The Brisa/Soares da Costa-led ELOS sponsor group was named preferred bidder for the second time on the Eu1.5 billion ($2.02 billion) Poceirao-Caia high speed rail pro­ject in Portugal in January 2011. The deal originally reached financial close in 2010 but was not drawn because of a ruling by the Portuguese Accounts Court. Finan­cial close for the new deal – effectively the same financing with a little more risk – is imminent.

Poceirao-Caia is the first stretch of the Portuguese side of the high speed link between Lisbon and Madrid. The result of the re-tender was as expected given that the ELOS group was originally awarded the project and has acceded to all of the requests of the Portuguese Accounts Court to shift more risk from the state onto the private parties. 

The Accounts Court had informed the state that it would not grant the project its consent (visto previo) for the original financing because the risk apportionment of the project was changed part-way through the tender. As part of a compromise to appease the Accounts Court, the ELOS consortium has rolled back the con­cession terms to those originally present­ed by RAVE to bidders at the start of the tender but were subsequently altered dur­ing the bidding phases.

The ELOS consortium, its lenders and the engineering procurement and construc­tion (EPC) contractors made three large revisions to the concession documents that were used for the original financing in May 2010. Firstly, in the original fin­ancing the state guaranteed half of Eu600 million EIB financing. This is cancelled and replaced by a guarantee provided by commercial banks for a maximum amount of Eu315 million. Secondly, as a device to lower hedging costs the state had assumed foreign ex­change risk at year 5. This is replaced by a forward start swap that fixes the interest rate from the end of the first 5 years until maturity so that commercial banks are covering all of the interest rate risk.

And thirdly, the concessionaire fully assumes the archaeological risk. This risk is fully passed down to the construction con­sortium via the back-to-back mechanism of the EPC contract. In the original financing the concessionaire would be entitled to a financing rebalancing whenever the grantor imposed a change of route if some archaeological findings would require a new environmental impact study. The biggest compromise is being made by the project’s contractors because of this sizeable risk. The contractors are Soares da Costa, Iridium/Dragados, Odebrecht, Edifer, Lena and Zagope.

In return for accepting more risks the concessionaire will receive availability payments around 5% higher than the first winning bid. The NPV of the original deal was Eu1.47 billion and this will increase to around Eu1.55 billion, with the exact figure depending on swap costs at signing. The construction cost was actually slight­ly decreased mainly through smaller de­signs for the Évora train station.

Financial close is expected early Febru­ary. The Mota-led group is thought to have submitted its original best and final offer with an NPV of Eu1.575 billion, without making amendments on the risk transfer in the project.

The new financing will mirror the origin­al financing, save for the acceptance of more risks as outlined above. The original deal closed 8 May 2010 and comprised a 33-year Eu600 million facility from the EIB, a Eu174 million commercial bank tranche, Eu122 million of equity and Eu688 million in EU TEN-T and cohesion fund sub­sidies. The debt-equity ratio was 85/15, the aver­age debt service ratio was 1.20x and the loan life cover ratio was 1.25x.

The banks are CaixaBI, Millennium BCP, BES, Santander and BNP Paribas. Margins on the term loan start at 300bp during the 48-month construction period, which is covered by the sponsor guarantees, then rise to 325bp during operation and up to 350bp after 4.5 years. The upfront arrangement fee is 275bp. The average life is 20.3 years.

?Status: Original financial close May 2010, second financial close due early February 2011
Size: Eu1.5 billion
Location: Portugal
Description: financing for 40-year construction and operation concession of the 170km Poceirao to Caia portion of the Lisbon to Madrid high speed rail route
Sponsors: Brisa (16.30%), Soares da Costa (16.30%), Iridium (15.22%), Lena (13.04%), Odebrecht (13.04%), Edifer (7.61%), Zagope (7.61%), BCP (5.44%) and CGD (5.44%)
Financial advisers: CaixaBI and Millennium BCP
Mandated lead arrangers: CaixaBI, Millennium BCP, BES, Santander and BNP Paribas
Multilateral: EIB
Sponsor counsel: Vieira de Almeida & Assoc.
Lender counsel: Uria & Menendez (public law), Campos Ferreira, Sá Carneiro (finance documents)
Sponsor technical: Systra
Lender technical: Arup
EPC contractors: Soares da Costa, Iridium/Dragados, Odebrecht, Edifer, Lena and Zagope