Eco-tax: Italian surprise
One of the first significant PPP deals to be awarded to a non-French sponsor, the Autostrade-led Ecomouv consortium closed a Eu704.5 million ($951.4 million) financing for the 13.5-year Eco-tax concession on 20 October.
The financing was delayed because of a legal challenge from Sanef, one of the losing bidders, and eventually featured minimal French bank support. But given the exposure of the French banks to the Eurozone’s woes, and persistent market rumours about their ability to fund project finance debt commitments, foreign bank dominance of the lender line-up proved a strength.
The concession entails the development of an electronic tolling system which tracks the movement of, and then charges a fee to, heavy goods vehicles using satellite technology across 15,000km of France’s road networks. The project will be fully operational in 20 months’ time, after the end of a three-month trial period in Alsace. The French state will re-invest the fee revenue in sustainable forms of transport such as rail and water.
The closest technical comparison is the Autostrade-led Europpass project in Austria, which tracked the movement of trucks and other heavy vehicles using microwave technology. The deal closed in May 2004, and Autostrade has similar experience using radio technology in Italy, but this is the first time satellite technology will be used for a heavy goods vehicle tolling project, in spite of persistent support from the EU government.
The deal could have been a difficult sell to sponsors because of the lack of technical comparisons, but sponsor appetite was assuaged by the cash flow model, which contains no traffic risk and is backed by availability payments for the life of the concession. The total amount of availability payments is about Eu2.8billion, plus some inflation-linked increases.
Five consortiums originally expressed interest. A Deutsche Telekom and Vinci-led consortium pulled out shortly after the project was tendered in August 2009 because the German telecoms company encountered an intellectual property issue concerning the use of its technology in France. Billoo Development submitted a bid for the project but failed at the first offer stage in December 2009.
MEEDAT, the French transport ministry shortlisted the three other bidders: ETDE/France Telecom/ CS Systèmes d'Information/ Kapsch TrafficCom/ FIDEPPP/SEIEF/DIF Infrastructure, supported by Credit Agricole and BNP Paribas; Sanef/Caisse des dépôts et consignations/Egis/ Atos/Siemens, supported by Dexia; and Autostrade, with best and final offers due in September 2010.
The awarding of the contract in January to Autostrade took many in the market by surprise deszpite the technical strength of its bid: Autostrade was the only bidder able to provide a working example of an on-board unit that would track the movement of the vehicles and offered the shortest construction period.
The grantors aimed to reach close by April. What followed, however, was a long legal appeal from Sanef against the awarding of the contract to Autostrade, which delayed financial close by six months. The administrative court in Cergy-Pontoise annulled the decision of the French ministry to award the contract, which threatened to force the government to prelaunch the tender process, but in June the Conseil d’Etat quashed this decision.
Sanef’s challenge was based on three main arguments. First, one of MEEDAT’s advisers, RAPP Trans, had previously worked for Autostrade on another project elsewhere and this meant that the tender should be cancelled on the principal of equal treatment of bidders. Second, the criteria used to measure the quality of the different bids were deemed to be arbitrary and open to discretion.
Third, and most saliently, it was alleged that Autostrade had bid for the process alone, but had then accrued partners further on. The dispute seems to have centred on the status of Thales and Steria, in particular. The two technology groups had originally bid alongside Vinci and Deutsche Telekom before that consortium withdrew, and then joined the winning group as sub-contractors. If they had been offered equity stakes, then this might have upgraded their status to full consortium members.
In the bid for the project, Autostrade disclosed to the state that it would act on a standalone basis, but that it would open up the shareholding later on, a process which was allowed in the tender document. Sanef might still decide to bring a further legal challenge, but this would have be based on the signing of the contract as opposed to the awarding process, and so most sources reckon this is unlikely.
The sponsors, which are providing Eu125 million of equity under the base case, reached close on 20 October. A club of five banks – Banca IMI, Credit Agricole, Deutsche, Mediobanca and Unicredit – provided Eu411 million of financing, Eu326 million of which will be covered by the Dailly tranche when the operational phase begins and the remaining Eu85 million will be uncovered. The tenor on the Dailly debt is 13.5 million, matching the concession period, while the commercial debt has a tail of 6 months.
