2008-05-23

The Portuguese Ministry of Public Works, Transport and Communications intends to keep his promise to launch the call for international public tenders for the construction and operation of the first section of the link Lisbon/Madrid (Poceirão/Caia) in June 2008, which also comprises the construction of a common rail track between Caia and Évora. This section of the project should represent an overall investment of 1,700 million euros.

The call for public tenders for the construction and operation of the section Poceirão/Lisbon should be launched in the last quarter of 2008.

According to the Minister of Public Works, the award of the tenders should take place in the second semester of 2009, due to the technical complexity of the project.

The Portuguese High Speed project is expected to represent an overall investment of approximately 8,000 million euros and has been attracting the attention of several local and international contractors, operators, infrastructure funds and banks.

Market sources report that Mota-Engil, Somague and, presumably, Teixeira Duarte, three of the largest Portuguese construction companies, will form one of the consortia that will bid in the high speed train projects.

Brisa, the largest Portuguese motorway operator, BCP, BES and other main Portuguese contractors, which may include Bento Pedroso, are also reported to be finalising the formation of a second consortium. It is likely that TIIC - Transport Infrastructure Investment Company, the infrastructure fund formed by Brisa, Millennium Investment Banking and La Compagnie Bengajmim de Rothschild, will be one of the members of this group.

Other local and interantional players, including among others Soares da Costa, Dragados, FCC, Cintra, Ferrovial, OHL, Bouygues, Vinci and Eiffage should also join the existing groups or form new consortia to bid in upcoming tenders.

It is expected that there will be at least three but most likely four or more groups will be bidding in the Portuguese high speed projects.

According to the business model announced in 2007, the project will be divided into six concessions, with the duration of forty years. The construction of the infrastructure will be split in five sections of the rail network, each awarded to a different consortium:

(a) Two sections of the link Lisbon/Oporto;

(b) Two sections of the link Lisbon/Madrid; and

(c) One section of the link Oporto/Vigo.

The telecommunications and signalling systems will be commissioned and operated by a separate entity.

The operation of passengers’ service will be carried out by private operators operating the rolling stock under a lease from the Portuguese State.


© 2008 Macedo Vitorino & Associados

2008-05-14

The environmental report submitted by the National Laboratory of Civil Engineering (Laboratório Nacional de Engenharia Civil – LNEC) confirmed that there were no environmental obstacles that could lead to the reversion of the Government’s preliminary decision to build the new Lisbon international airport (NLA) in Alcochete.

The next step will be the sbmission of an environmental impact report that confirming the compliance of the project with EU environmental rules, which is expected to be completed in the coming months.

Following the formal approval of the change of location by the Council of Ministers, the Portuguese Government will request to the European Commission the confirmation that the funds that had been committed by the Eurpean Union to the construction of the airport in OTA can be used for the construction of the NLA in Alcochete.

The Minister for Public Works, Transport and Communications announced that the construction of the NLA should be completed in 2017, in accordance with the initial schedule and that the launch of the public tender for the design, construction and operation of the NLA should take place in 2008.

Up until now, the transaction model approved would involve the privatization of ANA – Aeroportos de Portugal S.A. (ANA), the State company responsible for the operation of several Portuguese airports (which includes the renegotiation of the concession for all airports now operated by ANA, namely the Oporto, Faro, Ponta Delgada, Horta, Santa Maria and Flores ariports) and the concession for the planning, construction, financing and operation of the NLA.

The NLA project involves an overall investment of approximately €4,900 million, which has been attracting the attention of several local and international contractors, operators, infrastructure funds and banks.

In 2006, Brisa, the main highway concessionaire in Portugal, Mota-Engil, one of the largest Portuguese construction companies, and Somague, also one of Portugal’s main contractors, now controlled by Sacyr, together with Banco Espírito Santo, Millenniumbcp and Caixa Geral de Depósitos formed a consortium named Asterion, with the intention to bid for the NLA.

Meanwhile, other entities that are reported to be interested in this project include local contractors, Teixeira Duarte, MSF, Edifer, Bento Pedroso, Construtora do Tâmega, Alves Ribeiro, Zagope, OPCA, Grupo Mello, Efacec or Soares da Costa, as well as international players, such as Fraport AG, Vinci, Transdev, Airports of Paris, which has already participated in some of the developing stages of the NLA project, Dragados, BAA, Ferrovial, Bouygues, Albertis and Macquarie.

If you want to receive Macedo Vitorino & Associados briefing on the NLA project, please send an email to any of the contacts above.


© 2008 Macedo Vitorino & Associados

2008-04-15

1. Introduction
The main public works projected by the Portuguese Government for the forthcoming years will require an investment over 16,000 million euros until 2015 and will be carried out under public-private partnerships (“PPP”) schemes.
The key decisions in respect of the high-speed rail network, including the third bridge over the Tagus River, the new Lisbon airport (“NLA”) and the conclusion of the National Road Programme have been made and the first public tenders have already been launched.

