José Blanco – Spain’s transport minister – has recently signed a protocol with several public and private institutions outlining the funding for Spain’s €17 billion public-private partnership (PPP) stimulus programme.
Blanco announced the stimulus plan at the beginning of April, which intends to tender about €12 billion of rail projects and €5 billion of road refurbishment deals over the next year-and-a-half. The majority of the plan will comprise greenfield investments (about €11 billion of the €17 billion total).
Under the agreement, state-backed financial institution ICO will fund 30 percent, or €5.1 billion, of the stimulus programme with the European Investment Bank to commit €2.1 billion, or about 12 percent of the total, to help foot the bill, according to a statement from the transport ministry.
It is expected that the private sector will fund the remaining 58 percent of the stimulus plan, or €9.8 billion. In the ministry’s statement, the presidents of Spain’s commercial and savings banking associations both pledge to help facilitate the funding of the stimulus programme, but no specific amounts are mentioned.
Projects tendered under the stimulus plan will receive availability payments from the government to help attract commercial financing. Availability payments are agreed-upon instalments from the public sector in exchange for the concessionaire making the asset available in good condition. The plan also requires concessionaires to pay up to 20 percent of each project from their own balance sheets.
It is as yet unclear which projects will be tendered as part of the stimulus package, but one market source fears some of them may be geared more towards the construction industry, with unattractive internal rates of return (IRR) for traditional developers. Although Blanco has signalled that he will help bail out Madrid’s troubled ring-road concessionaires, doubts still persist on the specifics of potential government assistance.
To read more about Spain’s €17 billion PPP programme and its role in kick-starting the country’s ailing economy, please refer to this month’s issue of Infrastructure Investor or click here.