The closing of the Stade Velodrome PPP project in the City of Marseille, France is significant for several reasons, not least the country's increasing comfort with PPP as a procurement model for large scale projects.

The deal – the largest stadium project yet in the country – is a milestone success for the country’s sports infrastructure and a shining example of the central and local level financial backing that many PPP projects enjoy.

The €260 million (US$362m) redevelopment [Projects Database] will increase the stadium’s current capacity to hold 70,000 fans as well as creating a significant commercial space.

The scheme joins the likes of €330 million Lille stadium development [Projects Database] which closed in the tough financial climate of 2008.

Two other stadium projects - Nice [Transactions Database] and Bordeaux [Projects Database] - that are in the final stages of procurement.

As Lille, Marseille, Nice and Bordeaux stadium projects have all taken the PPP route, France’s PPP proponents will be hoping the rest of the championship stadium venues will also take the PPP financing route.

Background

France’s UEFA European Championships host bid included 10 stadia – of which seven require major renovations and three would be new – across 10 cities:

• Bordeaux
• Lens
• Lille
• Lyon
• Marseille
• Nancy
• Nice
• Paris (Stade de France and Parc des Princes)
• Strasbourg
• Toulouse

The Marseille scheme came to market in September 2009 but – perhaps owing to the scale of the project – only domestic giants Bouygues and Vinci responded to RFPs.

The bid was ultimately won by the Bouygues in June 2010 with a range of equity players coming on board, including:

• CDC
• Caisse d’Epargne 
• Fideppp
• InfraVia

Neither Bouygues nor Vinci is a stranger to the stadium market – Vinci is preferred bidder on Nice while both are currently in the running for Bordeaux.

Banks and state authorities have put in equal amounts of debt for the project, bringing it to financial close in the projected time-frame. While some local municipalities in France have been wary of PPP deals in the past, they are now seen to be increasingly interested in such structures.

The City of Marseille municipality also took up the responsibility of conducting a patronage risk study (PRS) on the Velodrome stadium – which is usually conducted by lenders.

A PRS involves testing the potential user market with a view to determining the extent to which the target market will utilise the infrastructure at a particular cost or price level.

The Project

The stadium - first built in 1937 - will undergo a complete overhaul with capacity being increased from 60,000 to 70,000 in line with UEFA requirements.

The project also includes a multiple reception areas and media space, better access for the disabled and the rehabilitation of the seat cushions and health. New commercial space will deliver 40,000-100,000m² of shops, restaurants, hotels, offices and other leisure facilities.

Wind turbines and a nature reserve have been planned for the new housing development as part of the region’s sustainability drive.

Olympique de Marseille football club will continue to be tenants of the revedeveloped stadium while as part of the project agreement the SPV will not be allowed to sell naming rights to the stadium

Financing

A range of state authorities have contributed around €130 million (US$181m) in subsidies alongside a debt guarantee post construction for the project. MLAs matched that up with another €130 million in senior debt over a 30-year tenor.

Commercial debt came from the following lenders:

• Caisse d'Epargne - US$54.38 million
• Credit Agricole CIB - US$39.38 million
• Credit Mutuel - US$39.38 million
• Natixis - US$54.38 million

The scheme has a debt: equity ratio of 54:46 with margins starting at Euribor +200bps before falling post construction then climbing to around Euribor +230bps at maturity.

The project’s US$173.14 million equity was split as follows: 

• Bouygues- 14 per cent
• Caisse des depots – 28 per cent
• Caisse d’Epargne – 5 per cent
• OFI InfraVia – 28 per cent
• FIDEPPP – 23 per cent

Future Developments

The structure and deal sizes of each of the stadia individually may not be huge, but the swift execution is testimony to France’s buoying PPP market.

With this stadium reaching successful close and another two on the horizon, the remaining six stadia are also likely to work out their construction and financing timetables soon.

So far, local French banks have dominated – grabbing almost all the important deals in the country. However, moving ahead as the PPP market dries up in markets like UK, there is chance for other European banks to move towards financing infrastructure projects in France.

Conclusion

France is undoubtedly taking the lead in the world of stadium PPPs. Both strong state and regional bank backing on the financial side are big advantages for PPP deals in the country.

Countries like Singapore too have taken inspiration from France. The Singapore sports hub PPP was one of the pioneering sports PPP that the country closed in November this year [Projects Database].

As host to large sporting events, a country is well positioned to use the opportunity to re-build its infrastructure as well as provide a fillip to commercial aspects like tourism.

The market will now closely watch the fate of the rest of the stadiums that form part of the Championships. But looking at France’s past track-record, it is almost certain that the country will deliver when it claims.

Project at a glance