Morningstar DBRS Assigns AA (high) Credit Ratings to Societe des Grands Projets, Negative Trend

DBRS Ratings GmbH (Morningstar DBRS) assigned a Long-Term Issuer Rating of AA (high) and a Short-Term Issuer Rating of R-1 (high) to Societe des grands projets. Morningstar DBRS also assigned a Long-Term Rating of AA (high) to Societe des grands projets' EUR 32.5 billion Green Euro Medium Term Note Programme (EMTN) program and a Short-Term Rating of R-1 (high) to its EUR 3 billion NEU CP program. The trend on the Long-Term Ratings is Negative. The trend on all Short-Term Ratings is Stable.

KEY CREDIT RATING CONSIDERATIONS
Societe des grands projets' credit ratings are aligned with those of the Republic of France (AA (high), Negative). Morningstar DBRS takes the view that Societe des grands projets benefits from very strong implicit state support mechanisms. Societe des grands projets' credit ratings are underpinned by: (1) its status as a national public agency ("établissement public national à caractère industriel et commercial" - EPIC) created by the French State by law dated 3 June 2010; (2) the ultimate responsibility of France to ensure the solvency of Societe des grands projets; (3) the essential role of Societe des grands projets for the State due to its main mission of designing, building and financing the public transport network of the "Grand Paris Express" (GPE), a strategic project with significant economic, social, urban and environmental impacts for the French capital region. To carry out this mission, Societe des grands projets benefits from allocated tax resources and is explicitly authorized to borrow.

The Negative trend on the Long-Term Ratings solely reflects the Negative Trend on the Republic of France's (France) AA (high) Long-Term Foreign and Local Currency - Issuer Ratings.

CREDIT RATING DRIVERS
The credit ratings of Societe des grands projets could be downgraded if any or a combination of the following occur: (1) the French sovereign credit rating is downgraded; (2) our assessment of the likelihood of support from France to Societe des grands projets weakens; or (3) France ceases to be the sole owner of Societe des grands projets.

Societe des grands projets' long-term credit rating could be upgraded if the Republic of France's long-term credit ratings were upgraded.

The trend on Societe des grands projets' Long-Term Issuer Rating could return to Stable if the trend on France's Long-Term Foreign and Local Currency - Issuer Ratings returns to Stable.

CREDIT RATING RATIONALE
The State is Ultimately Responsible for Societe des Grands Projets' Solvency

Societe des grands projets was created by law on 3 June 2010 as a state public agency (EPIC). Given the EPIC status of Societe des grands projets, Morningstar DBRS takes the view that the Republic of France is ultimately responsible for its solvency. In case of dissolution, Societe des grands projets' assets and liabilities would revert to the French State or another government-related entity.

The financing of Societe des grands projets is legally regulated by two principles: any additional contribution by Societe des grands projets to investments directly connected with the GPE must be compensated by new resources and the law also specifies the debt ceiling of Societe des grands projets, currently set at EUR 39 billion. The same first principle applies to the funding of Metropolitan Regional Express Services ("SERM)" outside the Ile-de-France region which can't be financed through the taxes raised in the Paris area currently allocated to Societe des grands projets.

In the event of short-term liquidity needs, Morningstar DBRS takes the view that a prompt intervention by the State to ensure timely debt payment could be made through the State government debt fund ("Caisse de la dette publique" - CDP), a state public agency that can directly purchase long- or short-term debt securities, in particular of other state public agencies, in order to support France's credit standing in the financial markets as mentioned in article 125 of the State budget bill for 2003 that created CDP. Morningstar DBRS considers that the State would also intervene in a timely manner to support Societe des grands projets to avoid any reputational risk for other state public entities, including public agencies, as well as for its own credit quality. Morningstar DBRS views the French government's commitment to Societe des grands projets as credible, thanks to the strong institutional environment in France.

Societe des Grands Projets is under Central Government Supervision

The governance of Societe des grands projets is under the supervision of the central government and under the joint supervision of the Ministry of Territorial Planning and Decentralization, the Ministry of Ecological Transition, Biodiversity, Forests, the Sea and Fisheries, and the Ministry of Economy, Finance and Industrial and Digital Sovereignty. The Management Board operationally manages Societe des grands projets under the supervision of the Supervisory Board. The three members of the Management Board are appointed by decree of the President of the Republic of France. Of the twenty-one members of the Supervisory Board, eleven are representatives of the State.

