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Portugal's Investment Model Evolution: A Path to Sustainability

Within the last decade, Portugal has allocated state investments predominantly to railways and highways, enhancing its global competitiveness. Despite the positive impact on international positioning, challenges persist, and a substantial funding gap hinders sustainability. Strategic measures implemented between 2012 and 2014 addressed the mounting debt, but the need for a more integrated and economically efficient financing model prevails. Looking ahead to 2020, the focus lies on initiating an intermodal revolution to optimize infrastructure utilization and enhance operational efficiency. The transition encompasses organizational restructuring, revamped funding strategies, and a fresh approach to concessions, prioritizing rail development and asset valuation. The ultimate goal is to achieve a balanced and sustainable investment framework that aligns incentives and risk-sharing mechanisms for public and private entities.

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Portugal's Investment Model Evolution: A Path to Sustainability

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  1. InvestmentRail andRoadPortugal ASECAP António Ramalho, CEO EP/REFER Lisbon, 29 May 2015

  2. Investment Model – 10 years In the last 10 years the State has invested 1/3 in railways and 2/3 in highways This trend deepened in recent 5 years: 25% - 75% This investment volume has significantly improved our international competitive position Road Network Rail Network Source: World Economic Forúm The Global Competitiveness Report 2014 - 2015 However the investment hasn't stopped the traffic reduction and the unbalance between modes

  3. Financing Model Total=1.831M€ Total=754M€ • Non-Sustainable Model • Weak Integrated Planning • Weak Economic Performance • However there is investment capacity Funding Gap 7.2M 3.4M

  4. TheRoad to sustainability 2012-2014

  5. The measures introduced between 2012 and 2014 reduce the peak net debt of 27 B€ (2035) to 7 B€ (2029), and the Net Debt / Ebitda of 21x to 8x(1)… 26,7 B€ 21,0X 7,8X 7,4 B€ (1) October 2012 business plan adjusted to the current projection tolls

  6. … due to the renegotiation of PPP's, the strong reduction in operating costs and the confidence of the Shareholder, realized on share capital increase (2)(3) ReportingYear: 2035 Billion € • Comparison of October 2012 business plan adjusted and the last EP business plan (Fev15) • The calculation of savings includes the capitalization of interest

  7. The New Challenge 2015-2020

  8. An Intermodal Revolution 1. System organization 3. System funding • Strategic Planning • Merger of the Representations • Integrated Regulation • Common Procurement • Transferof Dark-Green Funds • Access integration and value capture • Asset optimization 2. System operation 4. Capabilities valuation • Operational Planning • Single Corporate Management • Integrated Management of supply • Port-Interland expansion (co-modality) • Creation of Intermodal Competence Centers • Integrated Internationalization • Refunding of conservation engineering

  9. A New Model of Management 1. A New Model for Concessions 2. A New Set of Priorities • Motorways not Roads • Risk should be shared not transferred • Commercial Risk allocated to Private, Financial Risk allocated to Public • Who pays defines the selling proposition • To investors: liquidity • To the grantor: sustainability 3. A New Business Approach • Sharing risks • Alignment of incentives

  10. Priority to Rail Investment M€ M€

  11. Priority to Asset Valuation Usage Fee Revenue Increase Concessions Cost reduction Procurement CSI Tolls Asset valuation Headcount Net Debt Non-core Business Facilities 2040 2014 Base Scenario Ambitious Scenario

  12. Priority to Road Maintenance Evolution of the road fatalities in Portugal PRN2000 - 85% concluded Portugal: -48% (-521 VM) RR Nacional: -58% (-390 VM) Rede EP, SA: -61% (-354 VM) Rede Municipal: -31% (-131 VM 2005/2012 86% 55% 98% 100% Pavements Maintenance Bridges Maintenance

  13. Priority to International Rail Freight Atlantic Corridor • Priorities • Conclusion - CorridorSines- Caia/Madrid • Design andBuilding -CorridorAveiro - Vilar Formoso/Salamanca • AtlanticLine Sines-Vigo • Interoperability Iberian Plan - UIC Gauge + ERTMS • Electrification • Circulation of trains with 750 m • Increase capacity for 1.400 tonneswith simple traction in national and international freight connections Non-electrified sections Change of gauge Limitations of hauled load Lack of capacity

  14. antonio.ramalho@estradas.pt

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