Spanish rail firm files for bankruptcy after being hit by €34m fine

A train operator set up by Spanish contractor OHL to build and run a public-private partnership rail scheme in Madrid has filed for insolvency after completing only 30% of the line in nine years.

A €34m fine imposed by the city is blamed for sending the firm, Cercanias Móstoles Navalcarnero (CMN), over the edge, but the commercial viability of the suburban commuter link had been fatally undermined by the property crash that followed the financial crisis of 2008.

In a statement issued this week (24 May) OHL said that despite investing just under €240m ($270m) and searching for ways to fulfil the terms of its contract with the government of Madrid, it had to request the termination of its contract.

OHL said the bankruptcy was prompted by Madrid’s High Court upholding a €34m fine levied on the company by Madrid’s Ministry of Transport in February. This penalty was imposed after CMN tried to terminate its contract in June last year, after claiming that Madrid had breached its contractual obligations.

CMN has been trying to get out of the concession for some time. In December last year it began legal action to demand the termination of the concession and the granting of damages amounting to €370m.

The company was set up to build and manage a 15km rail link between the district of Móstoles in southwest Madrid and the town of Navalcarnero. This was awarded to OHL in 2007.

CMN has built less than a third of the line, largely because the original estimate of passenger numbers changed from 20,000 to 4,000. This was because a large urban development was cancelled after Spain’s property market collapsed in the 2008.

OHL requested changes to the deal to make the project feasible but was unable to agree them with the client.

The line was to have seven stations, and would have reduced the travel time between Navalcarnero and Móstoles to 20 minutes.

Photograph: OHL runs a number of PPP schemes in the transport sector (OHL Concesiones)

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