Equity capital markets: Aena row dampens international interest in Spain

Peter Lee
Published on:

TCI sues competition commission; investors fear regulatory and political risk.

The privatization sale of Spanish airports operator Aena, which raised $4.8 billion equivalent in February this year, looked like a big success for the Spanish government and for investors that bought the deal. Priced at €58, the shares hit €70 on the first day of trading, traded up close to €100 in April and were still up 70% from the issue price in the middle of July.

Ana Pastor Julian-160x186
Ana Pastor Julián, minister
for public works, Spain

But a legal row over proposed changes in the regulatory regime and the tariff structure, which had seemed set in stone before the IPO, now threatens to overshadow that success. The biggest single foreign investor in the IPO, UK-based hedge fund, The Childrens Investment Fund (TCI) – now, with a 7.7% stake, the second biggest investor in Aena behind the Spanish government, which still owns 51% – has filed claims in Spain’s national court, Audiencia Nacional, contesting a new tariff regime proposed by the Spanish Comisión Nacional de los Mercados y la Competencia (CNMC), the country’s national markets and competition commission. 

The CNMC is seeking to change the allocation of airport costs materially, shifting costs from the airline companies onto Aena, which TCI claims may cause economic damage to the company exceeding €1 billion.

Separately, Aena itself has also appealed against the decision to the same court. Investors are left reeling, as one part of the Spanish government seems to be in conflict with another. Obscure political rivalries lurk in the background.

TCI is pulling no punches in the matter, noting that the Spanish government set out through the IPO process to attract international investors that were fundamental to the success of a deal that signalled renewed access for Spain to foreign capital to drive economic growth. Now all that may be in doubt.

TCI states: "The CNMC’s surprise action creates legal uncertainty not only for investors in Aena, but in all Spanish regulated entities. Just as Spain is emerging from its economic downturn, the CNMC’s proposed actions damage confidence in Spanish capital markets by raising questions over whether the rule of law will be upheld."


TCI is seeking a short-term injunction to freeze the CNMC’s imposition of lower tariffs while longer consideration is given to its claims that the CNMC, while it is entitled to review if Aena has acted fairly and transparently in dealings with airlines, is over-stepping its legal competence in suggesting a whole new charging regime. 

Lawyers in Spain suggest that the main claim may take years to resolve. And it will be tough to extract a swift decision to suspend the new regime suggested by the CNMC as Spanish courts do not work speedily through the summer and the Spanish government must draft its budget law for next year, including expected contributions from Aena. 

If the CNMC’s new suggestions get incorporated from the outset, it will be hard to disentangle them from the new regulatory regime into which the company has not yet fully transitioned, under the so-called Document of Airports Regulation, which sets charges with a five-year horizon. Spanish research company N+1 notes: "This dispute generates uncertainty on 2016 tariffs as well as on tariffs for the period 2017-21, as 2016 will be the basis for their calculation."

Whether the damage to the value of the enterprise from the CNMC’s actions is as little as €1 or as much as €1 billion,
there is an important principle at stake here


Jose-Francisco Ruiz Solera, analyst at Deutsche Bank, has a sell on the Aena stock, following the run up since the IPO. He notes: "Aena looks like a resilient cash cow with moderate growth potential related to a recovery of traffic in Spain. However, there are also risks relating to potential cuts in tariffs."

The technicalities of the dispute relate to a shift for the regulated airport tariff regime to the so-called single-till structure, away from the dual-till structure that was incorporated into the draft regime established back in 2012 on which Aena’s privatization was based. 

Under a dual-till structure, which airport operators favour, the cost of providing core regulated airport services, such as a passenger control, transit and boarding, are met out of passenger tariffs, leaving airport operators free to separately agree deals with commercial operators of shops and restaurants. A single-till structure, which the CNMC seems to be suggesting, blends the costs of providing both core regulated and commercial activities together and by doing so shifts more of the cost burden onto airport operators. 


It’s a confusing situation. The CNMC brought forward its new regime in April, suggesting a cut in tariffs of as much as 3.5% this year. Aena objected in court, questioning not only the CNMC’s right to change the rules, but the provenance of its calculations. It now seems the cut to tariffs this year could be under 2%, if the CNMC gets its way, as it has already reviewed its own suggested formula.

Behind the scenes, sources in Spain point to a political conflict within the government between the ministry for public works headed since 2011 by Ana Pastor Julián – which took over Aena 10 years ago when it was unprofitable and heavily indebted and appointed new management that has turned it into a source of $4.8 billion of proceeds for the government – and other ministries.