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How to destroy a toll road
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Eastern Europe. ​ Late 2000s. ​ If you are old enough, you can feel the context. ​ A massive highways PPP. ​ Toll road. Billions in capex. One of those “nation-building” projects politicians love to parade in front of TV cameras. ​ You can smell now the country… ​ Your consortia are seasoned. Anyone knowing how to pour asphalt on top of something lined up. Your lenders are aligned. Your traffic advisors have gone blind staring at stochastic models. Everyone is gearing up for a clean, competitive procurement. ​ The government launches the tender. ​ Strong international interest. The market is buzzing. “This could be the benchmark project of the decade,” someone says. Amen. ​ And then… ​ The macroeconomic winds shift. Slightly first… Then… ​ Inflation ticks up. Currency wobbles a bit. Nothing dramatic… yet. ​ But the agency panics. ​ They start “strengthening the business case.” ​ Which is bureaucratic poetry for: “Let’s add complexity and pretend it’s sophistication… it’ll cost just a few millions of advisors”. ​ First, they update the traffic model. (Translation: delete everything you’ve done and start again.) ​ Then they revise the tolling policy. (Translation: your revenue projections? Fictional now.) ​ Then, my old times favourite: They introduce a “risk-sharing mechanism” nobody understands… Do you know that song about “to put the risk on the party that knows better how to handle it”? The same, but a little wrong… (Translation: lenders will hate it, bidders will run.) ​ Questions from bidders overflow the portal: “What triggers this mechanism?” “How are payments calculated?” “What’s the FX adjustment formula?” ​ The replies? “We are reviewing this internally.” ​ Weeks pass. Then months. Then… silence. ​ Meanwhile… ​ Contractors remobilize THREE times. Lenders ask for new stress tests. Traffic advisors update models so often they start naming versions after their ex-partners. Equity committees begin every meeting with the same question: ​ “Is this tender still alive?” And of course… ​ One bidder exits. Another quietly pauses their team. A third refuses to price under this uncertainty. ​ The agency? Shocked. ​ “We didn’t expect the market to react so sensitively.” ​ Right. Because investing billions under unclear rules and shifting policies is totally what sophisticated players do. ​ Here’s the real case part: The tender dragged an extra full year. ​ Twelve months. ​ Enough time for: Traffic to soften further FX to deteriorate Construction prices to rise 10–15% One top-tier lender to exit the country entirely ​ Two global bidders to walk away for other opportunities… in another continent. ​ The final result? The last remaining bidder presented a price 20% higher than originally forecast. ​ Why? ​ Because when there is no competition, there is no mercy. ​ And the official explanation? “Market volatility.” ​ Sure. Blame the economy… the universal scapegoat. ​ Not the inconsistent process. Not the unclear mechanisms. Not the chronic fear of making decisions. ​ The Lesson If you want your project to succeed… and getting a financial close in a PPP… Then… Stop redesigning it mid-flight. ​ A PPP is not a soufflé. You don’t open the oven every two minutes to check how it's doing. ​ You trust the recipe. You respect the process. You keep the temperature steady. ​ If governments want: Real competition Reasonable prices Bankable contracts Serious international players ​ They must stop improvising major contractual decisions halfway through procurement. ​ Because when uncertainty rises… Competitive tension dies. And when competitive tension dies… Taxpayers pay the funeral bill. ​ Want the truth about how PPPs actually collapse or succeed? Just scroll down, and click. ​My Mentorship​ ​ ​ 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. ​ ​ |
Vicente Valencia
I talk about Personal Growth, Management, Infrastructure and More | 👇JOIN +2k readers 👇
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