Driss Bererhi, Allen &
SECTION 1: Market overview
1.1 Please provide an overview of the project finance
market in your jurisdiction.
Project finance market is currently very active in France
and it covers the following main areas:
1. Greenfield projects, in certain specific sectors
(telecom/very high-speed networks, renewable energy/offshore
wind projects and social infrastructure such as universities
and schools). The greenfield market (development of new
projects) was very active between 2004 and 2013. After a short
slowdown it is now concentrated on specific areas generally
supported by governmental initiatives (including the very
high-speed telecom plan (see below), French university and
schools plan, and offshore wind farm projects).
2. Refinancing projects including highways and public
private project (PPP) refinancing. Most of the projects
launched a few years ago are now in a refinancing phase. This
concerns mainly motorways, as most of these assets where
initially financed through mini-perm schemes (short-term
financing with bullet repayment) and sponsors are now looking
to long-term refinancing. In 2016 and 2017, the A63, A28, A41,
A355, A19 and A150 motorways were refinanced. Other motorway
refinancings, such as for the A88, could be launched in 2018.
It also concerns social and transport PPP infrastructures.
An important number of PPPs have been launched since 2004
and refinancing these PPPs now may provide an important
reduction of financing costs (given the low level of margins).
The two major railway links structured through PPP schemes (CNM
and BPL) were refinanced in December 2017, by way of
renegotiation of margins. Most of the sponsors are currently
considering refinancing other PPPs (including universities,
prisons and other social infrastructures).
3. Brownfield projects including airport privatisations,
port acquisitions and infrastructure asset acquisitions.
Brownfield projects (acquisition of infrastructure assets) are
mainly concentrated on the transport sectors (airports and
ports) and strategic infrastructure/energy assets. After the
privatisations of Toulouse, Nice and Lyon airports, the
Bordeaux and Marseille airport privatisations should be
launched soon. Other sales of strategic assets should also be
launched in 2018.
Current project finance schemes go from standard loans to
complex structured finance, including project bonds
(securitisations and/or bonds schemes). Securitisation is
mainly used on PPPs while private placement bond financing is
used either on PPPs or on refinancing projects.
1.2 What is the composition of the market in terms of the
types of active lending institutions and has this been
The lending market is shared between three types of lending
institutions. The commercial banks active in the
infrastructure/energy markets are mainly French banks and
foreign banks with an infrastructure focus. Debt funds are
active mainly on refinancing or availability-based financing
and include French and more recently, foreign insurers. The
most active institutional lenders are the European Investment
Bank (EIB) and the French Caisse des Dépôts et
Commercial banks focus on short-term/mid-term/fronting
financing while debt funds and institutional lenders are
looking to provide long-term debt. Debt funds are more and more
involved on project finance transactions.
1.3 Please describe any major current projects or
initiatives that are influencing activity.
One of the most active sectors in France concerns telecom
very high-speed networks. The French very high-speed broadband
plan (France Très Haut Débit), which was
launched by the French government recently, aims to connect the
whole French territory by 2022, mostly by using the FTTH (fibre
to the home) technology. This national plan mixes both public
and private investments for an aggregate amount of
approximately €20 billion.
This plan has boosted the market and recent achievements in
France involve projects of all sizes, ranging from mega
regional projects such as in Alsace (€620 million
investment), Nord Pas de Calais (€730 million), Grand Est
(€900 million) and Gironde regions, to mid-size projects,
such as in Seine et Marne, Grand Lyon, Hérault and Var.
They are mostly all financed through public subsidies, equity
and/or external financing (commercial banks and/or debt funds
or institutional banks). The EIB is also eligible to provide
funding under the EU's Juncker investment plan and intervenes
either through direct lending or refinancing options.
SECTION 2: Transaction structures
2.1 Please review some recent notable transactions
involving your market and outline any interesting aspects in
Optical fibre deals
The Alsace optical fibre deal was financed in 2016 using a
soft mini-perm structure supported by a group of five French
commercial banks and an insurer. The EIB was also involved
providing a refinancing option for part of the debt after
construction. The remaining part of the financing needs is
covered by equity and by public subsidies. The implementation
of the first tranche of the project will lead to the connection
of more than 370,000 households in 700 French municipalities by
2022. If the conditional tranche is implemented, 100,000
additional connections will be completed. This project paved
the way for other significant projects of that type in other
French regions such as in Nord Pas de Calais and more recently,
in Grand Est, where closing occurred in August 2017.
Refinancing of motorways
The closing of the A19 and A150 motorway refinancings
occurred in November 2017. Both were structured through
innovative project bonds financing structures. The refinancing
of the A19 was a mix of loan and bonds while the A150 deal was
a full project bond refinancing. The main interest for using
project bonds on refinancing infrastructure assets is that debt
funds can offer a long-term tenor matching the duration of the
concession agreements; such refinancing occurring after the end
of the construction period and generally after the ramp-up
period which avoids the lenders to take these risks.
2.2 What might the projects above mean for the market and
have you noted other noteworthy developments in the way project
finance transactions are being structured for a) energy
projects and b) infrastructure development?
The successful completion of THD Alsace has given comfort to
the market on the eligibility of this sector for project
financing. The involvement of well-known French industrial
players, lenders, financial investors and the support of
institutional investors such as the EIB and the French Caisse
des Dépôts et Consignation (involved in most of
the public initiative telecoms projects in France), creates a
favourable climate for following projects such as Grand Est
fibre optic deal.
The achievement of the A19 and A150 refinancings on their
side showed that project bonds are clearly a credible and
efficient option for project refinancing in France and
compatible with infrastructure assets.
