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Construction Insights November 2023: France

20 November 2023
The legal regime of the new public energy performance contract with deferred payment created by the Law of 30 March 2023 has been clarified. 

Kick-off of the new energy performance contract "MGPE" towards greening the French public buildings

By a decree dated 3 October 2023, the legal regime of the new public energy performance contract (Marché Global de Performance Energétique - MGPE) with deferred payment created by the Law of 30 March 2023 has been clarified. From now on, the French public bodies can use this new innovative legal tool during a five-year experiment period. 

The Grenelle I Law of 3 August 2009 had already created an energy performance contract, but it was not very successful due to the high cost of renovation works. Over the past fifteen years, only 380 energy performance contracts have been signed, which is an annual average of 25 contracts. The new MGPE should lift the financial barrier by allowing deferred payment. 

The legislator is also anticipating greater success for this contract, due to an encouraging context. The rise in energy prices linked to the Ukrainian war since February 2022 is spurring public bodies to improve the energy performance of their buildings. In addition, the ELAN Law of 23 November 2018 and the decree of 23 July 2019 (called "Tertiary Decree") now require the implementation of actions to reduce energy consumption for the largest public or private buildings. The ELAN Law sets challenging targets: reduction of final energy consumption compared to 2010 by at least 40% by 2030, 50% by 2040, and 60% by 2050. The public bodies are subject to reporting obligations. They may be subject to administrative sanctions if they fail to fulfill their reporting obligations or to meet their targets.

The system is still experimental, as the deferred payment may generate additional costs for public bodies. The Law provides that the French Government will have to submit a mid-term report to Parliament on the contracts concluded, and a final report six months before the end of the experiment.  

The new law as of 30 March 2023 has created an experimental system for a period of five years enabling the public bodies to enter into MGPEs with deferred payment to carry out energy improvement works on public buildings. This new contract is an exception to the prohibition on deferred payments provided by articles L. 2191-2 to L. 2191-8 of the French Public Procurement Code. The payment of the contract holder is spread out over the duration of the MGPE. The deferred payment should enable the public purchaser to vary the contractor's fees according to the results in terms of energy performance. It should also facilitate the financing of the works by creating an exception to the prohibition of public bodies' deferred payment.

This new type of agreement is inspired by the rules applicable to French PPPs (Marchés de Partenariat) with the difference that the contracting authority (maîtrise d'ouvrage) is not delegated to the contract holder. There are however some similarities, such as the obligation to provide for a preliminary study before resorting to the contract.

The purpose of the preliminary study is to demonstrate that the MGPE is more favorable than using other methods. The public purchaser must then submit the study to "Fin Infra", an expert administrative department attached to the French Ministry of Finance, which will issue an opinion within one month.

The preliminary study should contain a general presentation of the project, including the economic balance of the public purchaser's project, the financial capabilities of the purchaser, and the financing structure. The project's suitability is also assessed based on energy consumption and greenhouse gas emissions.

The public purchasers must also provide a budgetary sustainability study, which is sent to the Minister for the budget for his opinion.

The Law allows public purchasers to enter into an MGPE for a project falling within the competence of several public bodies. To make the procedure easier in case of mutualisation, the preliminary and budgetary sustainability studies will be prepared by the purchaser for managing the project on behalf of the other purchasers. 

Regarding the MGPEs awarded by the State and its public establishments (établissements publics), two prior authorizations are required. Before launching the award procedure, these purchasers must obtain the agreement of the Ministers responsible for the budget and the economy. These authorizations shall be renewed at the end of the award procedure. The public establishments must also obtain the agreement of their supervisory ministry before signing.

The first projects could be launched in late 2023 or in 2024, as there is a great expectation coming from French public bodies in connection with energy performance in the current incentive context. 

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