Workshop with EU Member States: Work Package B Session 2 – Summary of findings from case studies 3...

Workshop with EU Member States: Work Package BSession 2 – Summary of findings from case studies

3 February 2011

2 Frontier Economics

Content

● Results□ Ex ante evaluation

□ Ex post evaluation

□ Ex ante vs. Ex post

● Observations for future discussion

● Annexe – detailed results


● Review of ex ante CBA

● Ex post evaluation

● Ex ante vs. ex post

● Discussion points

● Annexe - detailed results


Ex ante CBA – quality of the analysis

Review of

ex ante

Cost Benefit

Analysis

Good quality of core analysis for areas covered by guidelines

Limited analysis of alternative options

Limited use of sensitivity analysis

Documentation available often not sufficiently comprehensive


Ex ante CBA – its role in decision making

Projects2 4 6 8 10

Compliance with EC CF application requirements (9)

Ensure value for money (6)

Choose alignment (2)

Choose design standards (2)

Prioritise elements of national transport strategy (1)

Allocate budget and optimise timing (0)


Ex ante stated objectives

Reduce travel time (6)

Increase capacity/reduce congestion (4)

Reduce operating costs (2)

Improve safety (8)

Improve connectivity (2)

Projects2 4 6 8 10


Ex ante impacts taken into account in CBA

Impacts on safety (10)

Impacts on the environment (4)

Impacts on transport operators (3)

Impacts on users (Time Savings, VOCs) (10)

Other impacts (2)

Projects2 4 6 8 10








Ex post economic evaluation – benefit/cost ratio


Ex post financial analysis

For non-revenue generating projects the financial NPV is generally negative and there is no difference between Low and High case

EC financial contributions are required to ‘unlock’ the economic benefits identified in the CBA.

Negative financial IRRs however are to be expected, as these projects are not meant to be self-financing.

Ex post

financial

analysis


Benefit distribution

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

Railway -Spain

Road -Poland

Railway -Portugal

Road -Spain

Road -Greece

Road -Ireland

Railway -Greece

Road -Lithuania

Railway -Slovakia

Road -Hungary

Travel time VOCs FaresTransport operators Safety CarbonAir pollution Noise Other


Wider economic effects

● It is complicated to establish a causality link between the infrastructure and the observed effects

● The majority of the effects are related with Land Use, Supply Chain and Environment

Note: ✓ (Observed effect) ?(Difficult to establish a direct causality)

Land UseSupply Chain

GDP / output

Employment PopulationSocial

InclusionEnvironment Other

Railway - Spain ✓ ✓ ? ✓ ? ✓ ✓

Road - Poland ✓ ✓ ✓

Railway - Portugal ? ✓

Road - Spain ✓ ?

Road - Greece ✓ ✓ ✓ ✓

Road - Ireland ✓ ✓

Railway - Greece ✓ ✓

Road - Lithuania ✓

Railway - Slovakia ? ✓ ✓

Road - Hungary ✓ ✓ ? ?








Ex ante vs. Ex post – reasons for differences

● The ex ante evaluation and the ex post evaluation exhibit differences.

● Most of the discrepancies are related with differences in travel demand, cost overruns and discount rate used in the analysis

Note: ✓✓ (Primary reason) ✓(Secondary reason)

Outturn investment

costs

Economic growth

Population growth

Travel demandMarginal values

Discount rate

Opening year (delay)

Other

Railway - Spain ✓✓ ✓✓ ✓ ✓✓ ✓✓

Road - Poland ✓ ✓ ✓ ✓✓ ✓✓ ✓✓ ✓

Railway - Portugal ✓✓ ✓✓ ✓✓ ✓ ✓✓ ✓✓

Road - Spain ✓✓ ✓✓ ✓

Road - Greece ✓✓ ✓✓ ✓ ✓✓ ✓ ✓ ✓

Road - Ireland ✓ ✓✓ ✓✓ ✓✓ ✓ ✓

Railway - Greece ✓ ✓ ✓ ✓✓ ✓ ✓

Road - Lithuania ✓✓ ✓ ✓✓

Railway - Slovakia ✓ ✓✓ ✓✓ ✓✓ ✓✓ ✓

Road - Hungary ✓✓ ✓✓ ✓✓ ✓ ✓


Ex ante vs. Ex post - NPV

Overall NPV of the majority of the projects was overestimated in the ex ante evaluation (except for M1 Northern Motorway in Ireland)








