Investors check in

The French government’s plan to sell part of its share in four regional airports look set to take off this year with details of the programme expected to be announced within weeks of this issue going to press.

That’s the good news. The bad news is that there is still a lot of uncertainty surrounding the privatisations, according to a source close to the negotiations. “No clear decision has been taken yet, except the one to analyse the opportunity to sell part or all the state’s share in the airports. The government should have a clear view on what they want to do in next few weeks,” the source says.

Infrastructure Investor has learnt that, contrary to expectations, Nice airport is not one of the four airports earmarked for privatisation. The government, which owns 60 percent of Bordeaux, Toulouse, Montpellier and Lyon airports, wants to invite additional investors in to raise cash and create development opportunities.


Nice has been put on the backburner as officials have discovered that a new law would have to be drafted to allow a new investor to come on board, a source close to negotiations explains. The source added it was unlikely that the airports would be sold as one package unless one investor made an extremely compelling case to buy into them all.

In addition to the state’s 60 percent, local authorities hold 15 percent of the airports and chambers of commerce 25 percent. The state intends to keep a majority stake until 2013. How large a slice is up for sale is still unclear.

Daniel Benquis, a partner at Ernst & Young France, says there will be plenty for potential buyers to consider. There are also still questions about what will constitute the “public” stake after a sale, and the timing of any offer with presidential elections due early in 2012 (one wary infrastructure investor does not believe anything will take place before the 2012 elections).

“It is a little bit difficult to say how much [will be sold] because they have said that the public will continue to hold the majority stake but it is difficult to know what it means. Is it the central government [stake]? Does it include or not the region and the city and the chamber of commerce?” Benquis ponders.

Critical factors in any decision to invest include possible competition from high-speed rail services and the potential for expansion to increase revenue. “All the airports have their specific stories,” Benquis adds.

Bordeaux, for instance, faces potential cuts in passenger traffic when improvements to the high-speed rail network cut the journey time to Paris to two hours. Lyon already has a new high-speed rail station attached to it with room to expand.

And then there are other issues to consider, with one fund manager describing the airport privatisations as “a very high stakes political game” with plenty of potential for “conflicts of interest between the regional authorities and investors”.

Leading contenders to buy into the airports are French construction giant VINCI, utilities group Veolia, investment bank Macquarie and Aeroports de Paris (AdP). All decline to comment.

VINCI recently signed a 55-year concession contract for 85 percent of the new €450 million Nantes airport, expected to be operating by 2017. The Nantes chamber of commerce holds 10 percent and the Entreprise de Travaux Publics de l'Ouest 5 percent. VINCI already runs a number of smaller French airports.

France’s Caisse des Depots et Consignations (CDC) said last year it would be interested in buying a stake in the airports.

“Yes, it is a matter of interest for us as a long-term investor. These are crucial infrastructures for regional development. We would thus be interested if the state decided to sell stakes,” CDC Infrastructure chief executive Jean Bensaid told Reuters last year.

Befriend the locals

Benquis says the influence of the regional authorities could be important for any final decision. “The relationship with the local authority is key because even though the shares are held by the government, if your relationship is very bad with the local authority you will never get it,” he says.

In addition: “It is impossible to work if you have too Anglo-Saxon a way of proceeding. I would assume it won't be seen as too friendly from some airports,” he added, suggesting that increasing profits by cutting staff would not be viewed positively given the airports are big local employers.