Abstract
The third tender for the construction of a new high-speed railway in southern
France dominated the
transport infrastructure sector this quarter. It was
solely a French affair, with the usual suspects – Vinci,
Eiffage and
Bouygues – shortlisted for the contract to build, maintain and operate
the Contournment
Nimes-Montpellier (CNM) high-speed railway line. This is
in line with our view that the government’s
intention to accelerate
large-scale public works programmes will create opportunities for the
French
infrastructure players.
We see no reason to alter our forecasts
this quarter. First, apart from the progress on the high-speed
railways
tenders, there has been little else in the market to prompt us to anticipate
increased or even
sustained activity. Second, according to INSEE, the
national statistics agency, economic activity
deteriorated in Q309, and is
expected to fall further in the coming months. We therefore hold our
forecasts steady this quarter, forecasting a contraction of industry value
real growth of -5.5% for 2009.
Industry value will decline in 2009 from
EUR122bn in 2008 to EUR116bn in 2009 and fall further to
EUR112bn in 2010.
The stimulus plan represents a risk to the upside for our forecasts, albeit
not one that
could lift the real growth figure in positive territory
easily, given the scope of demand destruction coming
from the private
sector.
French companies that operate in the infrastructure sectors such
as Vinci, Bouygues, EDF, Veolia and
Lafarge are among the leaders in their
respective fields globally. Though their 2008 financial performance
was
relatively stable, they have all expressed concern for the short to medium
term. They all pin their
hopes on the infrastructure-geared fiscal
stimulus plans of France, other European countries and the
United States
and beyond, though there is precious little else at the moment to offer
comfort from the
downturn.
In December 2008, French President Nicolas
Sarkozy announced a EUR26bn (US$33bn) stimulus
package to boost the
country' s economy. Under the scheme, state-owned companies will increase
investment by EUR4bn (US$5.1bn) in 2009 and the government will supplement
this with a further
EUR4bn on high-speed rail projects, dams and canals,
university campuses, and road maintenance among
other projects. Though
this will provide momentum for the sector, the international scope of
operations of
the French infrastructure majors means that they are also
pinning their hopes on overseas fiscal stimulus
packages (such as the one
in the US for instance) to breathe life in their order backlogs in 2009.
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