UPDATE to APPRAISAL REPORT - Stage 1
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European Luxembourg, 12 November 2008 Investment PJrrREN/R&R/2008-1307/(...) Bank III Projects Directorate Transport & Energy Department Contact Person: (... ) Operation nr.: 20080070 Team Members: (... ) Supervisor: (... ) ENVAG: (... ) Sector Code: 63214100 Eligibility Code: 010004010000 030400010200 UPDATE TO APPRAISAL REPORT - stage 1 SLOVAK MOTORWAYS (PPP) D1 PHASE I Construction of 75 km of the D1 motorway - SFF option - SLOV AKIA (...) TABLE OF CONTENTS Page nr. Fly-sheet 3 SUMMARY FOR THE REPORT TO THE BOARD OF DIRECTORS 3 1. PURPOSE, LOCATION 4 2. CONTEXT/BACKGROUND 4 3. VALUEADDEDIDENTIFICATION 5 4. DESCRIPTION,CAPACITY 5 5. PARTICULARTECHNICALOR TECHNOLOGICALASPECTS 6 6. IMPLEMENTATION 6 7. PROCUREMENT 7 8. OPERATION 7 9. ENVIRONMENTALIMPACT 8 9.1 Key Issues 8 10. MARKET,DEMAND 11 11. INVESTMENTCOST 11 12. PROJECT RELATEDCONDITIONSTO BE FULFILLED 11 13. FINANCIALANDECONOMICPROFITABILITY 12 APPENDICES 13 A.1. TECHNICALDESCRIPTION 13 A.2. PROJECT INFORMATIONTO BE SENT TO THE BANKANDMETHODOF TRANSMISSION 14 D. ENVIRONMENTALSUMMARYSHEET 16 F. PROFITABILITYANALYSIS 17 H. VALUEADDEDSHEET 20 I. CONTACTS,REFERENCES, MISSIONS,CONSULTANTS 4 AB BREVIA TIONS SSK State Road Administration,manages the non-motorway road network NDS National Motorway Company, in 2005 with the objective to prepare, implement, operate and maintain the motorways (D roads) and expressways (R roads) defined in the "Plan of Development of Motorways'and Roads" endorsed 2005 Pcu passenger car unit AADT annual average daily traffic SEA Strategic Environmental Assessment MoTPT: "Ministry of Transport, Post and Telecommunications" MoE: "Ministry of Environment" EIA: "Environmental Impact Assessment" EIS: "Environmental Impact Statement": in the Slovak system, summary EIA document issued by the Promoter, prepared by a qualified consultancy company. FEIS: "Final Environmental Impact Statement": in the Slovak system refers to a statement issued by the MoE and the MoTPT, validating the mentioned EIS. EMP: Environmental Monitoring Plan OJEU Official Journal of the European Union ERIAM Economic Road Investment Appraisal Model ERR Economic Rate of Return PPP Public-Private Partnership VAT Value-Added Tax Project: Slovak Motorways (PPP) D1 Phase 1 - Update to stage 1 3 Operation nO:20080070 Fly-sheet PJ OPINION SLOVAK MOTORWAYS (PPP) D1 PHASE I (Operation nr. 20080070) SLOVAKIA (no) (... ) Project: Slovak Motorways (PPP) D1 Phase 1 - Update to stage 1 4 Operation nO;20080070 SUMMARY FOR THE REPORT TO THE BOARD OF DIRECTORS 1. PURPOSE, LOCATION The project concerns the partial completion of Slovakia's D1 motorway, which is part of the TEN-T. The D1 will eventually connect the country's principal cities Bratislava and Kosice and lead to the Ukrainian border. There are 5 motorway sections included in the Project with a total length of 75 km (about 15% of the total length of D1). The contract will be a 30 year DBFO concession. The project road crosses a mountainous region and a large number of structures and tunnels are to be expected. 2. CONTEXT/BACKGROUND 2.1 Monitoring experience The Borrower and Final Beneficiary of the EIB loan will be a Special Purpose Vehicle which is not yet incorporated. The Ministry/ the Public Promoter: Several other sections of D1 motorway have been financed in the past, which up to now have been constructed by the state and financed via the state budget. (... ) 2.2 Project background The Slovak Republic has been involved in the preparation of the current motorway programme since the mid-1990s1. The project concerns the partial completion of Slovakia's D1 motorway, which will eventually connect the country's principal cities Bratislava and Kosice and lead to the Ukrainian border. The corridor is part of the TINA road network in Slovakia, and became part of the TEN-T after Slovakia's entry into the EU in 2004. The EIB has in the past financed several other sections of this motorway (D1 Svinia-Presov and D1 Mengusovce - Janovce as part of the MOTORWAY AND EXPRESSWAY PROGRAMME (2001-0588) CA/359/02/322 of 23.07.2002; D1 Sverepec - Vrtizer under SLOVAK NATIONAL MOTORWAY COMPANY (2004-0430), CA/394/06 of 07.03.2006 - EUR 180m authorized (...) ) which so far have been constructed on behalf of the state and financed via the state budget, with additional EU CF support for the Mengusovce - Janovce section. 13km 16 km 8km 45 km 60 km 26 km 18.5 km 8.5 km 14 km 11 km 7km Presov 7km Presov 19km The motorway sections included in this project will be constructed and operated under a 30-year concession from operation startup, by a consortium of private companies which will assume 1 Early 1996 the Government of the Slovak Republic adopted the resolution 269/1995 "Development of motorways and international roads on the territory of the Slovak Republic", proposing the completion of a motorway network by 2005. Some of the EIAs for the project date back to 1997. Project: Slovak Motorways (PPP) D1 Phase 1 - Update to stage 1 5 Operation nO:20080070 construction and availability risk. At the end of the maximum legal concession period the motorway will be transferred to the state. The tender procedure for the awarding of the concession is on- going using a Competitive Dialogue procedure and the selection of the preferred bidder is foreseen for the first week of September 2008. 