Q&A: public procurement and PPP for ports and terminals in Portugal

Public procurement and PPP

Is the legislation governing procurement and PPP general or specific?

The legislation governing procurement and public–private partnerships (PPPs) is general.

Procurement is regulated by the Public Procurement Code (PPC) approved by Decree-Law No. 18/2008, as amended to the present, which incorporates the current Directives 2014/23/EU, 2014/24/EU and 2014/25/EU into Portuguese law. The PPC regulates both the procedural rules applicable to public tenders and the substantive regime governing the execution of public contracts, including specific liability rules. Ports are included in the specific utilities rules included in the PPC.

In turn, PPPs are regulated by Decree-Law No. 111/2012, as amended to the present (a major revision was put in place in 2019 but was subsequently revoked), which states the general standards applicable to the intervention of the state in the definition, design, preparation, launch, award, modification, supervision and monitoring of PPPs.

There have been some discussions about the application of the general PPP law to ports as they have a specific regime, but the principles of the PPP law tend to be applied and the recent (ongoing) revision of the public service concession incorporated several PPP principles in the contracts. Also, those principles are today incorporated in the concession contracts regime within the PPC.

May the government or relevant port authority consider proposals for port privatisation/PPP other than as part of a formal tender?

There is no room for unsolicited proposals or for privatisation. The procedure used for port concessions is an international public tender regulated by the PPC.

What criteria are considered when awarding port concessions and port joint venture agreements?

The criteria are always the best proposal in terms of public interest. The best technical solution and the best capacity to attract cargo and revenue to the port authority are included in these criteria. The value of the investment to be made and the duration of the concession, along with other criteria specific to the tender, may also be considered.

Is there a model PPP agreement that is used for port projects? To what extent can the public body deviate from its terms?

In the tender to be launched, the authority proposes a model contract. The public body can only deviate from its terms as specified in the tender and when it is allowed a negotiation procedure. It is common to allow some deviations negotiated within the tender procedure.

What government approvals are required for the implementation of a port PPP agreement in your jurisdiction? Must any specific law be passed in your jurisdiction for this?

There is no need for a specific law in Portugal as there is a general law applicable, but some approvals (eg, permits) and licences (eg, environmental) are needed. Only when the government wants to include in the contract some specific rules different from the ones of the general law is it mandatory to publish a specific law. This has been the case for some container terminals, namely in Alcântara in Lisbon and in Sines.

On what basis are port projects in your jurisdiction typically implemented?

As a rule, to date, the terminals concessions have not been greenfield projects, as they have been designed and built by the government or port authority; what is transferred to the private operator is just the operation and management of the port terminal. In specific cases where the improvement or expansion of the terminal is included in the concession, the model used is build–own–operate–transfer. The government recently announced for the first time some greenfield projects to be launched in the main ports (new terminals in Sines, Lisbon and Leixões) but those projects are currently paused.

Is there a minimum or maximum term for port PPPs in your jurisdiction? What is the average term?

The applicable law establishes a general term of 30 years, although it can be increased for a maximum of 75 years. This period may vary according to the value of the investment because the term should allow recovery of the amount invested. Discussions are ongoing as to whether this term should be generally increased to at least 50 years as other European countries such as Spain have already done, taking into consideration the huge investment that a port operation represents especially if the government wants to transfer more responsibility to the private operator, such as the enlargement of the terminal and the necessary dredging. Specific laws allow for more than the 30-year period mentioned, such as the container terminal of Alcântara in Lisbon and in Sines. For the new terminals that the government intends to launch, the duration will be fixed for a period of time in the region of 50 years.

On what basis can the term be extended?

As a rule, the initial term of the contract can only be extended in cases expressly stated in the contract. EU rules and the PPC limit the possibility of extending the term of the concessions.

Nevertheless, even the PPC in some cases allows the extension of a concession as a mechanism to rebalance the economic and financial considerations of the contract in the event of a change of circumstances. The extension is authorised considering, for example, the investments made and the time necessary to conclude the return on the investment. We have seen a number of specific laws authorising an extension of port concession contracts for more than 30 years, including for Liscont in Lisbon.

What fee structures are used in your jurisdiction? Are they subject to indexation?

As a rule, the fees are a mix of fixed land rent and revenue shares. The fees are usually subject to indexation. The new model of recent concessions (eg, Lisbon’s and Douro and Leixões’ revised contracts) establishes a formula that benefits an operator that attracts more cargo to the port and allows more risk in partnership with the port authority.

Does the government provide guarantees in relation to port PPPs or grant the port operator exclusivity?

Neither the government nor the port authority gives guarantees, so the operator assumes all the demand and financial risks.

As the model contract in use is a public service concession contract, it is granted with exclusivity for the terminal, although there is no exclusivity for the port as other terminals inside the same port can compete between themselves.

Does the government or the port authority provide any other incentives to investors in ports?

There are no other incentives to investors in ports as they could be classified as state aid by the European Commission, as has already happened in other European countries. What is normally done by the government is a facilitation of the necessary infrastructure by building new roads and railways to the terminal.