Around the world with ACCIONA Concessions

If Jules Verne imagined it would take 80 days to travel around the world, Juan José Clavería and Alberto Díaz del Río have discovered it can be done in just a week. When, 20 years ago, they got to know each other in South Africa — commissioning a motorway from Johannesburg to Pretoria — neither of them yet worked in ACCIONA, but they were united by their passion for the world of concessions … as well as transoceanic journeys.

Now they are an essential part of the team that has taken the company into the Top 20 infrastructure operators in the world, with a portfolio of 24 concessions distributed across three continents and involving investments totaling 9,000 million euros and including 1,250 km of roads and 3,500 hospital beds.

The volume of work associated with all the concessions ACCIONA has been involved in throughout its history now amounts to almost six billion euros, projects half of which were built by the Company’s own Construction  division. Financial results also testify to the quality of ACCIONA Concessions. The latest quarterly return reflects a revenue increase of 4.7% and, more importantly, 22.9% growth in Gross Operating Profit (Ebitda).

ACCIONA  has a significant competitive advantage in complex works with a big design velement

The key to success

The key to this success could be the ideal combination of engineers and economists that make up the team, the reputation the company has earned in the sector, its global character and the capacity to develop big infrastructure projects, and so on. Juan José Clavería, director of Concessions, sums it up as follows: “The figure of the concessionaire c onstructor is changing into what we call a developer. Pension and infrastructure funds have the capacity to invest, but not to manage. We — the concessionaire-constructor groups — have both.”

According to Mr Clavería, although finding the financing in the concessions world continues to be an important challenge, “today the most important thing is the capacity to develop projects, to move them forward.” Juan José Clavería believes that ACCIONA also has a significant competitive advantage in complex works with a big design element. “Wherever there is design, you will find us, and good design often allows you to optimize the price for the construction and operation.” A secret of Concessions’ success, adds Alberto Díaz, the company’s global business development head, “is to invest a little, and build a lot… and doing that for many clients in many countries.”

The company should grow again in 2016, as it sticks to this successful globalized model and opts to pitch for the best and biggest projects wherever they are in the world. Indeed, ACCIONA has earmarked some 50 new concession project opportunities worldwide for the coming year. All will be analyzed and offers made for many. “We are pre-qualified for half of the calls for tender we bid for. And, historically, we end up winning every one out of two of those,” says the Concessions team. Not a bad success ratio in a sector where competition is increasing by the day. To the big Spanish construction groups — which enter the fray for the majority of contracts — one must add the sector’s giant French players and other strong European and Latin American companies. And then there are the local companies that often end up being partners in the projects .

It is essential in concessions projects to have the capacity both to develop and manage them

A  complete portfolio

ACCIONA currently has many roads and hospitals in its portfolio. The most important road projects include several in Canada: the South East Stoney Trail highway in Calgary, which involves an investment of some 430 million euros; Windsor Essex Parkway in Ontario, more than 1.1 billion; and the A-30 in Quebec, over 1.5 billion. In Australia, the Sydney Light Rail Project stands out at over 1.1 billion euros and, in consortium, Toowoomba highway, over a billion euros too. In Latin America, Route 160 in Chile and the BR-393 in Brazil are the best known.

As for hospital concessions, the portfolio contains Fort Saint John in Canada, Bajío in Mexico, and the Toledo, Vigo and Ibiza hospitals in Spain. Also in ACCIONA’s domestic market, we have the Infanta Sofía Hospital and the Hospital del Norte, the latter becoming one of the best hospital centers in the whole Madrid region, and which Mr Clavería cites as one of the most important concessions in the history of the Company.

“It is emblematic, our demonstration to  the rest of the world, magnificently managed,” he declares. Sydney Light Rail will be another milestone in his opinion: “We are building it in George Street, the Calle Serrano (Madrid) of the Australian capital.” But he believes that the best project in ACCIONA’s history will go down as being the Vespucio Sur motorway in Chile. “The whole project from start to finish was a total success,” he enthuses.

AUSTRALIA & ASIA, CONSOLIDATION AND NEW CHALLENGES

In Australia, the last two bids by the company were both successful: the Sydney Light Rail, and the Toowoomba motorway. But we will have to wait a while now for new projects to come up again in the country. Now there is an opportunity in New Zealand. “There we are pre-qualified for a highway worth some 600 million dollars and we hope to present an offer for it in March 2016,” explained ACCIONA Concessions director Juan José Clavería, for whom South-East Asia, mainly Singapore and Philippines, could also offer interesting alternatives for the future.

