European PPP market bottoms out

The market hits a 10-year low with only €11.7bn of deals closed.

The European public-private partnership (PPP) market has hit its lowest point since 2003, closing just under €12 billion worth of projects last year, the European PPP Expertise Centre (EPEC), a think tank within the European Investment Bank, revealed in a recent report.

Sixty-six PPPs reached financial close in 2012 totalling €11.7 billion. That’s a 21 percent drop in number of deals closed compared to the 84 clinched in 2011, and a 35 percent drop in market size in relation to the €17.9 billion of PPPs closed two years ago.

Worryingly, four large projects accounted for 52 percent of the market in 2012 – two in France, one in the UK and one in the Netherlands. The largest project to reach financial close last year was the €3.2 billion Intercity Express Programme (Phase 1), the largest ever privately financed rolling stock deal. It accounted for 27 percent of the European PPP market last year.

There were also less big projects closed in 2012, with average transaction size decreasing from €213 million in 2011 to €177 million.

EPEC 2 411 

Last year saw the UK usurp France as Europe’s most valuable PPP market, accounting for 48 percent of the overall European PPP market. It also retained its crown as the most active market by number of deals, with 26 transactions concluded in 2012 compared to 27 in 2011.

France was the second-most valuable and active market with just under €4 billion of PPPs closed across 22 deals. Still, the only PPP market that actually grew in 2012 was the Netherlands. Education proved to be the most active sector, with 18 projects financed, followed by transport, which saw 13 deals funded.

Bank debt became pricier last year, with the average construction loan margin around 300 basis points compared to 2011’s 230 basis points, and circa 350 basis points approaching maturity, versus 2011’s 270 basis points.

In a sliver of good news, though, EPEC pointed out that European PPPs appear to be less dependent on government intervention and public financial institutions, with only five projects benefiting from public funding and/or guarantees last year.

*To read the full report, please click here.