Hungary, China sign loan deal for Budapest-Belgrade Chinese rail project

By Krisztina Than and Anita Komuves

BUDAPEST (Reuters) - Hungary and China have signed a loan agreement to finance the construction of a railway link between Budapest and Belgrade, Finance Minister Mihaly Varga announced on Friday.

Varga said in a video on his Facebook page that the loan carried a fixed interest rate and an early repayment option but he did not say what the exact terms were.

A key piece of data in the loan agreement is what interest rate Hungary will pay.

Earlier this month, Hungary drafted legislation to classify all data included in contracts for the $2.1 billion, tax-payer funded rail project for 10 years.

"We have a loan agreement that is advantageous and secure for Hungary," Varga said in the video, adding that the terms of the loan were "favourable relative to the currently available debt financing conditions."

Some 85% of the financing comes from China as a loan, while 15% is provided by Hungary, he said.

Varga said the new rail link, to be completed by 2025, would allow Hungary to be a centre for European logistical networks as Chinese goods travel from Greece to western Europe.

The 150-km (93-mile) Hungarian stretch of the railway will be built by CRE Consortium which includes holding company Opus Global, controlled by Lorinc Meszaros, an associate of Prime Minister Viktor Orban.

The other half of the winning consortium is owned by China Tiejiuju Engineering & Construction Kft. and China Railway Electrification Engineering Group Kft., representing the Chinese state railways company.

According to a statement by Opus in 2019, the holding company could earn revenues worth about 295 billion forints from the project over the planned construction period.

The project has suffered significant delays. China, Serbia and Hungary signed a memorandum of understanding on the 370-km (230 mile) rail route in December 2014 in Belgrade.

(Reporting by Krisztina Than; Editing by Alison Williams, William Maclean)