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Dáil Éireann debate -
Thursday, 20 Nov 2003

Vol. 575 No. 1

Written Answers. - Road Tolling.

Ciarán Cuffe


14 Mr. Cuffe asked the Minister for Transport the form of road tolling he expects to introduce in the roads projects being funded by private financing in the 2004 roads programme; the number of years for which the private sector will achieve a return on their investment in a typical project; and the forecast average return in current prices that the private sector will collect from an investment of ?150 million over the lifetime of the project. [27804/03]

Bernard J. Durkan


38 Mr. Durkan asked the Minister for Transport the extent to which existing and proposed road tolls are expected to increase charges on the motorist from its current ?3.8 billion per annum; and if he will make a statement on the matter. [27772/03]

Dan Boyle


63 Mr. Boyle asked the Minister for Transport the projects in which it is expected the ?150 million in PPP roads financing announced in the Book of Estimates for 2004 will be invested; the repayment arrangements for this form of financing; if the PPP is financing the exclusive source of funding for certain roads projects or if is used in conjunction with public financing; and the risks the private sector accepts with regard to the construction of the roads or the forecast level of traffic on the roads. [27803/03]

I propose to take Questions Nos. 14, 38 and 63 together.

The National Development Plan 2000-06 envisages that a proportion of the national roads programme will be implemented by means of public private partnerships, which will involve private sector funding remunerated in part by user tolls and will ensure earlier delivery of vital national road infrastructure. Through PPPs, private sector innovation will be harnessed in the areas of scheme design, construction and long-term operation and maintenance. User tolls are now in widespread use throughout the developed and developing world and are particularly favoured where rapid expansion in major road networks is required. It is considerably more widely used in roads financing than shadow tolls and more readily permit the transfer of economic risk, which is desirable in PPP projects.

The development and implementation of national road PPP projects is a matter for the NRA within the statutory and administrative framework provided by the National Development Finance Agency Act 2002 and Department of Finance interim guidelines on the assessment, approval and procurement of PPP projects. Within this statutory and administrative framework, it is a matter for the NRA to negotiate PPP agreements for the funding, construction and operation of toll funded national road projects. The NRA carries out extensive financial, legal and technical evaluation for each national road project to be procured on a PPP basis. This evaluation focuses on ensuring that value for money is obtained. A project will not be undertaken on a PPP basis unless it provides better value for money than would be obtained under conventional procurement. The NRA's current PPP programme comprises 11 projects spread throughout the country. It is expected that user tolls on these projects will leverage private sector funding of approximately €1.15 billion over the period 2004-08.

The amount of €150 million in external roads financing included in the public capital programme tables of the 2004 Abridged Estimates Volume is the estimated private sector investment in the N4-N6 Kilcock-Kinnegad scheme which commenced construction earlier this year; the M1 Dundalk western by-pass; the N8 Fermoy by-pass and the N25 Waterford City by-pass. It is additional to the Exchequer provision of €1.227 billion for the national roads improvement programme. Funding arrangements for the various schemes will not be determined until the relevant negotiations are finalised and tolling agreements entered into by the NRA. However, in general it is expected that PPP concessions would be of the order of 30 years duration and that they would be remunerated wholly or partly by tolls. Some construction and-or operating payments by the NRA may be necessary to allow toll charges to be set at an affordable level in order to reduce diversion and not to undermine the transportation benefits of the scheme.
The return to the concessionaire is dependant on its ability to manage the costs it will incur in the design, build and long-term operation of each scheme. Additionally, the traffic volumes that materialise on the road are a key factor in the overall return the private sector will derive from any PPP scheme. It should be noted that the PPP contract devised by the NRA also incorporates a revenue share mechanism, which serves to limit the return to the private sector in the event of traffic volumes exceeding expectations.
Funding of the PPP schemes comprises debt finance provided by the European Investment Bank and commercial funding banks along with equity finance. EIB funding is advanced to the private sector at particularly competitive rates, which are close to the cost of Government debt while the commercial debt finance on the PPP schemes has been advanced at competitive rates of 1% to 1.5% above EURIBOR. The equity investment in the schemes bid to date has been aggressively priced. Responsibility for the repayment of the debt and equity financing is a matter for the concession company.
As part of the PPP assessment process for an individual project undertaken by the NRA, a risk assessment is undertaken which identifies and quantifies the significant risks likely to arise on the project and considers their optimum allocation between the public and private sector. The key to achieving maximum value for money in PPP projects is to allocate risk to the party that can best manage it. In the case of national roads, risks and costs in design, construction, maintenance, traffic volumes and operation costs are generally carried by the concessionaire, while risks in relation to statutory procedures are retained by the NRA.
As regards the costs of tolling to the motoring public, the road projects identified by the NRA for PPP based on user toll financing will deliver time savings, journey time certainty and an overall high level of service to users for the toll charge levied. I am confident that the modest level of the tolls to be charged, combined with the high quality of the new roads and the greatly improved transport service they will provide, will ensure that the routes are attractive to the vast bulk of inter-urban traffic.