Interview with Juan José Clavería, Director of ACCIONA Concessions

Juan José Clavería is a qualified economist and has led ACCIONA Concessions for the last five years – half a decade in which the division has become internationally renowned, with major projects on four continents. After holding several jobs in the financial sector, in 2001 he joined ACCIONA Concessions, of which he was appointed Director in 2003. His initial stint at ACCIONA came to an end in 2005 when he joined Ahorro Corporación Financiera, before returning in 2013 as Director of ACCIONA Concessions.

1. January marks your fifth anniversary as head of ACCIONA Concessions. How would you rate this half-decade?

It was very positive overall. Over these five years, we have reached the goals we set out to achieve, both in terms of asset rotation, which we completed successfully at the most delicate time of the crisis, and in the area of operations. We have solved problems, refinanced projects, and improved contracts. The bottom line reflects this process and we are ending this period ahead of forecasts. We have a large project backlog and a huge number of projects up for tender in the coming months. That’s why I say it's been positive overall. I’m also in charge of a fantastic team, both professionally and personally, and the working atmosphere in Concessions is extraordinary.

2. You've known ACCIONA Concessions for a long time. How has the business changed since you first arrived in 2001?

During my initial period in Concessions, from 2001 to 2005, we were a small area, with a small team of no more than 12 people. When I returned, I faced the challenge of a business with around 20 projects and a team of over 70 direct employees and 800 indirect ones. Everything has changed. Back then, 80% of our projects were in Spain, and we occasionally bid in countries such as Chile, Brazil and Mexico. But the rest of the world did not exist. We had not yet entered Canada or Australia or the US. Now we are much more global. The change has been both quantitative and qualitative.

3. Are there any differences when working in one region or another?

Put simply, you could say that there are two worlds in the concessions business: the Anglo-Saxon and the Latin. There is a huge quantum leap when moving from the Anglo-Saxon world to the Latin world - where prior analysis of bids is limited, financing is not in place when the contract is awarded, and the tender phase takes no longer than 3 months. In the case of the former, one must assume that the tender can take between 12-14 months, and that bid-related expenses may be up to $40 or $50 million, as happens in Australia. In the Latin world, you bid with a preliminary plan, having barely negotiated anything with the client and without closing the financing; everything starts when you sign the contract. In the Anglo-Saxon world, it’s the exact opposite. You spend a year meeting with the client, negotiating the contracts, financing, developing the construction project. And the day after you sign, the works start.

Generally speaking, there is a change in the way the sector works. Previously, industrial groups led the concession business; today we still carry a lot of weight, but there are countless new players, such as infrastructure funds or pension funds that can provide most of the capital.

4. ACCIONA Concessions currently has a significant presence on four continents. Tell us about these projects.

In Australia, our most emblematic project is the Sydney light rail. It is a contract in which we are doing the construction ourselves – the civil engineering is 100% ACCIONA; there are no local partners. I think it's the first project of its type in Australia to be awarded 100% to a foreign company. It is a very emblematic project, and very complex, because it is being carried out in the heart of the city. A job like this is only possible after gaining certain prestige in the country.

Switching continents, the A-30 in Canada is another very important project and has served as a reference and a testimonial for us in many countries. In Europe, we are bidding in new countries, such as Norway, where we are the only short-listed international consortium for the first PPP project in 15 years. If I was to choose one particular activity in Spain, it would be our work in the healthcare sector, in hospitals.

5. Perhaps one of the most distinguishing features of ACCIONA Concessions is the enormous diversity in the sectors in which it operates (motorways, hospitals, railways). Does this plurality require a different attitude than in other lines of business?

The key to a concessions contract lies in establishing a proper contract structure. Explained very briefly - you sign a contract with a client, you assume a series of risks and, logically, you expect a return on those risks. In the interim, you have to finance the project, with capital and with debt. You need to establish certain contracts, such as the construction and operation contracts, in which you transfer all the construction and operation risks in the concession contract to the constructor and to the operator.

6. Does working on a global scale, with contracts in different countries, different financial and labour regulations, different cultures, different forms of Public-Private Partnerships require special approaches?

It does. You need to be able to adapt to an enormous variety of legal, cultural and labour scenarios. For example - when you hire a person in Australia, you need to define the job. After that, it’s not easy to ask the employee to do anything outside of that definition. That doesn’t happen in countries like Spain. It could be seen as a complication, but I see it as enriching. One of the biggest benefits of working in this business is the diversity and the opportunities to learn - to collect experiences that will then be very useful in other places. It also trains you to a very high level, and it strengthens you to take on new challenges. That is the case with our presence in the United States. At some point, we received the go-ahead to open in this complicated market, and to do so through Public-Private Partnerships (PPP), as we had been doing in other countries. In fact, that’s how we got into Canada, where we were awarded five concessions in a short period of time. Two years after that, we had an office in Miami, and we've been short-listed on two projects. We’re there, and we’ve done it the way these things should be done: you start from scratch, you look for local partners, you analyse the legislation, everything related to bonding for the projects, etc. It is definitely a challenge that we took on with the help of the entire group - with the Energy team at the Chicago office, and with the support of HR at the office in Vancouver. We’ve hit our stride in a country that -as I’ve said- is very complex, and that was thanks to the experience we've gained in other places.

7. If you had to convince me to award ACCIONA a concession, how would you do it in just a few words?

I’d say that ACCIONA has a consolidated reputation in the concessions business on an international scale. We are recognised as experts in complex projects, where design and construction are a challenge. In other words, our relative advantage isn’t in competing with local agents to pave a road, rather in complex projects such as the Sidney light rail or the A-30 in Canada, which I’ve already mentioned.

In fact, we were sought out for those projects. The global nature of the group is a very strong bargaining chip: clients see that we can work with the same partner in countries as diverse as Canada, Uruguay and Australia. On the other hand, our ability to structure operations or to raise financing is also significant. When we teamed up with Strabag in Norway to bid on a project, ACCIONA’s key role in the large Follo Line project helped a lot, of course, but so did our experience of complex projects.

8. What do you see as the main future lines in the global concessions sector?

I think there is a change in the trend in the concession model in the Anglo-Saxon world. Until now, the availability payment model has dominated in Australia, Canada and the United States. Recently, we have seen a major focus on the demand risk format, on real toll. I see movement in the Anglo-Saxon market towards real toll projects. The process is the opposite in the Latin market. In Spain, the entire Strategic Infrastructures and Transport Plan (PEIT) is designed around the availability payment model. In Chile, where there has always been a culture of tolls in the concession business, we are seeing availability payment projects, but I don't know whether that is a trend.

As for future lines, focusing on Spain, I would say that the challenge we need to face in infrastructures is maintenance, more than new construction. I don't think we need to invest so much in expanding our road network, rather in improving the layouts, capacity and improving junctions, etc.

9.  What are the main challenges facing ACCIONA Concessions?

Our most immediate challenges are in new markets, especially the United States, but also in Europe, where we haven't been present because there have not been many opportunities, but that are starting to arise.