Financing and Management

Project costs and financing

• Cost advantages in Hungary
• Project costs and financing
  
• Operational costs
  
• Co-operation and legal framework
  
• Procedure and project organisation

Hungary offers an advantageous and innovative solution to fund the ESS project. The greatest challenge is to generate financial coverage for the construction in the forthcoming 8 years, and sustain at the same time full operation of the most important neutron research facilities in Europe, in order to maintain the high scientific and technical expertise of the neutron community. The Hungarian proposal for financing ESS also serve this goal.
Taking advantage of a special facility of the Hungarian banking system, accounting at ESS in Hungary will be conducted in € (including salaries) from the outset, even before Hungary joins the Eurozone.

a) Hungary offers free of charge as “site premium” not only the site with roads and utilities at the border, but also another 20 % of the construction costs, which are evaluated to 1073 million € at Debrecen (in value 4th quarter of 2007). This construction costs are defined as the total spending until the start of commissioning envisaged for the beginning of 2018, and contain the full costs of 10 neutron scattering instruments (out of the reference number 22 in full operation). This 213 million € “site premium” will cover much of the conventional facilities (office, laboratory buildings, accelerator tunnel and experimental halls), and will not generate shares and property rights within the ESS consortium for Hungary. It will also be explored whether it is feasible to attract private investors to participate in the construction of part of the conventional facilities in a Public Private Partnership (PPP) with the Hungarian government and the city of Debrecen. This would free part of the total public funding envisaged (30 % of the total construction costs) for underwriting a larger initial share of ESS than the minimum defined in point c) below.
b) The remaining, 860 M€ construction and pre-operational costs will be underwritten in the form of shares in a non-profit ESS consortium, securing property and usage rights for the shareholder countries  / institutions in proportion of their contribution to the costs (i.e. 10 % share = 86 M€). Shares will be tradable on non-profit basis to allow countries to join in later (e.g. to cope with the timing of their funding cycles) and acquire access to ESS.
c) Beyond offering free of charge 213 M€ “site premium” contribution to the construction costs, Hungary will initially underwrite at least 12.5 % share of ESS using public sector funds. (This share could be higher if private funds can be raised in a viable PPP construction compatible with the non-profit status of the ESS consortium.) The corresponding usage right is well beyond the potential needs of the Hungarian research community in view of its size and the Hungarian share of GDP in the EU, therefore most of this share will be made available without profit, at actual costs to countries joining ESS later, either during the construction period or afterwards. In order to secure a timely start of the project up to another 200 M€ (23 % of shares) will be sought for, as needed, in form of a loan extended to the ESS project consortium by the European Investment Bank using the new ESFRI Risk Capital Facility (ERCF). The goal here is to work towards securing about 35 % bridge financing without any commitment or guarantee required from countries expected to join later, solely based on the anticipated very high market value of ESS for the European fundamental and applied research community in providing best in class neutron scattering research opportunities by about 2020. This facility will allow countries to decide on joining ESS at a later stage, which best suits their funding cycles or best fits their global planning. These countries will be guaranteed access to shares on non-profit basis, at the actual costs incurred (included capital costs) and evaluated following a scheme laid down at the start of the project.
d) On this basis, not more than 550 M€ will need to be initially underwritten (~50 % of the construction costs for 65 % of property and usage rights) by “day one” partner countries from Europe to assure full funding of the construction phase of the ESS in Hungary. Conventional, government guaranteed sovereign loans can be arranged for this commitment for any country interested in borrowing funds for its ESS participation. Preparatory contacts with a number of European countries (by now first of all with ESS collaboration partner Spain, another site candidate, the group of potential core partners from the Central European region - Austria, Bulgaria, Czech Republic, Poland, Rumania, Slovakia, Slovenia - and France, Germany, Holland, Italy, Switzerland and Russia), suggest that this relatively moderate financing goal can be achieved in a timely manner.