COPIED

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THE PURSUIT OF CARBON NEUTRALITY

Despite unforeseen challenges, some of the country’s largest contractors have reported positive results as the country recovers from the pandemic.

Despite the ongoing conflict in Ukraine and its aftermath, the construction sector in France exhibited resilience in 2022, with a growth rate of 1.9%, according to the European Construction Industry Federation (FIEC).

However, this positive trend is said to mask the disparities between the building industry (+3.1%) and the public works sector (-2.0%). FIEC adds that construction activity will remain substantially below its pre-crisis level in 2019. For 2023, the production growth rate is expected to remain stable with a slight increase of 0.1%.

The positive news is that the industry is expected to begin picking up in 2024, supported by investments in transport and renewable energy infrastructure projects, as well as government focus.

Renewable energy development

The French government has set a target to reduce greenhouse gas emissions by 35% in 2030 compared to 2015 levels. To achieve this target, the government is focusing on increasing the capacity of renewable energy sources throughout the country.

As part of France’s Recovery and Resilience Plan, announced in September 2020, the government is aiming for carbon neutrality by 2050. To support this goal, the government plans to build six new nuclear reactors, with a combined capacity of 25GW. This will increase the total number of nuclear reactors from 56 in January 2023 to 62 by 2036.

ITER, located in the south of France, is currently the country’s international nuclear fusion research and engineering megaproject aimed at creating energy through a fusion process similar to that of the Sun.

A total of 35 nations are working together to demonstrate the possibility of fusion as a source of energy on a large scale.

Construction of the International Thermonuclear Experimental Reactor (ITER) project began in 2013, and assembly of the tokamak began in 2020. The initial budget was close to €6 billion (US$6.4 billion), but the total price of construction and operations is projected to be anywhere from €18 (US$19.5) to €22 billion (US$23.8 billion).

Over in eastern France, the country has chosen Bugey as a site for two new nuclear reactors, part of a wider construction programme of six reactors costing an estimated €52 billion (US$58.2 billion).

Nuclear plant of Bugey (France, EDF)

PHOTO: SPIRITRESPECT, CC BY-SA 3.0, VIA WIKIMEDIA COMMONS

A TGV high speed French train in Gare de Lyon station

PHOTO: ADOBESTOCK

The office of French President Emmanual Macron announced the move last July, indicating that the pair of reactors would be built on the site of an existing nuclear power plant at Bugey.

Macron announced a new nuclear building programme in 2022, with French energy firm EDF overseeing the construction of six EPR2 reactors. Construction of the reactors is anticipated to start in 2027.

Construction activity will remain well below its 2019 high

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Additionally, as part of the broader plan ‘France Nation verte’, (France Green Nation) the French Prime Minister announced an investment of €100 billion (US$106.3 billion) in May 2023 to expand and upgrade the rail network by 2040.

Vinci was recently awarded – through its subsidiary ETF – a contract worth €700 million (US$757 million) to upgrade 800km of track and ballast throughout France.

Other contractors, such as Eiffage and Captrain, have been selected to cover the replacement of track equipment for the Atlantique, [Paris] Nord, and Sud-Est highspeed lines as well as renovation of 524km of track across the entire French rail network.

Contractors’ report increase

Despite the current woes in the industry, some of France’s largest contractors reported an increase in revenue in 2023.

Vinci reported a 12% increase in revenue to €68.8 billion (US$74.2 billion) in 2023 but has warned that growth in 2024 is likely to be at a slower pace.

Vinci’s order book stands at €61.4 billion ($66.2 billion), up 7% on 2022. Its operating income from ordinary activities was up 12.1% to €8.4 billion ($9.1 billion).

Vinci Construction saw “very strong” business levels driven by major mobility infrastructure projects, work on structures for climate resilience, and the energy transition. The energy transition and continued digitalisation also helped to drive growth in Vinci’s energy business, which accounted for almost 40% of the group’s total revenue.

Develon’s CEO, Mr Oh, at the company’s European dealer meeting

DEVELON OPENS ITS FIRST TRAINING CENTRE IN EUROPE

Develon, formerly Doosan Construction Equipment, has opened a new training centre for the European market just outside of Nantes, France.

The centre, which is the first the company has opened in Europe, comes as Develon aims to provide dedicated conditions to update and develop the knowledge and skills of dealer personnel and the company’s service technicians and demonstrators throughout Europe.

It is located in the chateaux region of the Loire Valley near Nantes and consists of a main building with several areas that can be set up for training.

It also comes with offices, workshops for service training and a 3000m2 outdoor area which is used for try-outs of machines from Develon and competitor machines.

Activities at the centre include dealer service and product training, internal ‘Train The Trainer’ sessions, virtual classrooms, training development (including video tutorials and other tools) and future events to include the promotion of Develon in schools.

