Nicolas CussacHead of PPP Unit, Network Development Division, Réseau Ferré de France

THIS YEAR marks a significant step for railway investment in France. For the very first time Réseau Ferré de France has been allowed to enter into public-private partnerships to finance and deliver major infrastructure projects. Authorised under transport safety and development legislation which came into effect on January 5 2006, this new investment model will allow a public-sector client to draw on the technical and financial expertise of the private sector.

Whether they are partnership contracts or concession agreements delegating the provision of public services to the private sector, PPPs are a real innovation for the French railway sector. In the past rail infrastructure investment projects were either funded directly by the operator, the state, or more recently by a coalition of national and regional governments, backed up by loans from international financing bodies such as EIB. But such is the scale of expansion and modernisation work envisaged for the next decade or so that the industry needs to start looking at alternative funding opportunities.

By making use of private finance raised on the markets, PPPs enable major investment to be undertaken while lightening the burden on the public purse. The use of PPP agreements enables contributions from the public sector to be spread over the lifetime of the contract, in contrast to traditional procurement where the spending is concentrated in the construction phase alone.

Rail projects are long-term investments, with rates of return typically calculated on the basis of a 50-year term for major schemes. Taking our three pilot projects, a 15-year contract term is envisaged for the installation of GSM-R and 30 to 60 years for the two new line schemes.

But as well as the basic structure encompassing the design, construction, operation and finance of a specific project over the long term, PPPs also offer opportunities for optimising performance by sharing risks and rewards between the project partners. Studies show that the integration of design and construction with efficient PPP risk allocation has a significant impact on the delivery of projects on time.

Two models in prospect

The new legislation envisages two main models, where the private sector player acts as a partner or a concessionaire. The role is essentially the same in either case - to finance, design, build and operate transport infrastructure. The difference lies in how payment is made for use of the new facilities.

Under a concession agreement, already well-established for road projects in France and elsewhere, rail operators would pay a toll or access charge based on their actual use of the new infrastructure. In contrast, a partnership contract would see RFF pay a rental or availability fee over the life of the agreement, based on the performance of the private-sector partner against its contractual obligations, but regardless of the actual use of the assets.

In both cases, the agreement would specifically exclude the operation of the track and the movement of trains, as well as the control and maintenance of safety systems including signals and pointwork. These functions would be undertaken by SNCF under a specific agreement comparable to the existing contract under which it manages and operates the national network on behalf of RFF.

Preparing the pilot projects

For RFF, this new form of public procurement represents a major opportunity to undertake or accelerate network development. PPPs should enable RFF to tap new resources from within the private sector and deliver projects more quickly, through appropriate allocation of risk, financial engineering and fine-tuning the tendering process.

Another major advantage is the consolidation of the total project cost at the level of the project partner, who is then in a position to measure and balance the design, construction and maintenance expenditure.

In 2006 RFF began to equip itself with the resources needed to launch PPP projects in the most effective manner. This included the creation of a PPP unit and major project teams within the Network Development Division, as well as the development of tendering models including the allocation of financial and technical risk and establishing project benchmarks. In 2007 RFF is seeking expressions of interest for the first three PPP projects, which are the national GSM-R programme, the Sud Europe Atlantique high speed line and a new line bypassing Nîmes and Montpellier.

On December 14 2006 RFF invited expressions of interest in a partnership contract to design, build, commission, operate, maintain and finance a GSM-R telecommunications system. This project will feature a truly innovative financing model which should come to fruition during the course of 2008.

Developed specifically for railway applications, digital GSM-R will replace an analogue track-train radio system which is now approaching the end of its useful life. As most European countries have also decided to adopt GSM-R, the new system will also deliver important interoperability benefits. GSM-R has been installed from the outset on LGV Est Européen, making it the first high speed line in France to be equipped.

The network development strategy will see GSM-R installed on 14 000 route-km, covering almost all electrified lines. RFF is directly constructing the first phase, which will see GSM-R go live on 2 000 route-km in eastern France between 2006 and mid-2009. But the next 12 000 km will be covered by a partnership contract. The future partner will operate and maintain all of the GSM-R equipment, which will be rolled out across the national network as necessary to meet the needs of train operators. Total cost of this project is estimated at about €650m.

New line construction

The next main area of investment to benefit from PPPs will be the construction of new lines, and here RFF is starting with two pilot projects to explore different partnership models.

Expressions of interest in a concession contract to finance and build LGV Sud Europe Atlantique were invited on February 27 2007. This comprises 300 km of double-track high speed infrastructure between Tours and Bordeaux plus several connections to the existing network. As an extension to LGV Atlantique, the new line will considerably shorten journey times and bring the best Paris - Bordeaux timing down to the 2 h threshold where rail gains a considerable competitive advantage over air and road.

In development terms, southwest France will benefit from the stimulus provided by a high speed connection to the capital and other regions, as already experienced by the southeast, west and north of the country, and coming to the east with the opening of LGV Est Européen (p357).

