Privatisation of Aeroportos de Portugal: Conflict between the National Economic Adjustment Programme and State Aid Rules?

people at the airport


Portugal notified to the Commission the privatisation of the “Aeroportos de Portugal” [ANA] for reasons of legal certainty [SA.36197].[1] ANA is the operator of most Portuguese airports. It manages eight airports across Portugal (Lisbon, Porto, Faro, Beja, and 4 airports in the Azores) that account for the vast majority of the commercial air traffic in the country.

It is worth noting that the sale of ANA was part of the privatisation plan prepared by Portugal in the context of commitments made in the Memorandum of Understanding for its Economic Adjustment Programme, which was agreed with the European Commission, the European Central Bank and the International Monetary Fund. The Programme includes a joint financing package of €78 billion.

The privatisation procedure

The privatisation was effected via the sale of shares representing 100% of ANA’s equity capital. 95% of the equity was acquired by Vinci Concessions. The remaining 5% of the equity was reserved to ANA workers. This part of the privatisation has not taken place yet. The overall price already paid by Vinci for 95% of the share capital is €2.93 billion [100% = €3.08 billion]. If the remaining 5% is not taken up by ANA workers, Vinci will have to buy it. Therefore, its commitment is for up to 100% of the capital.

The terms of reference for the sale of ANA set out two cumulative conditions to be met by applicants:

“i. be the operator, or major shareholder and controller of at least one airport with traffic exceeding 10 million passengers per year, or alternatively, be the operator or major shareholder of a network of critical transport infrastructure with revenues in excess of €400 million per year;

ii. hold equity or assets under management, in the case of the tenderer being a fund or similar investment structure, in excess of € by reference to the latest documents to provide audited accounts.” [para 13]

The terms of reference also contained a “lock-up” rule which prevented the disposal of shares during first five years after the sale.

Concession Agreement

Before the privatisation, ANA and the Portuguese Government signed a concession agreement for the eight airports in question. The concession runs for 50 years.

The privatisation process was organised in two discrete phases:

Phase I

It began with extensive market consultation, whereby a wide range of potential strategic investors were identified. Letters of invitation to participate in the privatisation process were sent to these potential investors. A number of non-solicited expressions of interest were received too. All interested parties which complied with the eligibility criteria were also accepted as participants. The initial consultation process identified 54 entities potentially interested in the privatisation, with 33 entities receiving the documentation relevant to the preparation of a non-binding offer. In addition, a draft of the concession agreement that was to be signed by ANA prior to the conclusion of the privatisation process was distributed to all interested parties. In the end, eight non-binding offers were received, three from single entities and five from consortia.

Phase II

Portugal selected five interested parties who submitted the highest bids. These bidders were invited to the second phase of the privatisation process, in which they were requested to submit binding offers. The choice was based on selection criteria which also took account of the opinion of ANA on the appropriateness of proposals for the strategic interests of the company.

In the second phase the interested parties had access to more detailed information than in the first phase and were able to have individual meetings with the privatisation manager and to make site visits to ANA infrastructure.

In the end, four binding offers were received, one from a single entity, and three from consortia. The fifth interested party participating in this stage of the process withdrew its offer in writing. ANA assessed the four binding bids on their suitability particularly in relation to their technical and strategic components, with a view to achieving compatibility with the company’s interests and future development.

The privatisation manager drew up a reasoned report assessing each of the four tenderers, taking into account the aforementioned assessment from ANA. The manager’s report together with ANA’s assessment were sent to a special monitoring committee set up to oversee the privatisation process. The committee then issued a reasoned opinion on the regularity, impartiality and transparency of the process.

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After analysing the manager’s report and the reasoned opinion issued by the special committee, the Portuguese government chose Vinci. Vinci’s bid of €3.08 billion was also the highest bid made. The second highest bid was of €2.44 billion.

