French rail communications PPP to close next week

After several delays, France’s €1bn GSM-R rail communication PPP is set to reach financial close next week with between eight to ten commercial banks. The latest issue holding banks from writing the final cheque has been the need to get assurances regarding the status of the 15-year contract should rail agency RFF – a public company – be privatised in the future.

French rail agency RFF is nearing financial close for its €1 billion GSM-R rail communications project, with banks getting ready to sign the deal sometime next week.

The public-private partnership contract (PPP) is RFF’s first such scheme and was awarded to a VINCI / AXA Private Equity/ SRF/ TDF consortium last year. It will require the consortium to implement a uniform communications technology across the remaining 11,000 kilometres of France’s rail network and will also include the new tranches of high-speed rail currently in procurement.

Between eight to ten commercial banks – led by Calyon – together with the European Investment Bank (EIB) and French state-backed Caisse des Dépôts et Consignations (CDC) are on standby to provide some €600 million of debt. Commercial banks will mostly fund the construction tranche with the EIB and CDC, through some €8 billion in savings, funding the operational period.

The latest obstacle preventing the contract from reaching financial close has been the lenders’ need to obtain assurances from the government about the status of the 15-year PPP should RFF, a public company, be privatised in the future. Sources are confident a solution is close to being reached though, which should pave the way for financial close next week.

Originally, the GSM-R PPP was scheduled to reach financial close in the summer of 2009 but was dealt a severe blow when equipment provider Nortel went bankrupt. Nortel, a Canadian firm, had already installed its GSM-R technology on some 2,700 kilometre of France’s rail network and was imposed by RFF on the consortium as the equipment provider for the PPP project.

But when Nortel filed for protection against creditors, banks brought the financial close process to a halt until the equipment provider’s situation was resolved. That only occurred late last year when Austrian supplier Kapsch bought Nortel’s global GSM-R business.