Industry Trend Analysis - Private Sector Road Plan Holds Promise - AUG 2017

BMI View: Spain's plan to attract private investment into the country's roads sector via public private partnerships (PPP) is a harbinger of things to come, as the country seeks alternative ways to modernise its infrastructure base without widening a persistent budget deficit. However, owing to the relatively high-risk nature of delivering infrastructure projects in Spain and the country ' s mixed record in implementing road PPP projects in particular, we are not alter ing our forecast at this time.

On July 17, the government of Spain announced an expansive investment programme that will seek to attract EUR5bn into the country's road infrastructure via public private partnerships. The programme will encompass the construction of 2,000km of new and unfinished roads over the next three years, with franchisees overseeing maintenance on 20 roads over the next 30 years.

We expect the plan will generate a significant amount of private sector interest in light of the fact that domestic companies like Acciona, Ferrovial, and FCC have recently lobbied the Spanish government to trim regulations in order to ease the collaboration between public and private sectors. This suggests that private sector interest is likely to be forthcoming should the government structure the projects in a transparent and attractive way. In particular, Norway's recently launched road PPP initiative - which we view as likely to succeed due to Norway's regulatory clarity governing PPPs and the country's broad political support - was highlighted as a possible blueprint for Spain's road programme (see , ' Positive Outlook For Road PPPs, ' January 5, 2017).

Continued Fiscal Shortfall To Bolster PPP Attraction
Spain - Budget Balance, % of GDP
f = BMI forecast. Source: BMI/IGAE

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