Portuguese operator CP cleared of historic debt: new trains in the cards
A financial restructuring and a debt cleared. Portuguese state-owned operator Comboios de Portugal (CP) has been compensated for services between the years 2002 and 2019 by the Portuguese government, effectively cancelling almost all of the operator’s debt, opening the way for purchasing new trains for future high-speed lines.
The order that completes CP’s financial restructuring operation was signed last week by the Portuguese government. Around 1.8 billion euros will be written off from CP’s debt according to numbers in the State Budget for 2022. CP’s total debt is around 2 billion euros, meaning only approximately 0.2 billion will remain. The restructure is “essential for CP to have the capacity to invest in the improvement, modernisation and expansion of services, particularly in access to financing for the acquisition of rolling stock, under conditions comparable to any other company”, says the Portugues Ministry of Infrastructure in a statement.
CP will be compensated by the appropriate sub-compensations for public service obligations between the years 2002 and 2019, in accordance with the provisions of the State Budget for 2023. With this endeavour, CP “gains effective conditions to fulfil its public service obligations contracted with the State and compete in the long-haul market, which operates under a competitive regime under European rules”, says the ministry.
‘Lack of proper financing in the past’
“The past will have to be resolved by the state through financial reorganisation in order to guarantee the future viability of its National Railway Operator”, CP stated in its 2021 Corporate Governance Report. “It was the lack of this type of contractual relationship and the decisions of the various governments not to properly finance the company’s activity that, in the past, forced CP to resort to debt in order to meet its financial commitments, giving rise to the so-called “Historical Debt” which, in 2014, totalled 4.3 billion euros.”
In 2022, CP recorded its first profitable year in the history of the state-owned company. It closed its annual balance sheet with positive net results, with eight million euros, reported Público. This was already a glimpse of the state compensation for that year, which is now repeated manyfold for previous years. A Public Service Obligation contract was signed in 2019 between the company and the State, which compensates it for loss-making services, and came into force in 2020 after approval by the Court of Auditors. In addition, CP transported 148 million passengers last year, the most significant number in the last 20 years. For last year, the compensatory compensation was 85.3 million euros, according to the the paper.
Train order and upcoming competition
For CP, the purchase of 12 high-performance trains depended on the repayment of CP’s debt. “It will be necessary to wait until the end of this year for the public transport company to launch the public tender for the purchase of 12 high-performance railcars, with a base value of 336 million euros”, said the Secretary of State for Infrastructure Frederico Francisco in a parliamentary hearing in March, reported Portuguese medium Eco. The high-speed trains will be part of CP’s commercial service, meaning they cannot be purchased with State funding, it writes.
The financial compensation to CP needed to be justified to the European Commission, showing that the debt that is cancelled is the one that existed before the liberalisation of the market, avoiding state aid. Though former Finance Minister, João Leão, said that it was not necessary to seek authorisation from the Commission, the current Ministry acknowledged that it is necessary to coordinate it with the EU. In April, it was “days away” from notifying the Commission, Minister of Infrastructure, João Galamba said to the parliament. No statements from the European Commission have been issued regarding the matter and whether it approves.
On March 22, Secretary of State for Infrastructure Francisco said the aim is to start the purchase of high-speed trains in the last quarter of 2023, when the first tender for the works on the new high-speed line between Porto-Lisbon is launched.