| S&P warns of long term risks linked to Spanish infra sector

S&P warns of long term risks linked to Spanish infra sector

Spain could still be a good place for infrastructure investors to invest this year, but there are long-term issues that need to be addressed, according to a Standard & Poors report published on Monday (8 February).

Political uncertainty following the December 2015 general elections is unlikely to affect the country’s infrastructure sector this year. S&P said: “We do not expect the political situation to hurt the infrastructure market this year because the government's budget has already been approved.”

However, it added that the elections' results suggest a weaker government than investors have been accustomed to in Spain.

The elections revealed a fragmented political landscape, with no outright majority and uncertainty over whether a new government will be formed any time soon, despite last week’s designation of the leader of the Socialist Party to form a new government.

Also, despite the 2015 improvements in the Spanish secondary market, S&P said that “still weighing on the market is the lack of long-term mandate for infrastructure planning”.

According to the rating agency’s infrastructure analysts, new PPP projects are unlikely to be procured this year regardless of the government. “Due to the time required to prepare the tendering process, significant activity on greenfield projects is also unlikely to materialize in 2017,” the report added.

S&P also warned of the issues of badly structured investments as seen in recent years. Major projects went bankrupt in Spain, such as the Perpignan-Figueras HSR concession which filed for bankruptcy last year; and eight motorway concessionaires which are now in bankruptcy proceedings and whose fate remains uncertain.

The report added that in the case of brownfield projects, their performance is tied to the performance of the economy rather than to political developments. “However, we believe a prolonged period of political uncertainty may jeopardise the recovery of the sector on the secondary market,” the report concluded.