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Spain extends bailout funds for road concessionaires

The government has decided to prolong a three-year loan programme designed to help re-balance road concessions struggling with lower-than-expected traffic until 2021.

The Spanish ministry of infrastructure (Fomento) has given a shot in the arm to the country’s ailing road concessionaires. It has extended a loan programme designed to help re-balance road concessions hit by much lower-than-expected traffic since the outbreak of the global financial crisis.

The bailout mechanism – known locally as cuentas de compensacion – is a sort of government loan provided to road concessionaires to compensate them for the difference between revenues generated from real traffic and the revenues these concessionaires would collect if 80 percent of their contractually agreed traffic expectations were actually met. 

The problem, as Fomento minister Ana Pastor told journalists when presenting her ministry’s budget for this year, is that “in many cases, [real] traffic is 40 percent below the pre-crisis estimates”. In practice, that lower-than-expected traffic has posed an existential threat to the 10 or so road concessionaires most affected by the crisis, many of which are facing tough refinancings in the near term. 

Madrid’s ring-roads have been notoriously affected by traffic breaks and almost all of Spain’s big concessionaires – including Abertis, Acciona, ACS, Ferrovial, Globalvia, OHL and Sacyr – can lay claim to managing at least one affected road concession.

To help redress this situation, Fomento will extend the cuentas de compensacion mechanism until 2021. The programme was originally designed to run for three years and was going to expire this year. It is not yet clear exactly how much money the government will set aside for these bailout loans.

Spain’s road concessionaires have been hit by two major problems in recent years: lower-than-expected traffic since the global financial crisis hit; and ballooning land expropriation – or right of way – costs, caused by court sentences overturning many of the originally agreed land compensation payments. 

Just this year, Fomento has set aside €600 million – or 19 percent of its budget – to tackle land expropriation costs. In comparison, the ministry intends to spend €873 million in 2012 to maintain its roads network.