Saturday, 20 November 2010

Spanish government seeking to assist private toll road companies

Reuters reports that the Spanish government is encouraging the biggest Spanish toll road operators, Cintra and Abertis to take over poor performing toll roads owned by other concessionaires in the country.   
Spain's economy has been hard hit by the recession, with significant property speculation bubbles popping and property prices dropping by as much as 30% in some places.  Unemployment is over 20% and the budget deficit has been a concern.  As a result, there appears to be drops in traffic on some roads affecting revenues.   

The alternative option being floated is a bailout which would cost the government hundreds of millions of euro, although one must ask why this should be necessary.  After all, the road remains and tolls can be set to maximise revenues (and as a result utilisation is optimised).  If a toll road defaults then the banks will pick it up, refresh the finances and sell it on.   However, it is likely that Spain's current socialist government prefers some form of state intervention.   Clearly the scale of the economic crisis is affecting sectors of the economy traditionally fairly immune to economic cycles.

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