Appendix 2 A2 Motorway in Poland - European...

March 2011 | Frontier Economics, Atkins, ITS 1

Appendix 2 – A2 Motorway in Poland


2.1 Introduction

2.1.1 Project overview

This chapter presents the results of the ex post analysis for the first pilot project,

the construction of the A2 motorway between Konin and Strykow in Poland.

Location

The central position of Poland in Central-Eastern Europe means that the main

transport corridors passing through it are of international significance. More

specifically the A2 Motorway forms part of the European Route E30 between

Berlin and Belarus. As illustrated in Figure 1, the A2 also forms a cross section

with the proposed A1 (a north south axis between Gdansk and Vienna) at

Strykow (north of Lodz). The A1 also forms part of the European TEN-T and

therefore forms a route of international significance linking Poland with Austria;

Hungary and Greece.

The A2 Konin to Strykow improvements considered in this evaluation is located

between Poznan and Warsaw and is shown in Figure 1.

2 Frontier Economics, Atkins, ITS | March 2011


Figure 1. Location of the A2 Motorway Project in its National Context

Source: Openstreetmap.org

Description

Whilst the A2 enhancements are clearly of strategic significance to international

traffic, it also serves as a more regional/local link between Konin (at the western

extremity) and Lodz (at the eastern extremity). Prior to the improvements on

this stretch of the A2, the main connecting route between these main settlements

was the single lane R72. Congestion however remains an issue in peak periods on

the R14 (linking Strykow with Lowicz) which remains a single carriageway road.

It has experienced a considerable increase in traffic flows since the pilot project

opened. After the opening, the A2 has since been extended to include a bypass

around the village of Strykow. This was completed in 2008 and removed

significant proportions of through traffic from the R14 (see figure 2 for location)

through the village.

Good transport connectivity is regarded as key to supporting economic activity

and inward investment in the Lodz and Wielkopolska Viovodeships (Regions).

At the regional and local level, both the A1 and A2 have been recognised recently

as a key strength in assisting the delivery of regional and national economic

growth.

Given their strong strategic location combined with other economic stimulus

methods such as property tax breaks and incentives for SME (small and medium



size enterprises), Lodz and Konin (amongst others) are major focal points for

future economic growth both regionally and nationally. Already these

settlements have attracted significant inward investment from multi-national

organisations in the food, distribution, electrical manufacturing and car

manufacturing sectors – recent examples include Nestle; Unicom; Wrigley;

Volkswagen and Skoda.

The project evaluated comprised of the construction of a dual 2 lane motorway

between Konin and Strykow. The project was developed in two phases, from

Konin to Emilia (85.8 km, Phase 1) and between Emilia and Strykow (18.1 km,

Phase 2). Key timescales for the project are summarised as follows:

Commencement of Construction – December 2003;

Phase 1 Official Opening (Konin to Emilia) – June 2006;

Phase 2 Official Opening (Emilia – Strykow) – July 2006;

Strykow Bypass Official Opening – December 2008; and,

Estimated completion date of A2 upgrades between Berlin and Warsaw

– 2012.

The A2 is, in part, toll motorway, with the exception of this new section. There

are proposals in place to introduce tolls on the section between Konin and

Stykow, and in April 2010 the construction of toll plazas at either end of the

project extremity was underway. The location of the project in its regional

context is shown in Figure 2



Figure 2. Location of the A2 Motorway Project in its Regional Context

Source: Openstreetmap.org

Figure 3 provides a comparison between the A2 motorway, which is a dual two-

lane motorway, and the former route and current main alternative (the R2),

which is a wide single lane and subject to varying speed limits and route quality.

The R72 (the former route between Konin and Lodz) is similar to the R2 and

passes through a number of towns and villages.



Figure 3. A2 Motorway (above) and R2 (below)

Source: Photos taken during site visit (27th April 2010)

As set out in the Polish National Transport Policy 2006-2025, continued growth

in Poland‟s economic prosperity (as shown in Figure 4) in the period 2000-2007

brought with it a number of problematic trends in national transport patterns,

including:

increased mobility of people in the form of greater car ownership

(Table 1);

a smaller mode share for rail freight and passenger transport (the freight

distribution market being more focused on road transportation);

growing user expectations in terms of comfort; reliability; safety; travel

time and low cost; and,



a growing burden on the environment.

Figure 4. GDP per Capita for Lodzkie and Wielkopolskie Vovoidships compared to

Poland.

Source: Poland Central Statistical Office (http://www.stat.gov.pl/gus/index_ENG_HTML.htm)

Table 1. Growth in Car Ownership 2003 to 2008

2003 to

2004

2004 to

2005

2005 to

2006

2006 to

2007

2007 to

2008

Poland 6.5% 3.0% 8.5% 9.0% 10.2%

Łódzkie 5.1% 1.3% 8.0% 8.9% 10.1%

Wielkopolskie 5.8% -2.8% 7.9% 8.9% 11.0%

Source: Poland Central Statistical Office (http://www.stat.gov.pl/gus/index_ENG_HTML.htm)

Strategic policy context

The policy background for the A2 Konin to Strykow improvements has been

clearly set out in the individual Funding Applications. The A2 runs through the

industrial centre of Poland. Its improvement was identified as being a key

priority to supporting accession and integration into the EU in key strategy

documents including the National Transport Policy 2001 -2015; Conception of

the National Land Use Policy and Economical Strategy and Polish National

Development Plan 2004 -2006.

The Polish National Development Plan 2004-2006 identified this project as one

of the first priorities for developing the wider national motorway system in

Poland and sets out the socio-economic strategy for its first years of membership

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2000 2001 2002 2003 2004 2005 2006 2007

GD

P (P

LN

) p

er

ca

pita

POLAND

ŁÓDZKIE

WIELKOPOLSKIE

http://www.stat.gov.pl/gus/index_ENG_HTML.htm

http://www.stat.gov.pl/gus/index_ENG_HTML.htm



in the EU. This document has since been updated in the form of the “Strategy

of Transport Infrastructure Development in 2004-2006 and following years”.

The main objectives stated in the latter are focused on removing barriers to

economic development posed by the insufficient transport infrastructure and on

improving the integration of Poland's transport network with the network of the

European Union and reducing environmental and social costs caused by lack of

infrastructure. Specific priorities for the investment included:

ensuring of effective road and rail connections needed for

intensification of trade turnover within the Common Market;

improvement of accessibility of main urban areas in Poland, constituting

vital centres of economic development;

support of the regional development;

improvement of road traffic safety and elimination of high social and

economic costs of road accidents;

reduction of environmental protection costs owing to more sustainable

development of transport sector; and

development of the inter-modal systems.

2.1.2 Sources

We have used a number of different data sources for this review. They can be

grouped into two categories:

project documentation; and,

primary & secondary data.

We summarise them below

Project documentation

We have obtained a number of documents relating to the A2 Konin to Strykow

project. These are listed in Table 2, together with their source.



Table 2. Summary of project-related documentation

Document (Author) Obtained from

Feasibility Study (GDDKiA)

Konin to Stykow (February 2003) GDDKiA

Financial Gap Calculation Report (PriceWaterhouseCoopers)

Konin to Emilia (August 2008)

Emilia to Strykow (August 2008)

GDDKiA

Final Report (GDDKiA)

Konin to Emilia (August 2008)

Emilia to Strykow (August 2008)

DG REGIO & GDDKiA

Environmental Report Non Technical Summary (GDDKiA) (May 2004)

GDDKiA

EC Application for Assistance Forms:

Subsection: Emilia to Strykow (March 2003)

Subsection: Dabie - Wartkowice – Emilia (October 2004)

Subsection: Konin to Dabie (October 2004)

GDDKiA

Economic Analysis Report

Subsection: Emilia to Strykow (March 2003)

Economic and Financial Analysis Report

Subsection: Dabie to Emilia (October 2004)

GDDKiA

EC Commission Decisions

Subsection: Konin to Emilia

Subsection: Emilia to Strykow

DG REGIO

Financing Memorandum

Subsection: Emilia to Strykow DG REGIO

Primary and secondary data

We have undertaken a comprehensive data collection exercise. A summary of the

data we have obtained is shown in Table 3. We are grateful to GDDKiA, CUPT,

Ministry of Infrastructure and the EIB for their help and assistance.



Table 3. Summary of Primary & Secondary Data Availability

Data Pre-project Opening Post-project Opening

Traffic flows

Comprehensive traffic count data has been supplied by GDDKiA for the year 2005 on the following routes: R2, R14 and R72.

A number of traffic counts which were undertaken in March 2010 have been made available from TransProjekt Warszawa (subcontractor of GDDKiA) for the following routes: A2, R2 and R72 and R14. A full set of data has been collected for the 2010 National Traffic Census but this could not be made available within the timescales of this study.

Highway journey times

Discussions with the key stakeholders revealed that pre project journey times on the main strategic route prior to the A2 opening (R2) do not exist. Therefore in the absence of further information the predicted ‘do-nothing’ journey times will be used to represent the pre project situation.

Post opening ‘moving observer’ journey time surveys were undertaken by the study team during the site visit in April 2010 for the purposes of this evaluation on the A2 (new route) and R2 (old route to Lowicz), R72 (old route to Lodz), and R14. These surveys were undertaken in both directions throughout the weekday.

