Portugal suspends Lisbon-Madrid HSR line

The new government has left the door open to re-evaluating the project with a view to cutting costs and procuring it within a different timeframe. If it decides to cancel the project, the state will have to pay around €150m in compensation to the concessionaire of the first stretch of the line.

Portugal’s recently elected conservative government has suspended construction of the Lisbon-Madrid high-speed rail line, raising the possibility that the planned link between the two Iberian capitals might be cancelled altogether.

“The project may be re-evaluated, including its scope and [procurement] deadlines, with a view to cutting costs,” the new government said. The decision is not surprising, given that the two parties that form Portugal’s new coalition government had always voiced their opposition to the high-speed rail link. 

Jose Blanco, Spain’s transport minister, has reacted cautiously to the Portuguese announcement, telling the Spanish press that it is still unclear what the announcement actually means. However, he said the Portuguese government would be making a “bad decision” if it chooses to cancel the whole project:

“If that’s the case, then we are talking about a serious communication problem,” Blanco commented, referring to the resources that have been allocated to the project on the Spanish side.

At this point in time, it is also unclear what will happen to the consortium that has won the public-private partnership (PPP) contract to design, build, finance and maintain the first stretch of the Lisbon-Madrid link. 

Construction of the first stretch had not yet begun, since the concessionaire was still waiting for authorisation from Portugal’s Court of Auditors, the country’s highest body regulating public spending, to proceed. In a way, that’s both good news and bad news for the concessionaire. 

The good news is that the consortium has not allocated its resources to construction and can apply for a state refund of the roughly €150 million in costs incurred through preparatory studies, bidding, and the securing of financing for the deal. But the downside is that it will not be able to claim compensation against future profits, which it would have been able to do had the project been approved by the court and started construction.

Portuguese companies Brisa, Soares da Costa, Iridium, Odebrecht, Lena, Zagop and local banks CaixaBI and Millennium BCP had secured funding for the €1.65 billion, 165-kilometre first stretch of the line in late 2009. The funding package included €600 million from the European Investment Bank, €90 million from commercial banks, €120 million in equity and about €840 million in state and European Union subsidies.

A tender for the €2 billion, second half of the Lisbon-Madrid connection had already been put on hold by the previous socialist government, with a view to re-tendering a slimmed down version of that stretch sometime in the future.