Spain nears launch of €15bn PPP programme

A new law is set to be approved in February that will allow the government to launch a three-year, €15bn infrastructure programme, to be procured in conjunction with the private sector. The new law will allow the government to guarantee private sector debt.

The Spanish parliament is set to approve a new law in February that will pave the way for the Transport Ministry (Fomento) to launch an ambitious €15 billion infrastructure programme.

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The three-year programme is the brainchild of transport minister José Blanco, who took office in April 2009, and intends to kick-start private investment in infrastructure after two years of declining activity. It also aims to counter the effects of a deep economic crisis that has left Spain with record unemployment. Blanco’s plan is set to target the transportation sector and should finally open high-speed rail to private investors.

But before the programme can be launched, parliament will have to approve a new law easing investors’ access to financing for Spain’s future public-private partnerships. Perhaps the most important step in the new law is that it opens the door for the government to guarantee up to 90 percent of the debt used on a project.

Additionally, it will also regulate a form of extraordinary government loan – the so-called creditos participativos – which can be used to help finance forthcoming concessions. Creditos participativos share many of the characteristics of subordinated debt but are qualified as an investment under Spanish law, and can thus be recorded off the government’s balance sheet.

To round off these measures, Spain’s Finance Ministry said that it will launch a €1 billion infrastructure fund this year managed by state-backed credit institution ICO. The fund will invest a maximum of €100 million per project with loans lasting up to 30 years.

Blanco has been working closely with the private sector to insure the success of his infrastructure plan and intends to clarify contracting mechanisms with a view to reducing private sector risk. Chief among these measures is the government’s willingness to help shoulder land expropriation costs, traditionally paid for by the private sector.

These costs became a controversial issue in Spain when landowners appealed to the courts and were awarded compensation that was far above the original expropriation costs.