Global Via fights to save troubled Spanish concessions

Spain’s ongoing economic woes, lower than expected traffic and the government’s tendency to change original concession terms are threatening to collapse two of Global Via’s Spanish concessions.

Spanish developer Global Via is fighting to keep two of its Spanish concessions from collapsing under the weight of the country’s economic difficulties, government changes to the terms of the original concession contracts, and lower than expected traffic.
 
The troubled concessions include a 114-kilometre highway connecting Cartagena to Vera, in the Murcia region, and Castellon airport, located in the east coast of Spain and still under construction. Although they are suffering from different problems, both concessions owe at least part of their troubles to the government’s penchant for backtracking on some of the terms it originally agreed.
 
For the Cartagena-Vera highway, which was awarded to a consortium of Spanish firms – Ploder (51 percent), Global Via (35.7 percent) as well as Bancaja, CAM and Cajamar (13.3 percent) – the main problem has been lower than expected traffic.
 
Known as the “ghost highway” in the local press, the motorway has recorded only 30 percent of its original traffic forecast for 2010. The reason for this, explains a source close to the concessionaire, is partly due to the government’s failure to implement a number of urban developments, in the aftermath of the financial crisis, that were expected to help bring traffic to the road.
 
But since these forecasts were part of the contract, the consortium has appealed to a special administrative court to force Fomento – Spain’s ministry of transport – to economically balance the concession and compensate it for falling revenues. So far, Fomento has earmarked €80 million for 2011 to help compensate concessionaires hit by falling traffic. The Cartagena-Vera highway, in operation since 2004, cost €646 million and was awarded for a period of 38 years.
 
The other concession that is forcing Global Via to spend time at the negotiating table is Castellon airport. Also awarded in 2004 to a consortium led by Global Via together with Spanish firms Abertis, Bancaja, Lubasa and PGP, the airport contract is at risk of bankruptcy following changes to its original terms.
 
Specifically, a recent change to Spanish law has transferred a number of services previously carried out by AENA, Spain’s airports authority, to the concessionaire. These include shouldering costs for fire and air traffic control services, in addition to the aircraft support services stipulated under the original concession contract.
 
However, the airport’s economic viability also depended on the construction of a number of tourism-related developments, including hotels and a golf course, which have not been carried out following Spain’s economic crisis, the same source said. The concessionaire is now asking the local authorities to pay an annual fee of €8 million during the concession’s 50 years to help rebalance it. But the authorities have so far balked at paying the extra fee, and are considering buying out the concessionaire.
 
Construction in Spain has decreased markedly ever since the country’s real estate bubble burst, with unemployment in the sector standing at over 750,000 people at the end of 2010.
 
Global Via owns over 40 infrastructure projects, including roads, rail, ports, airports and hospitals, worth over €3 billion. It posted turnover in 2009 in excess of €163 million and recorded earnings before interest, tax, depreciation and amortisation (EBITDA) of €74 million last year.