3. VALUEADDED IDENTIFICATION 3.1 Consistency with EU priority objectives (Pillar 1) The Project encompasses five new motorway sections of the already initiated D1 motorway high capacity road link between the Zilina and Presov regions, connecting the country's principal cities Bratislava and Kosice. The D1 corridor is part of the TEN-T. The project is the first of the four packages that are included in the PPP Motorway Programme officially approved by the Slovak Government in September 2007. All the sections encompassed in the project are fully within the limits of Stredne and Vychodne regions, both included by DG Regio in the Convergence Objective for the period 2007-2013. The motorway forms part of the Trans European Network for Transport. The project is therefore eligible under point (a) "regional development" and (c) .common interest" of Article 267 of the EC Treaty. (... ) 3.2 Quality and soundness of the investment (Pillar 2) The project will improve accessibility, thereby fostering economic development and territorial cohesion in Slovakia. It will become the main link between the lesser developed regions of eastern Slovakia and the thriving Bratislava region. Direct project benefits will consist of savings in travel time, vehicle operating costs and accident costs. The project will improve passenger and freight flows nationwide as the D1 corridor is considered to be the backbone of the Slovak road transport infrastructure. The economic benefits of the Project, relative to the do-minimum alternative will come from user time savings, the reduction of vehicle operating costs, improved safety and reduced environmental effects. (...) The project management and procurement strategy may leave the project exposed to some key risks potentially affecting the quality and soundness of the investment: . Full compliance with EU environmental Directives will have to be demonstrated before disbursement. Promoter capacity: Risks arising from the large investment volume of this PPP project combined with the lack of PPP experience of the promoter. The initial proposed timetable until financial close was unrealistically short. Delays in the process have already been experienced. However, not least with a view to the extremely difficult market conditions for long-term funding, further delays cannot be excluded. (...) Bidders may have had to integrate significant technical and price contingencies and mark-ups can be expected as they will have to price all risks left with them. (... ) 4. DESCRIPTION,CAPACITY There are five project sections, of which the first three sections are adjoining: Dubna Skala - Turany (total section length 16.45 km), Turany - Kralovany - Hubova (total section length 13.60 km), Hubova - Ivachnova (total section length 15.30 km), Janovce - Jablonov (total section length 18.54 km) and Fricovce - Svinia (total sectio'nlength 11.20 km). All are located on the West - East corridor of the country between Zilina and Presov. They all cross hilly to mountainous terrain and some subsections will have to be inserted in narrow valleys with steep slopes. These constraints require the construction of a number of bridges and tunnels totaling to some 1/3 of the total length of the project road. The motorway is a dual carriageway, two lane motorway. Currently available information on the characteristics of the project refers to the outline design produced by or on behalf of the National Motorway Company NDS, and available to the bidders. Design changes by a winning bidder are theoretically possible, although the procurement calendar for this project and also the permitting process {by which substantial changes in the promoter's Project: Slovak Motorways (PPP) D1 Phase 1 - Update to stage 1 6 Operation nO:20080070 design would require the reapplication for building permits, at the Concessionaire's risk) leaves little opportunity for bidders to propose design improvements. The following table summarises the main characteristics of each of the project sections: Dubna Hubova- Janovce- Fricovce- Total Skala- Turany- Hobova Ivachnova Jablonov Svinia Turanv Lenath 75.09 16.45 13.60 15.30 18.54 11.20 Lenath (Road) 67.89 16.45 9.00 13.30 17.94 11.20 Length (Tunnel) 7.2 0 4.6 2 0.6 0 Length (structures) 100 27 14 21 22 16 Interchanges 8 3 3 0 2 0 Rest Areas 4 2 0 0 2 0 Maintenance DepOt 1 0 1 0 0 0 Note: length figures in km The motorway is designed in category D26.5/100, which refers to the platform width (26.5 m, dual carriageway, two lane motorway) and the design speed (100 km/h). Speeds are further reduced to 80 km/h in tunnels. 5. PARTICULARTECHNICALORTECHNOLOGICALASPECTS The road will cross a mountainous area in Slovakia and consequently, a high number of tunnels and structures have been envisaged in the outline design.