Eiffage awarded €3.4bn French HSR deal

French rail agency RFF has named Eiffage as preferred bidder for the €3.4 billion Bretagne Pays de la Loire (BPL) high-speed rail line, connecting Connerre, in eastern France, to Rennes, in the centre of the country.

Eiffage beat competition from rival French developers Bouygues and VINCI to build and operate the 182-kilometre rail line over a 25-year concession period. Rumours in the French market say that Eiffage’s bid undercut its nearest competitor (Bouygues) by €300 million.

Contrary to the larger, €7.8 billion Tours-Bordeaux high-speed railway, which is due to reach financial close in the spring, BPL has no traffic risk, with the concessionaire to receive availability payments from the French government. Availability payments are contributions paid by the public sector in exchange for making an asset available in good condition.

Like its bigger brother, though, BPL can make use of the French government’s debt guarantee, which can cover up to 80 percent of the debt used for the project, one of Europe’s largest infrastructure deals.

The guarantee is being earmarked for about €800 million of the roughly €1 billion required from the private sector to fund the project. For BPL, it will only cover the construction period (although it can also apply to the ramp-up period and the first refinancing risk) and will add between 120 basis points and 150 basis points to the final price.

In addition to private sector funding, BPL will receive €1 billion from central government to cover the availability payments required and the same amount from the regional authorities as an upfront payment.

State-backed bank Caisse des Dépôts et Consignations (CDC) will also have a prominent role in BPL’s funding, having already pledged to lend €500 million to the regional authorities under favourable conditions to help fund their upfront contribution. The bank can also mobilise its savings funds – Fonds d’Epargne – to help finance up to 25 percent of the project cost post-construction.

Eiffage and RFF expect to sign the contract during the first half of the year with construction to be finished by autumn 2016. The project has been in procurement since December 2008.

To find out more about France’s multi-billion euro deal pipeline, be sure to read our country report on France to be published in the February 2011 issue of Infrastructure Investor magazine.