Discussion points

Satisfactory ex post BCR

● With a couple of exceptions, projects have so far delivered positive ex post NPVs and benefit-cost ratios higher than 1

Road projects vs. rail projects

● Generally, road projects tend to yield a higher BCR – but:

□ rail projects tend to have higher capital costs by definition

□ core CBA is a partial assessment of impact – does not include all factors that may make a rail investment preferable to road investment

Short elapsed time since opening

● This raises two issues for ex post evaluation

□ need to make assumptions about future demand (almost like in ex ante CBA)

□ in most cases, wider impacts take a long time to emerge

Identification of wider impacts

● Lack of monitoring since opening makes the identification of wider impacts particularly challenging (especially for projects implemented as part of a wider investment strategy, against a backdrop of rapid economic change)

Source of wider impacts

● Wider impacts mainly come from new infrastructures because of a step change in accessibility. Socio-economic impacts are more easily identifiable, even anecdotally. In the case of upgrades, most of the key benefits are already captured in the core CBA analysis, and wider impacts are harder to identify against a background of economic and social change




● Ex ante vs ex post




● LAV Madrid – Barcelona – French border (Spain)

● A2 Motorway (Poland)

● Algarve Railway (Portugal)

● A23 Motorway (Spain)

● Agiou Konstantinou Bypass (Greece)

● M1 Northern Motorway (Ireland)

● Thriassio – Kiato Railway (Greece)

● IX B Corridor (Lithuania)

● Bratislava Rača – Trnava Railway (Slovakia)

● M0 Budapest Ring Road (Hungary)

Projects


Project description

● The LAV (Línea de Alta Velocidad ) Madrid – Barcelona – French border is a high speed railway line connecting Madrid to the French border via Barcelona.

● The LAV between Madrid and Barcelona covers 621 kilometres, and it was developed in three stages:

□ Section Madrid – Lleida (442 km): opened in October 2003

□ Section Lleida – Tarragona (78 km): in operation since December 2006

□ Section Tarragona – Barcelona (100 km): operational since February 2008.

● Section Barcelona – Figueres (132 Km) is still under construction. Expected to be completed in 2012.

● Project includes 12 subprojects. Total Cohesion Fund contribution was equivalent to 72.25% of eligible costs (€1,042m)

● Construction of 72 km of rail bed and the installation of 610 km of railway tracks

● Part of the TEN-T Priority Project 3 (high-speed railway axis of south-west Europe), whose main objective is to provide high-speed rail connections between the Iberian Peninsula and the rest of Europe.


Results of ex ante and ex post CBA

NPV(€ million, 2008)

Economic IRR Benefit / Cost ratio

Ex postLow case -2,736 2.6% 0.6

High case -1,948 3.7% 0.7

Ex ante Economic CBA 1,091 6.3% 1.07

Ex ante Social CBA 4,125 8.9% 1.26

InfrastructureEx ante CBA analyses the whole line for the 1997-2005 period. Ex post analyses only the Madrid – Barcelona section for the 1997-2033 period

Ex ante CBA (May 2001 by INECO) covers the 1997 – 2025 period. It is a single cost-benefit analysis of the whole LAV (including the Barcelona – French border section, which is not completed at the moment)

Traffic / Capital costs

Ex ante CBA assumes higher number of passengers. Ex post capital costs are substantially higher

Additional effect

Ex ante CBA includes employment generation in the social analysis

Key sources of discrepancy

between ex ante and ex post

assessments

Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2009 onwards. High (low) case assumes 5% (2.5%), 2.5% (1.25%) and 1.3% (0.6%) for short, medium and long run respectively.


