Portuguese government halts repayments to PPP investors

07 November 2018 - 12:00 am UTC

The Portuguese government has stopped honouring availability payments owed to the concessionaires of numerous motorway PPPs worth several billion euros, sparking the threat of litigation as debt and equity investors feel the impact of the fall-out, Inframation understands.

The granting authority, Infraestruturas de Portugal (IP), has halted paying the fees owed to at least some of the circa 10 so-called sub-concessions – projects which were procured around a decade ago by IP’s predecessor, publicly-owned entity Estradas de Portugal (EP), and which reached financial close between 2008 and 2010.

The projects known to have been affected include the Algarve Litoral, Transmontana, Pinhal Interior and Baixo Alentejo sub-concessions, although others have been affected, too.

Lenders affected by the debacle – the cause of which is routed in a decision by a Portuguese court that the government has made excessively high payments in the past – include Banco BPI, Bankia, BBVA, Caixabank, CaixaBI, Santander and Societe Generale. The EIB is also a major lender to the projects, with hundreds of millions of euros at stake.

Equity investors affected include ACS, Globalvia, and several local players including SDC Investimentosand Elevo.

It is unclear exactly how long the payments have been stopped for, although one lender said his bank has not been paid for many months of this year, while another said repayments continued until September.

Investors hope the stand-off will be resolved before the next payments come due next month. A swift conclusion is needed given concessionaires are defaulting on their loan obligations with their lenders, sources said. One lender said banks have hired legal teams, although they have found it a struggle to do so as many law firms do not want to act against the government.

The government’s decision to halt the payments follows a decision by Portugal’s Court of Accounts that the government made certain additional contingent payments to one toll road concessionaire, the Algarve Litoral road project.

It is not clear why these contingent payments were made. However, the Court of Accounts deemed that as these payments had not been approved by the court then they were not valid. In response to the court’s decision, IP chose to withhold payments – but for several sub-concessions, not just the Algarve Litoral road one.

One source said that the value of the projects affected by the government’s move are worth up to EUR 6bn.

The sub-concession contracts were the subject of renegotiations imposed by Portugal’s international creditors – the so-called Troika – in order to make these PPPs less onerous for the public purse. These renegotiations, which lasted several years and in relation to some of those sub-concessions were completed in 2015-2017, resulted in major savings for the state.

Last month, Moody’s upgraded Portugal’s sovereign to Baa3 with a stable outlook, putting it back in investment grade territory. But sources have wondered if the current rating is sustainable in the longer term if financial obligations aren’t being met.

IP, the result of a merger of EP with rail manager REFER in 2015, declined to comment.

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