Orbán-ally oligarchs made EUR 38 billion in state motorway concession

The Hungarian government’s outsourcing of a large part of the highway network cost taxpayers HUF 15-17 thousand billion, equal to around EUR 38.4 billion. The motorway concession was awarded to a consortium of private equity funds owned by László Szíjj and Lőrinc Mészáros, two well-known government-close Hungarian businessmen.

The motorway concession contract, obtained by Szabad Európa after more than a year of litigation with the National Concession Office (NKOI), reveals the owners of the private equity funds and the amount to which the concession company will be entitled – information that was previously unknown.

The winning consortium of the tender set up in 2021 consists of seven private equity funds, with László Szíjjj and Lőrinc Mészáros as owners of four and three of them, respectively. Both men are closely linked to the government and Viktor Orbán himself.

We wrote about Mészáros and his relationship with Orbán HERE.

In addition to the owners, the finances were also revealed

The contract now obtained also reveals that the government’s 35-year motorway concession of a large part of Hungary’s highway network costs Hungarian taxpayers even more than previously estimated.

Before Szabad Európa’s winning litigation, it was Transparency International that received, also after a lengthy court procedure, the calculations that the government had prepared before the concession. The documents made public by the anti-corruption NGO revealed that a total of 12,600 billion forints (32.2 billion euros) of taxpayers’ money would go to the winning firm.

In the original contract with the winning concession company, the Hungarian Concession Infrastructure Development Ltd (MKIF), the state agreed to concede the management of 1,666 kilometres of road. There is also a possibility of an additional 381 kilometres of motorway going to MKIF, with the company operating the M5 and M6 highways until 2056. Including these sections in the concession, the government’s background calculation estimated the cost at HUF 13,700 billion (EUR 35.5 billion).

However, according to the documents obtained by Szabad Európa, the contract set considerably higher prices: the actual cost of the concession is a total of HUF 15 thousand billion (EUR 38.4 billion), which could reach 17 thousand billion forints (44.2 billion euros) when including the possible additional sectors.

The HUF 15,000 billion price consists of two items: HUF 8,580 billion for construction and HUF 6,492 billion for operation and renovation. As for the HUF 17,000 billion in the case of the extended network, HUF 9,222 billion would be spent on construction, and HUF 8,067 billion on the operation of the highways.

However, these amounts are subject to change, as the contract provides that the fees paid by the state may be indexed based on the inflation target of the National Bank of Hungary (MNB).

The motorway concession raises questions about possible corruption

Overall, the government intends to spend a total of HUF 8.5 thousand billion (EUR 21.7 billion) or HUF 9.2 thousand billion (EUR 23.5 billion), respectively, on new investments. As MKIF itself decides which contractor to use and how much to pay them, one of the concerning features of the concession scheme is that there is no necessity for a public procurement procedure in connection with these new projects.

As the motorway concession was granted to the interests of two of Hungary’s largest contractors, they have the right to use their own companies for development. Indeed, the funds had already declared at the time of the tender that they intended to hire subcontractors.

The biggest construction businesses in Hungary, which are known to win public tenders fairly easily, include Duna Aszfalt Plc., Hódút Ltd., Közgép Plt., and Mészáros és Mészáros Ltd. They are all, either directly or indirectly, owned by Lőrinc Mészáros and László Szíjjj.

The motorway concession raised troubles in the European Union, as well. On 24 April, the European Commission began infringement procedures against Hungary for violating the regulations on motorway concession contracts, after Transparency International filed a complaint.

The Commission has noted a number of issues with the motorway concession agreements regarding the motorways. It contends that Hungary violated EU legislation by awarding a 35-year concession that was not transparent concerning its projected contract value. Besides, Hungary failed to adequately transfer operational risk, and therefore, it was granted for an excessively lengthy period.

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Source: Szabad Európa