The banks also provided a Eu138 million bridge loan during construction, which will then be taken over by Caisse des Depots et Consignations, the financing arm of the French state, when the construction period comes to an end. The remainder of the financing requirements will be met with a Eu30.5 million VAT revolving credit facility. The sponsors plan to draw on Eu300 million of the debt during the first 12 months. The interest rates are being hedged, as stipulated by the grantor, by all of the banks.
Banca IMI, which supported the bid shortly after the tender was launched, took the largest ticket, which equates to 31% of the total commercial bank debt. Deutsche, Mediobanca and Unicredit joined the bid in September 2010 and took slightly less, though thought to be a roughly equal amount, while Credit Agricole only joined after best and final offers were due, since the bank was supporting the France Telecom bid, and wrote the smallest ticket.
The pricing on the debt is fairly competitive, with the uncovered portion in the range of other French PPP projects. The pricing on the Dailly debt is understood to be slightly higher than usual and in excess of 150bp. This is because the sponsors had support mostly from non-French banks, which are typically unable to offer the same pricing on the Dailly debt as French banks because of higher funding costs, according to one source close to the deal.
The sponsors were fortunate that pricing was set at best and final offer stage before the problems in the Eurozone gathered speed, which could have put further pressure on the margins, since the concession features some operational risk. This was partly the reason why the average debt service coverage ratio was set at 1.4x, which is a lot higher when the Dailly portion of the debt is factored out, notes one source close to the deal.
Ecomouv
Status: Financial close 20 Oct 2011
Size: Eu704.5 million
Location: France
Description: Development of a satellite tolling system
Grantor: MEEDAT
Sponsors: Autostrade, SFR, SNCF, Steria, Thales
Debt: Eu120 million
Lenders: Banco IMI, CDC, Credit Agricole, Deutsche, Mediobanca and Unicredit
Sponsor legal adviser: Willkie Farr & Gallagher
Sponsor financial adviser: Deutsche Bank
Lender legal adviser: White & Case
Lender technical adviser: LeighFisher
Grantor legal adviser: Clifford Chance
The financing was delayed because of a legal challenge from Sanef, one of the losing bidders, and eventually featured minimal French bank support. But given the exposure of the French banks to the Eurozone’s woes, and persistent market rumours about their ability to fund project finance debt commitments, foreign bank dominance of the lender line-up proved a strength.
The concession entails the development of an electronic tolling system which tracks the movement of, and then charges a fee to, heavy goods vehicles using satellite technology across 15,000km of France’s road networks. The project will be fully operational in 20 months’ time, after the end of a three-month trial period in Alsace. The French state will re-invest the fee revenue in sustainable forms of transport such as rail and water.
The closest technical comparison is the Autostrade-led Europpass project in Austria, which tracked the movement of trucks and other heavy vehicles using microwave technology. The deal closed in May 2004, and Autostrade has similar experience using radio technology in Italy, but this is the first time satellite technology will be used for a heavy goods vehicle tolling project, in spite of persistent support from the EU government.
The deal could have been a difficult sell to sponsors because of the lack of technical comparisons, but sponsor appetite was assuaged by the cash flow model, which contains no traffic risk and is backed by availability payments for the life of the concession. The total amount of availability payments is about Eu2.8billion, plus some inflation-linked increases.
Five consortiums originally expressed interest. A Deutsche Telekom and Vinci-led consortium pulled out shortly after the project was tendered in August 2009 because the German telecoms company encountered an intellectual property issue concerning the use of its technology in France. Billoo Development submitted a bid for the project but failed at the first offer stage in December 2009.
MEEDAT, the French transport ministry shortlisted the three other bidders: ETDE/France Telecom/ CS Systèmes d'Information/ Kapsch TrafficCom/ FIDEPPP/SEIEF/DIF Infrastructure, supported by Credit Agricole and BNP Paribas; Sanef/Caisse des dépôts et consignations/Egis/ Atos/Siemens, supported by Dexia; and Autostrade, with best and final offers due in September 2010.
