In 2001, Ecuador agreed with OCP to build a gas pipeline. They would charge a fee, for each barrel transported, until January 2024. This money was used to pay investment, utility and maintenance costs. Since the pipeline will already be paid for, there will be no need to charge even remotely the same price. The next concession contract should generate something new.

The duration of any concession closes the accounts between what the company invests and what it takes. While it lasts, the concessionaire assumes the responsibility of covering the necessary investments, management and maintenance of the good and/or service in full quality, until the last day of the concession. If it is a road (or airport), at the end of the period the concessionaire has to pay much more extensive maintenance than usual, in order to comply with the clauses that oblige him to return the roads (or airport runways) to the same perfect condition as they should have been during the award. Extending – without further ado – the concession allows the concessionaire to avoid this important cost.

Completion of the concession is crucial, since the concessionaire amortizes – accounting only – all its investments during the concession, and then delivers the goods in perfect condition. At the end, when the book value of your investment is equal to zero, the sign lights up: game over.

With the grantor, the opposite happens: at the end of the concession, the revalued concessioned asset appears in the books, because according to the concession clauses, it was in perfect condition. For this reason, when the end is delayed, there is a very negative effect on the public institution; equivalent, no more and no less, to a sudden loss of 100% of that revalued investment, which remains in the books (and pockets) of the trader.

In 2020, two road concessions in Guayas expired and the prefecture of this province could take them back and receive 100% of the tolls; instead, it will remain in the hands of the concessionaire until 2026. In 2019, the municipality of Guayaquil was to receive all the commercial spaces that the concessionaire was allowed to build around the airport; rather, it will remain in the hands of the concessionaire until 2031. The port concession expired in 2027, but was extended in 2019 until 2046.

Avoiding a game over and extending the usufruct of the concession beyond the period that already enabled the concessionaire to recoup the investment and fair profit is a social damage. On top of that, many extensions are calculated on the principle of securing a large profit on ostensibly additional investments, when the concessions already have clauses that require the concessionaire to make not certain, but all necessary investments for the good functioning of the concession.

At the end of each concession, there is a golden opportunity to go to the next level: perform a creative and productive restart, adjust the conditions, add conditions and thus maintain the real advantage and legitimacy of the concessions. (OR)