2. High-speed rail network
The Portuguese high-speed rail network project will represent an overall investment of over €8,000 million. The announced business model comprises six PPPs divided by the several sections of the lines Lisbon/Oporto, Lisbon/Madrid and Oporto/Vigo. Telecommunications and signalling systems will be commissioned to a separate entity.
The first public tenders are expected to be launched during the current year and the high-speed rail network should be operational in 2015.

3. New Lisbon airport
The construction of the NLA, in Alcochete, will represent an investment of around €4,900 million. The business model disclosed by the Government combines the privatization of ANA – Aeroportos de Portugal, S.A. and the awarding of the concession for the planning, construction, financing and operation of the new Lisbon airport during 30 years.
The final approval of the location of NLA, which was decided early in 2008, caused slight delays to the original project and forced the redefinition of the high-speed train route. However, the public tender is expected to be launched in the second semester of 2008.

4. National Road Programme
In December 2007, the Portuguese Government announced the launch of several road subconcessions, in an estimated investment of €3,100 million.
The public tenders for the Trás-os-Montes Motorway, the Douro Interior, the Baixo Alentejo, the Baixo Tejo, the Centre Motorway, the Litoral Oeste and the rehabilitation of EN125, in Algarve, were already launched. All these roads should be completed and operational in 2012.

5. Hydroelectric dams
During this month of April, the Portuguese Government will launch the public tenders for the construction and operation of nine hydroelectric dams, representing an overall investment of around €1,500 million. The new infra-structures will increase the domestic capacity of producing electric energy based on renewable resources around 1,144 megawatts and should be completed in 2015.  

© 2008 Macedo Vitorino & Associados

2008-03-24

The Portuguese Government has announced three new road concessions which will be launched in March in connection with the conclusion of the National Road Program (NRP): the concession for the rehabilitation of the National Road 125 (EN125), the Litoral Oeste concession and the Centro motorways concession.
The construction and renovation of these roads will be carried out by the private sector operating under the concessions to be awarded by EP - Estradas de Portugal, S.A. (EP), the public undertaking that is now responsible for managing and operating the Portuguese road network on behalf of the State.
The improvement works on the 153 Km national road EN125 which crosses the entire district of Faro, in the Algarve, includes the widening of the road, the construction of gravel traps for local traffic and the installation of a signaling and speed control systems along the entire road.
The Litoral Oeste concession will connect A1 and A8 near Leiria (IC36) by motorway and will also include the IC9, between Nazaré and Tomar, and the IC2 to Batalha. Under this concession, 80 kilometers of new roads will be built, in an overall investment of around 260 million Euros.
The Centro motorway concession includes the construction of new motorway stretches to the IP3, between Coimbra and Viseu, to the IC2, between Mealhada and Oliveira de Azeméis, and to the IC12, between Mortágua and Mangualde. 191 kilometers of motorway will be built, which represents an investment of 740 million Euros.
The public tenders for each of these concessions should be launched by the end of March, although the actual dates have not been announced. The public tender for the award of the Alto Alentejo Motorway Concession will only be launched in the second half of 2009.
As part of the NRP, the international public tenders for the award of the Transmontana Motorway, Douro Interior, Baixo Alentejo and Baixo Tejo concessions that were launched in 2007 are now in the bidding phase and should be awarded before the end of 2008.
According to the Government plans, all new road concessions should be completed in 2011, except the Alto Alentejo concession, which is expected to be completed in 2112. From the 547 km of new motorways, 369 km will be tolled and 178 km will not. By 2012, 75% of the NRP should be completed.
Given Portugal’s long experience in PPP road concessions, several local and international investors, contractors and banks will be interested in these projects. However, unlike the former road concessions that were granted by the State, the public sector obligations under the new concessions will be performed by EP, now a limited liability company, which could raise some issues as to whether there is any legal recourse against the State should EP default on its obligations.