NORWAY & OTHERS ALTERNATIVES IN EUROPE

Excluding Spain, where ACCIONA has had a high percentageof success with recent bids and where “in the short term thereis almost nothing new”, the concessionaires have gone back to studying the rest of the European market, which is picking up again after the past five or six years of stagnation. “In the United Kingdom — including each of the separate countries that make up the kingdom — there are various projects in the pipeline and ACCIONA has signed collaboration agreements with local partners to present offers for opportunities as they are published”, explained the ACCIONA Concessions director.

He believes the Dutch and German markets could present opportunities, too, “although the two difficulties we have is that the calls for tender are in their languages and it is complicated finding local partners”. Another market where opportunities might emerge is the Czech Republic, although there are few projects in Poland at the moment. Another market that could offer interesting possibilities is Norway, where ACCIONA won, in consortium with Italy’s Ghella, a contract for the design and construction of 20 km twin tunnels on the Follo Line, one of the biggest infrastructure projects in the country’s history. The first quarter of 2016 will see the publication of Norway’s concessions programme, for which ACCIONA is currently positioning itself to bid for contracts. “Following the success of the Follo Line, Norway welcomes us with open arms,” Mr Clavería said.

FROM PPPS TO PRIVATE INITIATIVES IN LATIN AMERICA

Public-Private Partnership (PPP) projects are sometimes unfairly and erroneously described as signifying All the Risk for the Private Sector . Rest assured, this is just an anecdote. “The reality,” explains Juan José Clavería, “is that, when you talk about Pubic-Private Partnership, the risk has to be balanced.” In his opinion, there are risks you can assume and others that you clearly cannot. The partnership must be based on the principle  of economic and financial balance in the contract.

There are, in essence, three risks to a concession: construction, operation and financial, points out Alberto Díaz. In his opinion, “although financing is more expensive in theory for the private than public sector, if the two first risks are transferred to the private sector, we all win in the end”. Another advantage of PPP projects, said Mr Clavería, “is that, in the short term, there are certain projects in which the Administration could not otherwise invest.

There’ll be a big PPP push in Chile this year, a total of six projects,” Mr Clavería pointed out. Among them, Vespucio East, the joining up of the Santiago de Chile ring. “Generally, it will consist of big road projects, since the hospital sector no longer wants concessions,   ACCIONA Concessions’ director explained. As well as PPP, ACCIONA Concessions recently began exploring what is known as the “Private Initiative” option.

This is a model in which the private company is the one that proposes the project to the Administration; if it accepts, it is put out to tender and, in certain cases, you can have a competitive advantage in terms of score,” the director explains. The most active market for this model is Peru, for which ACCIONA has presented six proposals. Three roads that were rejected by the Peruvian Government and three projects which could be accepted during 2016: one includes a hospital; another two hospitals, and; a third consists of an irrigation project. The most advanced project, however, is the Cayetano Heredia Hospital, which might be agreed upon within the next few months. Another Private Initiative currently proposed by ACCIONA involves a hospital in Mexico. Other opportunities for this model lie in the Colombian market. As well as Private Initiatives, there are other types of tenders. There was a boom in calls for roads, which we analyzed at the time and weren’t convinced, but a third wave is foreseen and we will study it, declared Mr Clavería.

A RICH VEIN IN CANADA

Canada is one of the ACCIONA Concessions’ star markets to date. The company’s portfolio there currently includes top projects such as the South East Stoney Trail highway in Calgary; the Windsor Essex Parkway in Ontario; the A-30 in Quebec, and; Fort Saint John Hospital in British Columbia. Together these add up to a total investment of almost 3.3 billion euros. The company has also just received pre-qualification for the Finch Light Rail in Toronto and has applied for pre­ qualification for two other projects it should find about in the weeks to come: the Gordie Howe International bridge that will join Canada with the United States, in which 2.2 billion euros is being invested, and; Highway 427, also in the Toronto district.

“On top of all this, there will be more opportunities now that the Government that won the recent Canadian elections clearly favors public-private collaboration,” said the director of ACCIONA Concessions. He believes “the main challenge in the Canadian market is that it is very mature, complicated, and with lots of competition.”