Ecomouv, 70 percent controlled by Atlantia, was created in 2011 to administer a motorway toll dubbed "ecotax", aimed at raising money to fund rail and other infrastructure projects.

The plan sparked protests by truck drivers that led to its eventual withdrawal - but only after Ecomouv had installed 173 electronic toll gates across France, worth up to 1 million euros each.

"The net indemnity covers investments - including repayment of part of the debt that will not be reimbursed by the (French) state - the return on invested capital and the voluntary liquidation of Ecomouv," Atlantia said in a statement.

The Italian motorway operator said France would also repurchase the equipment built by Ecomouv and take on the project's debt but gave no further detail.

At 1006 GMT shares in Atlantia were up 2.6 percent at 19.83 euros, outperforming Milan's blue-chip index FTSE Mib <.FTMIB>, which was rising 0.8 percent.

A source close to the matter told Reuters on Wednesday the French government would pay a total of around 800 million euros for scrapping the "ecotax" project.

In addition to the 403 million euro payment to Ecomouv, the state will also pay banks up to 40 million euros annually over 10 years, the source said.

(Reporting by Francesca Landini, editing by Stephen Jewkes and Susan Thomas)