© 2008 Macedo Vitorino & Associados

2008-01-18

1. The approval of the 2008 Budget law
The final version of 2008 State Budget published by Law 67-A/2007 of 31 December 2007 (2008 Budget Law) reflected substantially the Bill submitted by the Government, with minor changes to the initial proposal. One of those changes is the obligation of the State to pay default interest in case of delay in the refund of taxes.
In general, the 2008 Budget Law continued the tax policy followed in the year 2007, although it has approved a cut of the tax burden in certain cases.
2. Relevant changes approved by the 2008 Budget law
With respect to Portuguese personal income tax (IRS), the 2008 Budget Law updates the intervals used in the calculation of the IRS and increases the tax burden over pensions.
Nevertheless, there is a reduction of the tax burden over households and non-residents, whose income from employment or professional activities or pensions obtained in Portugal is now subject to a reduced rate of 20%.
Regarding Portuguese corporate income tax (IRC), we should highlight the following changes, among others:
(a) Reduction of IRC rate in the municipalities located at the interior, from 20% to 15%, for companies already incorporated, and from 15% to 10%, for companies to be installed in those municipalities;
(b) New temporary tax benefits applicable to the implementation of actions for the rehabilitation of urban property;
(c) Approval of the tax rules applicable to "investors in venture capital" (Investidores de Capital de Risco) which is basically the same applicable to Portuguese venture capital companies;
(d) Revision of withholding tax rules applicable to payments to non-residents and extension of the exemption applicable on dividends paid to entities resident in the other European Union countries, and
(e) Possibility to enter into transfer pricing agreements with the Portuguese tax authorities.
Regarding Portuguese valued added tax (IVA), we should highlight:
(a) Changes to the lists of reduced and intermediate rates; and
(b) A change on the rules applicable to the waiver of the VAT exemption applicable on the lease of buildings was also amended.
Although the 2008 Budget Law introduced some tax innovations, some of them still need to be tested, as is the case of transfer pricing agreements, which did not exist in the past in Portugal.

© 2008 Macedo Vitorino & Associados

2008-01-11

1. The decision on the location
After several years studying alternative locations, the Portuguese Prime Minister, José Sócrates, announced yesterday that the new international Lisbon airport will be built in Alcochete, on the southern bank of the Tagus river.
The decision to change the location of the new Lisbon airport was taken following the presentation of a comparative study prepared by the National Laboratory of Civil Engineering (Laboratório Nacional de Engenharia Civil – LNEC), which concluded that the new location would be preferable to OTA, which was the location where the airport was to be built.
According to LNEC, the choice of Alcochete is preferable to OTA in four of seven criteria, namely, air safety, sustainability of the natural resources, social and economic growth and competitiveness and financial costs. OTA only overcame Alcochete in three categories: the preservation of natural environment and biodiversity, transportation facilities and existing accessibilities. According to the estimated made by LNEC, the construction of the new airport in Alcochete should cost €4.9 million, €200 million less than in the OTA project, which was estimated to cost €5.1 million.
2. Implications of the decision
The construction of the new Lisbon international airport in Alcochete will require changes to the route of the high-speed rail network, which had been planned on the assumption that the new infrastructure would be built on the northern bank of the Tagus.
The new location may also affect the European structural funds that had already been allocated to the original project. However, the Portuguese Government believes that the EU Commission will support the project.
The choice of Alcochete will also lead to the revision of the future location of the third crossing over the Tagus river, which is now expected to link Chelas and Barreiro. According to the Government’s briefing of yesterday, this new bridge will include a motorway and a high speed rail track.
3. Future developments
The Minister for Transport and Public Works announced that, although the construction works might commence later, the timetable should not be reviewed so that new airport is operational in 2017.
Following this announcement, the Government will commission a final study on the environmental impact of the construction of the new airport in Alcochete as required under Portuguese and European law.
In any case, it is unlikely that the Government would go back on this decision, as, according to various reports on the issue, although the construction of the new airport in the south bank of the Tagus the environmental impact of the project should be acceptable and can be mitigated.

© 2008 Macedo Vitorino & Associados

2007-11-20

1. The facts
In 2005, the National Service of Fire-fighters and Civil Protection launched an international tender for the supply of forest fire fighting services involving the use of six helicopters and other related services.
Unlike other previous tenders, in which two different bidders – Aeronorte and Helisul – presented separate bids for these services, in 2005, these companies decided to create a consortium and presented a joint bid with a price increase of 93% in relation to 2004’s best bid.
As a result of the price increase, the Portuguese Government decided to annul the tender and to seek other solutions through the launching two new tenders using other types of fire fighting air equipment.
2. The procedure
After the press news concerning the annulment of the tender, the Portuguese Competition Authority decided to open an investigation to examine an alleged collusion involving the bidding consortium.
The Competition Authority concluded that Aeronorte and Helisul had presented a joint bid with the purpose of preventing, restricting and distorting the competition in the relevant market. The agreement leads to the elimination of the competitive pressure through the coordination and sharing between Aeronorte and Helisul of the supply of services and goods, the decrease in the number of bidders from two to one and an unjustified increase of the bid price.
3. The decision
Although the tender did not lead to a final award, the Competition Authority considered that this did not prevent the application of the Portuguese Competition Law and that the agreement entered into between Aeronorte and Helisul contravened article 4/1 the Portuguese Competition Law, as it prevented, restricted and distorted the competition to fix the prices and other commercial terms and conditions.
As a result, the Competition Authority applied fines of €179,933.38 to Aeronorte and €128,539.77 to Helisol, corresponding to 10% the annual aggregate turnover of each company, which is the maximum allowed by the Portuguese Competition Law.
Although it is expected that Aeronorte and Helisol will now appeal from the decision of Portuguese Competition Authority to the Commercial Court of Lisbon (Tribunal de Comércio de Lisboa), and whatever the outcome of this appeal might be, this decision opens a precedent in public procurement cartels evidencing the Competition Authority’s determination in fighting cartels and other restrictive practices in a series of decisions that defy the tradition of Portuguese regulators.
© 2007 Macedo Vitorino & Associados

