Bankrupt PPPs: Is it really so bad? Case study of R-3 and R-5 toll motorways in Spain

PPP projects that go bankrupt come to early termination and are usually considered a complete failure. While it is true that this outcome is catastrophic for the project shareholders and creditors, it may not be the case for other relevant stakeholders, such as the granting authority, users and society as a whole. Assessing the global outcome of the project requires several detailed ex-post analyses, such as financial analysis, cost-benefit analysis and value for money analysis. Unfortunately, these analyses are seldom performed. To illustrate this point a case study was analysed: the PPP contract for two toll motorways (R-3 and R-5) and a segment of a ring road (M-50) in the vicinity of Madrid, Spain. The results show that the cost of the project to the Government, although higher than estimated on the pre-feasibility study, will be significantly lower than the first and hasty estimates. The project, despite a lower demand than initially expected, is still highly beneficial to society. Finally, using a PPP for this project has allowed the Granting Authority to avoid risks that have materialized with an important cost.