Accident data

Accident numbers, location and frequency data has been provided by GDDKiA for the local highway network which includes R2 to the north and R72 to the south and R14 in the east. This covers the time period 2004 to 2006.

Accident numbers, location and frequency data has been provided by GDDKiA for the A2 project section, and the local highway network which includes R2 in the north, R72 in the south, and R14 in the east. This data covers the time period 2006 to 2008.

Project Costs

Predicted project costs are contained in the EC Application for Assistance Forms for each subsection of the project.

Project costs are contained in the Final Report which was submitted to DG Regio following completion of the project.

2.2 Ex post cost-benefit analysis

This section describes the analysis that has been undertaken to evaluate the ex

post outcome of this project, using observed data between 2005 and 2010. The

Standard Application Forms for Funding presented the economic benefits for

the relevant subsection of the project (with the exception of the Emilia to

Strykow Application which presented the economic analysis for the entire A2

motorway project based on the assumption that this section would not be built

without the other sections of the motorway). The Feasibility Study also presents

the economic benefits for the entire project and lists a number of the key

assumptions. The main sources of information used for this ex post CBA are

therefore the Application Form for the Emilia to Strykow subsection and the

Feasibility Study.

Following a site visit and discussions with key stakeholders, it has been

confirmed that the project has been implemented in line with that described in

the Application Form for Funding. This can be summarised as follows:

construction of dual 2 lane motorway between Konin and Strykow

which is not subject to tolls upon opening;



construction of 7 grade separated interchanges facilitating access to and

from „gmina‟ and „voivoidship‟ highways;

environmental mitigation measures including planting and noise

barriers; and

associated ancillary infrastructure including service stations, signage and

maintenance centres.

2.2.1 Headline results from the analysis:

This section offers some headline results from the analysis which will be explored

in more detail in the following sections of this report.

Economic analysis

A summary of the results of the ex post economic analysis is shown in Table 4

with a summary of the difference between the high and low case scenario

contained in Table 5.

Table 4. Summary of ex post economic analysis (2003 prices)

Low case High case

Net Present Value (€m) 523 900

Economic IRR (%) 18.2% 22.8%

Benefit-cost ratio 3.0 4.4

Source: Own calculation



Table 5. Summary of the differences between the high and low case scenarios.

Scenario Traffic Flows Assumption Traffic Speed

Assumption

High Case

Traffic growth assumed to be the same as forecast (approximately 2-4% per annum throughout the

appraisal period).

Minimum speed 35km/h

Low Case Traffic growth 50% less than the forecast growth throughout the

appraisal period.

Minimum speed cut-off 2km/h faster than high case on R2. (37km/h).


A detailed breakdown of the results is shown in Annexe 1

Financial analysis

We have also carried a financial analysis for the „Low case‟ and „High case‟

scenarios. From the point of view of the financial analysis both scenarios are

equivalent. There are two reasons why this is the case. First, the infrastructure is

a toll free motorway and revenues are zero in both cases, and second, costs are

the same in both scenarios. We have calculated the Financial Net Present Value

and Financial Rate of Return, for both the investment – FNPV(C) and FRR(C) –

and the capital employed – FNPV(K) and FRR (K). Finally, by taking into

account the EU and national contribution, we have also undertaken a financial

sustainability analysis. Table 6 summarises the results of the financial analysis for

each scenario. A detailed breakdown of the financial analysis results is contained

in Annexe 1.



Table 6. Summary of ex post financial analysis (2003 prices)

Low/High case

Net Present Value – Investment (€m) -263

Financial IRR – Investment (%) -3.5%

Net Present Value – Capital (€m) 47

Financial IRR – Capital (%) 11.6%


Wider socio-economic impacts

The project was implemented during a period of rapid economic growth in

Poland, so the wider socio-economic impacts directly attributable to the project

are difficult to establish. However, it is clear from our discussions with local and

regional stakeholders that the project has been instrumental in improving

connectivity at a local and regional scale. Anecdotal evidence from our

discussions also highlighted evidence of increased tourism, development of new

industries, and improvements to quality of life.

2.2.2 Costs

This section undertakes a comparison between the predicted and outturn project

costs in order to identify areas of under/overspend. The predicted and observed

project costs are contained in the Final Reports for the two subsections and are

summarised in Table 7.



Table 7. Summary of ex ante and ex post project costs (2003 prices discounted to

2003)

Cost Category Ex Ante

(€m)

Ex Post

(€m)

Level 1 (including VAT)

‘All-in’ 401.4 406.3

Level 2 (excludes VAT)

Land Purchase 0.1 0.2

Construction 324.7 327.7

Technical Support 13.6 15.7

Publicity 0.1 0.1

Source: Own calculation based on Application Reports and Project Completion Report

Table 7 shows that the actual costs are slightly higher than originally forecast. In

discussions with key stakeholders it became clear that the Application for EU

funding was based on an estimate of costs. The Project Completion Report

specified the following reasons for increases in cost over and above the Tender

price for construction:

extra land acquisition was required;

poor weather conditions in 2005 during the main construction phase;

additional drainage, earthworks and safety improvements required; and,

20% decrease in the value of the Euro compared to that assumed when

preparing the Feasibility Study and cost estimations.

We sought more disaggregated cost data on the basis of the methodology

developed by Work Package 10 of the ex post evaluation of the ERDF in the

2000-06 programming period.1 Neither the forecast or outturn costs made

available to the study team were consistent with the Level 2 or 3 unit cost

categories prescribed Work Package 10. The evaluation team did make enquiries

with GDDKiA and the EIB to obtain a more detailed set of cost figures, and

clarification of any differences. However, it was stated that the Application

1 „Ex post evaluation of cohesion policy programmes 2000-06. Work package 10: Efficiency – Unit costs of major projects‟.

Published on: http://ec.europa.eu/regional_policy/sources/docgener/evaluation/rado2_en.htm

http://ec.europa.eu/regional_policy/sources/docgener/evaluation/rado2_en.html



Forms and Project Completion Report should be used for definitive information

and a more detailed breakdown of costs is unlikely to be available.

Table 8 shows the project costs split into costs per km. With the data available

this is the closest match to Level 2 and 3 costs. Our analysis shows that on a cost

per km basis land purchase costs were around 67% higher than forecast. The

Level 1 unit cost was as predicted at €3.9m per km.

Table 8. Summary of ex ante and ex post project costs per km (2003 prices

discounted to 2003

Cost Category Ex Ante

(€)

Ex Post

(€)

Level 1 (including VAT)

‘All-in’ (€m/km) 3.9m €3.9m

Level 2 (excludes VAT)

Land Purchase (€/km) 900 1,500

Construction (€m/km) 3.1m 3.2m

Technical Support (€m/km) 0.1m 0.2m

Publicity (€/km) 600 400

Source: Own calculation based on Application Reports and Project Completion Report

2.2.3 Direct benefits

Time savings

The Application Form for Funding predicted journey times on two routes in the

study area. Post opening journey time surveys have therefore been undertaken by

the project team and a comparison of these figures is presented in Table 9.



Table 9. Summary of Predicted vs. Observed Journey Time Savings

Route Without project With

project Savings

Predicted

(Unknown

date)

Konin

to

Lowicz

2h 8min

(via R2)

1h 44min

(via A2, R14) 24min

Konin

to Lodz

2h 14min

(via R72)

1h 24min

(via A2) 50min

Observed

(2010)

Konin

to

Lowicz

2h 8min*

(via R2)

1h 36min

(via A2, R14) 32min

Konin

to Lodz

2h 14min*

(via R72)

1 hour

(via A2) 1 hour 15min

(*) Pre implementation journey time data was not available for this project. The predicted ‘without’ project

journey times have therefore been used for the purposes of this evaluation, which seem robust from our

observations on the site visit.

The table shows that the journey time savings resulting from the A2 project are

one hour 15mins which is greater than the predicted saving of 50 minutes. The

post opening journey times on R2 are also better than predicted.

Traffic Impacts and Congestion Reduction

Predicted traffic volumes were presented in the Feasibility Report for 2006. A

selected few of these counts have been factored to 2010 flows (at a growth rate

of 4% per annum) and are presented in Table 10. Also contained in the table are

observed pre and post implementation traffic flows. The pre project traffic flows

from 2005 have been factored by the same growth rate as those used for the

predicted flows, whilst the post opening traffic volumes are from 2010 so require

no factoring.



Table 10. Summary of Predicted vs. Observed Traffic Volumes

Road Location

Predicted (2010) Observed (2010)

Without

Project

With

Project Before After

A2

Modla (west of

project) 19,200 19,800 17,000 21,200

Dabie to Kolo N/A 16,900 N/A 18,800

Emilia to

Wartkowice N/A 19,200 N/A 16,300

R2

Kolo 24,900 14,300 24,300 10,500

Kutno 16,200 7,900 15,900 7,400

R72

Aleksandrow

Lodski 9,300 4,500 10,900 6,300

Turek 6,700 5,000 9,800 5,400

R14 Jamno 14,800 23,900 12,500 16,700

Source: Predicted: Feasibility Study. Observed: GDDKiA.