Wider impacts and use of CBA in decision making

CBA in the decision making

processTO BE UPDATED

Wider economic

impact

Significant increase in the number of passengers. Change in the average traveller profile. A new type of traveller: the commuter

Effects especially in Zaragoza and Lleida. Number of visitors grow, increase the number of congressional and business meetings and increase of overnight stays.

Zaragoza: logistics, international events and business land. (2008 International Exhibition about Water and PLAZA, a logistics platform). Lleida: the LAV and the technology park (Parque Científico y Tecnológico Agroalimentario de Lleida – PCiTAL)

New industrial park, PLHUS, located near the city of Huesca. It covers an area of around 1.150.000 m2

Mobility

Tourism

New activities

Additional effects












Projects


Project description

Source: Openstreetmap.org

● Construction of approximately 100 km of ‘non-toll’ A2 motorway between Konin and Strykow

● Total cost: €406m

● Two subsections:

□ Konin to Emilia (€348m)

□ Emilia to Strykow (€58m)

● Total Cohesion Fund contribution was EUR 325m (82% Konin - Emilia, 75% Emilia - Strykow)

● EIB also contributed financing up to the overall maximum allowed (90%)

● Dual two-lane motorway – substitute for a wide single lane road (the R2), subject to varying speed limits and route quality

● The R72 (former route between Konin and Lodz) is similar to R2 and passes through a number of towns and villages


Results of ex ante and ex post CBANPV

(€ million, 2003 ex post, 2003 ex ante)

Economic IRR (discount rate = 5.5%

ex post, 8% ex ante)

Benefit / Cost ratio (discount rate = 5.5% ex post, 8% ex ante)

Ex postLow case 523 18% 3.0

High case 900 23% 4.4

Ex ante 1,867 20.2% 3.1

Review of ex ante CBA

Key sources of

discrepancy between ex ante and ex

post assessments Ex post CBA uses a 5.5% discount rate. Ex ante uses 8%Discount rate

Formal risk assessment not undertaken, even though key risks were identified and some results from various sensitivity test are available

CBA documents not always provide enough clarification regarding key assumptions used in the analysis (e.g. journey times, split between light and heavy vehicles)

Large amount of (gross) benefits generated, in excess of €11billion - reasons for this result have been investigated

Ex post CBA uses updated values for parameters such as value of time, reduction in VOC, accident costs

Additional impacts

Value of parameters

Ex post CBA considers some induced traffic and foregone government revenues, which ex ante CBA does not consider

Two cases (Low / High) considered in ex post CBA, based on different assumptions on traffic flows and speed


Wider impacts and use of CBA in decision making● Wider impacts as a direct result of the

scheme are difficult to determine in quantitative terms

● A2 regarded as a key enabler of economic regeneration and development (Lodz Special Economic Zone)

● Faster and more reliable connectivity within Poland and to bordering countries has helped increase Foreign Direct Investment;

● Assisted in the growth of Logistics sectors and has facilitated the emergence of a broadened industrial base

● Greater business efficiency and productivity brought about by improved journey times

● Quality of life benefits through removing traffic from built up areas along the parallel routes (R14 and R72);

● Increased land values in the vicinity of the A2 and proposed A1 alignment (Strykow)

Lessons on use of

CBAAs a result of EU guidance, the establishment of CUPT and greater experience of CBA analysis for EU projects, it is generally felt that the reliability and application of CBA at the national level is improving.

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

● Benefits of scheme partially offset by poor reliability on the R14 between Lowicz and Warsaw;

● Increased traffic on the R14 has contributed to worsening road safety, air quality and noise;

● Increased access to tourist and cultural opportunities; and

● Some disturbance to agricultural patterns (severance) and animal movements.

