Faded green

TALK ABOUT DOMINANCE. By the end of the first half of last year, the French market accounted for about 57 percent of the €9.7 billion in public-private partnerships (PPP) that reached financial close across the European Union, according to data from the European PPP Expertise Centre (EPEC).

Of the four largest projects singled out by EPEC during the first semester of 2011, three were French: the gigantic, €7.8 billion Tours-Bordeaux high-speed rail line – one of the largest concessions ever closed in Europe, for which the private sector contributed about €3.8 billion in debt and equity; the €1 billion A63 highway; and the €800 million Balard defence headquarters, nicknamed the ‘French Pentagon’.

While EPEC has yet to release numbers for the second half of 2011, a cursory glance at the deals that reached fi nancial close during the latter part of the year is enough to safely conclude that France continued to be Europe’s largest PPP market.

As 2012 dawns, the French market shows no signs of slowing down yet, with rail agency Reseau Ferre de France (RFF) naming a consortium led by French developer Bouygues as the preferred bidder for the €1.8 billion Nimes-Montpellier high-speed rail line – the last contract to form part of RFF’s €13 billion high-speed rail PPP programme. But Nimes-Montpellier – or CNM, as it’s known in the local market – also marks the end of an era for French PPPs.

“The batch of mega-deals that formed part of [2008’s] stimulus package has now concluded. We are reverting to a more ‘normal’ deal pipeline, with projects in the range of hundreds of millions of euros,” explains Francois Bergere, the head of MAPPP, the French PPP unit.

Perhaps it’s better to say ‘almost’ back to normal, since the more than €4 billion Canal Seine Nord PPP – an ambitious project to develop a 106-kilometre shipping canal – is still making its way through the procurement process, although almost everyone in the French market expressed reser-
vations on whether the project will actually reach a safe harbour.

But Canal Seine Nord aside, Bergere is right: France’s PPP pipeline will become much smaller in size, with the brunt of it to be made up of: prisons – “up to 20 prisons are set to be built as PPPs over the next years”, Bergere says; universities – “some half-a-dozen university PPPs should get
green lighted this year”; and broadband internet – “there is a programme to roll out super-fast broadband at a regional level, with the Auvergne region close to awarding a €500 million-plus contract”.

Still, those craving some medium- to-large-scale (but not gigantic) transportation deals will be able to fi nd succour in a growing roads PPP programme. Highlights include the €750 million, A355 Strasbourg bypass, poised to be awarded to French developer Vinci; the long-gestating L2 road PPP, in Marseille, which recently attracted bids from four consortia; and the just-launched €1.2 billion A45 road concession, linking Saint-Etienne and Lyon.

THE SLOWDOWN

Still, while France’s PPP pipeline is looking robust, investors should bear in mind that this
is an election year, which will likely lead to a slowdown in the procurement and launch of
new projects, especially in the months immediately following the presidential election.

There is also a chance of backlash against the use of PPPs if President Nicolas Sarkozy doesn’t get re-elected and Francois Hollande, head of the Socialist party, takes his place. Part of that backlash is, in a way, the natural consequence of a change of political colour, as happened in the UK when
the new Conservative/Liberal Democrat coalition took over from Labour.

“The current PPP programme is very closely identifi ed with the current majority [President Sarkozy’s UMP party],” acknowledges MAPPP’s Bergere. “If there’s a new government, there will almost certainly be a reassessment [of the programme],” he adds.

However, politics is not the only factor that might potentially harm the PPP model: the
current economic environment is also conspiring against it.

“We might see a backlash against PPPs [with a new government] because the cost of financing is now much higher,” argues Jean Bensaid, chief executive of the €1.5 billion CDC Infrastructure fund. “But I think the state of public finances makes it impossible for a total backlash against PPPs.”

Bergere agrees: “My personal view is that if the new government wants to keep devel-
oping infrastructure and stimulating the economy they will have to look at PPPs.” But
that doesn’t mean the model will be used with the same frequency as it is today.”

Despite these caveats, though, France looks set to retain its status as one of Europe’s most active PPP markets in the years to come.