By Carlos Ruano and Julien Toyer
MADRID (Reuters) - For more than a century, services group FCC has run the sewerage system in Barcelona, northeast Spain. Now the victory of a radical left party in town hall elections last Sunday is casting doubt over the contract.
The concession, renewed in January and worth 104 million euros (73.64 million pounds) over seven years, is one of many FCC and rivals ACS and OHL hold in Spain's three main cities Madrid, Barcelona and Valencia -- all of which will have anti-austerity mayors keen on reassessing contracts.
From waste collection to water supplies and parks management, FCC alone has contracts worth a combined 250 million euros in the three cities, or about 4 percent of group revenues.
The incoming mayors have all said they want to return services to public hands or, at least, renegotiate contracts to cut their price or increase quality.
While the concessions businesses at ACS and OHL are smaller, they are also involved in several major infrastructure and construction projects that were fiercely opposed by the new local rulers and are likely to be put under review.
Investors have taken note.
Shares in FCC, OHL and ACS have dropped 7 percent, 6 percent and 4 percent respectively so far this week, underperforming Spain's blue-chip index Ibex, which is down 0.6 percent.
OHL Chairman Juan Miguel Villar Mir said on Wednesday the private-sector had a vital role to play in providing services.
"Spain still has a big public deficit and high debts and needs to stick to austerity and reduce public administration," he said.
"Some have talked about expropriations and measures that go against what the Spanish economy needs. It would have a grave impact," he added.
FCC declined to comment, while ACS was not immediately available.
Analysts expect the companies' shares to remain under pressure until there is greater clarity. Brokers estimate the potential hit to FCC shares could be anything between 3 percent and 35 percent.
Yet, senior sources at the firms and some industry watchers say the impact may not be as large as initially feared.
"New criteria of increased transparency and regulation may come into force but at the end of the day the rules will apply to all and no company will file for a concession at a loss," said an executive on condition of anonymity.
The executive added that taking services back into public hands would require a lot of money and would not be easy from a human resources point of view.
Beka Finance analysts, who have a stable rating on FCC shares, agree the risks are likely to be limited.
FCC, for instance, would be entitled to compensations if its contracts were cancelled, while the cost of break fees written into existing contracts could deter the new authorities from moving in that direction, they said in a note.
"In activities like waste management we believe that no change will take place," they added.
(Additional reporting by Robert Hetz; Editing by Mark Potter)