2007-09-11

 

A review by researchers at Brown University placed Portugal in the seventh position of the e-government strategy ranking. This review graded the governmental achievements in the use of information technologies regarding the exchange of information and services with citizens and companies.
The Brown University ranked 198 countries worldwide based on its e-government capability. To that purpose, the researchers analysed the governmental web sites according to several criteria, including available publications, databases, disability access, privacy, security and number of online services provided.
The seventh position achieved by Portugal is an outstanding result, especially when compared with the previous ranking, published in 2006. In one year, Portugal rose from the forty-eighth position to the seventh position and is presently the second best European country concerning e-government, following the Great Britain (in the 5th place). The highest places of the podium were awarded to South Korea, Singapore, Taiwan and United States of America, respectively. Canada was sixth.
This accomplishment was especially due to the recent efforts of the Portuguese public authorities regarding the simplification of the public services’ procedures, namely through the programmes “Simplex” and “Ligar Portugal”. As a result of these programmes, it is now possible to request documents and public certificates online and to access to free online databases, such as the website of the official journal, containing the most recent statutes of law published. It was also created an electronic identity card, which gathers the relevant personal information in a single card, which will be rolled out in the coming years.
In what concerns businesses, the Portuguese Government has also approved a set of measures in order to simplify the activity of commercial undertakings and tax applications proceedings. Among other things, the programme “Empresa na Hora” has made it possible for investors to incorporate a corporation in a single day using electronic means and allowed the registration of trade names online. The filing of tax reports as well as of company reports can also be made online.
There are still many measures of the programme “Simplex” to be implemented in the future, which means that the Portuguese government will continue to promote the use of the e-Government tools to facilitate the life of its citizens and businesses. Among those measures, it is expected that the formalities for the acquisition of real estate will be simplified.
The restructuring of the Portuguese public services is creating a more favourable environment for investors in Portugal, by removing one of the traditional obstacles to the investment in our country. It is, therefore, likely that foreign companies will now consider Portugal a better place to invest.
 © 2007 Macedo Vitorino & Associados

2007-02-16

BCP has entered into an agreement with the Santander Group for the acquisition of its shares in BPI’s share capital. BCP also proposes to acquire the shares now held by its pension fund. If these transactions are cleared by the CMVM, BCP will acquire a total of 10.5% of BPI’s shares.
BCP will become the third largest shareholder of BPI with 12.1%, after the Spanish bank, La Caixa, and the Brazilian bank, Itaú, which have 25 % and 17.5% respectively.
La Caixa, Itaú and Allianz (which owns of 8.8% of BPI’s share capital) have announced that they will not sell their participations for the offered price of 5.70 euros per share. This group controls more than 50% of BPI and can block the amendments to BPI’s Articles of Association proposed by BCP, which require a 75% majority.
Under the agreements entered into with the Santander Group, BCP granted Banco Santander the option to acquire BPI branches and/or other assets that will be sold if the takeover bid is successful.
The legality of this agreement was questioned by BPI, which considers that it violates the obligation to treat all shareholders equally. BPI also considered that there is no legal justification for BCP increase its shareholding in BPI above the 10% limit that was set by the CMVM.
Although not all information is available, the purchase option granted to Santander may, in fact, result in the granting of an advantage to Santander – whose economic value is difficult to quantify – that could constitute a violation of the takeover bid rules under which the bidder has the obligation to offer an equal price to all of the oferee’s shareholders. As a result, the CMVM may consider that these agreements violate article 112 CodVM and require BCP to raise the offer price.
On the other hand, in May 2006 the CMVM authorised BCP to acquire over the counter BPI shares, provided that BCP’s position would not surpass 10% of BPI’s share capital and that the acquisition price were not higher than the offer price.
The CMVM must now decide whether BCP may exceed that percentage or whether, as BPI argues, there is no legal justification to allow BCP to buy more shares of BPI over the counter.
The CMVM’s decision on this case may have an impact in the success of the take over bid and also create a precedent for other takeover bids.
In particular, if this is allowed, Sonaecom could offer Banco Espírito Santo to retain it as Portugal Telecom’s main bank so as to bring BES to accept its offer for Portugal Telecom. With the recent increase of Sonaecom’s offer for Portugal Telecom to Eur. 10.50, BES seems to be the only obstacle to the success of the offer.

© 2007 Macedo Vitorino & Associados