Public/Private Partnerships in Portugal

Introduction

The Portuguese equivalent of Public/Private Partnerships started in the early nineties with the construction of the second Tagus Bridge, one of the longest bridges in the world.

Between 1997 and 2002, several projects for the development of a major road construction programme achieved closure, worth 8.200 million euro.

In August 2002, the Portuguese government announced the construction of 10 new hospitals under public/private partnerships, with investments in excess of 2.000 million euro.

Background: Project Finance in Portugal

Portugal has since the early nineties been familiar with the concept of project financing under BOT (build, operate and transfer), DBFO (design, build, finance and operate) or the most recent PPP (public private partnerships). The following were the main projects that were closed during the nineties:

Tapada do Outeiro and Pego power plants. The power plants in Tapada do Outeiro (990 MW) and Pego (600 MW) were two of the largest non-recourse projects in Portugal.

The second Tagus Bridge. The construction of a second crossing over the Tagus river is to date the largest single infrastructure project ever undertaken in Portugal, costing approximately 960 million USD. In order to ensure financing, the concession of the old Tagus bridge was granted to Lusoponte, the consortium that built the second bridge named Vasco da Gama. To a certain extent, the second Tagus bridge served as the blue print to the DBFO road programme.

The DBFO Road Programme. The development of a major road programme of approximately 1,500 Km and costing approximately 8.200 million euro was initiated in 1997 under a DBFO scheme. A substantial part of the projects would be financed by shadow tolls and entailed no cost to the user. The SCUT Road programme, as it was named, was divided into 14 different projects which were awarded by public tender to consortia involving the major Portuguese and Spanish construction companies and leading banks.

The PPP for the health sector. The Amadora-Sintra hospital servicing approximately 600.000 persons in the Lisbon area was built in the early nineties with recourse to private financing. This, however, was not a public/private partnership in the strictest meaning of PPPs in the United Kingdom where they first appeared, as the government first commissioned and paid for the construction of the hospital, which was subsequently sublet to the operating company José Manuel de Mello Saúde. In any event, this was an example of private management of public hospitals and of the benefits of private management of hospitals, serving as model to the development of public/private partnerships in the health sector. In August 2002, the Portuguese government enacted a framework law governing the development of public/private partnerships for the construction of new hospitals, under which it plans to build 10 new hospitals. It also plans to amend the National Health Service Framework Law to allow the provision of health services to the National Health Service (Serviço Nacional de Saúde) by private hospitals and privately managed public hospitals.

Setting up the PPP Project

With the number of projects built under PPP schemes, a set of standardised procedures was developed which is generally viewed as striking the balance of the public interest and project company's objectives, as well as being "bankable". Broadly described, the following are the steps required for the setting up of a PPP in Portugal:

Enactment of the regulatory framework for the development of PPPs in the relevant sector. When the government intends to develop several different projects within the same sector, it will first establish the framework regulations for the development of PPPs in such sector and then specific regulations for each of the projects to be constructed and operated by the private initiative. This was the case of the National Road Programme built under the SCUT scheme and will also be the procedure used for the development of PPPs in the health sector. With respect to projects for the construction of a single facility or...