Societe des Grands Projets is Mandated by the State to Carry Out an Essential and Strategic Mission, the Grand Paris Express

The GPE is currently the largest public transport infrastructure project in Europe. It involves the construction and extension of approximately 200 kilometers of public rail transport lines, doubling the size of the existing network, and 68 stations. The GPE capital expenditure estimated at completion at EUR 36.1 billion (including provisions for contingencies) in 2012 constant prices, strongly increased since 2017. In June 2024, a first transport line, corresponding to the extension of line 14, was opened. As of today, Societe des grands projets has incurred more than half of the GPE total investment.

The State Determines Societe des Grands Projets' Financing

Societe des grands projets' own revenues are mainly made up of allocated tax resources, which amounted to EUR 904 million in 2024. As per Societe des Grands Projets' base case scenario, the full debt repayment horizon is currently set around 2070 to 2080. This horizon depends on factors exogenous to Societe des Grands Projets, such as the evolution of its allocated taxes and of the fees paid by the regional transport authority Ile-de-France Mobilites (IDFM), as well as macroeconomic conditions, including funding costs. The characteristics of Societe des grands projets' revenues, such as tax bases, tax rates and fee levels paid by IDFM are set by the central government.

Prudent Debt and Liquidity Management

To finance its investments, Societe des grands projets borrows mainly in the form of green bond issuances. At year-end 2024, its debt stock amounted to EUR 30.6 billion, of which 92% were accounted for by bonds issued under its Green EMTN program and 8% corresponding to EUR 2.5 billion of bank loans from the European Investment Bank (rated AAA, Stable). The EUR 2.5 billion loans from the EIB benefit from the explicit guarantee of the State.

Thanks to debt prefunding carried out since 2018, Societe des grands projets enjoys a comfortable liquidity position. Its cash, which needs to be deposited at the State Single Treasury Account, exceeded EUR 10 billion on 1 March 2025.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

Credit rating actions on France are likely to have an impact on this credit rating. ESG factors and their effect on the credit analysis of France are discussed separately at https://dbrs.morningstar.com/issuers/14372.

There were no Environmental, Social or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024)
https://dbrs.morningstar.com/research/437781

RATING COMMITTEE SUMMARY
The main points discussed during the Rating Committee include Societe des grands projets' institutional and financial relationship with the French central government, its status, its mission, its financial performance, and its debt and liquidity management.
 
Notes:
All figures are in euros unless otherwise noted.

The principal methodology is the Global Methodology for Rating Government Related Entities (15 April 2024) https://dbrs.morningstar.com/research/431178/global-methodology-for-rating-government-related-entities. In addition Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings https://dbrs.morningstar.com/research/437781 in its consideration of ESG factors and Morningstar DBRS Global Corporate Criteria (3 February 2025) https://dbrs.morningstar.com/research/447186/morningstar-dbrs-global-corporate-criteria in its consideration of commercial paper liquidity backup.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The sources of information used for these credit ratings include the analytical information provided by Societe des grands projets, Societe des grands projets' 2019-2024 financial reports, its Green Euro Medium Term Note Programme Prospectus, its Negotiable European Commercial Paper Information Memorandum, the 2024 report of the National Court of Audit on Societe du Grand Paris, the State budget law for 2025 and related reports, National Institute of Statistics and Economic Studies (INSEE), and Legifrance. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

These credit ratings concern a newly rated issuer. These are the first Morningstar DBRS credit ratings on this issuer.

Morningstar DBRS does not audit the information it receives in connection with the credit rating process, and it does not and cannot independently verify that information in every instance.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are under regular surveillance.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

The sensitivity analysis of the relevant key credit rating assumptions can be found at: https://dbrs.morningstar.com/research/452552/.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Mehdi Fadli, Senior Vice President, Sector Lead, Global Sovereign Ratings
Rating Committee Chair: Nichola James, Managing Director, Global Sovereign Ratings
Initial Rating Date: 25 April 2025.
Last Rating Date: Not applicable as this is a newly rated issuer.

DBRS Ratings GmbH, Sucursal en España
Paseo de la Castellana 81, Plantas 26 & 27
28046 Madrid, Spain
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
Neue Mainzer Straße 75
D-60311 Frankfurt am Main
Tel. +49 (69) 8088 3500
Geschäftsführung: Detlef Scholz, Marta Zurita Bermejo
Amtsgericht Frankfurt am Main, HRB 110259
Tel. +34 (91) 903 6500

For more information on this credit or on this industry, visit http://dbrs.morningstar.com.