PF Archive

Portugal roads: No liquidity crunch

19 12 2008

The Portuguese roads sector continues to spawn deal closings, despite the liquidity crunch and bank angst over the future ownership of state-owned concessionaire Estradas de Portugal (EP). In November the Mota-led Douro Interior closed. This month the Soares da Costa/ FCC/Ramalho Rosa-sponsored Transmontana has closed and a further two closings – Baixo Alentejo in January and Baixo Tejo before year-end – are imminent. The reasons these deals are closing are several. First, state-owned EP – which collects the tolls and then pays availability to the sub-concessionaires – is not guaranteed by the state and theoretically could go bankrupt. But the Portuguese government would never allow that to happen, although there are still doubts about whether EP will always be 100% government-owned. Second, the EP sub-concession remuneration system is a mix of availability and shadow toll – the size of the availability payments depend on the amount of traffic and therefore shadow toll revenues – giving a degree of certainty to debt repayment. Third, there is the political will and strong bank-sponsor relationships to push the roads programme forward. But there are still niggles with the system and worries that liquidity will be insufficient to finance EP's full Eu5 billion ($6.8 billion) roads programme. The deals that have closed to date will not actually fund until 2009 and at least some of the debt will come out of...