The traffic flow data shows that actual traffic flows on the A2 are marginally

higher than predicted on the western section (Dabie to Kolo) and lower than

predicted on the eastern section (Emilia to Wartkowice). Traffic flows have

reduced considerably on the R2 and are now lower than forecast. Flows on the

R72 between Konin and Lodz have also decreased but are still higher than

forecast. R14 between Strykow and Lowicz has experienced an increase in traffic

volumes as expected, but traffic volumes are considerably lower than predicted

on this route.

The traffic flows presented in this section suggest that the vast majority of the

traffic using the A2 has re-assigned from the R2 in the north and the R72 in the

south. The figures suggest that there has been very little additional traffic as a

result of the project.

Safety

Observed accident data on the main routes in the vicinity of the project has been

made available by GDDKiA, and covers the period 2004 to 2008. The opening

year, 2006, has been excluded from the evaluation as it has not been possible to

determine whether the accidents recorded in this year occurred before or after



opening. The period 2004-2005 has therefore been selected to represent the pre

project situation, with 2007-2008 representing the post opening situation. This

data has been compared to the predicted number of accidents over the same time

period.

Table 11 shows that the number of predicted accidents is higher than observed.

This is primarily because the predicted accidents cover many of the minor roads

in the modelled area. As traffic volumes on these minor roads are not forecast to

significantly change as a result of the project, and hence we would not envisage

large change in accident numbers on these „minor roads‟. The observed data

cover the main strategic routes where traffic flows are forecast to have changed

(A2, R2, R72, R14). Therefore even though the percentage difference between

predicted and observed is similar, the absolute difference in the number of

accidents is likely to be a more accurate representation of the impact of the

project.

Table 11. Summary of Predicted vs. Observed Accident Numbers

Predicted Observed

Before Opening (2004 and 2005) 1,058 434

Post Opening (2007 and 2008) 937 395

Difference 121 39

% Difference 13% 10%

Source: Predicted: Feasibility Study Appendices. Observed: GDDKiA.

2.2.4 Externalities

The Application for Funding states that 0.5% of the benefits of the entire project

arise from savings due to lower air pollution levels. However, the technical basis

for these figures could not be established from the available documentation. As

these figures form a small proportion of the overall benefits they have not been

evaluated in this study.

2.2.5 Wider impacts

The Cohesion Fund is a structural instrument that helps Member States to

reduce economic and social disparities and to stabilise their economies.

Therefore it is important that this evaluation considers not only the impacts on

journey times, safety and utilisation, but also some of the more qualitative

impacts relating to the social, economic and physical environment. The ex ante

documentation for the three elements of the A2 project contained relatively little

information regarding the specific wider economic, social and environmental



impacts likely to emerge from the projects. With respect to non-quantifiable

impacts the ex ante documentation stated that it was not possible to identify all

of the factors associated with the development of new motorway links in the

region of Poznan and Lodz. Despite this statement, the following anticipated

impacts were recorded elsewhere in the application document:

the project will create conditions for the improvement of transport and

development of the road network, which constitutes a growth factor;

it will improve safety for wild animals in proximity of the project;

pollutant volumes emitted into the air will be reduced;

environmental protection measures such as sound barriers, rain water

treatment facilities, overpasses for wild animals and protective greenery

belts will help mitigate against the adverse impacts of the new

motorway;

relieve traffic from towns and villages located on the old A2 alignment;

and,

support of national development aims set out in: Transport

Infrastructure Development Strategy 2000-2006; Polish Cohesion

Funding Utilising Strategy; National Transport Policy 2001-2015; and

the Polish Land Use Policy and Economic Strategy.

Further to the above, the ex ante evaluation provided an estimate of the number

of jobs (direct and indirect) that the project was anticipated to generate in the

construction and operational phases. The detail of the forecast impact on jobs is

discussed further in the sections that follow. The remainder of this section sets

out our general approach to assessing the wider impacts of this project. It then

summarises the impacts identified by stakeholders that can be attributed, at least

in part, to the A2 Konin to Strykow improvement.

Approach to Ex Post Evaluation

The recent global economic downturn, growth in Poland‟s national economy and

other policy/infrastructural interventions implemented at local, regional and

national levels will all have influenced the emerging patterns of development,

economic growth, social and environmental change along the A2 corridor.

To obtain a qualitative understanding of the broad economic, social and

environmental costs and benefits materialising from the A2 project, we talked to

with representatives of the following organisations:

Lowicz Town Office (Lowicz Town Mayor);

General Directorate for National Roads and Motorways: Lowicz;



Department of Planning and Maintenance of the Lowicz Powiat Road

Network;

Strykow Gmina Office (Strykow Mayor and Roads Inspector);

Lodz Special Economic Zone (Investment Development Specialists);

General Directorate for National Roads and Motorways: Lodz

(Economic and Finance Department/Environmental Protection

Department;

Kutno Department of Environmental Protection, Office for Promotion

and the Investor Service;

Konin Powiat – Promotion and Development Department; and

Konin Town Office (Department of Economic Activity and

Development).

The feedback provided in these consultations (intended to provide a range of

perspectives from officials within settlements across the extent of the project)

illustrates that much of the evidence regarding the wider economic, social and

environmental impacts of the A2 is at best anecdotal and often could not be

supported by quantitative statistics. It was also stated that wider economic

factors such as the recent economic downturn and Poland‟s access to the EU in

2004 may have influenced recent economic and land-use behaviours in the Lodz

region. There was however a degree of consistency in the views presented by

each consultee, this in its own right helps give some confidence in the likely

impacts of the A2 Konin to Strykow project. The remainder of this section now

focuses on summarising the emerging messages from these consultations.

Economy Impacts

The A2 Konin to Strykow Project is fully contained within the Lodz Special

Economic Zone (SEZ). The Lodz SEZ covers a geographical area of 1,162Ha

and contains some 18,670 workplace establishments. The purpose of the SEZ is

to support economic development of the Łódź region by encouraging

diversification of the business community; job creation; encouraging uptake of

modern production techniques and technologies; drawing upon existing

academic and research infrastructure and provide support for the existing

businesses in the Lodz region.

Consultation with stakeholders, suggests the A2 has been one example of an

enabler of economic growth in the Łódź area. The existing A2 alongside

proposals for completion of the project to Warsaw and proposals for the A1

project is regarded as a major selling point for government authorities attempting

to attract inward investment; land development and economic growth.

Collectively the stakeholders from across the Lodz region perceived that the A2



project has made a positive contribution alongside other infrastructural and

policy measures to improving the economic environment across the region.

Economic Development and Investment

As part of a wider package of policy and infrastructural interventions, the A2

project is regarded as a key enabler of economic regeneration and development

by authorities in locality of the A2 project. Figure 5 provides and illustration of

the growth levels being in the Lodz SEZ, some of which can be attributed to the

ongoing improvements to the A2.

Figure 5. Investment expenditure and number of workplaces in the Lodz SEZ 1998-

2009

Source: LODZ SEZ Flexicurity – Our Key to Success (Lodz Special Economic Zone, 2008)

Whilst it is recognised that there were likely other background influences

contributing to rapid growth in the region, the rapid recent increase in

development along the A2 provides an example of the importance that the

business and industrial community place on accessibility to their suppliers, labour

force and markets. The A2 (and future A1) was also regarded as a key piece of

infrastructure which has helped to enhance investment conditions. The project

has been instrumental in attracting investment in the logistics sector. It was cited

by one stakeholder that in recent years, 8 new businesses were established in

Kutno‟s Industrial area close to the former A2 and felt that the distributing and

manufacturing sectors have benefited since the construction of the A2. It is

largely felt that development in the corridor has been fuelled by faster and more

reliable connectivity within Poland and to bordering countries (more specifically

to the west) provided by the A2. There was a perceived increased in international



lorry movements that was regarded as an indicator of how the A2 has helped

facilitate business activity. This is verified by the traffic data collected for the

existing and former A2 corridors (Table 12) which confirms a 75% increase in

HGV traffic in the A2 corridor.

Table 12. Summary of changes in A2 corridor HGV flows

Route Goods Vehicles flows

Light Goods Vehicles Heavy Goods Vehicles

R2 5.500 2,100

New A2 N/A 7,500

Total 5,500 9,600

Source: Observed before and after opening traffic count data

Anecdotally, greater road accessibility to region alongside other measures aimed

at attracting businesses has helped broaden the industry base in the corridor.

Although heavy industry remains important in the sub-region, diversification is

recognised as a key trend emerging in the region due to the increased presence of

major multinational companies from Western Europe and China. Indeed

development sites have not solely been converted to logistic and warehouse

accommodation, but for a mixture of uses including production of white goods;

food manufacturing; high tech goods and building materials. It should be

recognised that stakeholders have further attempted to exploit they geographical

and logistical advantage by offering development plots with good access to

resources; economic and social infrastructure; water and waste water facilities;

good cellular coverage; gas and electric connections as well as a range of tax and

other incentives offered by the Lodz SEZ.

The settlements of Warsaw; Poznan; Lodz, Wiceznia, Kutno, and Strykow and

other locations on the A2 exits are regarded as key beneficiaries of the A2. It is

envisaged by many that the completion of the A2 to Warsaw will only add to

further economic strengthening of the region. A concluding comment by the

SEZ, was that the levels of growth and land development achieved in Lodz of

late would have been difficult to achieve without investment in A2. Figure 6

illustrates the key focal points for development in the Lodz SEZ.

