Spain: PIC highways programme
In July 2017, the Spanish government announced the Extraordinary Road Investment Plan (Plan Extraordinario de Inversión en Carreteras or PIC). This plan involves investing €5 billion ($6.2 billion) to construct 2,000 km of highways over a four-year period (2017 to 2021).
The purpose of this plan is to (i) complete the remaining parts of the Trans-European Transport Network; (ii) resolve bottlenecks in the existing road network; (iii) improve and adapt the main existing highways under the requirements of new regulations relating to accidents, noise and CO2 emissions; and (iv) ensure the proper maintenance of all the projects carried out.
The plan will follow the public-private collaboration scheme (PPP). This scheme avoids allocating the cost from the government budget, requesting construction companies to assume the responsibility of maintaining the infrastructures for a 30-year period. The projects' remuneration structure will be based on availability payments (PPD), with no exposure for construction companies to traffic risk. The government has said that this mechanism of availability payments has already proved to be successful in the rest of Europe, where it has gone from representing five percent of projects to more than 90% over the past 10 years. The government aims to implement this plan based on other European countries' experience, in which the private sector is involved while maintaining the government's commitment to reducing the public deficit. Accordingly, concessionaires will have to seek financing for more than 20 projects, each with a value ranging from €100 million to €400 million.
The plan will also be backed by EU financing through the European Investment Bank. Several projects in the plan might be financed through the Juncker Investment Plan.
The Ministry of Public Works (Ministerio de Fomento) is expected to publish the tender documents for the first project of the plan in the coming weeks, after which it will publish the documents for the remaining projects.
The construction companies awarded the projects are expected to request financing for the projects. The financing of these projects can be obtained through traditional bank financing, or new alternatives can be sought. These projects could be financed through project bonds, where concessionary companies obtain financing through issuing bonds in the capital markets. Mixed structures could also be used whereby concessionaries obtain part of the financing through credit facilities granted by credit institutions or institutional investors, while the other part is financed through the issuance of project bonds.
Over the past few months, several instances in Spain of infrastructure and energy projects being financed through project bonds or mixed structures (loans and bonds) have happened. We will look into whether this financing tool could serve as an alternative for funding several of the 20 projects that need to be financed under this plan.
Jaime de la Torre