PORTUGAL Law and Practice Contributed by: Manuel Requicha Ferreira and Diana Avillez Caldeira, Cuatrecasas
7.5 Risk Areas for Lenders If a borrower, security provider or guarantor is declared insolvent, the most relevant risk for lenders is the possible claw-back of the agreements entered into between the lenders and the insolvent entity, namely for the granting of guarantees or security, under the terms detailed in 7.1 Impact of Insolvency Processes . Furthermore, and in addition to the recoverability risks (which are assessed on a case-by-case basis con- sidering the assets and liabilities of the debtor, the security benefitting the lenders and the range of credi- tors), lenders will also face a recovery timing issue: unless they benefit from financial collateral, security and guarantees have to be enforced within the insol- vency procedure, which, as mentioned in 7.3 Length of Insolvency Process and Recoveries , may take a long time. After a decade of lower project finance activity in Por- tugal (including due to restrictions on public invest- ment following the sovereign debt crisis), there has been a noticeable increase in such activity in recent years, especially in the renewable energies sector (in line with the promotion of the energy transition), and more recently in public infrastructure, with spe- cial emphasis to the financing of the high-speed rail network. The National Investment Plan 2030, which defines the structural investment priorities for this decade, and the Recovery and Resilience Plan presented by the Por- tuguese government within the framework of the EU Recovery and Resilience Mechanism, created a new incentive for public investments and public-private partnerships (PPPs), as well as new opportunities for project financing – namely in relation to rail, airport (ie, the new Lisbon airport) and port infrastructures. In this context, sectors associated with innovation, greener production and digital tools and skills are the major beneficiaries of the expected public investment and, as such, should be more active. The recovery plan also envisages relevant investment projects in health 8. Project Finance 8.1 Recent Project Finance Activity
(such as the Hospital Lisboa Oriental and the Hospital Central do Algarve ), social housing and infrastructure. In parallel, the project finance sector in Portugal has also witnessed several refinancing transactions for existing project debt in recent years, which do not follow the standard project finance approach. 8.2 Public-Private Partnership Transactions The PPP legal framework is based on the Portuguese Public Contracts Code (PPCC) and the PPP laws. Portuguese PPPs typically follow project finance structures with a build-operate-transfer (BOT) model. The concession agreement regulates the major con- tractual issues of the PPP, namely the terms on which the project company will construct and operate the project as well as the payment terms associated with the PPP. In addition to the concession agreement, the remaining documents that comprise the PPP package are also attached: the equity subscription agreement, the shareholder agreement, the direct agreement, the construction contract, the operation contract and the financial documents. Before launching and awarding the PPP, environmen- tal impact declaration and urban planning licences need to be issued. An environmental licence may also be required for certain industrial projects. Under PPP laws, the risk of the project shall be clear- ly contractually identified, and its allocation shall be made in accordance with each partner’s ability to manage it. Nonetheless, the partnership must also involve a significant and effective transfer of risk to the private partner, particularly financing risk. Financial rebalancing, as the main mechanism cover- ing project risks, remains with the public contracting entity. Following the execution of the PPP contract, and prior to its entry into force, the Court of Auditors will review the agreement. The acts, contracts and other instru- ments previously subject to auditing by the Court of Auditors may produce findings prior to the visa, except in respect to payments resulting from such acts, contracts or instruments being audited.
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