According to stakeholders, feedback from the business community regarding the

relative success and failures of the project has been non-existent. However it is

felt that rapid development levels been observed in the vicinity of the project is

evidence of the positive economic effects of the project on encouraging business

activity. There is general agreement that reduced international and national

journey times via the A2 could only result in enhanced business productivity and



hence enables continued investment by companies in expansion. The stakeholder

representative from Kutno, stated that anecdotally the Kutno plain region had

had some medium adverse impacts on the gastronomy industry.

Figure 6. Distribution of Sub-Special Economic Zones in the vicinity of the A2

Motorway

Source: Lodz SEZ Flexicurity – Our Key to Success (2008)

Foreign Direct Investment

Available development land adjacent to exit points on the new A2 has been

subject to much interest from Foreign Direct Investors (FDI‟s). Improved

access to major economic centres such as Warsaw and Poznan and connectivity

from neighbouring countries (particularly to the west) has helped attract major

FDI into the settlements along the A2. Recent land purchases close to the A2

have been predominantly made by foreign investors, while Polish businesses have

been more interested in developing sites closer to the main towns where there is

better access to labour and markets. It was suggested that FDI‟s have been keen



to exploit the logistical and visibility benefits offered by the A2. In the vicinity of

Strykow, over 0.5million Ha of land has been developed mostly by foreign

companies from other parts of Western Europe and North America.

There were some suggestions that internal trading has increased between towns

and of strengthening supply chains, particularly those located along the A2

corridor, businesses previously based in Poznan have now moved to nearer to

Warsaw to exploit the levels of accessibility that were not there before.

Few stakeholders reported adverse economic impacts from the A2, a

representative from the SEZ suggested there had been a „probable‟ reduction in

service/fuel trade on bypassed route, although this has been offset with gains on

the R14 where traffic has increased following project opening.

Administrative Burdens

When challenged on the administrative burdens created following opening, little

feedback was provided. A number of stakeholders did comment on the increased

maintenance costs associated with pavement damage caused by diversions of

heavy traffic during construction on to lower capacity local routes and increased

traffic on the R14 following opening of the A2. One stakeholder quoted a 50%

increase in maintenance costs following the opening of the A2 due to new trips

generated by the increased development around the A2.

The R14 suffers from heavy congestion but this is due for renewal following the

works for the completion of the A2 to Warsaw by 2012, which will offer further

accessibility benefits. Congestion is particularly prevalent on the periphery of

Lowicz and is offsetting some of the journey time gains offered by the A2

improvement. Furthermore, Strykow‟s position at the end of the upgraded A2

had created some local congestion issues in town. These have since been resolved

following the completion of the A2 Strykow Bypass. Strykow‟s representatives

stated that their budgets for investment in the Gemina had increased by 40 times

since 2000, and this is perceived as a reflection of the increased attractiveness of

the area due to the A2 and proposals for the A1 corridor.

Property Values

Land values have increased substantially in recent years according to SEZ (100%

increase in recent years). This appears to reflect the commercial attractiveness of

the sites to investors whom have a preference for highly accessible sites with

good visibility from the core network, but is also reflected in the high sales prices

achieved by farmers selling their land along the proposed route.



Social Impacts

Skills, Labour and Employment

Whilst it is not clear how these figures were prepared, Table 13 summarises the

number of jobs anticipated to be created as a result of the A2 project at the ex

ante stage. With an absence of baseline assumptions and the range of other

influencing factors affecting job growth in the vicinity of the project and Poland

more generally, it is not appropriate to provide a quantitative estimate of the

number of jobs created by the project as part of this ex post evaluation.

Table 13. Summary of Forecast Job Creation at time of Ex ante Appraisal

Construction Phase Operational Phase

Project

Phase Direct Jobs

Indirect

Jobs

Expected

Duration

Direct Jobs

(Increase

per annum)

Indirect

Jobs

(Increase

per annum)

Konin to

Dabie 1,450 2,200 15 140 325

Dabie to

Emilia 1,250 1,900 15 160 375

Emilia to

Strykow 300 625 21 32 80

TOTALS 3,000 4,725 - 332 780

Source: Application for Funding documents

Consultees in Lodz, Strykow, Konin, Kutno and Lowicz did provide verbal

feedback suggesting that the A2 improvement has facilitated job creation through

the large increase in investment in the area over recent years. A number of

consultees felt that historically the region had struggled to retain graduates and

skilled workers trained at Lodz‟s University. However there was some feeling that

this trend was declining and that urban areas with good linkages were becoming

more attractive places to seek employment in a variety of sectors including

warehousing, logistics and distribution, white goods manufacturing and electronic

items. Responses from stakeholders in Konin suggest there has been a decline in

local unemployment, however it is unclear whether this is attributable solely to

the A2 improvement or wider economic influences.

Community Impacts and Quality of Life

The main observable impact of the A2 has been its effects on traffic volumes and

composition.



As demonstrated in previous sections, the completion of the A2 has led to a shift

of traffic from less suitable populated routes onto an all-purpose inter-urban

route. Feedback provided by the Kutno stakeholder confirmed that no post

opening noise or air quality monitoring had taken place since the opening of the

project. They did however confirm that there has been a reduction in traffic on

the DK92 (former A2), assuming a link between traffic volumes and such types

of pollution, it is reasonable to assume that the latter have also reduced. It was

also confirmed the effect of this reduced traffic was a positive impact on quality

of life and the social environment. Konin and Strykow authorities also

recognised the positive impact of the projects on removing freight traffic from

less suitable routes in built up areas.

Whilst the enhanced connectivity and associated development investment has

brought many benefits, several stakeholders commented in the increase in

presence of HGV traffic. Whilst the A2 is suited to accommodating such traffic,

the R14 (particularly between Warsaw and Lowicz) is regarded as below standard

for carrying increased volumes of HGV‟s which in turn has contributed to safety;

congestion; air quality and noise concerns along the route. Furthermore a

number of stakeholders made reference to disrupted farming activities along the

R14 due to farming land being severed by a heavily trafficked route.

Issues of “rat running” were also put forward by stakeholders to the east of the

project still evident following opening of the A2 – this was largely attributed to

traffic attempting to avoid worsening congestion on the R14. It was

acknowledged that the completion of the A2 towards Warsaw will alleviate such

issues.

Whilst increased traffic in built up areas has its adverse impacts, there was

recognition that its causation (increased traffic) does have its benefits to local

communities. Increased development and economic presence essentially helps to

generate extra income for a settlement which can then be invested in improving

public realm.

Tourism Impacts

Stakeholders representing Stykow, Lodz, Konin and Lowicz all provided

examples of how the A2 had help to increase accessibility and attendance to the

region‟s tourist and cultural provisions. An anecdotal example was given by

Lowicz‟s representatives, according to whom the local annual Folklaw festival is

now attracting attendees from a wider geographical area. Such events are

regarded as major income earners as visitors spend money that supports hotels,

restaurants, leisure facilities and other services. Further feedback from a Konin

stakeholder illustrated that the A2 had help broaden the availability of cultural

opportunities and access to natural heritage.



Impacts on the Environment

In response to the Environmental Impact Assessment prepared at the ex ante

phase of the project, a number of environmental mitigation measures were

proposed as follows:

noise absorbent barriers to be erected adjacent to settlements in order

to achieve the requirements of the national noise regulations;

animal crossing points comprising modified underpasses and some

special overpasses;

water pollution control structures between the road drains and the out-

fall, points to surface or ground water; this comprise oil interceptors,

sand traps, and two forms of combined balancing ponds/storage

reservoirs to treat road run-off to achieve national water quality

standards; and

vegetation plantings to assist in the amelioration of air pollution in the

area of settlements.

Two Post Opening Studies have been undertaken following the opening of the

A2. The first published in January 2008 focused on the section from Dabie to

Strykow, whilst the second published in June 2010 focussed on impacts between

Strykow I and Strykow II junctions. Both were conducted on behalf of

GDDKIA. Whilst stakeholders were asked to provide evidence on the emerging

environmental impacts of the project, very few examples were given.

Stakeholders all commented on the adverse effect of the increased traffic on the

R14 on noise and air quality, but no other examples of impact was provided.

The conclusions from the two studies are summarised as follows:

First study (Dabie to Strykow, 2008):

additional noise mitigation measures to improve acoustic conditions in

built up areas adjacent to the A2 should be put in place;

at locations adjacent to A2 with high noise levels (>60db during the day

and >50db during night time hours) it was recommended for land use

to be reserved for non residence purposes;

there was no evidence that the motorway has had a negative impact on

air quality or human health. The highest recorded level of nitrogen

dioxide in the air was 79u/m3 per hour (39.5% of permissible

thresholds);

concentration of petroleum hydrocarbons and slime were within

permissible levels;



a frequent monitoring and maintenance of water equipment was

recommended;

there was no evidence that the A2 on this section has had a negative

impact on soil condition in the proximity of the motorway;

the agricultural order of the area through which the motorway passes

had been disrupted, bringing a new order to surrounding areas; and,

the construction of the A2 has resulted in disturbance in wild animal

movements although there is some evidence that the two animal

underpasses were being used by both small domestic and wild animals.

Second study (Strykow II to Strykow I, 2010)

noise levels do not exceed maximum thresholds, but are approaching

them;

air pollution does not exceed permissible levels; and

the implemented rainwater management system is ensuring that soil and

ground water systems are not adversely affected in the vicinity of the A2

alignment.

