The Autorité de la Concurrence in France has published their opinions on motorway concessions following a request from the French National Assembly's Finance Committee. The opinion document includes 13 innovative recommendations to make projects successful.

France has 11,882 km of motorways; 9,048 are operated thanks to a concession system by 19 operators owning concessions (SCAs: Sociétés concessionaires d'autoroutes i.e. the concession-holders). Out of these, seven 'historical' SCAs represent 92% of turnover for the sector. With the exception of COFIROUTE, a subsidiary of Vinci, which has always been a private company, the other six were privatized in 2006 to the benefit of the Vinci, Eiffage and Abertis groups for a total amount of 14.8 billion euros (US$ 16.51 billion).

After an analysis of the consolidated accounts of the 'historic' concession-holders, the Autorité has established that the concession-holders' increase in turnover since 2006, fuelled by constant traffic growth and increasing toll charges, appears to be largely disconnected from their costs. Consequently, the concession-holders' net profitability is very high: it reached in 2013 – with differences between companies - between 20% and 24% of their turnover. In other words, for every EUR 100 (US$ 111.57) tolls paid by users, between EUR 20 (US$ 22.31) and EUR 24 (US$ 26.77) represented a net benefit for the operators.

This exceptional profitability does however not appear to be justified by the business risks:

• Concerning toll tariffs, the legal framework of motorways concession regime guarantees the operators an annual regulatory increase equivalent to 70% of inflation until the concessions expire, which is often replaced by the law governing the rates payable for government planning contracts (loi tarifaire des contrats de plan) (80-85% of inflation + a percentage representing compensation for planned investment); 
   
• Concerning motorway traffic, while the SCAs systematically stress the risk of a possible reduction in traffic, this risk should be put into context. Travel by any other mode of transport (aeroplane or train) or by using other roads can only be substituted for motorway travel to a very minor extent and analysis of the demand shows that it not very price-sensitive. Finally, in the last ten years, it has been noticed that even if traffic decreases in one year, it always makes up for it by an increase in subsequent years, at least in the case of light vehicles which account for the great majority of revenue. The most recent forecast estimates the increase at 0.7% per year until 2030.

Furthermore, even when motorway traffic reduces significantly, for example, during the economic crisis of 2008-2009, the 'historic' operators' turnover, as well as their net profitability, generally continued to increase, thanks to the sole effect of the increase of toll tariffs. In other words, only an even more severe crisis than the 2008-2009 one may correspondingly result in an equally severe drop in traffic which might – possibly – result in a reduction in their turnover.

The other risk claimed by the operators is the debt burden they carry. The net debt of the seven 'historic' SCAs currently amounts to more than 23.8 billion euros (US$ 26.55 billion). Although this is high in absolute values, the Autorité has nevertheless calculated that the cash flow generated by the operators is such that, by the end of the concession - unless a major economic crisis resulting in a collapse in traffic - the debt will have been paid off. Furthermore, since privatization, the operators' debt has increased by 17% (excluding COFIROUTE) without encountering any particular financing difficulty. Not only is this debt devoid of risk, but it even enables the concession-holders to take advantage of the tax benefits resulting from the total deductibility of interest on borrowings (a benefit assessed at 3.4 billion euros (US$ 3.80 billion) since 2006).

Finally, the Autorité noted that, including exceptional dividends, the dividends paid by the six 'historic' operators privatised between 2006 and 2013 represented 14.9 billion euros (US$ 16.53 billion). Of course, these dividends were partly used to repay the debt contracted by the operators' shareholders for acquiring the toll concessions, but they were also used to remunerate the shareholders. The proportion of dividends used to remunerate shareholders will furthermore increase as the acquisition debt is paid off. The exceptional profitability of the SCAs, largely unrelated to their costs and disproportionate to the risk involved in their business, is comparable to a guaranteed income.

The Autorité observed that certain concession-holders, in particular ESCOTA, made questionable choices by under-weighting the price criterion in the overall marks awarded and opting for marking formulas that neutralized the price differentials between bids. Not only do such choices prevent them from benefiting from more favorable bids, but they are also liable to favor associated companies due to the subjectivity in marks awarded for technical criteria. 

The risk is even greater since the fact that concession-holders belong to the Vinci and Eiffage groups could potentially favor exchanges of information with associated road works companies, thus putting them in a more favorable position than their competitors in bidding for tenders.

The Autorité understands the benefit of the plan for stimulating job creation and investment in the public works sector, without recourse to budgetary resources. However, the price to pay for the State and the user is high: then extension of the concessions will delay the date on which the State will regain control of motorway operation and the date on which it could potentially start new negotiations for new concessions. Consequently, the Autorité recommends rebalancing the Plan in favor of users and the State. The concession-holders' concession contracts need to be renegotiated in exchange for their extension: a new index-linkage formula for the toll tariffs as well as reinvestment and profit-sharing clauses could be introduced to favor the riders required to implement the recovery plan.