Government overhaul leaves Portugal’s PFI sector in turmoil

The Portuguese PFI market, a source of rich pickings for UK lawyers, has hit a hiatus after December’s sacking of the centre-right government.

The regime, led by Pedro Santana Lopes, had been in office for only six months before Portuguese president Jorge Sampaio dismissed the government and called for early elections.

The intervening period has left Portugal without an effective government, and a raft of PFI projects languishing in the political vacuum.

In September 2004, the Lopes administration announced its decision to move away from ‘shadow toll’ toward ‘real toll’ projects. Under the shadow toll system, the government pays an agreed amount to the private sector, designed as a protection if usage on the road, and thus toll revenue, dips. Under real toll projects, the financial and revenue risks rest wholly with the private sector.

The decision was to see seven existing shadow toll projects renegotiated. Law firms were gearing up to tender for roles in the renegotiation process.
The Socialist Party has a clear lead in the opinion polls and looks certain to replace Lopes in February’s elections. Its view on the renegotiation of existing PFI road toll projects is not clear.

One lawyer active in the Portuguese market said: “There’s a double uncertainty as to which government will do what.”

A number of project refinancings are also on hold. Around a dozen road toll projects have been stalled, leaving lawyers and other participants in the PFI market awaiting the outcome of the election.