST administers road projects with European financing), several authority leadership changes have also taken place during year 2014.

 

Zero motorway km have entered into service during the first nine months of year 2014, with plans to commission 60 km by the end of the year. The motorway network now extends to circa 634 km under exploitation. Circa 100 km entered into service during late 2013. Compared with the country’s area of 238 thousand square km, Romania could not significantly improve its European ranking and remains a country with one of the lowest motorway densities per thousand sq. km in Europe, but also with potential judging from the existing local needs and the approved TEN-T network, integrating the country in the wider European transport network.

 

In addition to international traffic, the current motorway infrastructure supports an estimated locally registered fleet of 5 million vehicles, which translates into a density of one vehicle per four persons. One important driver for the motorway network increase is the need to connect the Romania’s strong manufacturing base with the countries of export. There are several economy sectors that would benefit from better road connection and lower transport cost. To mention an example, Romania’s vehicle production is estimated during 2014 at 441 thousand vehicles (BMI), with 80% of local production translated into exports. Vehicle manufacturing is also linked with the development of a strong automotive systems manufacturing base.

 

In an effort to close the funding gap between the public budget resources and the infrastructure construction needs, authorities have launched different procedures looking to share different risks with the private sector whenever the latter is in a better position to manage them, as follows:

  • Public Private Partnership (PPP) for the Design, Construction, Financing, Operation and Maintenance (DBFOM) contract for a 58 km green-field motorway, i.e. the Comarnic-Brasov. This is the most advanced project and the tender has been awarded to the Vinci, Strabag, Aktor consortium during December 2013. As of mid-September 2014, the concession agreement has not been signed. The other consortia that had prequalified for the tender in February 2013 have been China Communication Construction, Spedition UMB Tehnostrade and Impregilo-Salini.
  • DBFOM for a 121 km green-field express way or motorway, i.e. Craiova-Pitesti, linking two strong car manufacturing plants, i.e. the Ford-Craiova platform and Dacia-Pitesti. The consortia that qualified for the tender are:

        1. Vinci (France), Aktor (Greece), Strabag (Austria)

        2. China Communication Construction Company (China), Dogus (Turkey), Egis (France)

        3. Obrascon Huarte, OHL (Spain)

        4. Spedition UMB, Vectra Service (Romania)

        5. Impregilo, Salini (Italy).

 

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Scoring Methodology by ERNST&YOUNG


 
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