Case Studies: Radial 2 (R-2) Toll Motorway, Spain

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Project Overview
Figure 1: Radial 2 (R-2) Toll Motorway, Spain
Radial 2 (R2) Toll Road, Madrid, Spain
Project Type: Both
Contract Duration: 24 Years (extended for an additional 15 years)
Budget: EUR 500M (original) Final projected investment EUR 900M
Project Time Line
Conception: Before 2000
Call for tender: 2000
Contract approved: 2000
Contract signed: 2001
Financial close: March 2003
Actual start of operations: October 2003


The Radial 2 is an alternative toll road to the existing N-II National Highway in the north east area of Madrid. This additional road was built to reduce congestion in the existing N-II motorway corridor in the north east of the geographically central capital of the country (Madrid), and was conceived in the late 1990s. The Spanish government opted to use the road scheme as an initial trial for a privately financed toll road program known as Radiales de Madrid.

The concession includes the tolled R-2 motorway and a non-tolled section of the M-50 loop, although there is a shared last section, tolled for long distance drivers and non-tolled for local drivers, depending on the entrance point.

The concession project comprises a length of 80.7 km in the north east, of which the toll road R-2 is 62.3 km long. The concession also includes an 18.4 km long section of the M-50 loop in the eastern part of the city, between the existing A-2 and A-4 roads.

The R-2 starts at the R-40 ring road and ends at the N-II, the national highway to Barcelona, east of Guadalajara city. The motorway has two parts, the first inner one between the M-40 and M-50 ring roads with a length of 10 km; and the second outer one from the M-50 to the N-II joining at P.K. 62, with a length of 52.3 km. This includes a common 7.5 km section of the M-50 that is tolled for R-2 drivers and non-tolled for drivers using only the M-50.

The motorway contains 11 junctions, one service area and feeder roads, and a maintenance and control area. The toll system includes 8 barriers: 4 on the main carriageway and 4 on the access links.

The toll road provides an alternative access route from the periphery to the city centre, and a suburban distributor for a length of 62 km, ending and merging in the M-50 beltway for the last section.

The R-2 was awarded in 2000 to a consortium led by Spanish construction firms ACS and Acciona Group. The initial construction budget was EUR 500M. However due to additional payments related to land acquisition, the investment amount is still increasing and is projected to be near EUR 900M.

After negotiations with the grantor the concession period, originally expected to end in 2024, was extended until 2039 to partially compensate for the additional works and other cost overruns in the price of land acquisition.

The R-2 opened to traffic in 2002. Traffic gradually escalated to an average of 11,034 vehicles per day in 2007. Due to the economic crisis, traffic in 2012 fell to 5,928 vehicles per day, a 24% drop from previous year. In 2013, there was another considerable decrease by 23% to 4,588 vehicles per day.

The Contracting Authority (Public Party)

The Ministry of Public Works is the responsible authority on behalf of the public sector. In its activities it is supported by the:

  • Infrastructure Secretariat, a high level executive body set up to develop infrastructure planning, carry out project screening and selection, and undertake final decision making;
  • Highways Department, responsible for regulatory requirements in the bidding process and technical coordination of the construction process;
  • Toll Motorways Delegation, responsible for monitoring contracts and renegotiations.

The Concessionaire (Private Party)

Autopista del Henares S.A.C.E. (HENARSA) is the concessionaire, and the financing SPV is Infraestructuras y Radiales S.A. The initial private sponsors were: construction companies: ACS 35%, Acciona 25%; operators: AUREA 15%, AVASA 15%; financial institution: Caja Madrid 10%.

After some modifications to the shareholdings, the new stakeholders are Abertis (taking the shares previously belonging to AUREA and AVASA) and secondly Globalvia (previously Caja Madrid).

A bank syndicate led by the financial shareholder Caja Madrid (a savings bank) was created to finance up to 85% of the project, around EUR 425M. The European Investment Bank (EIB) participated as a funding provider but no credit risk was assumed. The minimum capital requirement was 15% of the investment cost. The financing facility is linked to the full concession period and no miniperms were negotiated. The term is 21 years, out of the initial 24 year concession period.

The SPV receives bank debt from the banking syndicate that simultaneously injects all of the funds to the concessionaire in the form of capital / subordinated debt.

Bank renegotiation has taken place due difficulties in meeting debt service requirements as the project has evolved.