CBA played no role in the choice of the route alignment












Projects


Project description

● Modernisation of railway link (more than 300Km) between Lisboa (south) and Faro

● The project was subdivided in four subsections, involving:

□ duplication of the rail track

□ construction (3) and renewal (12) of stations

□ installation of a new control system to increase maximum speed

● Total cost: €490m (NPV, 2008 prices)

□ Pinhal Novo to Ermidas + Linha de Sines (€137m)

□ Coina to Pinhal Novo (€114m)

□ Pinheiro to Km 94 (€12m)

□ Ermidas to Faro (€227m)

● Total Cohesion Fund contribution was €323m, equivalent to 80% of eligible costs (€405m)

● Modernisation of the railway line, Lisboa to Algarve (Faro)

● The project is part of the TEN-T Priority Project 8 (Multimodal axis Portugal/ Spain-rest of Europe – Railway)





Ex postLow case 48.2 6.7% 1.15

High case 79.2 7.4% 1.24

Ex ante 156.7 9.1% 1.6

Traffic volumesForecast traffic in ex ante CBA does not match with actual traffic outturn in the first ten years of the project

Ex ante CBA barely complete (insufficient information on key assumptions and no Sensitivity and risk assessment). Section Coina to Pinhal Novo excluded in this ex ante CBA. Overestimation of time savings

CostsDifferences in the period when capital costs were incurred. Treatment of foregone fuel tax revenues

Benefit calculation

Differences in the value of parameters, application of the “rule of half” and treatment of revenues (REFER and CP)

Discount rate Ex post CBA uses a 5.5% discount rate. Ex ante uses 5%



assessments

Two cases (High / Low) considered in ex post CBA, based on different evolution in future passenger volumes and freight volumes and their impact on operating costs




process

Limited role of ex ante CBA in the decision-making process

From discussions with project stakeholders in Portugal it seems that the quality of CBA has increased, playing now a central role in the project appraisal

Wider economic impact

Effects largely captured by the core CBA

Counties (concelhos) that have a direct relation with the Lisbon – Algarve railway have increased their IPC (Indicador per Capita) with the exception of Setúbal

Additional environmental action: implementation of a noise barrier in Funcheira, according to legal requirements.

REFER: journey times to Setúbal, Évora, Beja and Faro are normally higher than for road transport due to limited capacity on the “25 de April” bridge.

Future projects: Lisbon – Porto; Porto – Vigo (Spain); and Lisbon – Madrid (will use part of the Lisbon – Algarve railway track, specifically the Lisbon – Évora section)












Projects


Project description

● Construction of approximately 75 km of ‘non-toll’ A23 motorway

● The project was subdivided in four subsections:

□ Huesca – Nueno (11.5 Km)

□ Monreal del Campo – Calamocha (14.8 Km)

□ Santa Eulalia – Monreal del Campo (21.9 Km)

□ Teruel – Santa Eulalia (26.8 Km)

● Total cost: €247m (NPV, 2010 prices)

□ Huesca – Nueno: €29m

□ Monreal del Campo – Calamocha: €78m

□ Santa Eulalia – Monreal del Campo: €98m

□ Teruel – Santa Eulalia: €43m

● Total Cohesion Fund contribution was equivalent to 85% of eligible costs (€205m, NPV, 2010 prices)

● Construction of 75 km of ‘non-toll’ A23 motorway in Spain

● Although the A23 is not part of any TEN-T corridor, it belongs to the European route E07 connecting Pau in France to Zaragoza in Spain





Ex postLow case -27.7 4.6% 0.9

High case 27.6 6.3% 1.1

Ex ante 120.3 9.1% 1.6

ParametersEx post: Fuel costs is more that 100% higher while value of time is approx. 50% higher than in the ex ante CBA

Not a unique ex ante CBA for all the 4 subprojects. New segments were not generate induced traffic. Time saving is the main driver of economic benefit. It more than compensates increase in VOC and fuel consumptions due to higher speed.

Time savingEx post: significant lower minutes saved. Ex ante assumes 27 and 33 mins. and ex post used 13 and 9.3 mins for cars/LGV and HGV respectively.