Patrice Pesnot, head of training at Develon in Europe, said, “The new Training Centre is intended to provide an environment to allow participants to concentrate on Develon products, allowing them to remove themselves from their daily work and focus entirely on the training activities.”

Geographically, France accounted for 43% of Vinci’s total revenue, with the rest coming from outside the country.

Revenue within the construction business rose 9% on a like-for-like basis as compared to 2022, totalling €31.5 billion (US$34 billion). Revenue at Vinci Energies was €19.3 billion (US$20.8 billion), up 11% on a like-for-like basis. Its Cobra IS division, which specialises in applied industrial engineering and is based out of Spain, saw revenue climb 18% to €6.5 billion (US$7 billion).

Some of the world's biggest contractors are based in France

PHOTO: ADOBESTOCK

UN AND FRANCE CO-HOST FORUM TO DECARBONISE CONSTRUCTION

Nearly 2,000 people from 50 countries, including government officials, diplomats, industry representatives, and members of civil society, convened in Paris for the Buildings and Climate Global Forum during the first week of March.

The buildings and construction sector’s global greenhouse gas emissions are continuing to rise, the French ecological transition ministry said according to news agency France24.

“The sector is not on the right path to decarbonise by 2050,” the ministry added.

“It is therefore crucial to fundamentally rethink the way we build and use our buildings to ensure that national climate policies succeed and the Paris Agreement on climate is respected,” it said.

The UN has set a goal for the world to achieve net-zero emissions by 2050 to meet the ambitious target of limiting global warming to 1.5 degrees Celsius above pre-industrial levels.

The buildings and construction sector is responsible for one-fifth of global greenhouse gas emissions.

The forum was attended by government officials from the US and China, the two largest economies and emitters of greenhouse gases, as well as architects, engineers, property developers, and other international organisations.

Xavier Huillard, Vinci’s chairman and CEO, said, “Vinci’s overall performance was of a very high quality in 2023. Revenue and earnings grew strongly and reached new all-time highs. Free cash flow was exceptional and significantly exceeded expectations.

“Almost all of the group’s businesses, both in France and abroad, saw very positive momentum throughout the year.”

Huillard added that the only exception was the property development business, which is dealing with a severe downturn in its sector.

With a solid presence in highly buoyant markets, particularly in the energy sector, Vinci reported its confidence for future trading.

“The environmental transition, energy efficiency, the digital revolution and sustainable mobility are major challenges that are generating considerable demand, which represents opportunities for the group’s companies,” added Huillard.

Significant growth

Eiffage is one of the world’s top 20 biggest contractors and the company highlighted a 13% increase in net profit group share. The results report said it was “another year of significant growth” for the group’s contracting and concession segments.

Eiffage said it increased its recurring operating income by 8.6% while noting debt reduction and cash flow generation at €2.3 billion (US$2.5 billion), roughly 22% higher than the same point last year.

The company said European activities were a big driver of 2023’s success.

“In contracting, revenue grew 7.1% to nearly US$19.7 billion, driven by the activity of the group’s European entities, more than 16.5% growth in Europe outside France,” said Eiffage.

Construction revenue took a dip, mostly on a slower real estate market, but Eiffage said residential building, civic, and industrial builds in its home country helped offset a sluggish year, overall.

“Revenue was down 2.3% to US$4.6 billion,” stated the group. “The decline in new housing in France was partially offset by residential and tertiary renovations, the construction of public facilities, and industrial investment.”

The company reported a US$5.5 billion order book for construction activities as of the end of last year. As for infrastructure, the company reported a revenue increase of nearly 10%.

Eiffage saw a 23% increase in international revenue last year. Reporting on the infrastructure division, the company said that it, “continues to benefit from strong activity on the HS2 high-speed rail line in the UK and the E18 motorway in Norway, positive momentum in the transport infrastructure market in Germany, and the boom in offshore wind.”

Also seeing similar growth last year is Bouygues’ construction business, which saw sales increase 2% to €27.3 billion (US$29.6 billion) in 2023, as gains in its Construction and Colas divisions offset declines in its struggling property arm.

A strong performance in its International Building division (up 15%) helped Bouygues Construction’s sales to increase 5%.

Sales at Colas rose by 3%, driven by a 6% increase in its rail activities and a 3% lift in roads. However, the conglomerate’s property division, Bouygues Immobilier, saw a 14% drop in sales compared to 2022, reflecting a “challenging market environment”.

The total backlog for the construction businesses climbed 4% to €28.4 billion (US$30.8 billion).

Construction in France has been facing challenges in its attempt to recover since the pandemic. While there is some positive news as construction companies are reporting increased growth and there are large-scale government infrastructure investment plans, it should be noted that the industry has a long way to go before it is fully back on track.