There have also been negotiations with the grantor, mainly due to additional work requirements and cost overruns in the price of the land. This last question is the main issue since its final cost is expected to increase by 1000% of the original budget for land acquisition. In principle, the additional outflows have been financed by shareholder contributions and State participative loans, but in 2013 a voluntary insolvency procedure was filed due to lack of funds for land expropriation payments.

Actual traffic has been lower than expected since the beginning of the concession, and the economic downturn has made the project’s negative situation even worse. As a consequence, the concessionaire has reported losses since 2010.


The road is used as an alternative uncongested access motorway to the centre of Madrid, as well as being the fastest way to reach the M-40 ring road in the north of the region, and other important connections such as Barajas airport.

Most expected users are commuters from residential areas and towns in the catchment area for transits to the downtown city area and distributor roads. In addition, the toll road offers a more efficient transport route for long distance users in the corridor between Madrid and Barcelona, as an alternative to the existing A-2 that links Spain's two main cities.

Tariffs are regulated by the Government. The contract includes fixed tariffs for different vehicle categories, which are updated annually in accordance with the inflation rate. An additional increase of 1.95% p.a. is expected in the tariff for the extension period starting in 2024, to partially compensate for additional works and other cost overruns in the price of land acquisition. Commuters using electronic devices may benefit from frequent user discounts.

After the opening of the new road in 2002 average traffic volumes were just over 5,000 vehicles per day, reaching more than 11,000 vehicles per day in 2007. Following the economic crisis, traffic levels fell to 5,928 vehicles per day in 2012, a 24% drop in comparison with the previous year. Similarlaly, in 2013, there was another considerable decrease by 23% to 4,588 vehicles per day.

Key Purpose for PPP Model Selection

Restrictions on the public budget and the potential for revenues were the principal motivations for the use of the PPP model. The project is part of a global infrastructure plan for the Madrid region, named Radiales de Madrid, which aims to provide alternative solutions for the existing saturated road network. The plan introduced the PPP model as a means of building new alternative access routes using direct tolls as the repayment mechanism.

Project Timing

The Radial 2 road was conceived in the late 1990s to reduce congestion in the existing N-II motorway corridor in the north east of Madrid and to distribute traffic through the new M-40 ring road.

Just one year after the first Radial 3 and 5 project was successfully launched and awarded in 1999, the following Radial 2 project was called for tender in February 2000. The contract was awarded and the concessionaire created within the same year.

Important dates for the project may be summarized as follows:

  • Initial Call: February 2000;
  • Grant approved: 4 November 2000,
  • Creation of concessionaire: 19 December 2000;
  • Contract signed: 2 February 2001;
  • Target date for initial operations: October 2002;
  • Financial close: March 2003;
  • Actual start of operations: October 2003.

Project Locality and Market Geography

The project is located in the outer urban area of Madrid, and is an alternative toll road to the existing N-II national highway in the north east of Madrid.

In addition, the project complements the road transport network in the region, and provides direct access to new housing developments in the north east area of Madrid.

Procurement & Contractual Structure


The Spanish public works ministry (Ministerio de Fomento) launched an open call bidding process for an administrative concession for the construction, maintenance and operation of the toll road Autopista R-2, from Madrid to Guadalajara and the Madrid M-50 loop. The bidding process followed the existing legislation in force, mainly Law 8/1972 onr toll roads under the concession model, Decree 215/1973 on general standards, and the Law 13/1995 on public procurement.

The open call process was detailed in a specific, standard administrative format approved by a Ministerial Order in February 2000. Some additional modifications were approved by another Ministerial Order in June 2000.

Participants were consortia made up of construction companies, operators and financial entities. Contract award was made on the basis of the most advantageous offer.

The contract was awarded in November 2000 by Royal Decree to a consortium formed of the construction companies Grupo Dragados S.A. (now part of the ACS Group)” and Necso Entrecanales Cubiertas S.A(Acciona Group)”; the operators Autopista del Mare Nostrum, S.A.C.E (renamed AUREA and later AUMAR) and “Autopista Vasco-Aragonesa Concesionaria Española S.A.C.E.(AVASA); and the financial institution Caja de Ahorros y Monte de Piedad de Madrid. The project was expected to be in operation by October 2002.

Contract Structure

The contract is a typical BOT using the design offered by the Ministry of Public Works/Highways Department. It includes technological innovations in the adoption of free flow electronic devices which have contributed to an updated and efficient toll system.

