France Infrastructure Report Q1 2010

This quarter BMI has introduced a new data series for infrastructure and its subsectors (transport and energy & utilities). This is an effort to address a significant deficiency in the availability of globally comparable, infrastructure-specific indicators and forecasts across a wide range of countries. The new infrastructure data series enables users to quantify trends and growth patterns in the infrastructure sectors of the 35 main emerging and developed markets out of the 62 countries in the infrastructure service. The stimulus plan made the largest provisions for the transport sector and specifically for the development of France’s high-speed railways. By December 15, the government will have the final bids in for the Tours-Bordeaux line, while in early December it had agreed to a new company to operate the planned high-speed line from Madrid to Paris. The latter is predicated upon the construction of the Perpignan-Figueras line, which is also in the tendering phase. In addition, the tram public-private partnership (PPP) in La Reunion was signed in early December, supported by state guarantees. Construction of all projects is due to begin in 2010/11.

The prominence of railways in France’s infrastructure sector in the coming years is reflected in the new infrastructure forecasts for France. Its share of total infrastructure industry value will rise from an estimated 37% in 2007 to 44% by 2014. Only power plants and transmission infrastructure will claim a larger share of infrastructure industry value, and railways will overtake utilities by the end of the forecast period. The jump in railways industry value will also be evident in the overall infrastructure industry value, which is forecast to see its contribution to total construction increase from an estimated 23% in 2008 to 29% in 2010. Our forecasts for the overall construction industry are much more bearish: we are forecasting a decline of 9.7% in construction industry value in 2009, falling to EUR105.7bn, from EUR117bn in 2008. Our forecasts are guided by continuous declines in official data for the construction sector over the previous quarters.

In the project finance ratings France tops the regional table, though with a very small lead over Germany. The country has developed large-scale PPPs in transport and utilities, and French companies are carrying out concessions throughout the globe, bringing home expertise, thus minimising risks on the side of the sponsor/contractor. We believe that most serious obstacle to France’s business environment rating is the dominant position of the French infrastructure companies and subsequently the absence of foreign players in the infrastructure sector. The ‘big three’, Bouygues, Vinci and Eiffage, dominate most transport contracts, while Alstom, EDF and GDF Suez are omnipresent in the utilities sectors. In the infrastructure Business Environment Ratings for Western Europe, France ranks second, with an overall score of 72.5, just behind Germany.