Fitch: Euro crisis hits transport hard

Toll road operators in southern Europe have been particularly hard hit, experiencing traffic falls of more than 10% this year. But the ratings agency warns that the crisis is also eroding ‘the core stability of the infrastructure sector’.

Ratings agency Fitch has warned in a series of notes that the economic crisis sweeping through Europe “continues to erode the core stability of the infrastructure sector”.

Fitch singles out the transportation sector as being particularly hard hit, especially in troubled southern Europe. According to the ratings agency, toll road operators Brisa and Abertis have seen their respective concessions in Portugal and Spain experience traffic declines of over 10 percent, as road use decreases in the face of prolonged austerity policies.

Italy’s Atlantia, while not as badly affected as its Iberian counterparts, “has also experienced weak traffic although not to the same degree”. Only France has stood strong on the traffic front, “with only modest traffic declines,” Fitch highlighted. Still, traffic in southern Europe is expected to remain weak with a recovery forecast to take several years, the ratings agency gloomily warns.

The economic stresses being felt across the continent are also affecting public sector counterparties. This has translated into “revenue payment delays in some Spanish road projects,” for example, with Fitch advising that there is a risk that availability payments backing transportation and social infrastructure projects might be affected.

Finally, the ratings agency also warns there is a “risk that regulatory frameworks for infrastructure may be altered”. Fitch points to the renewable sector as an example and while it is not expecting that European governments will apply retroactive cuts […] “new taxes on the energy sector in Spain and Italy combined with structure operating requirements on renewable energy assets in Italy have adversely impacted credit quality”.