Private concession contracts for toll roads in Spain: analysis and recommendations

Baeza, María de los Ángeles; Vassallo, José Manuel

doi:10.1080/09540962.2010.509179

Cited by 50 publications

(25 citation statements)

References 18 publications

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“…A major toll-motorway program was launched in Spain in the late 1990s (Baeza and Vassallo 2010). This program was subject to the general legislation on public infrastructure concessions which established in a specific way how to determine the compensation to the concessionaire upon termination of the concession contract (Ministerio de Fomento 2003).…”

Section: Application To a Motorway Concession In Spainmentioning

confidence: 99%

“…Therefore, most PPPs insolvency situations possibly occur when the private partner's revenues depend on the demand, and it turns out to be much lower than initially expected. Some important examples include the highway program in Mexico between 1989and 1994(Carpintero and Gómez-Ibañez 2011 and, more recently, motorway concessions in Spain (Baeza and Vassallo 2010).…”

Section: Introductionmentioning

confidence: 99%

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Default and Abandonment Option in Motorway Concessions

Colín

Soliño

Lara-Galera

2017

J. Infrastruct. Syst.

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As long as motorway concessions are subject to the variability of traffic demand, it is necessary to apply valuation methods that can take into account that uncertainty. In the past, many concession projects have faced an early termination of the contract due to lower traffic than expected. These insolvency situations raise the issue of the compensation to the concessionaire when the contract is prematurely terminated. A methodology based on the real-options approach has been developed in this paper to assess insolvency situations in motorway concessions. Under this approach, the mechanism of compensation can be modeled as an abandonment option, granted by the public administration to the concessionaire, in which the value of the option will depend on the evolution of traffic. This methodology is then applied to the case of a real concession in Spain. The results show a significant value of the abandonment option, which represents an implicit aid from the public administration to the concession. In this way, the methodology presented in this paper can contribute to gaining a better understanding of the risks of motorway concessions and enhancing the transparency in concession contracts.

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Section: Application To a Motorway Concession In Spainmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Default and Abandonment Option in Motorway Concessions

Colín

Soliño

Lara-Galera

2017

J. Infrastruct. Syst.

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“…The literature shows that bidders tend to act strategically in competitive auctions to win the competition at all costs (Bain 2009;Baeza and Vassallo 2010). Baeza and Vassallo (2012) reported significant bias towards traffic overestimation, with 50% of the deviation during the ramp-up period in road concession contracts in Spain linked to the availability of frequent renegotiations.…”

Section: Traffic Behaviormentioning

confidence: 99%

Federal Toll Road Concession Program in Brazil: Is It Moving in the Right Direction?

Brochado

Vassallo

2014

J. Infrastruct. Syst.

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This paper assesses the toll road concession program started by the federal government of Brazil, from its beginning in 1996 until 2012. Brazil has one of the longest road networks, under private concessions, in the entire world. The authors use the case study approach, based on the available information, to analyze the evolution of the program over the course of its history. Specifically, a detailed analysis is conducted from three perspectives: those of the competitiveness of the tender, the impact of toll modifications caused by the rebalancing of the economics of the contract, and the actual evolution of the traffic flows as compared to their estimates, respectively. It is found that the most recent auctions have been very competitive. Moreover, with the original toll roads, bidders relied on early traffic forecasts that turned out to be overly optimistic, and over the years, contract rebalancing has led to large increases in toll rates. Overall, and even though Brazil's program can be considered successful in many ways, there is still considerable room for improvement.

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“…Based on the case study of highway concessions in Spain, Baeza and Vassallo (2010) show how concessionaires tend to put pressure on the government to renegotiate concession contracts when the real traffic turns out to be lower than originally calculated by the concessionaire. As Guasch et al (2008) points out, renegotiations are unfortunately quite common in concession contracts, and they are initiated not only by the concessionaire, but also by mutual agreement between the government and the concessionaire.…”

Section: Introductionmentioning

confidence: 99%

The role of the discount rate in tendering highway concessions under the LPVR approach

Vassallo

2010

Transportation Research Part A: Policy and Practice

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Flexible-term highway concessions are becoming quite popular around the world as a means of mitigating the traffic risk ultimately allocated to the concessionaire. The most sophisticated mechanism within flexible-term concession approaches is the least present valué of the revenues (LPVR). This mechanism consists of awarding the concession to the bidder who offers the least present valué of the revenues discounted at a discount rate fixed by the government in the contract. Consequently, the concession will come to an end when the present valué of the revenues initially requested has been eventually reached. The aim of this paper is to evalúate the effect that the discount rate established by the government in the bidding terms has on the traffic-risk profile ultimately allocated to the concessionaire. To analyze this effect, a mathematical model is developed in order to obtain the results. I found that the lower the discount rate the larger will be the traffic risk allocated to the concessionaire. Moreover, I found that, if a máximum term is established in the contract, the lower the discount rate, the less skewed towards the downside will be the traffic-risk profile allocated to the concessionaire.

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Private concession contracts for toll roads in Spain: analysis and recommendations

Cited by 50 publications

References 18 publications

Default and Abandonment Option in Motorway Concessions

Default and Abandonment Option in Motorway Concessions

Federal Toll Road Concession Program in Brazil: Is It Moving in the Right Direction?

The role of the discount rate in tendering highway concessions under the LPVR approach

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