Land Use Impacts

As highlighted elsewhere in this analysis, stakeholders perceive that the A2 has

had a significant impact on the development of land around exit points along the

A2 (particularly at Strykow and Konin, as shown, for example, in Figure 7).

Moreover, it has facilitated development on the edge of other settlements in the

Lodz SEZ including Kutno; Lowicz and Lodz itself.



Figure 7. New Development at Strykow

Discussions with stakeholders in Konin and Strykow showed that the A2 has

been central to local spatial planning processes as local authorities were keen to

exploit the accessibility advantages it offers. In order to mitigate against the

adverse impacts of new development around the A2, Strykow has introduced a

policy that only development with a neutral or beneficial impact on the local

environment will be granted planning permission.

Modal Shift

In accordance with growing economic prosperity in Poland, car ownership has

increased in recent years (as shown in Table 1). This is reflected in increasing

traffic volumes discussed elsewhere in this document. Long term modal share

data shows that the proportional changes in car ownership levels in the vicinity

of the project are in line with national trends. Feedback from stakeholders

suggests that the A2 has resulted in reduced utilisation of the rail freight system

due to the increased attractiveness and flexibility of the road network.

Suggestions were also made that people‟s travel horizons may have increased

along the A2 corridor as journey times have reduced, however this can not be

verified in quantitative terms.

Utilisation rates

As requested by the TORs, we have considered the evolution of the utilisation

rate of the project since opening. We have calculated this by considering, for the

year 2010, the ratio between the actual total number of passenger car units



(PCUs) and the total potential number of PCUs that could be accommodated on

the A2, based on our route capacity calculations.

Table 14 shows the total number of PCUs in 2010 for two sections of A2. The

table also shows the total maximum capacity available, based on a calculation of

Congestion Reference Flow given by the UK formula:

Capacity = 2300 - (A x proportion of HGVs)

= 2300 – (24 x 50%)

= 1,100 x 4 lanes * hour to day factor (assumed 10 for this project)

= 44,000 vehicles per day

Table 14. Utilisation rates on the A2 Konin to Strykow (2010)

A2 Section Observed Flow

(PCUs)

Theoretical

Capacity Utilisation Rate

Dabie to Kolo 29,700 44,000 67%

Emilia to Wartkowice 24,450 44,000 56%

Source: Own calculation based on GDDKiA data, PCU factor =2 for HGVs and UK Capacity Formulae

Based on our calculation, we have found that utilisation rates on the two sections

of A2 are between 56% and 67%, largely because of the very high HGV

proportion of 50% suggesting spare capacity does exist. However, we note that,

due the assumptions underpinning this calculation, this result should be treated

as purely indicative and only represents a snapshot of the current situation.

Table 15 presents the utilisation rate at the end of the appraisal period (2022) if

the forecast traffic growth is realised (2010 to 2022 = 39% increase). This shows

that the project would be approaching capacity in 2022 if the forecast traffic

growth is realised.

Table 15. Estimated Utilisation rates on the A2 Konin to Strykow (2022)

A2 Section Observed Flow

(PCUs)

Theoretical

Capacity Utilisation Rate

Dabie to Kolo 41,300 44,000 94%

Emilia to Wartkowice 34,000 44,000 77%

Source: Own calculation based on GDDKiA data, PCU factor =2 for HGVs and UK Capacity Formulae

It should be noted that the forecast growth assumes no tolls on this section. If

for example, traffic growth was half of that forecast as a result of the tolls, the



utilisation would be 81% and 66% for the Dabie to Kolo and Emilia to

Wartkowice sections respectively.

Unintended Effects

The nature of the positive impacts observed following project opening are largely

as desired and on the whole adverse unintended effects have largely been

avoided. Anecdotal evidence from stakeholders suggests that increased traffic on

the R14 between the improved section of the A2 and Warsaw has had adverse

impacts on noise, air quality and road safety. Furthermore maintenance

challenges on the R14 and other links to the A2 have emerged as a result of

greater presence of HGVs in the vicinity of the scheme. Furthermore public

awareness of proposals for development of Poland‟s motorway network has lead

to land values rising more than expected – hence the higher than expected land

costs associated with this scheme.

Accompanying Actions

We would envisage that the dramatic increase in capacity provided by the new

motorway is likely to have been sufficient to promote the success of the scheme

in its own right. The improved A2 itself has been used as a key selling point for

those involved in promoting economic development along the route e.g. Stykow,

Lowicz, Lodz and Konin.

2.2.6 Uncertainty and sensitivity analysis

The A2 project was appraised over a 20 year period and it‟s clearly impossible to

state what changes will occur in this timeframe which may affect the benefits

(traffic demand, other nearby projects etc). This unknown has therefore been

considered by introducing a high case and a low case scenario primarily based on

changes in traffic demand. A summary of the high and low case selected for this

study is shown in Table 5.

Re Forecast of impacts

A detailed analysis of the calculations used to inform the ex ante predicted

benefits has been undertaken prior to reforecasting the impacts using actual data,

and it can be seen that the route experiencing the most benefit due to the project

is the R2 – as would be expected. However, the magnitude of the difference

between the non investment and investment options is significant and therefore

warranted further investigation.

It is clear from the calculation spreadsheets that the predicted speed in the non

investment situation is 10km/h for the entire appraisal period from Konin to

Krośniewice (west of Kutno), and 10km/h from 2008 onwards between

Krośniewice and Lowicz. This entire stretch of road is over 100km in length and

represents a without project journey time in excess of 9 hours. This is clearly



significantly greater than the figures presented in the Funding Application which

states that a journey time saving between Konin and Lowicz of 24 minutes is

expected.

Hence, the primary reason for the high level of journey time and vehicle

operating costs benefits is the assumed non investment speeds that have been

modelled on the R2.

For example, in the UK, speed-flow relationships have been derived for different

road types, and these assume a minimum speed cut-off which is based on the

assumption that below a certain speed (45km/h in the case of a single

carriageway road), vehicles would either:

re-assign to alternative routes;

spread into quieter time periods or overnight (often known as peak

spreading); or

not travel at all, which is often modelled as suppressed traffic, which is

released in the form of induced traffic when journey times improve in

the future.

In our view, these speeds are unrealistically low, and this has been reflected in the

selection of the high and low case scenarios used for the outturn assessment.

Therefore, we have re-calculated the ex ante economic benefits of the project. To

do so, we have updated „with‟ and „without‟ project traffic volumes, assume

logical speeds on a number of key routes, and update VOT, VOC and traffic

accident rate values from recent sources. Below we provide a summary of our

assumptions.

Pre project (factored) and post project traffic volumes for 2010 were used in

conjunction with the same growth profile as used in the ex ante appraisal.

This assumed a traffic volume growth rate of approximately 2-4% per

annum.

The „investment‟ accident costs derived in this evaluation have been reduced

by 68% to account for the observed reduction in accidents (39) compared to

predicted (121).

The study area was revised to only include the key routes where benefits

would be expected. These are as follows: R2 (between Konin and Strykow),

R72 (between Konin and Lodz), R14 (between Lodz and Strykow) and the

A2 motorway. The A1 (running north-south through the area) and the R14

south of Lodz have therefore been removed from this evaluation.

The „non investment‟ vehicle speeds on the R2 have been increased from

10km/h to a minimum of 35km/h (i.e. a speed cut-off has been applied).



10km/h is a very low speed cutoff for a rural road and indeed many urban

areas. Therefore 35km/h has been selected to more accurately reflect what

would occur in reality, and this still represents a conservative estimate.

The „investment‟ speeds on the R2 have been checked to ensure appropriate

logical speeds that reflect the lower traffic flows are adopted.

The „investment‟ speeds on the R14 between Strykow and Lowicz have been

increased as based on the site observations they appeared very low in the ex

ante appraisal. (A speed cut-off of 30km/h has therefore been applied).

Value of Time – Updated values taken from HEATCO (2006)2 guidance in

2002 prices adjusted to 2003. The actual journey type split (commute, work

etc) is unknown so the UK‟s WebTAG guidance default proportions have

been used.

Value of Accidents – These have been taken from the HEATCO (2006)

guidance in 2002 prices adjusted to 2003 with the split by severity taken

from the defaults used in the UK‟s COBA (Cost Benefit Analysis) accident

appraisal software.

Vehicle Operating Costs – This has been taken from the Blue Book for

Poland (September 2008)3, produced by JASPERS and adjusted to 2003

prices.

This approach is seen as the most appropriate for deriving a best estimate of the

outturn benefits of the project as it utilises updated sources of information whilst

retaining the „common sense‟ approach towards vehicle speeds discussed

previously. The low and high case developed to test the sensitivity of the project

to changes in traffic flow and speeds is summarised in Table 5 earlier in this

report.

Margin of Error

The high case scenario demand over the 30 year evaluation period generates an

NPV 72% above the low case scenario. This is primarily due to the level of

uncertainty associated with the levels of economic and associated traffic growth

forecast in Poland over the 30 year period, and also due to the different

assuptions of minimum speed cut offs used for the low and high case scenarios.