LGV Sud Europe Atlantique will also form a key section of the route linking northern Europe with southern France and the Iberian peninsula along the Atlantic coast, freeing up capacity for regional passenger services and freight trains on the existing Tours - Bordeaux route where traffic is approaching capacity limits on certain sections.

Studies to date forecast that the new line could generate more than 3 million additional passenger-journeys a year on the route and would cost €5bn to build. The Angoulême - Bordeaux section is expected to enter service in 2013, with Tours - Angoulême to be completed in 2016.

To explore the partnership model, RFF plans to invite proposals during 2007 for a new route bypassing Nîmes and Montpellier, which would be around 70 km long and is forecast to cost around €1·2bn.

Today, the existing double-track line between Nîmes and Montpellier is one of the most heavily-used sections of the national network, seeing large numbers of regional, inter-regional and international passenger services as well as freight trains. Demand in this corridor is forecast to grow even more sharply, given strong demographic growth in the region requiring modern public transport for local journeys and high speed travel rising as traffic grows on LGV Méditerranée. Rail traffic in southern France should also receive a boost from the opening of the new route to Spain through the Pyrenees between Perpignan and Figueres, while rolling motorway and express container trains offer good prospects for intermodal freight.

The new bypass would diverge from the Narbonne - Nîmes route west of Montpellier and connect at its eastern end with LGV Méditerranée, the conventional Nîmes - Tarascon line and the freight route from Lyon along the right bank of the river Rhône. Capable of accommodating high speed trains, the new route is expected to open in 2013.

New rules for procurement

The new partnerships are very promising, but it must be remembered that they are being developed in the specific context of an operating railway which brings its own particular requirements. Safety is paramount, enshrined in the precise rules and standards governing operations. The interface between new lines and the existing network also raises issues including timetabling and uniformity of track access charges.

To ensure that the network continues to be operated as a coherent whole, a particularly important point with concession agreements, RFF will remain in overall charge and ensure that all these factors are considered from a national perspective. As the instigator and client for development projects, RFF must also define the new procurement rules, setting out its requirements, monitoring performance and establishing technical benchmarks.

The commercial benefits of PPPs are of equal importance. This innovative method of procurement will require RFF to consider how risk is shared, for example, and to examine how the main civil engineering groups (who are likely to be the companies winning the concessions) structure major projects. There will be wider advantages from considering these issues, and this new way of conceiving and developing projects together will not only involve cultural change for RFF but will also benefit the railway sector as a whole.

RFF examine les exemples de PPP pour financer les améliorations d'infrastructure

Le gestionnaire d'infrastructure RFF va mener à bien plus de 20 projets d'importance, approuvés par le gouvernement français, cela pour un coût estimé à 40 milliards d' euros, l'investissement total étant bien au-delà de la capacité traditionnelle du financement public. RFF dispose d'un nouvel outil pour accélérer le développement du réseau, sous la forme de partenariats publics-privés. L'an dernier il a créé un département PPP, mis au point des adjudications types pour l'attribution des risques financiers et techniques et a établi les points de référence du projet. RFF cherche maintenant des manifestations d'intérêt pour trois PPP, afin de financer le programme national GSM-R, la ligne à grande vitesse Sud Europe Atlantique entre Tours et Bordeaux et une ligne nouvelle contournant Nîmes et Montpellier

RFF probiert PPP-Modelle zur Finanzierung von Infrastrukturausbauten

Die Infrastruktur-Organisation RFF nimmt über 20 grosse Projekte in Angriff, welche von der französischen Regierung abgesegnet sind, aber mit geschätzten 40 Milliarden Euro sind die gesamten Investitionskosten weit über den Möglichkeiten der öffentlichen Finanzierung. RFF besitzt in der Form von öffentlich-privaten Partnerschaften (PPP) ein neues Werkzeug zur Beschleunigung von Netzausbauten. Letztes Jahr wurde eine Abteilung für PPP aufgebaut, Ausschreibungsmodelle für die Aufteilung von finanziellen und technischen Risiken entwickelt und Projektbewertungen geschaffen. RFF sucht nun Partner in drei PPP-Pilotprojekten zur Finanzierung des nationalen GSM-R-Programms, die Sud Europe Atlantique Hochgeschwindigkeitsstrecke zwischen Tours und Bordeaux sowie für eine neue Umfahrungsstrecke von Nîmes und Montpellier

RFF explora los modelos de sociedades público-privadas para crear mejoras en las infraestructuras

El gestor de infraestructuras RFF está desarrollando más de 20 grandes proyectos aprobados por el gobierno francés pero, con una estimación de 40 mil millones de euros, la inversión total supera la capacidad de la hacienda pública. RFF cuenta con una nueva herramienta para acelerar el desarrollo de la red en la forma de las alianzas público-privadas. El año pasado creó un departamento de alianzas público-privadas, desarrolló modelos de propuestas para la distribución de riesgos técnicos y financieros y estableció patrones de referencia de proyectos. RFF busca ahora expresiones de interés en tres alianzas público-privadas piloto para fundar un programa GSM-R nacional, la línea de alta velocidad Sud Europe Atlantique entre Tours y Bordeaux y una nueva línea de circunvalación de Nîmes y Montpellier