(BFM Bourse) – According to The echoes, the Council of State has, in an opinion requested by the government, given the green light to a potential surcharge on companies managing motorway concessions, provided however that this tax also applies to other infrastructures such as airports . On the Paris Stock Exchange, Vinci and Eiffage are suffering.
It’s an old sea serpent: take binding measures for motorway concession companies (SCA), whose profitability is regularly the subject of fierce debate. The question came back to the fore at the start of the year, after several media reported in January the conclusions of a report by the General Inspectorate of Finance (IGF) for 2021.
This document reported higher than expected internal rates of return (IRR) and made various proposals, including a reduction in tolls of up to 58%-59% for certain SCAs. Or a levy on the gross operating surplus of these companies, or, in short, a tax.
The executive, after the publication of this document, seized the Council of State to see what measures could potentially and legally be imposed on SCAs. Bruno Le Maire then judged that the State had been “mistaken” during the privatization of motorway concession companies, under the Villepin government, underestimating the financial advantages that the concession companies could derive. The Bercy tenant then spoke out in favor of reducing the duration of motorway concessions, among the avenues to follow. It should be remembered in this respect that the motorways belong to the State and the SCAs operate them via concession contracts over a certain period, the term “privatization” of the motorways being an abuse of language.
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A surcharge subject to conditions
According to The echoes this Monday, the Council of State delivered its legal opinion to the government. According to the daily, the high administrative court was “firm on the question of the duration” of the concessions but on the other hand gave the green light to a potential increase in the tax burden of the SCAs. This on condition that this taxation is “proportionate” and concerns concessions other than motorways, such as airports. The high administrative court would take as an argument the fact that the reduction in corporate tax, from 33% to 25% under the Macron five-year term, has enabled concession companies to reap greater financial gains than expected.
As rightly pointed out The echoes, a report by the Transport Regulatory Authority published in January pointed out that this reduction in income tax had enabled incumbent SCAs to increase their internal rate of return by 24 basis points (0.24%), with a cumulative positive impact of nearly €8 billion on their cash flow.
A government source quoted by The echoesestimates that this new levy could bring in two to three billion euros per year by 2030. Contacted by BFM Bourse, a spokesperson for the Ministry of Economy and Finance did not comment.
Even if it is only an expertise delivered to the executive, the market is clearly scared. Around 11:10 a.m., the Eiffage share lost 4.7% while that of Vinci lost 3.4%. Eiffage (APRR, AREA) and Vinci (Ecota, ASF, Cofiroute) are two of the three major private motorway concession groups along with the Spanish Abertis (Sanef).
“This creates very strong uncertainty for motorway companies, which represent a significant part of the results of Eiffage and Vinci (more than 40% of operating profit for Vinci)”, comments Charles Maynadier, analyst at Kempen & Co.
“Now it remains to be seen whether and how the French government intends to translate this possible increase in taxation into law,” he adds.
Would the executive agree to increase taxation knowing that, as reported by The echoes, the potential surcharge would also hit airports, which are just recovering from the pandemic? The answer is hardly obvious. Especially since the privatization of Aéroports de Paris, although postponed for the time being indefinitely by the executive, is still a possibility offered by the Pacte law.
Julien Marion – ©2023 BFM Bourse
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