2 http://heatco.ier.uni-stuttgart.de/

3http://www.funduszestrukturalne.gov.pl/NR/rdonlyres/B07E158E-3A7A-43A2-87C4

84E1533AA415/47156/BlueBookPublicTransportfinalMRRMI12_092.pdf

http://www.funduszestrukturalne.gov.pl/NR/rdonlyres/B07E158E-3A7A-43A2-87C4



2.3 Review ex ante cost-benefit analysis

Throughout this study, we have followed the „EC Guide‟. The majority of the ex

ante appraisal documentation was prepared between 2002 and 2004 (shown in

Table 2). However, it should be noted that the CBA for this project was

prepared in accordance with pre-existing EU guidelines entitled “Guide to Cost

Benefit Analysis of Major Projects in the Context of EC Regional Policy” (June

1997).

The Feasibility Study covers the entire stretch from Konin to Strykow. It

provides a summary of the context for this project. Its objectives are explicitly

stated in the EU Funding Application and can be summarised as follows:

provide a fast and convenient connection of the existing A2 motorway

section with Lodz and with Warsaw via existing national roads.

relieve traffic from the existing national road (No 2) and local towns

and villages between Konin and Lowicz;

improve safety on the existing roads (in particular National Route No

2); and,

Allow use by heavy trucks up to 115kN axle load.

Although the Feasibility Study provides some context to the project

development, the EU Application Forms contain the most comprehensive

description of the transport problems in the area, the project objectives and its

role in contributing to the overall transport vision for Poland (Transport

Infrastructure Development Strategy 2004-2006).

The CBA for this project only considered the implementation option that was

actually built. From brief commentary in the Feasibility Study, we understand that

the decision on the route was taken in 1995-96, although no indication is given

regarding this decision and its rationale.

2.3.1 Headline results from the analysis

Table 16 shows the results of the ex ante economic analysis of the project, which

shows a very positive benefit-cost ratio. A financial analysis was not undertaken

for this project, and the implications are considered later in this section.



Table 16. Results of ex ante economic analysis

NPV (€ million,

2003 prices)

Economic IRR ~

(%)

Benefit-Cost

Ratio

Konin - Strykow 1,867 20.2% 3.1

Source: Application for EU Assistance Reports – March 2003

2.3.2 Key aspects of ex ante CBA

Traffic Analysis

The Feasibility Study contains traffic forecasts for the „non investment‟ (the do-

minimum) and the „investment‟ (the do-something) variants for the opening year

(2006) and a horizon year (2020). The 2020 forecast assumes that the A2 has

been completed between Germany and Warsaw, although it is unclear from the

technical documentation when exactly the next stage of the motorway becomes

operational. After reviewing the calculations we have received, we believe the

impact of the A2 extension are still excluded from the final years of the appraisal

period. The percentage increase in traffic throughout the appraisal period has

been derived using local guidance (‘Forecast of Traffic on Rural Network of National

Roads until the year 2020’), and the traffic growth ratios were assumed for the

whole area and not split by road classification. A number of other key

assumptions were used in the forecasting procedure:

the proportions of light and heavy vehicles were assumed to be 80%

and 20% respectively;

the potential impact of new traffic-generating developments in the area

was not considered; and

the forecasts do not include the potential for induced traffic resulting

from the project.

We could not obtain an explanation for the split between light and heavy

vehicles. However, an analysis of observed post-opening data suggests that this

assumption has significantly underestimated the proportion of heavy vehicles

both on the A2 and on the surrounding local highway network.

The study area for the ex ante appraisal is sufficient in size, as it covers the

obvious parallel routes (R2 in the north), R72 (in the south) and other local roads

in the area. The ex ante analysis also considers the potential for traffic re-

assignment from these nearby routes, presenting the predicted percentage

changes (albeit with a large range).



Economic analysis

As noted previously, the ex ante CBA only includes an analysis of the „non

investment‟ and „investment‟ options. It does not consider any other route

alignments at this stage. The project was appraised over a 20 year period (2003-

2023). The analysis assumes that capital costs would be incurred in 2003, 2004

and 2005 prior to opening in 2006. It was therefore assumed that benefits would

be accrued from 2006 onwards.

The project costs have been presented in the Feasibility Report (in Zlotys), and

are summarised in the EU Application forms (in Euros). When the currencies are

converted at the stated exchange rate (4.2PLN = 1 Euro), the costs in both

documents match. Predicted costs are also presented in the Project Completion

Final Reports for the 2 subsections alongside the actual costs accrued during

construction. The Final Report provides a breakdown of costs by key elements

(land purchase, construction, VAT etc). It is noted that the predicted costs

information falls short of the degree of granularity required to calculate „Level 3‟

unit costs as specified in Work Package 10, and are actually little more than „Level

1‟ costs with some additional breakdown.

With regards to benefits, the CBA makes the following assumptions:

Time Savings. The main time benefit for this project is for those users

who switch to the motorway, with predicted time savings of 24 minutes

between Konin and Lowicz and 50 minutes between Konin and Lodz. The

congestion relief for users remaining on the other local roads would have

been considered in the traffic model and resulting economic analysis.

However, the available documentation provides no commentary in this

regard. The values of time have been derived from Polish sources. These are

€3.60/hour for cars, €6/hour for trucks, and €29/hour for buses. It should

be noted that the values of time do not distinguish between leisure time and

work time. We would expect to see a higher value for drivers‟ work time.

The rationale for not differentiating between journey purposes (i.e. business

or leisure) is not presented.

Accidents. To calculate the accident savings, the CBA has assumed the

following values: €60,000 per accident, €120,000 per fatality and €25,000 per

injury. These were used in conjunction with standard accident rates by road

classification along with the predicted traffic volumes. The CBA presented

the monetary benefit arising from reduction in accidents but did not provide

an indication of which parts of the network are likely to see the most

benefits. It is noted that the cost of a fatality is very low compared to UK

values and indeed those contained in the 2002 EU Guide to CBA. The

assumptions underlying the ex ante accident costs are not reported in the

documentation.



Vehicle Operating Costs. These benefits were established by calculating

the change in vehicle kilometres as a result of the project, then applying a

monetary impact per vehicle kilometre. The average monetary value used

was €0.16/km for cars and €0.60/km for trucks. The values take into

account factors such as highway condition and vehicle speed. The CBA,

however, did not present the rationale supporting these assumptions and

only indicated the average values used.

Air Pollution Emissions. Air pollution emissions account for a very small

proportion of the overall predicted project benefits (0.5%). They were

calculated using a cost per 1000 vehicle kilometres ranging from €0.72 to

€18.57, depending on the speed and type of vehicle. Again, the underlying

assumptions behind the calculations were not explicitly stated in the CBA.

In order to calculate the annual benefits of the project over 20 years, the CBA

multiplied the above values by the number of vehicles, taking into account traffic

volume growth and modelled speed changes. The „rule of a half‟, presented in

Annexe 1, would not have been required in this instance as no new trips were

assumed to result from the project.

In terms of wider socio-economic impacts, the Funding Application quantifies

the number of direct and indirect jobs that would be created in both the

construction and operational phases of the road investment. However,

supporting commentary to back up the figures was not provided.

An Environmental Impact Assessment was undertaken. The Funding

Applications contains a summary of the main results. Based on a review of the

Non-Technical Summary, it would appear that all aspects of the environmental

impacts were considered in detail. The air pollution impacts were monetised

based on changes in traffic volumes but these results are presented only in the

Funding Applications. A number of measures to mitigate the negative

environmental impacts were also presented (including noise barriers, wildlife

tunnels).

The CBA appendices contain the results of the calculations of costs and benefits

for each year of the appraisal period and present the net present value (NPV), the

internal rate of return (IRR), and the benefit-cost ratio (BCR). The CBA used

the 8% discount rate suggested by the EU guidelines “Guide to Cost Benefit

Analysis of Major Projects in the Context of EC Regional Policy” (June 1997) at

the time of application.

Table 17 provides a summary of the results of the ex ante cost benefit analysis.

These figures are presented in the Application for Funding for the Emilia to

Strykow subsection (although they relate to the entire project) and are the ones

we use to compare ex ante and ex post CBA later in this chapter.



Table 17. Summary of Predicted Benefits

Benefit Unit Value Present Value (€m)

Vehicle Operating Costs Car: €0.16/km

Truck: €0.6/km 1,289

Passenger time costs

Car: €3.6/hour

Truck €6/hour

Bus €29/hour

5,784

Drivers worktime costs Car: €3.6/hour 4,037

Accidents

€60,000/accident

€120,000/fatality

€25,000/injury

507

Air Pollution From €0.72 to €18.57/1000

vehicle km. 59

TOTAL 11,676

Source: GDDKiA

This table shows overall benefits of €11.7bn for the A2 Motorway between

Konin and Strykow, with 84% of the benefits being derived from journey time

savings, 11% from savings in vehicle operating costs, 4.5% from accident

benefits, with only 0.5% from air pollution benefits.

Financial analysis

The CBA was completed on the basis that the project would not be a toll

motorway, therefore it was assumed that a detailed financial analysis was not

required. However, the absence of tolls does not eliminate the need to carry out a

financial analysis. This is therefore an omission in the ex ante appraisal. We note

that the infrastructure necessary for collecting tolls is being installed even though,

based on the information available the future tolling of the route was not

considered in the CBA documents. The impact of tolls would clearly have a

detrimental impact of the economic results of the project, whilst improving the

financial results due to the income from revenues.

