Lisbon Bridge Fails To Cross Cash Divide

As a feat of civil engineering, the Vasco da Gama bridge being built across the Tagus estuary in Lisbon inspires awe. But behind Europe's longest river crossing is a tussle over who is going to pay for it. The conflict centres on the toll charges for using the 18km road crossing "� effectively a debate about whether taxpayers or bridge users pay for the Es180 billion (£652 million) investment, which is Europe's biggest private-sector infrastructure project since the Channel tunnel.

The issue, which became politically charged after a violent commuter revolt on a nearby bridge in 1994, is one of a series of problems that have beset Lusoponte, the international consortium which won a build and operate contract for the bridge in April 1994.

 

The contract involves the transfer of the bridge to government ownership after 33 years. Environmentalist protests have forced Lusoponte, led by Kvaerner, the Norwegian engineering group, to invest in a nature reserve to protect black-winged stilts and other rare birds that breed in salt pans beneath the southern entrance to the crossing.

One early difficulty appears to have faded. Bouygues, the French construction company that headed the losing consortium competing for the contract, alleged the concession was unfairly awarded.

It did not appeal, though, and the allegations have been denied by Lusoponte and the Portuguese government. But the toll question, vital to the financing of the project, threatens to persist. Under terms of the concession contract, Lusoponte plans to charge about Es340 (£1.20) for a car. Any less would incur a commercial loss, it says. This is more than twice the price that led angry motorists to blockade the April 25 suspension bridge, 20km downstream.

If the Socialist government decides to impose a lower toll to avoid the risk of more protests, it will have to add substantially to compensation already paid to the operators.

The stand-off, which has to be resolved before the bridge opens next March, highlights the potential conflict between commercial and political interests in such deals.

Every time the government tinkers with the toll mechanism, the bridge becomes less a project finance initiative and more a traditional public-sector infrastructure,'' says a Lusoponte executive.

In June 1994 riot police clashed with hundreds of motorists who blockaded the April 25 bridge for 10 hours at the height of a week of militant protests over an increase in the toll from Es100 to Es150. As a result the toll on this bridge, also operated by Lusoponte since January 1996,has been frozen by the government at Es150 at least until 1999.

But the two bridges have to charge the same if the Vasco da Gama crossing is to fulfil its prime purpose of relieving congestion on the April 25 bridge, which is used by more than 140,000 vehicles a day.

Few commuters would be attracted to a new bridge that costs more than twice as much to cross. Lusoponte's contract envisages that the toll on the April 25 bridge should have risen to at least Es240 by now, climbing to about Es340 on both crossings next March.

But two governments have already unilaterally revised the terms thrice in less than three years, holding down the toll and paying the consortium Es19.9 billion in compensation.

The project finance aspect of the new bridge is being heavily diluted,'' says a Lisbon investment banker. Government payments to the operator are undermining the principle that users rather than general tax-payers pay for the project.''

Kvaerner acquired its 24.8 per cent stake in the consortium when it bought Trafalgar House of the UK last year. Campenon Bernard, a French construction company, owns an equal holding and five Portuguese companies together hold 50.4 per cent. Most finance for the project remains in the private sector, although 35 per cent of the investment comes from the European Union's cohesion fund. But government intervention is altering the project risk in ways the financial backers and operators are finding difficult to assess.

The only certainty, says one analyst, is that the unknowns in the complex equation are steadily increasing. The death toll from accidents linked to the Vasco da Gama bridge rose to at least 11 yesterday after a mechanical rig collapsed on Thursday, killing three Portuguese workers and two French engineers. Rescuers were searching for another missing worker.