Download PDF: Analysis of Clonee/Kells Scheme Traffic Guarantee Mechanism
Source Data:
- “Detailed description of Clonee/Kells Scheme Traffic Guarantee Mechanism” document. (Appendix 1)
- NRA letter to An Taisce 01/09/2010 Re: Daily Traffic Counts on M3 Motorway. (Appendix 2)
- Press release 03/07/2007 of Parent company, “Ferrovial” concessionaire for the M3 PPP scheme. (Appendix 3)
Assumptions:
- That the information in the detailed description, (Appendix 1) remains accurate.
- That the limited traffic data from the M3 provided, (Appendix 2) is sufficient to calculate an Annual Average Daily Traffic for the opening year 2010:
| Min. Traffic | Max. Traffic | |
| June 2010 | 19,295 | 24,403 |
| July 2010 | 18,582 | 23,880 |
Average of the 4 data points = 21,540
Assume AADT for M3 in 2010 is 21,540
From review of NRA automated traffic counter data along the existing N3 in 2009, (Appendix 6), the year before the M3 was opened we can see that peaktraffic on the road occurs in the months of May, June, July, August. Thus the supplied traffic data on the M3 being in June and July 2010 is likely to represent if anything an overestimate of the M3 Average Daily Traffic for the year.
It is also remarkable that a significant “Jump” in average daily traffic has occurred in just 1 year. Where Average daily traffic counts of the 13,814-15,893 range occurred on the existing N3 in 2009 with a reduction in traffic volume from 2008 of 4.2%-6.2%, (Appendix 6) . Now in 2010 traffic counts of 18,582-23,880 are reported on the new M3 completely and massively reversing the trend in just one year. Perhaps this most likely is due to additional traffic being attracted to the M3 for alternative routes along with some switching from public transport etc but a user survey should be conducted.
- The Ferrovial press release of 03/07/2007, (Appendix 3) states that the scheme investment is €575 million, €246 million coming from a government payment during the construction phase. The remaining €329 million therefore represents the investment or “senior debt” that is to be repaid over the concession period of 45 years. I have used these figures from 2007 as the detailed description, (Appendix 1) section 1.7.1 states:
“The level of Traffic Guaranteed will be …. the traffic corresponding to 90% of Tenderer’s debt service costs for the equivalent period in accordance with the Tenderer’s Base Case…”.
The 90% of Tenderer’s debt service costs for a year represents the upper limit the Traffic Guarantee Amount for the same year can attain.
I presume the contract states the debt is calculated on that which the private contractor states at the base year, 2007, when the contract was awarded to prevent a cost over run during construction raising the upper limit of the Traffic Guarantee Amount that the NRA could have to pay.
- Using a simple on-line mortgage calculator and assuming 6% annual interest on a repayment type mortgage over the 45 year concession, (Appendix 4) the annual tenderer’s debt service costs are €21,286,463, (€1773871.82 x 12 months).
Results:
See attached excel work book, M3 Clonee-Kells Toll PPP, (Appendix 5).
Scenario 1: Assuming growth as per PPP contract but starting from a Average Daily Traffic in 2010 as per that calculated from max./min. traffic counts for June/July 2010 of 21,540. The penalty payment required by the NRA to return to Ferrovial by the term of the concession would be €27,724,826.
Scenario 2: Assuming no growth in traffic in the 1st (ie opening) year of the M3 followed by traffic growth as per PPP contract but starting from a Average Daily Traffic in 2010 as per that calculated from max./min. traffic counts for June/July 2010 of 21,540. The penalty payment required by the NRA to return to Ferrovial by the term of the concession would be €37,715,434 .
Scenario 3: Assuming no growth in traffic in the 1st two years of the M3 followed by traffic growth as per PPP contract but starting from a Average Daily Traffic in 2010 as per that calculated from max./min. traffic counts for June/July 2010 of 21,540. The penalty payment required by the NRA to return to Ferrovial by the term of the concession would be €47,706,042.
Scenario 4: Assuming no growth in traffic in the 1st three years of the M3 fpllowed by traffic growth as per PPP contract but starting from a Average Daily Traffic in 2010 as per that calculated from max./min. traffic counts for June/July 2010 of 21,540. The penalty payment required by the NRA to return to Ferrovial by the term of the concession would be €57,696,651.
Conclusion:
- Underestimations of Traffic growth by the NRA will result in penalty payments by the NRA during the course of the Ferrovial concession in the 10′s of millions of Euros.
- A conservative mid-range value based on available information and trends to date would be €40 million.
- These penalty payments remain significant when compared to the overall value of the Debt to be paid to Ferrovial:
| Total Penalty to be Repaid to Ferrovial, (€) | Total Penalty to be Repaid to Ferrovial Expressed as % of Total Debt to be Repaid, (%) | |
| Scenario 1 | 27,724,826 | 8.43 |
| Scenario 2 | 37,715,434 | 11.46 |
| Scenario 3 | 47,706,042 | 14.50 |
| Scenario 4 | 57,696,651 | 17.54 |
- The data supports the case that for such schemes the Irish taxpayer will pay the “Double Hit” of first, paying extra for an over sized new road and second, the contractual penalty payments when traffic fails to grow to forecast.
- The data furthers the case for an open review of NRA traffic forecast figures before further road schemes can be progressed.
Appendices: For appendices please download the pdf.
Download PDF: Analysis of Clonee/Kells Scheme Traffic Guarantee Mechanism
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