- French motorways are among the best in the world.
- Private and public companies are working in harmony.
- Concession contracts as a solution to keep good infrastructures.
Large infrastructure projects, such as the construction of motorways, can take many years to complete and can have costs reaching into the billions. It is this scale that demands efficient models for their completion. Public-private partnerships are a versatile mechanism for directing private investment and expertise at national projects, bringing them about at much reduced cost to taxpayers.
The French concession model
Since the 1950s, the French state has largely used concessionaire companies to build and operate its motorways. These companies are contracted by the state to carry out every aspect of the project, but as the minister of the economy, Bruno Le Maire, recently highlighted “the state still owns the motorways.”
“The model of public service delegation to private companies has proved its effectiveness…We have one of the best motorway networks in the world,” the minister saidto a Senate commission in July.
The result is a particular form of public-private partnership that allows the state to avoid funding costly infrastructure projects itself whilst retaining ultimate control of the asset.
The concession company operates the road, taking in the toll fees as revenue: money that both pays for operating and development costs, and covers the massive debts taken on many years before to fund the construction of the roads.
The system is particularly interesting because the government does not have to put down any taxpayer money to pay for concession motorway construction or further network development. In fact, in 2006, when the French government sold its last shares in APRR, the main group that carries out these projects, it also transferred €17 billion worth of motorway debt to that company.
The concessionaire takes on all of the potential risk associated with fluctuations in motorway demand, with little beyond the tolls through which to recover its investment.
Ultimately, the state enjoys regulatory control and oversight over these operators. When the contract is over, the road is returned to the state debt-free, in perfect working order, and without any buy back capital. The model is analogous to buying a second home and using tenants’ rent to cover mortgage repayments.
Paying for a public good
At its core, the system hinges on the user-as-payer model: that is to say, it is the motorway users, rather than the wider pool of taxpayers who pay for this form of public service. They do this through toll charges based on the type and size of vehicle, distance covered on the motorway, and sometimes, on the eco-footprint of the vehicle as well.
This model also means that foreigners in the country making use of the roads have to pay too, but French citizens at the other side of the country never using them, quite reasonably, do not. On top of this, the state also receives a significant portion of the tolls (about 40%) in the taxes paid by the operating companies.
The prices for tolls are linked in the contracts to inflation, as well as the cost of road construction and maintenance. The model is well-regulated, with the framework having been reinforced in 2006 to ensure greater transparency and balance. The addition of regular 5-year follow-up-reviews and potential new penalties, imposed and determined by the state, grant the government good control over the direction and evolution of the process, ensuring toll rises are fair and proportionate.
The advantages of concession contracts
The strengths of this model lie in the way it leverages the private sector to complete and operate public infrastructure without ceding state ownership rights. Motorways are public infrastructure, and they remain always the property of the state. Equally, the state writes up the concession contracts, so retains much of the control.
By extending contracts, the same project can also continue to evolve, expanding motorway networks using the tolls from well-used concession roads to pay for new ones, often those that would be less-well travelled and, therefore, less profitable. In France, this is known as adossement, or backing, and it has been used to create around half of all new motorways over the past three or four decades.
Interestingly, in France, which is among the three European countries with the greatest levels of concession roads (with the French figure sitting at 78% of all motorways) — concession road safety is almost unmatched among its peers.
“Besides Denmark and Netherland, where only short specific road links are under concession, the lowest accident and fatality rates are observed in France,” according to a commission advisory study by PwC, suggesting further merit for the French approach.
Additionally, revenues generated by tolls get put to use in expanding existing stretches of motorway, by widening and adding new lanes to accommodate trends in traffic and to avoid congestion. Tolls also cover the cost of regular and winter services that keep the surface of the roads safe for drivers, and new park-and-ride schemes aimed at offering the public greater convenience when travelling.
Concession companies in France also make certain commitments about keeping roads modernised and in line with technological developments. For instance, companies have been introducing electronic toll badges for regular commuters, E-vehicle charging points, and even AI systems for traffic monitoring.
When it comes to toll roads in France, as with many national subjects, there is plenty of lively discussion. Some people are of the opinion that citizens not only have to pay too much to use motorways, but they have to watch companies make large profits through running them as well.
This misconception comes largely from viewing the concessionaires and their profits only within a given year, rather than over the lifetime of the project, and forgetting about the huge sums of investment and risks taken on at their starting point. As with most real-world subjects, context is absolutely essential in coming to an informed position, with few people today considering the early operating losses.