Choice of a negotiation process

Portugal based the choice of this process on the following grounds:

i.Maximisation of the revenue arising from the privatisation;

ii. Reinforcement of the growth and efficiency of ANA, thus increasing its competitive position and the long term value of the airports.

iii. Minimisation of the Portuguese state’s exposure to the risks related to the implementation of the privatisation procedure, notably by ensuring that its framework fully protects the national interest and maximises revenues.

“The intention of these goals was that the State would obtain the maximum sale price, but have certain safeguards as to the future of ANA as the holder of the concession for the provision of services to support civil aviation in Portugal.” [para 37]

Portugal stated that the “chosen process provided conditions which fully ensured the participation of the greatest number of appropriate entities with strategic ownership interests, and thus ensured a competitive and transparent process, as well as preserved the value of the assets and their economic importance.” [para 38]

The Portuguese authorities stated that “the method was justified as it not only allowed income from the disposal of shares in ANA to be optimised but also strengthened the development of the company, guaranteeing a coherent, suitable and stable shareholder structure.” [para 39]

The Portuguese Government also argued that “the chosen procedure was already established by the Portuguese law and had already been used successfully in previous privatisations, with very positive results in terms of competitiveness and swiftness. The chosen process was most suited to meeting the deadlines agreed in the aforementioned Economic Adjustment Programme for Portugal. [paras 40-41]

Lastly, it was submitted by Portugal that an independent consultant carried out a valuation of ANA, which was lower than the price of €3.08 billion agreed with Vinci.

Existence of State aid

The Commission began its assessment by reiterating that “the privatisation of a firm is an economic policy choice which, in itself, falls within the exclusive competence of Member States.” [para 45]

The case law and the decisional practice of the Commission indicate that when a State-owned firm is sold (i.e. privatised) the purchaser does not receive an advantage if the seller (i.e. the state) behaves in a way that is consistent with that of a private market economy investor [see cases T-296/97, Alitalia; T-228/99, WestLB ; T-366/00, Scott; C-399/00, SIM 2 Multimedia; T-358/94, Air France].

According to the decisional practice of the Commission, there is no State aid when shares are sold on a stock exchange. In other cases of sale of assets there is a presumption that the sale is free of State aid when the following conditions are fulfilled:

i. the sale takes place through a competitive tender that is open to all comers, is transparent and is non-discriminatory;

ii. no conditions are attached which are not customary in comparable transactions and which are capable of potentially reducing the sales price;

iii. the assets are sold to the highest bidder; and

iv. bidders must be given enough time and information to carry out a proper valuation of the assets in question.

As is also well established in the case law and decisional practice of the Commission, non-economic considerations – such as industrial policy reasons, employment considerations or regional development objectives, which would not be acceptable to a market economy operator – create a presumption for the existence of State aid. This happens because the sale price is depressed or the sold firm acquires an advantage which would be unavailable under normal market conditions.

The Commission accepted that ANA was sold through a competitive tender that was open to all comers, and was transparent and non-discriminatory. Many entities were invited to bid. Despite the fact that the Portuguese authorities did not follow a standard public tender process, the Commission considered that “the chosen negotiation process respected the criteria of openness, transparency and non-discrimination.” [para 56]

Indeed, although the Commission did not express its views in these terms, the eligibility conditions concerning prior experience of operation of a major airport or the size of the bidder in terms of the value of their equity or assets were objective and necessary to ensure successful conclusion of the sale. Inexperienced or too small bidders could have caused unwarranted disturbance to the negotiation and bidding process.

The shares were indeed sold to the highest bidder. The final price of €3.08 billion was higher than the pre-sale estimate of the independent expert and 26% higher than the offer of the second highest bid.

Bidders were also given enough time and information to carry out a proper valuation of ANA. The duration of phase I was over six weeks, while that of phase II was four weeks. The Commission considered these time periods to be reasonable and sufficient.

The Commission added that there were no subsequent complaints or allegations of improper procedures or hidden state aid.

