On the 11 April 2019, the French Parliament adopted the PACTE law (Action Plan for Business Growth and Transformation), which has been under discussion since June 2018 before the French National Assembly and Senate. The PACTE law has two objectives: to grow businesses in order to create more jobs and to redefine the role of companies in society to increase employee involvement. One of the flagship policies of this law deals with the sale by the French State of its shares in major infrastructure companies: Aéroports de Paris (ADP), Engie and GRTGaz. This privatization process shall contribute to the financing of a 10 billion euro fund for innovation. Following the adoption of the PACTE law by the French Parliament, the law shall now enter into force in the coming weeks.
The PACTE law authorizes the French State to sell its stakes in ADP.
(i) Evolution of the legal framework regulating ADP
In order to prepare the privatization of ADP, substantial changes regarding its real property regime and tariff regulations are provided in PACTE Law.
ADP (owned 50.6 % by the French State) currently owns all the real estate assets and buildings at Roissy (Charles de Gaulle) and Orly airports and can operate both airports without any limitation of duration.
Under the terms of the PACTE law, ownership of the real estate assets and buildings at Roissy and Orly airports would be transferred to the French State at the end of the 70-Year Period as from the transfer to the private sector of the majority of the share capital of ADP (the 70-Year Period) provided that the French State would grant to ADP the right to operate the airports during such 70-Year Period. As a result, ADP will not have any more a perpetual right to operate, but a right limited to the 70-Year Period. ADP will be compensated by the French State for this loss, according to a formula defined in the PACTE law.
The compensation would be comprised of:
- a fixed lump sum, payable upon the effective transfer of the majority of the share capital of ADP to the private sector in accordance with the discounted cash flow (DCF) method to assess the damage to be suffered by ADP by the loss of cash flows from the end of the 70-Year Period to perpetuity following the transfer of its assets to the French State at the end of the 70-Year Period (the Amount 1).
- an amount equal to the net book value of the relevant assets at the end of the 70-Year Period and payable on that date (the Amount 2).
(Amount 1 and Amount 2, together the Amounts)
The Amounts will be determined by ministerial order, with the assent of the Committee on Shareholdings and Transfers (Commission des participations et des transferts) for Amount 1.
Other provisions of the PACTE law set out the missions of ADP and the rules regarding tariffs. The specifications (cahier des charges) enacted by the French State will now provide for new obligations and new controls for the French State. The specifications provide that the French State can appoint a “commissaire du gouvernement”, who can attend all meetings of the board of ADP, without voting right. The top executives of ADP will have to be agreed by the French State on the basis on their probity and competence.
Tariffs are to be set in accordance with the “dual-till principle”. Accordingly, regulated fees (e.g. aeronautical activities, rental of premises within the terminals for aeronautical purposes – e.g. airlines’ offices, car parking, access roads and internal buses, airport real estate when related to aeronautical activities) shall cover the infrastructure costs and must be approved by the State. Unregulated fees (e.g. commercial activities outside terminals such as hotel, shops, advertising spaces, currency exchanges and car rental) are to be freely set by ADP.
(ii) Rules regarding the privatization process
The PACTE law provides that, in the event where the sale of the shares does not intervene on the stock market, the French State has to launch a competitive and transparent public tender. The specifications of such public tender have to include prequalification criteria, which shall be in relation to financial capacity and airport experience.
Neither the precise calendar of the ADP privatization process, nor the remaining amount of shares the French State will keep are precisely known. It should be noted that some members of Parliament have proposed a draft law to maintain ADP within the public sector and organize a referendum to adopt it in accordance with Article 11 of the French Constitution. This draft law is currently being reviewed by the Constitutional Court. The fate of this formal request shall be clarified in the coming weeks.
Article L. 111-68 of the French Energy Code provides that at least 33.33% of the share capital of Engie must be owned by the French State.
Article 52 of the PACTE law deletes this obligation and provides now that the French State shall hold a minimum of one share in Engie. It shall be noted that the French State has currently a golden share in Engie which it is not proposed to remove. It is expected that the PACTE law will open the way for the French State to sell down its stake in Engie.
GRTGaz is the French natural gas transmission system operator. Pursuant to article L. 111-49 of the French Energy Code, GRTGaz has to be 100% owned only by Engie, the French State or public entities.
Article 52 of the PACTE law amends this article to provide that GRTGaz has to be majority owned by Engie, the French State or public entities. It is expected that this article will open the way for Engie to sell down its stake in GRTGaz.
 It is highly likely that some members of Parliament will refer the PACTE law before the French Constitutional Court (Conseil constitutionnel), which will have a one month period to give a ruling on the law. The PACTE law cannot enter into force before the ruling of the Conseil constitutionnel.
 Commission des participations et des transferts is an independent administrative authority which is in charge of evaluating the public-owned companies in the event of transfer of the shares owned by the French State.