Darren O'Rourke
Question:
298. Deputy Darren O'Rourke asked the Minister for Transport if he is concerned about the financial liability to the State due to the traffic guarantee clauses in the M3 and Limerick tunnel toll contracts; if these payments will increase over the coming years as a result of the efforts to move persons to public transport modes thereby reducing traffic levels on these motorways; the estimated liability for such from now until the expiry of both contracts; and if he will make a statement on the matter. [2396/23]
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As Minister for Transport I have responsibility for overall policy and funding in relation to the national roads programme. Under the Roads Acts 1993-2015, the operation and management of individual national roads is a matter for Transport Infrastructure Ireland (TII), in conjunction with the local authorities concerned. Therefore, matters relating to the day to day operations regarding national roads, including toll roads and the establishment of a system of tolls, are within the remit of TII. More specifically, the statutory power to levy tolls, to make toll bye-laws and to enter into agreements with private investors are vested in TII under Part V of the Roads Act 1993 (as amended).
With regard to the payment mechanism associated with M3 and Limerick Tunnel, it is a contractual obligation which incorporates a traffic guarantee mechanism. Therefore, the contracts for the privately-operated toll schemes are commercial agreements between TII and the Public Private Partnership (PPP) concessionaires concerned.
Noting the above position, I have referred the question to TII for a direct reply. Please advise my private office if you do not receive a reply within 10 working days.
A referred reply was forwarded to the Deputy under Standing Order 51.
I refer to your recent parliamentary question, Ref. No. 2396/23, to Mr Eamon Ryan TD, Minister for Transport. The position in relation to your enquiry is as follows.
Traffic Guarantee payments (also referred to as Variable Operational Payments - VOPs) are unique to the M3 and Limerick Tunnel toll concession contracts and arise in circumstances where actual traffic volumes do not reach the threshold volumes that are specified in the respective Public Private Partnership (PPP) contracts. The VOP mechanism reflects the specific challenges and risks that the private sector faced in the delivery of these two major infrastructure schemes.
For example, the Limerick Tunnel project faced particular significant construction risks relating to (a) the nature and extent of the tunnel works under the River Shannon and (b) significant uncertainty at the time of procurement in relation to the extent of implementation of a Limerick city centre traffic management strategy and its potential consequences in terms of traffic outcomes. This uncertainty caused particular difficulties with forecasting traffic volumes using the tunnel.
In relation to the M3 Clonee-Kells Scheme, the major challenge for the private sector was the quantum of debt that had to be raised in order to fund the construction of what was at that time the largest road construction project undertaken in the State.
Transport Infrastructure Ireland (TII) wished to avoid these risks being reflected in a higher bid price/debt pricing for the full concession lengths of the projects and consequently implemented the VOP mechanism on the schemes as a method of reducing, in part, the risk profile of the projects. From the perspective of the bidders, who have significant debt servicing obligations in relation to the debt raised for the schemes, the VOP mechanism ensures that a minimum level of project revenue is guaranteed in any year.
The estimated VOP liability from now until the expiry of the Limerick Tunnel PPP contract is €118m (excluding VAT). This estimate is based on projected annual increase in inflation of 2% per annum from 2023 to expiry and a projected traffic growth of 1% from 2023 up to 2031, 0.5% growth between 2032 and 2034 and 0% growth thereafter, until expiry of the contract (2041).
TII does not expect a VOP liability on the M3 PPP contract from now until expiry. This assessment is based on the assumption that traffic does not decrease below current levels.
I trust that this information is of assistance to you.