SECTION 3: Legislation and policy
3.1 Describe the key legislation and regulatory bodies that
govern project financing in your jurisdiction.
There are two main types of PPP agreements in France:
partnerships (availability risk); and concessions (revenue
risk). PPP law has recently been harmonised and simplified.
Ordinance of July 23 2015 and Decree of March 25 2016 aim to
unify and consolidate the different types of PPPs into a single
PPP contract called the marché de partenariat.
The purpose and scope of the marché de
partenariat are now redefined. The tendering authority can
modulate the scope of the projects to be covered and operation
and maintenance obligations are now optional. The ability to
conclude this type of contract is now given to the State and
local authorities only.
Concession agreement regulation is now covered by Ordinance
of January 29 2016, whose objective is to simplify concession
contracts law. There is a single threshold applicable to all
types of concession agreements. Specific rules apply regarding
the duration of a concession agreement.
Although there is no specific regulatory body governing
project finance in France, FININFRA (formerly MAPPP), a public
department under the supervision of the Ministry of Finance,
gives support to tendering authorities and other actors
involved in PPP contracts' processes.
3.2 Have there been any recent changes to regulations or
regulators that may impact the finance structuring in terms of
guarantee and security regimes, local currency rules and
foreign investment restrictions?
French law was amended at the end of 2017 to allow security
agents to directly benefit from security interests on behalf of
creditors. In the past, the security agent could only act as
agent. This will facilitate the management of security
interests and the drafting of the financing documentation.
Subject to specific exceptions, bondholders were supposed to
be organised through an assembly (the masse des
obligataires). Since the end of 2017 and subject to
specific conditions, the creation of such assemblies is no
longer mandatory. This gives more flexibility on the management
of a bond issuance and facilitates intercreditor
Since January 2018, and subject to the implementation of
specific decrees, securitisation vehicles can directly benefit
from simplified assignment of receivables, where in the past
only registered banks benefitted.
3.3 Please describe the regime governing renewable energy
Please see 3.4 below for incentive schemes in this area.
3.4 Does your jurisdiction have incentive schemes in place
for various types of energy or infrastructure project
There are two types of public financial support for
renewables. The feed-in tariff scheme enables projects to
benefit from the right to sell all generated electricity to EDF
(the French State-owned utility), at a guaranteed price, for 15
(wind) or 20 (solar) years, under a PPA. This scheme is now
being replaced by the so-called premium scheme
(complément de rémunération).
Under this scheme, projects are required to sell the
electricity in the market and benefit from an ex-post premium
under a 20-year contract entered into with EDF. For solar and
large wind projects, the contract is awarded following a tender
3.5 Are there any rules, legislation or policy frameworks
under discussion that may impact project finance in your
Please see section 3.2 above.
SECTION 4: Market idiosyncrasies
4.1 Please describe any common mistakes or misconceptions
that exist about the project finance market in your
Banking monopoly applies in France and only registered banks
can normally lend money. Some exceptions have been extended
recently but this is an important issue in the context of the
structuring of a financing or in the context of transfer of
participations. It is also important to notice that certain
security can benefit certain types of creditors only (including
simplified assignment of receivables). Financial assistance and
upstream guarantee restrictions also apply in France.
The fact that only public authorities and local government
(and companies carrying-out public services missions) can enter
into contracts drafted into French (or both in French and
English, the French version being the binding version) is also
an important specificity of the French market that that should
be kept in mind.
4.2 What measures should be taken to best prepare for your
A preliminary legal analysis (including on these aspects)
should be carried-out in advance in order to determine whether
the principles above apply to the underlying project.
SECTION 5: Practical considerations
5.1 How established is the legislative framework and
authorities that govern public-private partnerships (PPP) and
where have PPP structures most successfully been applied?
The legislative framework for PPPs is well established and
has been simplified and harmonised recently. For more details
on the legislative framework please see section 3.2 above.
5.2 What are the key considerations relating to foreign
investment into projects as regards insurance and tax
The main tax issue regarding certain project finance
transactions refers to thin capitalisation rules and the
deduction of interest on projects where the debt is secured.
5.3 Are there any specific issues creditors should be
mindful of regarding a bankruptcy and restructuring
There is a general freezing process principle under which:
(i) insolvent companies cannot be subject to legal/enforcement
proceedings; and (ii) outstanding contracts, including
financing documents, cannot be terminated without the prior
authorisation of the insolvency administrator. The court can
decide that any payment made by the company before it became
insolvent is void (during a maximum 18-month backward period).
Bankruptcy law provides for special ranking of employees and
tax/social security authorities. Other proceedings having
similar freezing effects can also apply as soon as the company
is subject to financial difficulties (without being yet
SECTION 6: Outlook
6.1 What are your predictions for the next 12 months in the
project development and financing sector and how do you expect
legal practice to respond?
The market will probably concentrate on brownfield project,
including the acquisition of strategic assets such as ports and
airports, and refinancing, especially of PPPs as most of those
entered into a decade ago are eligible for refinancing.
The lending market is very wide and competitive and a lot of
sources of liquidity are available. Financing structures will
probably be more complex, with a need for legal support with
regulatory, project finance, M&A, securitisation, capital
market and derivative specialists and experts at the same
Partner, Allen & Overy
T: +33 (1) 40 06 53 25
Driss Bererhi is a specialist in banking and
financing law, with a specific expertise in the
infrastructure and energy sectors. He advises
borrowers, financial institutions, funds, industrial
companies, corporates and governments on project/PPP,
acquisition and bond financing transactions and general
banking/finance regulation issues. He is very active in
the infrastructure, transportation, energy and telecom
sectors, in Europe, MENA and Africa.