Re-Concessioning of the High Speed Railway Between Figueres and Perpignan

Díaz-Barceló Romero, Antonio (2018). Re-Concessioning of the High Speed Railway Between Figueres and Perpignan. Thesis (Master thesis), E.T.S.I. Caminos, Canales y Puertos (UPM).


Title: Re-Concessioning of the High Speed Railway Between Figueres and Perpignan
  • Díaz-Barceló Romero, Antonio
  • Alcaraz Carrillo de Albornoz, Vicente
Item Type: Thesis (Master thesis)
Masters title: Ingeniería de Caminos, Canales y Puertos
Date: 2018
Faculty: E.T.S.I. Caminos, Canales y Puertos (UPM)
Department: Ingeniería Civil: Construcción
Creative Commons Licenses: Recognition - No derivative works - Non commercial

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In 2005 the Spanish and French Governments signed an agreement to collaborate in the construction of a railway section in the border of both countries to foster good and passenger flows. A consortium called TP Ferro comprised of Spanish and French construction companies (ACS and Eiffage) won the tender. TP Ferro consortium proposed to bear the following risks: design, construction, operation and maintenance, availability and demand risks, whereas the grantor would deal with Ius Variandi and Factum Principis ones. The force majeure risk would be shared between the grantor and the concessionaire. The project was subsidized by the UE (c.€524m) to yield acceptable returns in exchange of the risk bore by the concessionaire. Besides, it was highly leveraged. Hence the concessionaire only injected €54m. Total uses of the project accounted for €1,097m. The feasibility studies were already carried out in 1992 and the project tendered in 2001. The tender was a highly competitive process were all the major Spanish and French major construction companies formed consortia to present a proposal. The main criteria comprised low subsidy, technical traits and financial capacity of the bidders. The project was awarded to TP Ferro that signed the agreement with the governments in 2004. The construction phase ended in 2010 and costs exceeded the budget as further railway length construction and another rail set up were required to comply with the interoperability standards of the UE. Appealing to the “ius variandi” principle, the Governments compensated the concessionaire with €128m and 3 years of operation life extension. The international railway section between Figueras and Perpignan is 44.4km long and comprises an 8.2km tunnel across the Pyrenees. TP Ferro offered the following services:  Basic services: request capacity to use the line in a timeslot solicited, control of the train and traffic lights, access to traffic information and support in case of emergency  Additional services: use of electric facilities for traction in some areas according to chapter 6 of the Network Declaration, use of lane 3 in case of emergency, especial monitoring services for dangerous merchandises, access to the telecommunication network and additional information for the correct use of the infrastructure  Optional services: tracking services that allow the client to monitor the train in real time through a web site, change of locomotive in TP Ferro´s maintenance base and park the locomotive in TP Ferro´s base as long as there are locomotive manoeuvres previously requested by the client. Unfortunately, the concession ended in default in 2016. The actual demand was lower than the forecasted and therefore the estimated future cash flows were not anymore sufficient to reimburse the total of the debt and refinance the debt levied for construction. This situation led the Government to step in and delegate the management of the concession to the railway public entities (ADIF and SNCF). The liquidation amount owed by the concessionaire has been estimated in accordance with the clauses defined in the contract and it amounts to approximately €406m. The concessionary was liable to repay creditors €560m and the government €100m for the demand risk transference to the public sector. On the other hand, the grantor was eligible to pay for the net asset value excluding the value of the subsidies minus the debt interests. Nowadays, the project is being managed by railway public entities (ADIF and SNCF), but the contract stated a timeline of 4 years with the possibility to extend the first period by a maximum of 2 years. Most likely, a decision on the future of the project will be made before the end of this period. The analysis has also determined whether the direct or indirect management system is more convenient for the project. The Public Sector Comparative Analysis shows that the direct management option entails a lower cost for the public administrations. However, the fact that the entry fee would reduce the total amount paid to ensure the continuance of the project skews the balance in favour of the indirect management solution. A new concession tender alternative has been thoroughly studied assuming that the following risks would be transferred again to the private sector: demand risk, availability risk, operation and maintenance risk. A model has been built to analyse the amount of debt and equity that could be used to yield acceptable returns and avoid ending up in default. In terms of new funds to ensure the continuance of the project, the debt issued would be €75m. New equity would also be lower, c.€35m. The use of the €110m would be the repayment to the old concessionary. This amount makes sense as actual traffic is approximately 10% of what was initially expected. Shareholder’s Investment Rate of Return is c.10.5% given the stability of the traffic demand and risk transferred to the new concessionaire. Furthermore, the debt coverage ratios remain over the floor set in the contract. This infrastructure project has been compared against some similar cases, especially the Radiales one, which was also rescued by the Spanish Government and outlaid a canon in order to compensate the creditors of the original concession and keep the project alive. The Spanish Government recently expressed its intention to retender the concessions with the objective to reduce the canon. Moreover, this is a good moment to attract investment as the Spanish economy is growing at a high pace. Running the NPV model with all the monetized externalities and other costs, the feasibility study shows preference for the operation scenario. This would imply a reduction of costs in terms of time savings, CO2 emissions drop and lower operation costs due to the use of a more efficient transport mode use. The net present value of the latter costs is €1,120m vs €2,191m (not considering the project). The analysis shows that relative low investments could lead to ensure good conditions of operation, allocate risks to a new party and find a way out to the bankruptcy situation whilst reducing the canon paid by the governments.

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Item ID: 52625
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Deposited by: Biblioteca ETSI Caminos
Deposited on: 16 Oct 2018 09:53
Last Modified: 16 Oct 2018 09:54
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