In 2011, the European public-private partnership (PPP) market can be easily conflated with a single country – France – which accounted for 62 percent of its value, a report released by the European PPP Expertise Centre (EPEC) last week shows.
EPEC’s numbers are unambiguous: if it weren’t for France’s flagship PPP transport projects – such as the massive €7.8 billion Tours-Bordeaux high-speed rail line – the value of the European PPP market would have experienced a sharp decrease in size in 2011. Thanks mostly to France, the market recorded some €17.9 billion of PPPs closed during 2011, roughly in line with the €18.3 billion of deals closed in 2010.
But the number of transactions closed throughout Europe last year – 84 versus 2010’s 112 – already hints at the decline in market value that is sure to come this year, now that France is winding down its massive high-speed rail programme.
While the actual number of deals concluded last year declined sharply, “transaction size increased considerably in 2011,” EPEC said, with the average deal size increasing to €213 million last year compared to 2010’s €163 million. Remove Tours-Bordeaux from the equation, though, and 2011’s average deal size drops to €150 million, below 2010’s mean. In fact, take away Tours-Bordeaux, and you wipe out 30 percent of the European market’s value in 2011.
Outside of France, only the UK could be said to have had a PPP pipeline last year with just over €3 billion of PPPs closed. In fact, the UK continued to be Europe’s most active market in terms of number of deals closed. But the 27 PPPs concluded in the UK last year was significantly less than the 44 PPPs closed in the country during 2010.
The bad news continues, with EPEC noting that “bank financing for PPP projects remained constrained in 2011 [with] loan margins having eased only marginally and loan tenors […] on average shorter than in 2010”. According to the PPP body, the average maturity of senior debt loans exceeded 20 years in 2011. In 2010, “half of the PPP transactions had debt tenors in excess of 25 years [whereas] in 2011 only 24 percent of transactions exceeded the 25-year mark,” EPEC said.
In terms of pricing, “the average loan margin was around 230 basis points (240 basis points in 2010) for the construction phase and around 270 basis points (275 basis points in 2010) approaching maturity and the lowest and highest margins for construction phase stood respectively at 170 basis points (180 basis points in 2010) and 300 basis points (425 basis points in 2010),” according to EPEC.
To read the full report, please click here.