Ex-post evaluation of government loans provided to shadow toll motorways in Spain

Abstract

Budgetary constraints are prompting many governments to encourage private financing of transportation infrastructure through Public-Private Partnerships (PPPs). Fiscal support measures have been often used to improve the financial feasibility of these projects, but also to rebalance the economics of the contracts to compensate for changes imposed by the government. This paper analyses the awarding of subordinated public participation loans (SPPLs) to ten brownfield shadow-toll motorway PPPs in Spain after additional works were imposed by the government. SPPLs are government loans, subordinated to the senior debt, that were intended to facilitate the PPP contractors the financing of the aforementioned works. This paper evaluates the financial and social impacts of the awarding of these loans to three of these projects. To that end, the SPPL repayment capacity of the PPPs and the social benefits derived from the improvement in road safety are estimated to evaluate whether the government's decision to support these projects was justified from a social perspective. The results show that, although the government's decision was reasonable, the design of the SPPL and its awarding conditions should be improved to guarantee the public interest.