APAC: Chinese asset manager to back USD 410m Bosnia motorway 

11 July 2018 - 12:00 am UTC

A pair of Chinese financial investors have expressed their interest in funding a key Bosnia motorway project which will cost up to EUR 350m (USD 411m).  

China Orient Asset Management (International) Holding and Sinochem Capital, the financial unit of Chinese state conglomerate Sinochem Group, have signed an agreement with the the Republika Srpska (RS) government to jointly carry out the Vukosavlje-Doboj Highway PPP and its Vukosavlje-Brcko branch.

The 47km motorway PPP goes from Doboj city — a railway transport hub — to the town of Vukosavlje close to the border with Croatia in northern RS. The PPP project involves DBFOM of the four-lane motorway that will form part of Corridor Vc, known as the extension of the Trans-European Transport Networks.

The Government of the RS last year gave approval for a loan of EUR 70m for this section, which is estimated to cost EUR 260m-EUR 350m, while China’s Sinosure is likely to provide credit guarantees to the project.

“Most recently we have seen more Chinese builders looking at transportation PPPs in Central Eastern Europe while they can also act as EPC contractors,”said a banker who advises on related cross-border deals. “But it is rare to see such a big Chinese asset manager interested in these projects as a financial investor.”      

In 2012, the RS government opened a tender to DBFOM the project with submission deadline in 2014, which attracted consortia including one led by Austria’s Strabag and another by Korea’s Samsung. The concession period is 30-40 years, which is subject to further negotiations, according to the bidding document.  The European Bank for Reconstruction and Development(EBRD) at the time also expressed its willingness to provide a loan to the project

In November 2015, the tender process delayed and all proceedings were suspended amid private investor concerns over the financial prospects of the project

Corridor Vc is the largest transportation project package being promoted in Bosnia. In addition to the Vukosavlje-Doboj Highway, it also includes:
– Banja Luka-Prijedor-Novi Grad motorway
– Šamac-Doboj-Sarajevo-Mostar-Čapljina-Metković railway 
– Sarajevo and Mostar Airports.
– Waterways and quays on the Sava, Bosna and Neretva Rivers.

So far, a significant part of funds used for these projects have been sourced from budgets and soft loans offered by the EBRD, EIB and other international financial institutions. The government intends to use PPPs for most of the projects. 

Sinochem is China’s biggest chemical conglomerates while China Orient Asset Management is a Chinese state-owned asset manager which specialises in managing non-performing loans. The latter has RMB 980bn (USD 147bn)  under management and is among the four largest asset manager in China. China Orient Asset Management’s major shareholders are China’s Ministry of Finance, the National Social Security Fund, China Telecom and Shanghai Electric as its major shareholders. 

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