The Afsluitdijk causeway is slated for a major overhaul which will once again transform the structure into an international showcase of ingenuity in Dutch hydraulic engineering. “This is a symbol of Dutch pride – a testament to our people’s resourcefulness and success in the battle against the elements.’
After more than 85 years, the 32-kilometer-long Afsluitdijk causeway – a national treasure and the number-one emblem of the country’s never-ending struggle against the rising water – is due for a major rehabilitation. The high-profile project will improve the dike’s flood-protection capacity and facilitate the movement of water from the IJsselmeer inland bay to the Wadden Sea. This is guaranteed to keep the Netherlands safe and dry well into the future.
The new causeway will be safer for passing traffic, thanks to wider emergency lanes on the A7 highway. It will also be markedly more sustainable, as floating solar panels ensure that all locks and pumps will be energy-neutral. The new dike will also leave more room for nature: for example, the regional public-private partnership De Nieuwe Afsluitdijk is building a “fish migration river,” an opening in the Afsluitdijk that will enable fish to move freely between the freshwater IJsselmeer lake and the salt-water Wadden Sea.
This showcase of Dutch innovation is slated to be completed in 2023, which requires an investment with a net present value of EUR 550 million. The project was awarded to the Levvel consortium, a joint venture between the BAM, Van Oord and Rebel contractors. They are responsible for designing and constructing the new Afsluitdijk causeway and managing and maintaining it over a 25-year period on behalf of the Directorate-General for Public Works and Water Management (Rijkswaterstaat).
The Only Dutch Bank
Rabobank is the only Dutch bank involved in financing the complex mega-project, with other backers including various German and Belgian banks and the European Investment Bank (EIB). The contracting partners reached out to the bank at an early stage. “It helps that we know our clients well – we have long-standing relationships with them, through thick and thin.
This means – in all modesty – that we have a unique understanding of the risks associated with the business,” says Rabobank’s David de Bondt, who looks after major clients in the construction industry. He feels the project was a natural fit for the bank: “This project is a symbol of Dutch pride – a testament to the entrepreneurial spirit that helps us win the battle against the water. Entrepreneurial spirit is in Rabobank’s DNA, and this is exactly the sort of project that gets us excited. Another reason we were eager to get involved with the Afsluitdijk project is the focus on sustainability and on making sure future generations are safe and protected. It’s a boon to the country on so many different levels.”
“Entrepreneurial spirit is in Rabobank’s DNA, and this is exactly the sort of project that gets us excited.”- David de Bondt, Rabobank
Risks Relating to Completion
As Mireille Bombeld, Rabobank Associate Project Director Finance, explains, the risks associated with large-scale infrastructure projects such as the Afsluitdijk causeway sound easier to manage than they are. “Our client is the national government, so at least you’re secure in the knowledge there’s no risk of default. The main risks occur during the period between the design and the completion of the project.
Is this type of ambitious design technically feasible – and can we get it done within the budget? But the greatest risk by far is failure to meet the deadline. Most expenses are racked up before the project is completed, when it hasn’t actually begun generating income yet.”
In financing the project, Rabobank nevertheless decided to focus on that initial, relatively high-risk construction stage. De Bondt: “It’s simply more interesting and exciting than the next stage, the long-term loans that will be taken out right after the dike is completed. There’s no shortage of banks willing to provide long-term loans for failsafe government projects, but it’s during the preliminary stage that contractors need the added value we’re able to provide. We’re unfazed by the risks because we always keep the lines of communication open with both the client and the team of contractors.”
“We’re unfazed by the risks because we always keep contact with client and the team of contractors.”- Mireille Bombeld, Rabobank
Parent Company Guarantee
In large-scale infrastructure projects, the risks are analyzed and assessed in depth, both by the bank itself and by external companies. During the early stages of the financing process, the bank works with clear term sheets, which allow it to set market-based interest rates. But Rabobank delivers added value for deals such as this one. As financial expert Bombeld explains, Rabobank is the only Dutch bank to provide the equity capital the project company needs at the earliest stage. “Instead of the customary letter of credit, we are willing to accept a parent company guarantee. We feel comfortable doing this because of how well we know the market and our clients. It cuts down on expenses, time and paperwork for our client. It also means the guarantee limits imposed by other financiers are not affected. Working out puzzles like this is a huge part of what makes our work so much fun.”
Rabobank will continue to play a key role even after “Afsluitdijk 2.0” becomes operational: in the next few decades, the bank will be responsible for managing the cash flows and reports relating to management and usage. De Bondt: “There will be a need for a domestic partner who makes sure everything runs smoothly. We regard this as a basic service we provide to clients – it’s a specialization that allows us to be involved in many of these types of public-private partnerships.”
De Bondt feels the new Afsluitdijk causeway will be more than just a safe, sustainable and eco-friendly dike. “It’s at least as important that all the partners involved in the project are demonstrating the level of excellence that Dutch engineers – specifically, hydraulic engineers – are capable of. It’s a bit like the Delta Works construction projects: they really elevated the stature of our country internationally and gave Dutch contractors the opportunity to be involved in exceptional projects all over the world. In funding the new Afsluitdijk causeway, we’re helping the sector to further strengthen its image, both in the Netherlands and internationally.”
This article is part of the Wholesale Banking for Better series.
“Improved collaboration at the pre-competition stage”
“We want to work on building a better country: more sustainable – which means greener – but above all a country that’s well prepared for the future. That’s why we look beyond the timeframe of individual projects. Rabobank always operates based on a long-term vision and encourages contractors and clients, including the government, to do the same,” De Bondt says. “We’re not going to solve the major issues our society is facing by getting hung up on who can get the project done at the lowest price. We need to put our heads together before we get to the competitive stage – that is, before we all start bidding against each other. We need to think about the one million new homes that need to be built, about the changes we need to make to the nation’s infrastructure, and about protecting the country from flooding. Sure, it’s always exciting when you get to fund a prestigious new project, but what really makes us happy is strong, inspiring ideas on what the Netherlands should look like by 2050.”
Resumé David de Bondt
After earning a degree in Civil Engineering from Delft University of Technology and a degree in Business Administration from Erasmus University Rotterdam, David de Bondt began his career as an M&A expert at ABN Amro and later at RBS. He joined Rabobank’s M&A division in 2012. He has specialized in the construction industry and hydraulic engineering sector since 2010, handling contracts for clients such as Heijmans, Ballast Nedam, VolkerWessels, CRH and Saint-Gobain. As a Rabobank Senior Relationship Banker, David was recently placed in charge of the coverage for larger contractors and engineering firms operating in the Netherlands.