Traffic growthEx ante CBA assumes around 3% annual traffic growth rate on the new A23



assessments

Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2010 onwards. We used 5% (i.e. the average annual growth rate for the A23 between 1998 and 2008) for the High case and 2.5% for de Low case.




process

Ministerio de Fomento - Unidad de Carreteras de Aragon (stakeholder): the decision to construct the A23 motorway was mainly political.

Economic analysis where carried out to decide on different alternatives on the exact configuration of the new A23 by the “Demarcación de Carreteras del Estado en Aragón”

Wider economic

impact

New logistic and industrial park, PLATEA, developed by the Government of Aragón and managed by Platea Gestión S.A.

Industrial aeronautical platform, PLATA, developed by the Government of Aragón and the Teruel City Council. It is expected to be completed by late 2010

Spanish Government is considering two new road connections, providing links to the A23 (Alcolea - Monreal del Campo and Cuenca - Teruel)

New industrial park, PLHUS, located near the city of Huesca. It covers an area of around 1.150.000 m2

The technology park, WALQA. It is situated in the outskirts of Huesca, on the dual carriageway Autovía Mudéjar that directly links to Madrid

Teruel

Huesca












Projects


Project description


● Construction of dual two lane Agiou Konstantinou Bypass (Motorway Standard)

● Complex structure including the construction of 7 tunnels through mountainous landscape

● Total cost: €317.8m

● Total Cohesion Fund contribution was €117m (37% of total cost)

Objectives

• To increase motorway speeds and road connectivity between Greece and other EU countries;

• To improve safety record;

• Reduce load/capacity ratio; and

• Improve journey times




Economic IRR (discount rate = 5.5%

ex post, 5% ex ante)


Ex postLow case 233 12.6% 2.1

High case 283 13.4% 2.4

Ex ante 422.1 17.6% 3.1

Two cases (Low / High) considered in ex post CBA, based on different assumptions of GDP growth and therefore Do Something demand – these are shown for the 30 yr assessment (as per the ex ante)


The CBA was conducted on the assumption that revenues would contribute to the national treasury, rather than the concessionaire that operates the scheme. No detailed risk assessment was undertaken as part of the ex-ante appraisal

No assessment of the monetary impacts of externalities was made e.g. noise, CO2, Air Quality impacts

There was absence of evidence regarding how the accident benefits were derived and monetised

Key sources of


post assessments

Re-assignment and Traffic Growth Assumptions

Ex post CBA showed that 84% of corridor traffic has switched to the new road compared to a forecast of 64%. Furthermore post opening traffic volumes were lower than forecast (recession effects)

Ex post CBA did not quantify the maintenance costs benefits that were included in the ex-ante appraisals

Ex post CBA uses a 5.5% discount rate. Ex ante uses 5%

Additional impacts

Discount rate



EU Guidance on CBA regarded as useful tool for standardising CBA across the community

Only one option considered and therefore CBA played no role in option choice. CBA good tool for scoping out impacts prior to scheme construction

● Wider impacts as a direct result of the scheme are difficult to determine in quantitative terms

● Removal of traffic from bypassed settlements supports better urban spatial planning (car parking; pedestrianisation; access to cultural opportunities; provision of holiday accommodation –est. 2000 new homes) and growth of the tourist industry in particular.

● Facilitate drainage works to address historical flooding problems;

● Anecdotal evidence of improved air and noise conditions;

● Enhanced access to ferry port in Agios Konstantinos (shipping route to Skiathos);

● Creation of better conditions for local economic growth with faster and more reliable links to Athens, Thessalloniki and countries north of Greece; and

● Landscape impacts have been mitigated through construction of tunnel sections

Lessons on use of

CBA

CBA doesn’t necessarily fully capture measurable impacts on regional development which may take time to materialise












Projects


Project description


● Construction of approximately 16.5 km of motorway between Dublin Airport and Balbriggan Bypass



