TWO DECADES OF DBFO ROADS IN THE UK AND SPAIN: AN EVALUATION OF THE FINANCIAL PERFORMANCE

Road schemes are of major importance in the global PPP market, with the UK and Spain being key players in the field. Rather than examining toll road performance, this paper focuses on those schemes which are privately financed... [ view full abstract ]

Road schemes are of major importance in the global PPP market, with the UK and Spain being key players in the field. Rather than examining toll road performance, this paper focuses on those schemes which are privately financed but funded by payments from government, that is, Design-Build-Finance-Operate (DBFO) arrangements covered by shadow toll or availability payment mechanisms. Now that a good number of DBFO schemes in the UK and Spain have been operational for well over half the contract period, there is scope for a detailed comparison of DBFO performance in both countries and an analysis of how the DBFO model has evolved. Using the information gathered from 17 UK and 29 Spanish DBFO schemes, the objective of this paper is an ex post evaluation of the financial performance of the DBFO model since it was implemented in both countries, with empirical evidence aimed at understanding the similarities/differences between schemes in both countries, how these have affected financial performance and which stakeholders are beneficiaries. Preliminary results show that these contracts continue to be very expensive for public administrations, especially in the UK, where the financing costs and fee per kilometre are high. On the other hand, they are an easy source of revenue for the parent companies of the concessionaires, due to financing charges being higher than those paid to external financing entities. Despite circumventing the controversial hard-tolling, some projects present poor outcomes. Whilst they may be well designed technically, location and/or forecast traffic volume may be poor. National characteristics are also important and can influence project performance. Several other problems around these projects are identified, including lack of public accountability and transparency or poor governance, raising long-term questions around affordability.