Time savings

An analysis of the technical documentation reveals a lack of detailed predicted

journey times. The Funding Application presents a forecast journey time saving

between Konin and Lodz of 50 minutes and between Konin and Lowicz of 24



minutes. However, from this information, we could not ascertain exactly where

the journey time measurements were taken (for example, it could be the Lodz

junction on the A2 or Lodz city centre). For the purposes of the ex post

evaluation considered later in this chapter, we have made an assumption

regarding the start and end points for the predicted journey times.

Given the predicted journey time savings of an hour or more in future years, the

assumption of no induced traffic is conservative, as these time savings would

make induced traffic relevant to the appraisal.

Sensitivity Analysis and Risk Assessment

In addition to the „non investment‟ and „investment‟ options considered in the ex

ante appraisal, a small number of sensitivity tests were undertaken which aimed

to provide evidence relating to the robustness of the economic benefits of the

project. The tests which were presented are as follows:

+/-20% total traffic; and

+/-20% project costs.

It is understood that a standalone Risk Analysis document was not prepared for

this project, and the results of the above tests were presented in the Feasibility

Study and the EU Application for Funding documents. This showed that despite

variations in costs and traffic volumes, the project still performed well in terms of

its Internal Rate of Return (IRR). The IRR showed less variation resulting from

changes in cost than traffic flows. However, the results provide sufficient

confirmation that the benefits of the project are maintained despite the

substantial cost and traffic under/over estimates tested.

There is no indication from the documentation that any other forms of risk

and/or sensitivity analysis was undertaken for this project.

2.3.3 Summary

The CBA presented for the project option which was finally implemented is

complete and follows the appraisal guidance that was appropriate at the time.

However, we have identified a number of issues which are summarised next:

The decision making process for the choice of route alignment was carried

out prior to the CBA, therefore the reasons underpinning the selected

alignment are not considered in detail in the CBA assessment;

The predicted benefits seem to be high for a project of this kind (in excess

of €11billion). Although a project of this nature would be expected to

generate considerable benefits, the reasons for the exceptionally large

magnitude of benefits have been investigated in detail;



The CBA documents made available to the evaluation team do not provide

sufficient clarification regarding how the key assumptions were derived and

are often not consistent. This is supported by discussions with stakeholders

who stated that consultants often underestimate the importance of the

assumptions used in the CBA.

Based on the information received, it‟s clear that a formal risk assessment

was not undertaken for this project. Although the results of a small number

of sensitivity tests were presented.

There is no single self contained CBA document, with the data and results

spread between the Feasibility Study, EU Application Forms, and Economic

Assessment Reports. A standalone document which explicitly details the

process, assumptions and results is recommended which would create an

element of consistency and clarity when comparing different projects.

Based on discussions with stakeholders in Poland, there is a general view

that the quality of CBA‟s being published is improving; and

The key risks associated with this project (as with many others) were

identified as the forecasting of traffic demands, journey time assumptions

and project costs. We have carefully reviewed these assumptions as part of

our ex post evaluation.

2.4 Differences between ex post and ex ante analysis

Table 18 compares the results of the ex ante economic analysis as reported in the

Application for Funding Reports with the results of the ex post CBA for

Approach 3b, which we consider as the most representative ex post scenario.



Table 18. Comparison of ex ante and ex post economic CBA (2003 prices)

Ex ante Ex post

Low case High case

Net Present Value (€m) 1,867 523 900

Economic IRR (%) 20.2% 18% 23%

Benefit-cost ratio 3.1 3.0 4.4

Source: GDDKiA for ex ante analysis and own calculation for ex post analysis

Overall, GDDKiA estimated that the project would deliver value for money,

with an NPV of €1,867m and a benefit-cost ratio of 3.1. However, we have

reviewed in detail all of the key parameters and made some significant revisions

in our ex post evaluation, and even with these changes the ex post analysis has

confirmed that the project has delivered value for money.

We have identified a few sources of differences between the ex ante analysis and

the ex post evaluation. We address them below.

Capital cost

Capital costs reported in the ex post evaluation are €406m, up from

approximately €400m reported in the ex ante analysis.

Traffic volumes

With regards to traffic volumes, the actual traffic volumes on the A2 are similar

to those predicted, with a greater transfer from Road 2 than predicted, but less

transfer from Road 72 than predicted.

In short, the traffic volume predictions in 2010 were realistic, and the traffic

volume growth was also sensible at 3-4% p.a. which is less than observed trends

in the corridor

Benefit calculation

With regards to benefit calculation, there are two main causes for the difference

between the ex ante and ex post analyses.

Different parameters. For the ex post CBA we have used updated values

for all the parameters used to calculate the benefits of the project, ranging

from the value of time, the reduction of vehicle operating costs and updated

accident costs. These are generally higher values than those used in the



original CBA (even when compared at the same price base) and hence the

application of this change has increased the benefits.

Modelled Speeds. As discussed previously, we have changed the modelled

speeds used in future years significantly. The CBA assumes that traffic

growth on Road 2 would cause journey speeds to deteriorate very quickly,

and speeds of 10km/h are shown for 2009, and all subsequent years. In our

view, this is unrealistic and we have increased these speeds to incorporate a

more sensible cut-off in line with best practice.

Inclusion of additional impacts

The ex ante CBA does not include two elements that should be included in

analysis.

Induced Traffic. The CBA states that induced traffic has not been

considered, i.e. only re-assigned traffic uses the new A2 Motorway. With

time savings of an hour, this level of time saving is likely to lead to additional

traffic in the corridor. This is likely to be the release of „suppressed‟ trips in

the „Without‟ Investment scenario, as well as generating completely new

trips. Once the A2 is complete to Warsaw, induced traffic may be

significant. The exclusion of this source of traffic may have under-estimated

benefits.

Foregone government revenues from the fuel tax. Changing vehicle

kilometres and vehicle speeds implies a change in overall fuel consumption,

which, in turn, implies a change in government revenues from the fuel tax.

The GDDKiA CBA did not include this impact in the ex ante CBA.

Discount rate

Finally, we note that, in the ex ante analysis, the calculation of the NPV of the

project used an 8% discount rate, as suggested by the guidance available at the

time. Currently, The EU recommends the use of a 5.5% discount rate which we

have used for the ex post evaluation. For comparison purposes, we have

calculated the NPV of the ex post evaluation using a discount rate of 8%. Table

19 summarises the results. It can be seen that the ex ante results shown

previously in Table 18 closely match the low and high case results discounted at

8% here. This indicates that on a like with basis, the project has delivered value

for money broadly in line with that predicted.



Table 19. Estimate of 30 year economic benefit (discounted to 2003 at 8%)

Scenario

Undiscounted

Benefits

(€m)

Discounted

Benefits

(€m)

NPV IRR BCR

High Case 2,197 880 622 22% 3.2

Low Case 1,392 601.1 346 18% 2.2


Finally, we note that the current Polish discount rate as specified by the National

Bank of Poland is 3.75%.

Residual value

In the ex post analysis we have calculated the expected residual value of the

project at the end of the appraisal period. In order to do this we have applied a

linear depreciation over 40 years to the capital expenditure incurred.

2.5 Role of CBA in decision-making process

In April 2010, we undertook structured interviews with senior representatives of

several central bodies to understand the role and success of the CBA approach.

The organisations we met with were:

Generalna Dyrekcja Drog Krajowych I Autostrad (GDDKiA);

Centre for European Transport Projects (CUPT);

Ministry of Infrastructure; and

The European Investment Bank (EIB).

With the exception of CUPT, all of the bodies consulted were involved in the

application process for the A2 Konin to Stykow project. The depth of ex ante

evaluation for the A2 project was largely dictated by the processes and

requirements set out by the EU guidelines in “Guide to Cost Benefit Analysis of

Major Projects in the Context of EC Regional Policy” (June 1997) at the time of

application.

It was generally felt that CBA guidance is useful and gives sufficient flexibility for

Member States to adopt aspects of their own CBA processes to meet the

challenges posed by different types of transport project. This does however

create some problems in that consultants regularly misunderstand the importance

of documenting their CBA assumptions clearly as part of the overall application

process.



Overall, the rigour of CBA auditing for Polish funding applications has improved

over recent years. Internally within Poland, all applications for cohesion funding

under the 2007-2013 have been subjected to a greater degree of auditing than was

the case for the A2 Konin to Strykow under the previous ISPA and 2000-2006

cohesion funding processes. An illustration of improvements to CBA auditing

procedures is the establishment of CUPT in 2007. The mission of this body is to

support beneficiaries such as GDDKiA in the preparation for and

implementation of EU funded projects including those funded through the EU

Cohesion Fund.

As a major investor in the A2 Konin to Strykow project and of other major

transport projects implemented in new Member States, the EIB undertook its

own CBA analysis using its own models based on more conservative values of

time, accidents and vehicle operating costs. Our discussions with the EIB were

useful to understand the Polish CBA issues and the key areas of risk, namely

traffic demand and cost forecasting.

