Bechtel: Unit price of the Morava Corridor has not changed

The unit price of the Morava Corridor highway in Serbia has not changed, Forbes was told by the American company Bechtel, which is the main contractor for the highway in a consortium with the Turkish company Enka.

– The project was not fully developed at the time of signing the contract. The agreed price was structured to allow for subsequent development of the project and additional specification of key elements of the project – the company stated in a response to Forbes.

Asked why the annexes to the contract on the execution of works with the Ministry of Construction, Transport and Infrastructure were not signed, even though the price of the 112-kilometer highway has since increased from the original approximately 900 million to 2.15 billion euros, the company stated that “the contract included a standard escalation formula for dealing with market fluctuations, which was used during the COVID-19 pandemic and the war in Ukraine.”

– The new price also reflects the improvement of the highway by introducing an intelligent traffic management system that automatically warns drivers of hazards – they stated.

Additional works, as Bechtel said, are also included.

– Among these works is a large flood protection system to protect the highway and communities from devastating floods of the West Morava River. These works, together with the highway, will increase resilience to climate change and ensure that Serbia’s investment in high-quality infrastructure is sustainable in the long term – the company told Forbes.

Forbes Serbia previously wrote that the document, which was actually a quarterly report on the work of the Ministry of Construction, Transport and Infrastructure, did not state that any annex to the contract had been signed with the Bechtel-Enka consortium, which changed the originally agreed price.

They remind that, according to the Commercial Agreement, for the Pojate-Preljina section, i.e. the Morava Corridor, the agreed amount of 745 million euros was accepted.

– The commercial contract also provides for indirect material costs for the total scope of work, which represent the contractor’s costs in support of construction activities and amount to 3.12 million euros per month. Indirect material costs for the scope of work at unit rates are also provided for, amounting to one million euros per month. Having all of the above in mind, the total accepted contracted amount of the project is 943 million euros – the document states.

On the other hand, according to data from the Ministry of Finance in the Revised Fiscal Strategy for 2026, it states that the total estimated value of that project is 2.15 million euros (254 billion dinars), which is 2.5 times higher than what should have been the maximum price when the contract was signed.

The Ministry of Construction, Transport and Infrastructure did not respond to questions about why signed annexes were not listed for that project and whether that meant that the annexes had not been signed.

According to Forbes, the state borrowed from a consortium of foreign banks for this infrastructure project in the total amount of around EUR 1.9 billion.

The first loan of EUR 431.7 million was confirmed by the Serbian Parliament in 2021, and was contracted with JPMorgan Chase, with a guarantee from UKEF, and then the second loan confirmed in early 2022 amounted to EUR 400 million. Then, in 2023, amendments were adopted, so the loan amount was increased to EUR 500 million, and the loan was taken from the same consortium of foreign banks.

The third loan of EUR 700 million was provided by several banks led by JPMorgan Chase, with insurance from the Multilateral Investment Guarantee Agency, and the most recent loan was for EUR 260 million.

Forbes reminds that the state at one point declared the project a project of national importance, and that the Serbian Parliament adopted a special law, lex specialis, which helped to directly select the contractor and bypass the procedures required by the Public Procurement Law.

Forbes says that it also finds it interesting that the Ministry of Construction said that the direct contracting of the work had been carried out “on the basis of the Interstate Agreement between the Government of Serbia and the Government of the United States,” but that such an agreement, however, does not exist.

BECHTEL LIMITED OGRANAK BEOGRAD

Ministarstvo građevinarstva, saobraćaja i infrastrukture Republike Srbije

Bechtel ENKA UK Limited Ogranak Beograd

Bechtel

Enka

Ministry of Construction

Morava Corridor

price

additional works