GSM-R rail communications PPP - France

Last year, France saw its Global System for Mobile Communication (GSM-R) PPP project – which faced a range of challenges - reach financial close after several delays due to the financial crisis and the technology provider Nortel's financial woes.

The US$1.6 billion project had been on for several months. The TDF consortium led by Vinci was named preferred bidder on the deal in February 2009, although problems with the GSM-R network supplier, Nortel meant that the deal couldn't be completed until its status was resolved [Transactions Database].

However, the status requirement was not the only problem for the GSM-R deal and several issues delayed the project.

The project's specifics

GSM-R (Global System for Mobile communication - Railway) is a digital telecommunication network that replaces the current Train to Surface (RST) analogical radio communication system enabling rail traffic controllers and train conductors to communicate with each other.

The GSM-R PPP transaction will provide a next generation communications system for more than 14,000km of railroad, following on from the 2,000km in eastern France, which Réseau Ferré de France (RFF) is equipping from its own resources as the first phase of the national roll-out. Among the 14,000 kilometres, 12,000 kilometres will be created as part of the partnership contract.

As the project progresses, the GSM-R system will be opened to use by transportation companies that use the French national railway network.

The works – which is expected to cost €520 million - will be executed by a company in which Vinci Energies has a 60 per cent equity holding. Vinci Energies will also own a 40 per cent stake in a specially formed company that will operate and maintain the GMS-R system for a total cost of around €430 million.

Project Background

Back in 2008, the French railway authority RFF entered into the competitive dialogue process with four consortia after they submitted proposals in December 2007:

  • TDF - Vinci Energies, Vinci Concessions, SFR and AXA Investment Managers Paris
  • Effiage and France Telecom
  • Alcatel-Lucent France, Caisse des Dépôts et Consignations, Macquarie Capital Group
  • ETDE - Bouygues Telecom, Sogetrel, SNEF, Barclays European Infrastructure (II) and Dutch Infrastructure Fund

RFF then issued final invitations to tender in July 2008 with an original bid deadline set up for 14 October but pre-qualified teams did not submit their final bids to RFF before December the same year. The deadline was therefore delayed by six weeks because of market conditions linked to the financial crisis. The railway authority finally selected a preferred bidder in February 2009.

Once the preferred bidder was selected, the project faced several issues during its financing process, starting by the fact that one of the lenders which originally backed the Vinci-led consortium left the bank group. The lender tried to re-join the deal at a later stage in the financing process, but failed to secure its place in the club.

Some other challenges also came from RFF’s side as the French railway authority under-estimated the inter-creditor agreement between the EIB and Caisse De Dépôts et Consignations (CDC), leading to further delays to signing. RFF also gave CDC assurances on its status over the course of the 15-year contract, without providing the same comfort to the EIB. The issue was finally resolved following high-end political assurances to get the deal across the line.

The Financing

The US$1.3 billion lending package is being provided by a group of commercial banks, one development bank and one government’s loan. The GSM-R PPP project was oversubscribed by 13 per cent in total, with the following financing structure:

  • equity - €78 million  
  • commercial bank debt - €776 million
  • RFF contribution - €219 million
  • EIB (European Investment Bank) - €383 million
  • CDC (Caisse de Dépôts et Consignations) - €177 million

The US$776.13 million commercial bank debt was provided by eight banks, with Crédit Agricole CIB acting as sole bookrunner. The banks were the following:

  • Bayern
  • BBVA
  • Crédit Agricole CIB
  • Dexia Group
  • Grupo Santander
  • Intesa San Paolo
  • KfW
  • SMBC

The total cost of the project is estimated at US$1.6 billion, funded on a 90:10 debt-to-equity ratio with US$78 million contributed in equity. The equity is provided by the TDF consortium with four sponsors:

  • Vinci – 30 per cent (split into Vinci Energies 5 per cent and Vinci Concessions 25 per cent)
  • SFR – 30 per cent
  • AXA Private Equity – 30 per cent (Axa Infrastructure Investissement 15 per cent and Axa Infrastructure Partners 15 per cent)
  • TDF – 10 per cent

The legal advisers on the deal were Hogan Lovells to the French authorities, Allen & Overy to the lenders, Freshfields to the sponsors, Norton Rose to the EIB and Linklaters to CDC.

Compagnie E. de Rothschild was the authority’s financial adviser, while Grant Thornton advised the lenders and RBC Capital Markets advised the sponsors.


Apart from the fact that this project is the largest PPP transaction to reach financial close under the Contrat de Partenariat framework since its inception in France in 2004, the GSM-R PPP project stands among other due to its European dimension.

Despite several issues, the French GSM-R system remained a necessity for the French government as the majority of railway networks – in 17 European countries – had already chosen GSM-R. Therefore, the French system meant a single communications system in Europe, compatible and interoperable between the different railroads.



Transaction Snapshot

GSM-R Rail Communications PPP

Financial Close:
$1,633.73m USD
Debt/Equity Ratio:
Concession Period:
15.00 years
Full Details