□ Dublin Airport to Lissenhall (€163m)

□ Lissenhall to Balbriggan (€69m)

● Total Cohesion Fund contribution was:

□ €152m

□ 65% total costs, 88% eligible costs

● Dual two-lane motorway – substitute for a single carriageway road (the N1), subject to varying speed limits and route quality

Balbriggan Bypass

LissenhallInterchange

Airport Interchange

Dublin

Balbriggan Bypass

LissenhallInterchange

Airport Interchange

Dublin





Ex postLow case 3,805 53 17.2

High case 3,905 53 17.6

Ex ante 534 16 5.5



assessments

Traffic flows

Investment costs

Current traffic volumes are between 177% and 218% of those forecast for 2020. Traffic growth was significantly underestimated due to higher than expected economic and population growth between 2003 and 2007.

Outturn costs were 58% higher than anticipated in 1995.

Journey time modelling, maintenance costs, accident predictions, valuation parameters and discount rate

Ex ante CBA was objective and consistent with standards of the day (1995). Used a ‘link based’ only model.

Other



Wider impacts

Use of CBA in decision-making

Difficult to establish causal link between the project and wider impacts:

- Project is small (16km) with respect to overall investment in Ireland’s transport network

- Occurred at a time of rapid economic and population growth in Ireland

Linked to expansion of Dublin Airport and growth in Swords (population increased by 6,500 up 25%)

In Ireland CBA forms an integral part of:

- Public sector expenditure assessment

- Transport appraisal

With respect to transport :

- Value for money indicators are part of the case made for transport budget to the DoF

- CBA forms part of route selection, preliminary design and project close out;

- CBA elements form part of a Multi-Criteria Assessment












Projects


Project description


● Construction of a new grade separated double track standard gauge railway line between Thriasio and Kiato. Replaces an outdated single track metric line

● In total the line included four applications for cohesion funding

● Total cost: €508.0m Total Cohesion Fund contribution: €238.4m (47% of total spend)

OBJECTIVES

● Reduce rail journey times

● Increase revenues and decrease operating costs

● Improve safety

● Improve connectivity to the wider rail network

● Promote mode shift from highway to rail



(€ million, 2000)Economic IRR Benefit / Cost ratio


High case 258 9.30% 1.79

Ex ante 396 7.3% 1.50

Ex ante CBA considers the planned future extent of the line to Patra in the West, rather than the current extent of the line to Kiato

Ex post CBA uses updated values for parameters such as value-of-time, value of externalities, accident costs and operating costs

Ex post CBA considers the safety benefits of removing level crossings from the line, this was not considered in the ex ante CBA

Two cases (Low / High) considered in ex post CBA, based on different assumptions regarding rail demand originating from beyond Kiato

Key sources of


post assessments

Additional impacts

Value of parameters

Scope of the assessment


The CBA does not apply the rule of half to new rail passengers diverted from the highway

Assumptions that future year operating costs would be comparable to costs per passenger km on existing standard gauge railways in Greece are dependant on comparable utilisation

Formal risk assessments were not undertaken although the results of various sensitivity test were presented



Stakeholders recognised CBA as being a necessary procedure to gain funding and a useful tool for prioritising options where alternatives can be tested

CBA had played no role in the choice of the route alignment as there was little potential for an alternative route.

Lessons on use of

CBA

The OSE Group reorganisation plan for 2010 includes the objective to manage the real objectives of investments both in terms of feasibility and in terms of economic profitability

● The scheme has only been open in its entirty for just over three years, it may take many years for significant social and environmental impacts to materialise

● Although new out of town station locations have received some negative feedback they offer potential for new development sites and are included in a number of local expansion plans

● Removal of trains from built up areas has offered local congestion benefits and associated benefits in terms of noise, air quality and congestion caused by disruption at level crossings

● The line has improved gateway access; the line accesses Piraeus directly where ferries depart to Greek islands, and via interchange at Piraeus to Athens International Airport.

