Shares of Aeroports de Paris SA (EPA:ADP) fell by over 2% on Friday after France's transport regulator, the Autorit e9 de R e9gulation des Transports (ART), declined the operator's second tariff proposal for 2026, resulting in a carryover of existing charges into the coming year.
The proposal, filed on Jan. 16, sought to keep tariffs frozen for 2026, begin narrowing the gap between fees for Schengen and other international passengers, lower the debt premium included in the regulated weighted average cost of capital (WACC), and preserve the existing split of costs between regulated and non-regulated activities. Under the submission, the company said the plan would produce a 3.5% return on capital employed (ROCE) compared with an assumed 4.8% WACC.
ART's rejection, issued on Feb. 10, noted that the regulator expects the operator to generate roughly 4.5% to 5.5% ROCE when measured against a regulated WACC of 4.3%. The regulator cited several reasons for the refusal: a WACC it considered too high, a cost-allocation approach that it said understates returns by 0.5% to 1%, and financial forecasts the regulator judged overly cautious, understating returns by 0.2% to 0.5%.
Because ART refused the submission, the tariffs set for 2025 will automatically carry forward into 2026, effectively extending the freeze for the current year, according to analysts at Morgan Stanley. That outcome increases short-term revenue uncertainty for the operator.
Looking further ahead, ART's position raises questions about the multi-year Economic Regulation Agreement (ERA) covering 2027-34. If the company and the regulator cannot agree on a framework for that period, the regulator would have the unilateral authority to set tariffs for 2027. Morgan Stanley's analysis highlights that such a unilateral setting could produce lower tariffs, a reduced WACC, and no multi-year visibility for the operator.
The regulator's rejection came one day before the French government sought a non-binding opinion from ART on the draft 2027-34 ERA proposal, with that opinion due in early April. ART has encouraged the operator to speed up discussions concerning cost allocation as part of refining the multi-year plan.
Morgan Stanley said talks on cost allocation could continue into the late second quarter, with any revised proposal to be negotiated between the operator and the French government during the summer and into early autumn. The next key regulatory milestone is April 11, when ART is expected to publish its opinion on the draft ERA. The brokerage noted it would "again expect a negative opinion," citing the draft's lack of changes to the cost-allocation grid that ART has insisted must be modified.
The rejection and the extended tariff freeze add another layer of uncertainty to ADP's regulatory and financial outlook, particularly around returns and the assumptions that will govern multi-year tariffs if an agreement cannot be reached.
Note: This article presents the regulator's decision and market reaction based on company submissions, ART's findings, and analysis from Morgan Stanley. It does not introduce additional facts beyond those reported by the regulator and the brokerage.