September 18, 2014 / 11:41 AM / 3 years ago

UPDATE 2-French regulator urges motorway plan renegotiation

* Motorway plan must better serve state, user interests-regulator

* Motorway operators’ profitability rates not justified-regulator

* EU yet to rule on French motorway plan (Adds reaction from French motorway operators association)

By Dominique Vidalon

PARIS, Sept 18 (Reuters) - France’s competition authority said on Thursday a 3.6 billion euro ($4.64 billion) motorway upgrade agreed with toll road operators should be renegotiated to better serve the interests of the state and road users.

The regulator, responding to a request for recommendations by the National Assembly’s finance committee, said the motorway operators’ high profitability rates could not be justified by the costs they have to bear or the risks they face.

Motorway operators Eiffage, Vinci and Abertis unit SANEF last year agreed with the French government to bear the cost of upgrading motorways in exchange for an average three-year extension of their concessions.

The plan is a much-awaited boost for France’s builders, which have been hit hard by deficit-reduction measures.

Feedback from the European Commission on the motorway plan is also expected later this year. The EU review aims to ensure it does not amount to a form of state aid or unfair competition.

“While the motorway plan can be a positive factor for employment and investment, the extension of the concessions... can be the opportunity of a renegotiation with the motorway companies in which the state should regain the upper hand,” the French regulator said in a statement.

The recommendations include a suggestion to cut toll rates, but it was not clear if that would be part of any renegotiation.

Vinci and Sanef had no immediate comment, while Eiffage could not be immediately reached for comment. The transport ministry said it was reviewing the recommendations.

The ASFA association of French motorway operators said in a statement its members remained “at the disposition” of the state and of the finance committee that had asked for the report.

“Each year, motorway operators contribute 4 billion euros in tax revenues. For the next 20 years, they will support all the construction, traffic and operational risks and the financing of the concessions with no impact on the state budget,” it added.

Since 2006, French motorway operators have seen a rise in revenue fed by continuous growth in traffic and toll rates, which “appeared largely disconnected from their costs”, the regulator said.

As a result, motorway companies showed net profitability of between 20 percent and 24 percent of sales in 2013.

“The exceptional profitability of the motorway operators is largely disconnected from their costs and disproportionate in view of the risks tied to this business,” the regulator added.

The authority recommends in particular changing the index mechanism pegging toll rates to inflation, integrating a formula that would take into account traffic levels. (1 US dollar = 0.7764 euro) (Editing by James Regan and Tom Heneghan)

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