● The existing line will contribute to further wider economic benefits if the line is extended to Patra port, as planned, providing a rail link to EU markets

New Standard Gauge Line

Old Metric Line (passing loop)












Projects


Project description

● Modernisation of one of the two main motorway routes in Lithuania.

● The project was subdivided in four subprojects:

□ 2000/LT/16/PT/001: widening and strengthening of 32.7 km and the strengthening of 135 km of motorway

□ 2002/LT/16/PT/007: widening and strengthening of 30.9 km and the strengthening of 70.9 km of motorway

□ 2004/LT/16/CPT/003:widening and strengthening of 37.8 km and the strengthening of 20.1 km of motorway

□ 2004/LT/16/CPT/008:construction of the Vilnius bypass, a new road 3.2 km long

● The total aggregate cost €154m. Total amount eligible: €148,8m. Total ISPA / Cohesion Fund contribution was €121,9m (82% of the eligible costs)

● Modernisation of one of the two main motorway routes in Lithuania. This is part of the IX B transport corridor, 315km of motorway linking the port city of Kleipeda with the capital city of Vilnius, via Kaunas. The route then links Lithuania with other destinations in Eastern Europe.

● The project also involved the construction of the Vilnius Southern bypass



Vilnius Southern bypass NPV (€ million, 2009) Economic IRR Benefit / Cost ratio

Ex post 142.1 29.1% n/a

Ex ante 111.9 22.8% 4.5

Upgrading of the IX B Corridor

Higher NPV in the ex post CBA driven by higher – than -forecast VOC.

Ex ante CBA was carried out separately for the upgrading of the motorway and for the Vilnius bypass

Vilnius Southern bypass

Higher NPV in the ex post CBA driven by higher – than - expected traffic volumes



assessments

Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2010 onwards. High Case applies growth rates that the LRA assumed in the ex ante CBA. Low Case assumes no traffic growth

Upgrading of the IX B Corridor NPV (€ million, 2009) Economic IRR Benefit / Cost ratio

Ex postLow case 200.3 55% 3.3

High case 212.2 56% 3.4

Ex ante 83.2 21% 2.5




process

In 1994, the Lithuania Road Administrator (LRA) developed its own CBA guidance manual. In Lithuania, however, ex ante CBA is not used to choose between alternative projects competing for limited funding.

LRA uses ex ante CBA as a way to identify the project specifications (such as the design of a junction) and technologies (such as the asphalt type) that would yield the best value for money

Wider economic

impact

Traffic flows had grown fasted than assumed in the ex ante analysis

Expansion of the Kleipeda Free Economic Zone and the set up of the Kaunas Free Economic Zone.

3 public logistic centres were set up alongside the route of the IX corridor

Empty lots near the major cities have been developed and turned into shopping centres as they became more accessible to the public.

Vilnius Western bypass and a new outer bypass are being developed

Socio economic

impact

Other projects

Impact of the project on soil pollution, both during construction and operation, has not been significant,Environment












Projects



● Modernisation and upgrade of 37 km track between Bratislava Rača and Cίfer, supporting line speeds of up to 160km/hr. Station upgrades to all stations between Rača and Trnava.



□ Rača to Šenkvice track (€46m)

□ Šenkvice to Cífer track and Rača to Trnava stations (€167m)

● Total Cohesion Fund contribution was €127m (75% of Rača-Šenkvice and 50% of Šenkvice-Cίfer eligible costs)

● Remaining costs paid for by the state budget

● TEN-T Corridor Va track upgraded to support line speed between Rača and Cίfer up to 160km/hr , with station improvements at all stations shown

● Later applications for funding submitted to improve sections northbound of Trnava (under implementation) to complete upgrade from Bratislava – Žilina – Košice

Project description




Economic IRR (discount rate = 5.5% ex post, 10% ex ante)



