OREANDA-NEWS. The recently published contractual amendments of Autoroutes Paris-Rhin-Rhone's (APRR; 'BBB+'/Outlook Stable) concession do not alter its credit profile, according to Fitch Ratings. The agreement balances the French government's wish to support economic activities with APPR's contractual rights.

From a financial standpoint, the key concession change is an additional concessionaire capex plan. Under the agreement, APRR Group (including its subsidiary Area) is committed to realize EUR720m of additional capex over the next five years in exchange for 2.1 years of concession extension for APRR (Area 3.9 years). Fitch's initial assessment indicates that the equilibrium of the concession will be unaffected while the consolidated leverage (APRR, Effarie) should still progressively come down to around 5x over a five-year horizon.

The dispute on the 2015 tariff freeze was also settled under the current agreement. The government has agreed to compensate APRR and AREA for this tariff freeze (as well as for land tax increase passed in 2013) via supplemental toll adjustments over 2016-2023 period (on average 0.38% p.a.).

The additional cash flow from higher tariffs will partially offset the payment that, under the agreement, APRR is committed to make to the French Transport Infrastructure Agency (AFTIT) over the next 20 years. This cash outlay is modest in size (ca. EUR15m) as it accounts for around 1% of APRR Ebitda. APRR has also agreed to invest approximately EUR50m into a fund which will invest in green transportation projects. The net effect on leverage and coverage is expected to be marginal and does not affect the rating.

New concession terms also include other targeted measures to enhance stability of the concession contracts such as improvement of protection against future adverse changes to motorway-specific taxes (Article 32) and, in the event of future material outperformance, revenue caps which may apply. The former provision (tax pass-though) enhances investors' protection against future adverse changes to motorway specific taxes. The latter foresees a cap on the concessionaire profitability based on the cumulative toll revenues since the year of privatization occurred (2006); APRR's current revenue is broadly below the level set in its 2006 business plan, and, as such, the company does not foresee any impact on its concession from the introduction of this cap.

Fitch expects to update its rating case and review APRR's ratings over the next few weeks when a full update of the issuer's Business Plan will be available.