PPP veterans often say: Don’t believe me? Once upon a time there was a major highway PPP in a coastal region. Hundreds of kilometers, DBFOM, 30-year concession. Everyone was excited. Lawyers clapping with their ears. Consultants getting loans for their yachts. You know that good or bad, they always win… And this seemed great… in principle.
The traffic model looked good. The maintenance KPIs were reasonable. The construction risk? Largely passed to the private consortium… as usual crap. One clause—barely discussed—was titled “Force Majeure: Adverse Weather Events.” It looked harmless. Force majeure? You know what SPVs ask for in the bar, right? Put me three of these, please. One for me, and one for these other two guys, the contractor and the operator. The contract said delays caused by “exceptional” weather could qualify for time relief—but not compensation. And “exceptional” was defined as any event exceeding historical averages by more than 20%. Simple, right? Prepare yourself. Pick up the popcorns. If a lawyer… click on the “I’m working on” so that the clock start ticking… The consortium priced accordingly… of course. A buffer for a few rainy days. No big deal. Year 1: Climate change, El Niño, bad luck—who knows. The contractor screamed: “This is exceptional! Look at the flood levels! The weather station is underwater!” The agency calmly pointed at the contract: “Actually... historical average + 20%. You're still within it. No extension. No relief. Get back to work.” Cue the lawsuits. The contractor brought in meteorologists. The agency brought in statisticians. “Rain is only disruptive if it's horizontal.” Meanwhile, the project burned cash. The debt service clock didn’t stop. Neither did penalties. Eventually, the contractor had to inject equity to avoid default… being eaten alive by ants while watching on loop all Biden speeches is less painful for these guys. Behind closed doors, they blamed the legal team: “Why didn’t you flag this clause?” The legal team said: “You priced the risk. You didn’t ask us to model the weather.” And the technical team said: “We assumed you'd renegotiate if weather went crazy.” In the end, nobody won. If you think that this is impossible. Only an invention… I’ve seen worse. Examples… below. PD 1: If you liked this email, don't keep it in secret and forward it to a friend. They will thank you enormously one day. PD 2: If somebody has sent you this email and you want to receive emails like this yourself, visit vicentevalencia.com PD 3: If you want unsubscribe, click the link below. |
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