French hospital in early PPP exit

The woes of the Greater Paris facility, which Eiffage was due to operate until 2041, have revived a heated debate over the future of PPPs in the country.

The Centre Hospitalier Sud-Francilien (CHSF), a hospital located in Corbeil-Essonnes, south of Paris, has reached a settlement with French developer Eiffage over the future of its maintenance and operation contractual arrangements.

CHSF, which has been described as the country’s most modern hospital, was built in 2011 under a public-private partnership (PPP) between Eiffage and the French state. Under the scheme, Eiffage was due to receive availability payments worth €48 million every year for 30 years, ending in 2041.

CHSF will now pay Eiffage a one-off fee of €80 million to exit the PPP contractual arrangement by 2015, 26 years before the planned end of the concession. The developer was originally seeking €194 million in compensation, but agreed to the terms of the exit last month. The settlement was formally confirmed through a vote of the CHSF supervisory board on Friday.

The legal wrangling and media controversy surrounding CHSF, the construction of which was completed eight months behind schedule, has poured fuel on the fire of the ongoing debate over the role of PPPs in France. Multiple mishaps during the construction phase – which a subsequent audit numbered at around 8,000 – were singled out by the scheme’s detractors as reasons to keep the country’s social projects solely under public responsibility.

A shift in political discourse over PPPs following the 2012 election of President François Hollande, who initially showed little enthusiasm towards the model, preceded a number of controversies over high-profile PPP projects last year, including legal challenges to the €700 million Paris Court of Justice and the €730 million Ecotaxe electronic toll projects.

The debate has had a particular focus on the role of PPPs in social infrastructure. Two partners at a Parisian law firm told Infrastructure Investor earlier this month that “perhaps the PPP scheme is sometimes too rigid an arrangement when it comes to build hospitals, on which unplanned modifications need to be carried out almost constantly during the construction process”.

While they didn’t think their role in infrastructure financing was jeopardised, they said such controversies had pushed public authorities to reflect deeply about when PPPs are the most suitable arrangements. Figures compiled by Infrastructure Investor Research & Analytics show that the value of French PPPs nearly halved between 2011 and 2013.

Yet other market participants are more upbeat, amid signs that the government has started to focus away from simple cost arithmetic and recognise the broader economic interest of PPPs.

“There’s been a couple of emblematic PPP projects some politicians took as scapegoats. But none of them has actually been stopped,” said Fadi Selwan, executive vice-president at Vinci Concessions.