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14 January 2019
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Heating up

France has been making major in-roads into developing new community heating facilities using PPP. The UK could probably learn a few lessons from its friends across La Manche
Heating up

Over the past year, France has faced its fair share of political upheaval, as witnessed by the so-called Gilets Jaunes protestors who continue to bring the country to a standstill.

While some of those protests have turned violent, the underlying issues of those demonstrating are wide and varied, but have solidified in a way that has made it increasingly difficult for the government to focus attention on anything other than working a way through the grievances and finding solutions that can restore order and calm to the nation.

Not, perhaps, the most conducive of times for a major privately financed infrastructure programme, one might think.

And while we certainly have not seen the kind of programme of investment that the PPP industry might like to see, there has been one sector in France that is leading the way across the continent: community heating facilities.

In December, two heating network schemes were launched in France, one of which was worth €165m. Based on the outskirts of Paris, near Orly Airport, the project is only the latest in a line of heating network procurements in the country. July was a particularly fruitful month for the sector, with two deals launched, one awarded and one – a €274m scheme again in the suburbs of Paris – reaching financial close.

Perhaps the most interesting thing about the sector, however, is that deals don’t have to be over €100m to get off the ground. While clearly projects like some of those mentioned above are mega-deals that will be able to attract some significant investors, there are also smaller schemes in the market, in the sub-€50m range.

This is important, as it offers a wide scale of investment opportunity that should attract a varied range of investors.

And, with a number of deals already signed – as well as a history of running district heating systems in France – the sector is unlikely to have too much difficulty attracting investors to the market.

Indeed, given the apparent success of this market, it may be worth other countries taking a closer look at how the deals are being packaged.

One obvious beneficiary from having some conversations with the French may well be the UK, given its own desire to make more use of heat networks as a way to boost its use of more environmentally friendly energy solutions.

If – and it is a big if just at present – we can forget Brexit for a moment, the Department for Business, Energy and Industrial Strategy could do worse than look at what has been achieved in regions across France. A report compiled by Deloitte and published by the department in August last year suggested a PPP model could prove successful for the delivery of heating networks in the UK.

That report referred to the PF2 model – now no longer with us thanks to Chancellor Philip Hammond’s Budget flourish – but the underlying premise of using private finance to deliver this infrastructure still stacks up, however it may be badged.

Food for thought, perhaps, but certainly something for the UK to bear in mind if it is serious about getting a nationwide programme of heat networks off the ground.

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Heating up

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France has been making major in-roads into developing new community heating facilities using PPP. The UK could probably learn a few lessons from its friends across La Manche

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