Questionable conditions

With respect to the requirement for the absence of any conditions that could depress the sales price, the Commission examined the “lock-up rule” which prevented the disposal of shares during the first five years after the sale.

Here the explanation of the Commission is wanting. Portugal claimed that a lock-up period was usually required in contracts for the award of service concessions and that the lock-up period in this case was already set out in the concession agreement prior to the privatisation agreement. It is probably true that the owner of an asset, who confers the right of exploitation of that asset to another party, does not want the concessionaire to transfer that right to a third party without its consent. But in this case, the state was intending to dispose of its assets. A private investor would have no interest in the fate of its asset after its disposal. The only legitimate reason, from a state aid perspective, for the Portuguese government to introduce a lock-up clause in the concession agreement would have been to assure potential owners of ANA and to facilitate the conclusion of the sale.

But this is not what appears to have happened. According to the text of the Commission decision, Portugal signed a 50-year concession agreement which specifically required that during the first five years after the privatisation the government had to authorise any change in the ownership of the concession. This is indeed puzzling: if the intention of the Portuguese government was to assure the new owner of ANA, the right for the authorisation should have been assigned to the new owner and not retained by the government after the privatisation. If anything, this limits the rights of the new owner which in turn could depress the value of ANA.

The Commission went on commenting that “since this change of ownership clause was already present in the concession, the Commission considers that it was a condition that any seller, including a private party, would have been bound to respect in a sale of the same assets, and it would have therefore been imposed on any purchaser of the shares of the company holding the concession.” [para 59] But this is a circular argument. The behaviour of the Portuguese government had to be compared to that of the typical private investor. Instead, its actions before the sale are used to justify the terms of the sale because it acted the way it acted; a rather meaningless comparison. More seriously, the Commission fails to consider that the Portuguese government acted in such a way that the terms of the sale agreement could be influenced by the terms of the concession agreement.

Then the Commission adds information which directly undermines the principle that the seller is not concerned about the fate of the company after it is sold. In paragraph 60 it is stated that “the Portuguese authorities state that this type of lock-up period is customary in privatisation processes in Portugal to ensure a medium-term stability of the privatised company” . The medium-term also covers the period after the sale. Apparently, the lock-up period “is not perceived by bidders, when competing for the acquisition of a company such as ANA, as a condition that would significantly influence the price offered.” Normally, the Commission would immediately demand proof of such claims. In this case it is not known whether it asked or received any. At any rate, none is provided in the text of the decision.

The Commission concludes with the observation that “since the final bid was considerably higher than the estimated value of the privatised company, the lock-up rule did not negatively influence the price level to any significant extent. Moreover, after five years the purchaser will enjoy full ownership rights with no continuation of the restrictions on selling the assets, therefore this condition is not such as to permanently affect the economic freedom of the purchaser to dispose of the company as it sees fit. [para 61]

In past decisions the Commission rejected arguments from member states that conditions imposed on sales of state assets did not affect the outcome of the sale allegedly because the privatised companies were sold to the highest bidder. As the Commission correctly observed in those cases, the highest bid could have been even higher in the absence of those conditions.


It is obvious that the Portuguese government had to ensure the viability of ANA after its privatisation because that was important for the success of its economic reform programme. This is a legitimate objective. But it does not necessarily follow that the Commission must adopt a convoluted logic in order to clear the privatisation process. It could have found State aid in favour of ANA and declared it compatible with the internal market.


[1] The Commission Decision can be accessed at:



Phedon Nicolaides

Dr. Nicolaides was educated in the United States, the Netherlands and the United Kingdom. He has a PhD in Economics and a PhD in Law. He is professor at the University of Maastricht and the University of Nicosia. He has published extensively on European integration, competition policy and State aid. He is also on the editorial boards of several journals. Dr. Nicolaides has organised seminars and workshops in many different Member States, and has acted as consultant to several public authorities.

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