The original budget was EUR 500M. However the total investment is still increasing and is expected to be near EUR 900M due to additional works and deviations in the price of land.

The remuneration scheme is based on user tolls. Tolls are regulated by the government and indexed to inflation rates.

The contract has been renegotiated due to several issues which have caused cost overruns. As a result, the grantor has modified the concession contract by awarding a 14 year extension and tariff increases for the extended period. In addition, the concessionaire has been the financial beneficiary of participative loans provided to meet payments for increases in the price of land acquisition, as well as some short-term financial support with a minimum revenue guarantee (three years). However this support was not eventually fully implemented.

Due to the fall in traffic levels following the economic crisis, the project is unable to generate sufficient cash flow to meet debt service requirements and payments for the increased price of land. As a consequence, the concessionaire has filed an insolvency procedure that is currently under consideration, and negotiations with the main stakeholders are taking place in order to find a viable solution.

Risk Allocation

Risk allocation does not seem to be expressly written into the contract in detail, but it may be derived from general and specific administrative procedures and regulations. It is presented in Figure 2.

Figure 2: Original risk allocation

Design is predetermined in the draft project prepared by the public administration, but the concessionaire has to elaborate the final construction project. The Highways Department monitors construction standards and requirements, and approves minor technical modifications. Therefore design and construction risks are private, but the concessionaire must follow the project design already defined by the grantor. Only additional works ordered by the grantor which are not included in the original project have to be compensated.

Even though construction risk is assumed by the concessionaire, the contract has been renegotiated due to new requirements for additional works not included in the original project. As a result, the concession period has been extended and tariffs during the extension period increased in order to compensate for the corresponding cost overruns.

Maintenance, commercial and financial risks are transferred to the private sector.

Although it is not always clear, some general provisions included in the regulations suggest that the regulatory risks are public. The two main provisions are:

  • Public administration liability, applicable for some cases of early termination;
  • Economic and financial equilibrium (re-balancing), to compensate for any damage arising from the public administration actions.

The land expropriation risk, originally transferred to the private sector, is in the end being assumed by the public sector, given the huge deviation from expected values.

The public sector assumes the risk in the event of force majeure.

The grantor may support projects under adverse conditions related to two main issues: the large deviation in land acquisition prices and the drop in traffic caused by the dramatic economic downturn.

Indeed, by the end of 2009 the Spanish Government had set up a mechanism to provide financial support through public sector participative loan instruments to compensate for deviations in land expropriation prices exceeding 175% of the projected rates for the payments, to take place after January 2010.

Similarly, by the end of 2010 the Government had implemented a temporary compensation account using the same participative loan instruments, based on a minimum revenue guarantee (MRG) covering 80% of the projected traffic. Nevertheless these two mechanisms were subject to the availability of funds in the annual public budgets. Due to strong public budget limitations, funds for the compensation account were paid only in 2012; this financial support was not provided to the concessionaire in the following years.


A traffic forecast was offered by the state in the tender documents. The winning offer included a new traffic forecast, which has been used as a reference for potential renegotiations.

No performance KPIs have been set, and only some general requirements for operation and maintenance are in place. These concern maintenance standards, to ensure a high level of quality and comfort.

Since operations started traffic performance has been lower than projected and users’ reluctance to pay tolls has been evident. There was a ramp up period in the forecast, but this has been insufficient to capture the initial build-up of traffic and its decline since the economic downturn.

In 2013, the concessionaire and its parent companies asked for voluntary insolvency proceedings to be initiated. This was later accepted by the Commercial Court and published in the Official State Gazette.


  • Abertis (2013). Cuentas anuales consolidadas.
  • Acciona (2013). Cuentas anuales consolidadas.
  • ACS (2013). Cuentas anuales consolidadas.
  • Aseta (2012). Toll roads in Spain.
  • Ministerio de Fomento (2011 and 2012). Annual report on the toll road sector in Spain.
  • Ministerio de Fomento (2012). Traffic on toll roads. (Monograph)
  • Official State Gazette (2000): Specific administrative procedures for Autopista de Peaje R-2 from Madrid to Guadalajara: tender, modifications and Decree granting approval.
  • F. J. Villalba-Romero, C. Liyanage, 2014, Radial 2 (R-2) Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8