The awarding of the contract in January to Autostrade took many in the market by surprise deszpite the technical strength of its bid: Autostrade was the only bidder able to provide a working example of an on-board unit that would track the movement of the vehicles and offered the shortest construction period.
The grantors aimed to reach close by April. What followed, however, was a long legal appeal from Sanef against the awarding of the contract to Autostrade, which delayed financial close by six months. The administrative court in Cergy-Pontoise annulled the decision of the French ministry to award the contract, which threatened to force the government to prelaunch the tender process, but in June the Conseil d’Etat quashed this decision.
Sanef’s challenge was based on three main arguments. First, one of MEEDAT’s advisers, RAPP Trans, had previously worked for Autostrade on another project elsewhere and this meant that the tender should be cancelled on the principal of equal treatment of bidders. Second, the criteria used to measure the quality of the different bids were deemed to be arbitrary and open to discretion.
Third, and most saliently, it was alleged that Autostrade had bid for the process alone, but had then accrued partners further on. The dispute seems to have centred on the status of Thales and Steria, in particular. The two technology groups had originally bid alongside Vinci and Deutsche Telekom before that consortium withdrew, and then joined the winning group as sub-contractors. If they had been offered equity stakes, then this might have upgraded their status to full consortium members.
In the bid for the project, Autostrade disclosed to the state that it would act on a standalone basis, but that it would open up the shareholding later on, a process which was allowed in the tender document. Sanef might still decide to bring a further legal challenge, but this would have be based on the signing of the contract as opposed to the awarding process, and so most sources reckon this is unlikely.
The sponsors, which are providing Eu125 million of equity under the base case, reached close on 20 October. A club of five banks – Banca IMI, Credit Agricole, Deutsche, Mediobanca and Unicredit – provided Eu411 million of financing, Eu326 million of which will be covered by the Dailly tranche when the operational phase begins and the remaining Eu85 million will be uncovered. The tenor on the Dailly debt is 13.5 million, matching the concession period, while the commercial debt has a tail of 6 months.
The banks also provided a Eu138 million bridge loan during construction, which will then be taken over by Caisse des Depots et Consignations, the financing arm of the French state, when the construction period comes to an end. The remainder of the financing requirements will be met with a Eu30.5 million VAT revolving credit facility. The sponsors plan to draw on Eu300 million of the debt during the first 12 months. The interest rates are being hedged, as stipulated by the grantor, by all of the banks.
Banca IMI, which supported the bid shortly after the tender was launched, took the largest ticket, which equates to 31% of the total commercial bank debt. Deutsche, Mediobanca and Unicredit joined the bid in September 2010 and took slightly less, though thought to be a roughly equal amount, while Credit Agricole only joined after best and final offers were due, since the bank was supporting the France Telecom bid, and wrote the smallest ticket.
The pricing on the debt is fairly competitive, with the uncovered portion in the range of other French PPP projects. The pricing on the Dailly debt is understood to be slightly higher than usual and in excess of 150bp. This is because the sponsors had support mostly from non-French banks, which are typically unable to offer the same pricing on the Dailly debt as French banks because of higher funding costs, according to one source close to the deal.
The sponsors were fortunate that pricing was set at best and final offer stage before the problems in the Eurozone gathered speed, which could have put further pressure on the margins, since the concession features some operational risk. This was partly the reason why the average debt service coverage ratio was set at 1.4x, which is a lot higher when the Dailly portion of the debt is factored out, notes one source close to the deal.
Ecomouv
Status: Financial close 20 Oct 2011
Size: Eu704.5 million
Location: France
Description: Development of a satellite tolling system
Grantor: MEEDAT
Sponsors: Autostrade, SFR, SNCF, Steria, Thales
Debt: Eu120 million
Lenders: Banco IMI, CDC, Credit Agricole, Deutsche, Mediobanca and Unicredit
Sponsor legal adviser: Willkie Farr & Gallagher
Sponsor financial adviser: Deutsche Bank
Lender legal adviser: White & Case
Lender technical adviser: LeighFisher
Grantor legal adviser: Clifford Chance
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