Discussions held with the relevant stakeholders have revealed that CBA was not

used as a tool to prioritise between alignments for this pilot project as the

alignment had been set many years before EU accession. Our discussions

revealed that Poland has a national priority to build up its motorway network,

only after this has been achieved will CBA be more comprehensively used to

prioritise projects or options. Furthermore there was a general consensus that it

was political influence determining which projects progress and not the outcome

from CBA which at most confirms the extent to which a chosen project offers

value for money. This was also a view that Member States regard CBA as a

hurdle to jump in order to secure funding and the “go versus no go” scenario

rarely exists.

Stakeholders from the Member States expressed that it was rare to find poor

economically performing projects in the current list of priorities as they represent

such significant improvements to the national road network.

As result of EU guidance, the establishment of CUPT and greater experience of

CBA analysis for EU projects, it is generally felt that the reliability of the

application of CBA in Poland is improving.



Detailed results

Figure 8. A2 Motorway – Poland. Economic analysis (€m, 2003 prices) – Low case


2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

BENEFITS

Consumers Surplus

Time Benefits 0.0 0.0 0.0 56.5 85.2 95.3 95.5 94.2 91.4 86.8

Vehicle Operating Costs 0.0 0.0 0.0 -39.0 -1.0 0.6 8.0 11.5 9.7 5.3

Environmental Benefits 0.0 0.0 0.0 -0.1 0.1 0.1 0.1 0.1 0.1 0.0

Accident Reduction 0.0 0.0 0.0 -3.2 -1.7 -1.8 -1.4 -1.8 -2.1 -2.4

TOTAL BENEFITS 0.0 0.0 0.0 14.2 82.5 94.2 102.3 104.0 99.1 89.7

COSTS

Investment Costs

Land Purchase 0.0 0.1 0.0

Construction 25.9 222.8 93.2

Technical Support 1.2 10.7 4.5

Publicity 0.0 0.0 0.0

Total Investment costs 27.2 233.6 97.7

TOTAL COSTS 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

NET BENEFITS -27.2 -233.6 -97.7 14.2 82.5 94.2 102.3 104.0 99.1 89.7

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

BENEFITS

Consumers Surplus

Time Benefits 105.5 111.1 115.7 119.7 125.1 129.9 140.4 152.2 164.3 177.3

Vehicle Operating Costs 10.1 10.6 8.6 9.0 21.9 22.6 26.1 31.2 32.6 34.6

Environmental Benefits 0.1 0.1 0.2 0.2 0.2 0.2 0.4 0.4 0.4 0.4

Accident Reduction -2.3 -2.4 -2.5 -2.9 -3.0 -3.3 -1.4 -2.6 -2.7 -2.8

TOTAL BENEFITS 113.4 119.5 121.9 126.0 144.2 149.4 165.4 181.2 194.6 209.5

COSTS

Investment Costs

Land Purchase

Construction

Technical Support

Publicity

Total Investment costs -190.0

TOTAL COSTS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -190.0

NET BENEFITS 113.4 119.5 121.9 126.0 144.2 149.4 165.4 181.2 194.6 399.5

Discount Rate 5.5%

ENPV 523

ERR 18.2%

B/C Ratio 2.96


Figure 9. A2 Motorway – Poland. Financial return on investment (€m, 2003 prices) –

Low case


2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

TOTAL REVENUES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0





TOTAL INVESTMENT COSTS 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Maintenance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

TOTAL OPERATING COSTS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

TOTAL OUTFLOWS 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

CASH FLOW -27.2 -233.6 -97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

TOTAL REVENUES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Land Purchase

Construction

Technical Support

Publicity

TOTAL INVESTMENT COSTS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -190.0

Maintenance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


TOTAL OUTFLOWS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -190.0

CASH FLOW 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 190.0

Discount rate 5.0%

FNPV (C) -263

FRR (C) -3.5%



Figure 10. A2 Motorway – Poland. Financial return on capital (€m, 2003 prices) –

Low case


2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Revenues

Residual values

TOTAL FINANCIAL INFLOWS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Local contribution

Regional contrintribution

National contribution -1.4 -30.3 66.2 -1.3

Total national public contribution -1.4 -30.3 66.2 -1.3 0.0 0.0 0.0 0.0 0.0 0.0

Maintenance

Total Operating Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

TOTAL FINANCIAL OUTFLOWS -1.4 -30.3 66.2 -1.3 0.0 0.0 0.0 0.0 0.0 0.0

NET CASH FLOW 1.4 30.3 -66.2 1.3 0.0 0.0 0.0 0.0 0.0 0.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Revenues

Residual values 190.0


Local contribution


National contribution

Total national public contribution 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Maintenance


TOTAL FINANCIAL OUTFLOWS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

NET CASH FLOW 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 190.0

Discount rate 5.0%

FNPV (K) 47

FRR (K) 11.6%


Figure 11. A2 Motorway – Poland. Financial sustainability (€m, 2003 prices) – Low

case


2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

EU Grant 28.6 263.9 31.6 1.3

Local contribution




Operating subsidies

FINANCIAL RESOURCES 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Passenger vehicles

Goods vehicles

TOTAL REVENUES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

TOTAL INFLOWS 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0





TOTAL INVESTMENTS COSTS 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Maintenance


TOTAL OUTFLOWS 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

NET CASH FLOW 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

CUMULATED CASH FLOW 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

EU Grant

Local contribution




Operating subsidies


Passenger vehicles

Goods vehicles

TOTAL REVENUES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

TOTAL INFLOWS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Land Purchase

Construction

Technical Support

Publicity


Maintenance


TOTAL OUTFLOWS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

NET CASH FLOW 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0




Figure 12. A2 Motorway – Poland. Economic analysis (€m, 2003 prices) – High case


2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

BENEFITS

Consumers Surplus

Time Benefits 0.0 0.0 0.0 69.4 82.5 95.7 99.4 102.0 103.1 102.8

Vehicle Operating Costs 0.0 0.0 0.0 -9.7 -1.7 1.8 5.9 11.5 11.9 9.7


Accident Reduction 0.0 0.0 0.0 -1.9 -2.0 -2.0 -1.5 -1.8 -2.0 -2.1

TOTAL BENEFITS 0.0 0.0 0.0 57.8 78.9 95.6 103.9 111.8 113.2 110.6

COSTS

Investment Costs





Total Investment costs 27.2 233.6 97.7

TOTAL COSTS 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

NET BENEFITS -27.2 -233.6 -97.7 57.8 78.9 95.6 103.9 111.8 113.2 110.6

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

BENEFITS

Consumers Surplus

Time Benefits 85.0 85.8 85.4 84.2 83.9 81.8 84.9 88.6 90.8 93.4

Vehicle Operating Costs 3.3 1.3 -3.6 -5.8 -8.2 -10.8 0.7 2.1 0.0 -1.8


Accident Reduction -2.6 -2.8 -3.1 -3.6 -3.9 -4.2 -2.7 -3.6 -3.7 -4.0

TOTAL BENEFITS 85.7 84.3 78.7 74.9 71.8 66.9 82.9 87.1 87.1 87.6

COSTS

Investment Costs

Land Purchase

Construction

Technical Support

Publicity

Total Investment costs 0.0 0.0 0.0 -190.0

TOTAL COSTS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -190.0

NET BENEFITS 85.7 84.3 78.7 74.9 71.8 66.9 82.9 87.1 87.1 277.5

Discount Rate 5.5%

ENPV 900

ERR 22.8%

B/C Ratio 4.36


Figure 13. A2 Motorway – Poland. Financial return on investment (€m, 2003 prices)

– High case


2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

TOTAL REVENUES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0





TOTAL INVESTMENT COSTS 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Maintenance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


TOTAL OUTFLOWS 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

CASH FLOW -27.2 -233.6 -97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

TOTAL REVENUES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Land Purchase

Construction

Technical Support

Publicity

TOTAL INVESTMENT COSTS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -190.0

Maintenance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


TOTAL OUTFLOWS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -190.0

CASH FLOW 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 190.0

Discount rate 5.0%

FNPV (C) -263

FRR (C) -3.5%



Figure 14. A2 Motorway – Poland. Financial return on capital (€m, 2003 prices) –

High case


2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Revenues

Residual values


Local contribution




Maintenance


TOTAL FINANCIAL OUTFLOWS -1.4 -30.3 66.2 -1.3 0.0 0.0 0.0 0.0 0.0 0.0

NET CASH FLOW 1.4 30.3 -66.2 1.3 0.0 0.0 0.0 0.0 0.0 0.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Revenues

Residual values 190.0


Local contribution




Maintenance


TOTAL FINANCIAL OUTFLOWS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

NET CASH FLOW 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 190.0

Discount rate 5.0%

FNPV (K) 47

FRR (K) 11.6%


Figure 15. A2 Motorway – Poland. Financial sustainability (€m, 2003 prices) – High

case


2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

EU Grant 28.6 263.9 31.6 1.3

Local contribution




Operating subsidies


Passenger vehicles

Goods vehicles

TOTAL REVENUES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

TOTAL INFLOWS 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0






Maintenance


TOTAL OUTFLOWS 27.2 233.6 97.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

NET CASH FLOW 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

EU Grant

Local contribution




Operating subsidies


Passenger vehicles

Goods vehicles

TOTAL REVENUES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

TOTAL INFLOWS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Land Purchase

Construction

Technical Support

Publicity


Maintenance


TOTAL OUTFLOWS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

NET CASH FLOW 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


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Appendix 2 A2 Motorway in Poland - European...

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