High case 216 12.4% 3.2

Ex ante -0.77 9.93% 0.99

Two cases (Low / High) considered in ex post CBA, based on different assumptions of GDP growth and therefore Do Something demand – these are shown for the 20yr assessment (as per the ex ante)


CBA documents not always clear on price base used, and rounding of small numbers in the document means precision is lost

Assumption that all new users would transfer from highway – no allowance for induced travel

Do Minimum assumes no growth of patronage on the line without the scheme, with Do Something demand growing proportionally with GDP growth

Key sources of


post assessments

Value of parameters

Ex post CBA uses updated values for parameters such as value of time and accounts for inflation of these values over the evaluation period

Ex post CBA considers externality benefits (noise, CO₂, air pollution) and foregone government revenues, not considered in the ex ante CBA

Ex post CBA uses a 5.5% discount rate. Ex ante uses 10%

Additional impacts

Discount rate



Ex ante CBA seen as a thorough assessment process which is taken very seriously by the Slovak authorities – demonstrated by the level of detail in the application

Use of CBA in Slovakia is improving, particularly with the development of local CBA guidelines

Only one option considered (upgrade) therefore CBA played no role in option choice

● Wider impacts as a direct result of the scheme are difficult to determine;

● Improvements upstream of the project cause delays and disruption to this section of track;

● Overall decline of rail patronage across national ŽSR network, with increasing car ownership;

Lessons on use of

CBA

● Beneficial for linking people to jobs in Bratislava and Trnava (where a number of global firms are present);

● Draws tourists from Bratislava out to rural provinces (Carpathian Mountains); and

● Following completion of upstream projects, improved links between the business cities of Bratislava, Žilina and Košice will enhance national development and trade links.












Projects


Project description

2008 truck flows in Hungary Source: http://www.kti.hu

● Construction of approximately 39 km of motorway around Budapest

● Total estimated cost: €371m


□ M0 Eastern Sector

□ M31 Gödöllö Connection

● Total Cohesion Fund contribution is:

□ €285m

□ 85% eligible costs

● New dual two-lane motorway – part of new orbital route around Budapest

M0 Eastern Sector Lots 2, 3 and 4)

M31 not constructed in 2008





Ex postCentral case 1,522 25.8% 6.8

Zero growth post 2010

317 13.6 2.2

Ex ante Central case 1,178 16.1 3.2



assessments

Traffic flows

Investment costs

Traffic growth in general from 2003 to 2010 has been lower (24%) than was anticipated (approx 50%). This is due to lower economic growth. Traffic flows on southern sections of M0 project are higher than expected due to absence of competing infrastructure

Outturn costs are 25% lower than anticipated.

Growth over time in valuation parameters, discount rate, opening year

Ex ante CBA was systematic, objective and consistent with standards of the day (2004). Traffic modelling did not include induced traffic.

Other sources



Wider impacts

Use of CBA in decision-making

Difficult to establish causal link between the project and wider impacts:

- Project is ‘youthful’.

- Definition of the counterfactual (economic recession and other transport projects)

-- Local (to M0) visual, air and noise pollution issues

-- Improved accessibility between outer suburbs in north and east Budapest

-- Some new retail parks and logistic centres adjacent to M0.

CBA is an integral part of the decision-making process:

-- Route selection; alignment selection; prioritisation

There exists a tension between CBA and environmental assessment:

- Environment permit needed for construction;

- Environment authorities look to minimise impact on environment. Reportedly they pay little heed to CBA;

- There is a need to better integrate the environment and the CBA.


Frontier Economics Limited in Europe is a member of the Frontier Economics network, which consists of separate companies based in Europe (Brussels, Cologne, London and Madrid) and Australia (Melbourne & Sydney). The companies are independently owned, and legal commitments entered into by any one company do not impose any obligations on other companies in the network. All views expressed in this document are the views of Frontier Economics Limited.


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Frontier Economics Ltd, 71 High Holborn, London, WC1V 6DA

Tel. +44 (0)20 7031 7000 Fax. +44 (0)20 7031 7001 www.frontier-economics.com

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