Globalvia’s Spanish airport crashes into public ownership

The Valencia government says banks backing the concessionaire for Castellon Airport were demanding more strenuous conditions that would have to be shouldered by the taxpayer. But private sector sources indicate the concession was not economically viable after the Spanish region failed to develop promised tourism infrastructure around the airport.

The government of Valencia, in eastern Spain, told the concessionaire of Castellon Airport before the year ended that it was going to take over the 50-year concession for the regional airport, citing unacceptable cost increases demanded by the banks backing the concessionaire.

In a statement, the authorities highlighted how the banks financing a consortium of Spanish firms Globalvia (45 percent), Lubasa (30 percent), Bancaja (15 percent), PGP (5 percent) and Abertis (5 percent) toughened conditions ahead of a needed refinancing, making the concession unprofitable for the concessionaire. 

According to the regional government, the public sector would have to contribute an extra €29 million in addition to a previously agreed payment of €21 million for the next eight years for the concession to survive. As a result, it decided not to burden the taxpayer with the cost increase, opting instead to take the airport into public ownership.

A spokeswoman for Globalvia would not comment on the Valencia government’s decision. But other private sector sources familiar with the deal tell a different story on the airport concession’s collapse. In their view, the concession fell through not because banks toughened their refinancing conditions, but because the public authorities reneged on a deal to compensate the airport concessionaire for much lower-than-expected traffic.

“I don’t know if you’ve ever been to Castellon Airport, but it’s in the middle of nowhere,” one of the sources wryly remarked. According to the source, the only reason the concessionaire concluded that the airport was economically viable was because the regional government had pledged to develop tourism-related infrastructure, including hotels and a golf course, around the airport. 

But when Spain’s real estate bubble burst, the authorities did not go through with the planned tourism developments, which – according to the sources – dramatically reduced the airport’s estimated passenger traffic. This led the concessionaire to ask for the government to rebalance the concession, which it agreed to in principle but failed to do in practice, leaving the airport operator unable to refinance its debt.

Negotiations are now likely to centre on what sort of compensation the private sector consortium can expect to get for the circa €120 million it spent in building the airport, which was inaugurated last March, although it has yet to start operations, for lack of the requisite permits.

Globalvia owns some 40 infrastructure projects, including roads, rail, ports, airports and hospitals, worth over €3 billion. Over 90 percent of its portfolio is located in Spain, according to Globalvia’s website. Last October, PGGM and OPTrust invested €400 million in Globalvia through a convertible five-year maturing instrument.