British banks in €900m Alps deal

Two leading British banks are spending more than €600m (around £400m) to finance a new motorway across the French Alps.

HSBC, Bank of Scotland Corporate - part of HBOS - and Calyon, the corporate and investment banking arm of Crédit Agricole, are providing a total of €940.5m to French company Adelac, which will design, build and run the toll road. It is understood that the banks are putting in equal sums.

The A41 North will run for 19km between Annecy and Geneva in the Rhône-Alpes region of France and will include a 3km tunnel through Mont Sion and four viaducts. The motorway is expected to reduce journey times into Switzerland significantly, as well as cut accidents; the current mountainous route is a notorious black spot.

Private finance initiatives (PFI) are becoming increasingly popular on mainland Europe, and UK banks are looking to cash in. "What we have found in continental Europe is that these markets are beginning to embrace PFI in a way the UK has for some time now," said a Bank of Scotland spokesman. "For investors and equity partners, the model offers a very attractive investment opportunity."

This is the second high-profile PFI infrastructure project that the Bank of Scotland has helped fund in France, after it backed the A28 toll motorway north of Paris, which opened six weeks ago.

Revenues will be generated through interest on the debt as well as the tolls and fees for running the motorway.

Adelac is owned by French construction group Bouygues, motorway operator AREA and provincial bank Caisse d'Epargne et de Prévoyance des Alpes. Work on the motorway is due to start next year, and it is likely to be completed within five years.