Risk Sharing in the New Public Works Concession Law in Spain

Abstract

Budgetary constraints are forcing transport infrastructure authorities to raise private funds to finance the construction of new projects and the maintenance of existing ones by using concession contracts. One of the key elements in correctly defining a concession scheme is to establish an adequate risk-sharing mechanism among the stakeholders that take part in the process. This paper describes and analyzes the effect of the new Spanish Concession Law on risk sharing, in particular, the effect of the so-called progress clause on the calculation of risk held by the concessionaire. This law was designed both to reinforce private financing of public facilities and to improve the legal framework by defining a new risk-sharing approach, particularly in relation to the risks involved in estimating traffic demand. The paper finishes with an analysis of a specific application of the traffic risk-sharing approach for highway concessions in Spain.