Changes in the French PPP

and concession framework

F.BERGERE Secretary General French treasury PPP taskforce

OECD Paris,

24 March 2011

2

French PPP market at crisis onset

PPP Act recent (2004), Progressive ramp-up,

Able & willing professional actors pulling the market

Very aggressive financing terms

Legal framework in place and working; few litigations;

=> Overall compelling case for PPP on economic,

political & legal grounds as a key tool in implementing

infra projects

…But still an “emerging market”for big projects …

3

Financial crisis impact in 2009

-Reduced banking capacities

-Club deals to replace the syndication market

-Increased cost of funding

-Reduced tenor

-fewer active players on financial side, with an

increased aversion to demand risk

=> Several big-ticket PPP projects hitting the market

in2009/10 in danger of being deferred or abandoned

Pros & Cons of Public support to PPPs?

PROS:

Necessary to avoid projects falling in the liquidity trap

Demultiply economic activity & jobs

Idea= keep balance between public & private sectors’ responsibilities

Limited immediate impact on budget outlays & deficit

CONS:

Contrary to spirit of PPP (transfer risk to private sector)

Windfall opportunity for hard-to-finance deals (concessions)

Issues like: LT budgetary sustainability, balance-sheet impact, compliance with State aid/competition EU rules

5

The French Economic stimulus

package for 2009-2010

Public Investment = focus of Stimulus plan

Public support to PPP financing: Main

measures adopted in Feb 2009

1. 10bn€ State Guarantee scheme

2. 8 bn€ Co-funding from Caisse des dépôts- managed

Fonds d’Epargne

3. Adjustable financing terms +Partial public funding

of PPP projects now possible

6

State guarantee scheme

• EUR 10 Bn State guarantee program for

priority projects realised under PPP&

concession scheme

• Guarantee to be granted before end-2010

• Guarantee up to 80% of the private sector

debt (commercial banks & EIB loans) financing

required

• Guarantee priced according to normal market

conditions (compliant w/ EU state aid regul.)

Stimulus package results on PPPs:

To date 15 projects reviewed, and 7 projects granted eligibility to State guarantee, for an aggregate amount of approx. €4 billion, out of the 10bn maximum amount available:

HSL-Tours-Bordeaux, Le Mans-Rennes, Nimes-Montpellier, CDG-X, Ecotaxe/HGV, MoD Balard premises, Tram-Train Réunion

Only 2 projects would effectively need the Stat guarantee to achieve closing: Tours-Bordeaux & CDG-X, both concessions

No financial closing yet, but enabled major projects (with up to 15bn€ cumul.investmt) to be pursued throughout the financial crisis

=> Clear signal about Gov’t commitment to pursuing the development of PPPs

8

Co-funding from CDC

managed saving funds • EUR 8 Bn co-funding program over 5 years

• Transportation infras and Renewable Energy : 7 Bn

• Universities : 1 Bn

• Co-funding (< 25% of debt required) alongside

public and private sector financing sources

•Long tenors ( up to 40y) and favourable terms

• First examples : 20 projects identified for over

3 bn €) et 8 signed (Paris Universities,…)

9

Temporary measures : what

next?

State guarantee already closed for new deals

Adjustable financing also expired at end-

2010

CDC co-financing expiring by end-2013

But need for long-term financing of

privately funded projects still there

10

Assessment of PPP - jan 2011

415 projects at all stages of procédure, incl. 84 projects

attributed for a combined amount of 8.4bn€

Typologie

30%

7%

14%6%

26%

15%0% Bâtiment

Transport

Culture et sport

TIC

Equpt urbain

Energie

Formation

jan 2011

11

Assessment of PPP - jan 2011

Montants unitaires d'investissement

11%

32%57%

X>150M€;

30<X<150M€

X<30M€

jan 2011

12

Prospects beyond 2011

• The French PPP market will register a peak in 2011 with

around 6 to 8 bn€ investment for new projects signed.

• Beyond , visibility more limited, but already identified

projects could account for 60 bn€ over the next 10 to 15

years (6 to 8% of total public investment): Grenelle

environnement, Plan Numerique, Plan Campus, Grand Paris..

• Financing issues: half of total for big projects to be

financed by private sector ( rest by public subsidies

upfront+CDC): HOW?

•Other issues ( legal, procedural…) deemed secondary

13

Beyond the financial crisis:

Further development of PPP market subject to a number of challenges being satisfactorily met:

- better pipeline programming & regular deal flow to attract competition + need to better structure major PPP projects

- Develop long term solutions for infrastructure financing by both Public sector and private funding: find new sources of LT financing on capital markets (through securitization…) to complement bank credits

14

Bond financing?

Working Group managed by MAPPP & DG Treasury with private participants (companies, banks, institutional investors …) in H-1 2010

Report & proposal to Minister of Economy in July 2010

Technical Aspects & due diligences performed (competition rules, Solvency II, Basel II..) by March 2011

15

Envisioned scheme

Creation of a Fonds commun de Titrisation(Securitisation)

– Assets = irrevocable debt over a public structure (cession Dailly

acceptée)

– Liabilities = Bonds issued

2 possible intervention modes :

- Refinancing after construction stage

- Financing from closing (implies managing construction stage &

piggy-backing )

For PPP launched by State & et central-level public agencies (no

local governments) => quasi-sovereign risk for bond-holders

16

Prospects

Strong interest from institutional investors

(insurers,..;)

Expected fallout: provision of long-term ,

financing in significant volume

Improve competition on financing costs for PPPs

First market –test by H-2 2011

Articulation with EU Project bonds 2020?

17

Contacts:

Mission d‘Appui aux Partenariats Public-Privé

6 rue L.Weiss PARIS 75013 Télédoc 323

Tél: 0144 97 34 30

Fax: 0144 97 33 88

Mél: contrat.ppp@finances.gouv.fr

Site Internet: www.ppp.bercy.gouv.fr