NETLIPSE NETWORK MEETING 27-28.5.2013 Seppo Mäkinen Finnish Transport Agency
27.5.2013 Mainroad 4 Järvenpää – Lahti PPP – Project 1997 – 2012 FINLAND
27.5.2013 27.5.2013 Seppo Mäkinen
Mainroad 4 Järvenpää - Lahti
• www.fta.fi 27.5.2013 Seppo Mäkinen
Background
● The first life-cycle road project in Finland ● The Motorway in figures •Length 70 km •Number of new bridges 88 •Number of trees and plants planted 175 000 •Noise barriers built 8,5 km •Length of animal fences 130 km •Amount of recycled material used 50 000 m3 •Soil and rock excavated 3 500 000 m3
• www.fta.fi 27.5.2013 Seppo Mäkinen
Contract time and principle ● Signing of the consession agreement 19.3.1997 ● Contract with • The Finnish Transport Agency (FTA)
• Road Company Tieyhtiö Nelostie Oy ● Contract includes • Road Company Tieyhtiö Nelostie Oy is responsible for the design, building, financing and operation of 70 km of motorway for 15 years between the cities of Järvenpää and Lahti in southern Finland ● Payment mechanism • Based on annual traffic volume
• Average annual service payment 20 - 22 M€. Paid quaterly. ● End of contract 30.8.2012 • First PPP project to be handed over back to the client
• www.fta.fi 27.5.2013 Seppo Mäkinen
ORDERED BY THE FINNISH TRANSPORT AGENCY (FTA)
FTA
ROAD COMPANY NELOSTIE OY Investors Financiers (Service Provider)
Daily Construction Maintenance Maintenance
• www.fta.fi 27.5.2013 Seppo Mäkinen
INVESTORS
• Skanska Finland Invest AB 50 % • John Laing Infrastructure Ltd. 50 %
FINANCIERS
• Sampo Bank, Finland • Nordic Investment Bank (NIB)
• www.fta.fi 27.5.2013 Seppo Mäkinen
Steps before handover
● Road Company Nelostie Oy started to hand over inspections 3 years prior to the end of contract
● Nelostie Oy assure to FTA that the current condition of the road meets the quality requirements at the end of the contract period
● FTA makes own inspections
● Joint meetings between Nelostie Oy and FTA as many as needeed
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27.5.2013 Seppo Mäkinen
Quality standard
● Hand over condition of pavement •Maximum depth of rut is 20 mm/100 m •Maximum average depth of rut is 14 mm/1000 m •IRI 3,5 mm/m (maximum)
• www.fta.fi 27.5.2013 Seppo Mäkinen
Quality standard
● Bridges •Complete inpection of every bridge during last 3 years, reports to the information system •Schedule for needed repairs prior to hand over •Required information to FTA bridge register
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27.5.2013 Seppo Mäkinen
Quality standard
● Drainage and groudwater •Checking: •Functionality •Groundwater protection •Cleaning of pipelines and drums
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Quality standard
● Green areas •Plants, trees and bushes > trimming and cutting •Animal fences > repair if necessary •Animal fences > opening service road if necessary
● Noise Barriers •Inspection on facade
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27.5.2013 Seppo Mäkinen
Quality standard
● Traffic signs •Inspection of reflection
● Road lightning and electricity •Transfer agreements to FTA •Check the condition on lightning poles •Return in ”switch on the light condition” ● Automatic traffic calculation points •Will be handed over to FTA
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27.5.2013 Seppo Mäkinen
End of the comprehensive service agreement
● The main principle of agreement •When the motorway will be delivered to the FTA in 2012 the road shall be in a similar condition to a15 year old motorway…it is not new.
• www.fta.fi 27.5.2013 Seppo Mäkinen
Important dates in the project
● March 19, 1997 > The Contract signing ● November 12, 1998 > The first section 30 km opening ● September 17, 1999 > The second section 40 km is opening ● October 13, 1999 > The 1st & 2nd sections opening ceremony ● August 30, 2012 > The contract expiring ● August 30, 2012 > Ownership reverts to FTA
● CONTRACT VALUE (EUR) 210 milloin
• www.fta.fi Traffic amount and accidents on Highway 4 Järvenpää - Lahti 1996 - 2012
30000 40 38 35 35 25000 24100 30 30 21000 20000 26 25 25 18000 21 Deads
15000 20 20 KVL 13000 Traffic 15 15 Injured 10000 14 9 9 8 10 5 5000 4 3 3 3 6 5 2 2 1 1 1 0 0 0 0 0 0 0 Year
1995 2000 2005 2010
• 27.5.2013 Seppo Mäkinen www.fta.fi TRAFFIC COUNTS AND INDEXES
Traffic
Automatic traffic counters in every lane The road was shared in four zones Every zone had the prise for a vehicle every year Payment four times a year
Indexchanges in
Service fee Maintenance cost
27.5.2013 • Seppo Mäkinen 17 www.fta.fi
EFFECTS AND CHALLENCES
● Private financing ● fast construction time ● number of accidents decreased ● freedom in construction, no annual funding limits
● Economic life (new railway was opened in 2006) ● tradefunctions activates in the area ● land use more effective ● town planning ● turism ● co – operation ● connecting cities
27.5.2013 • Seppo Mäkinen 18 www.fta.fi
EFFECTS AND CHALLENCES
● Environment
● korridor thinking ● noise reduction ● land use ● commutation ● removal
● PLUS ● co- operation between contractos and client closer ● shorter construction time ● better traffic safety ● better traffic fluency ● increased imloyment
27.5.2013 • Seppo Mäkinen 19 www.fta.fi
EFFECTS AND CHALLENCES
● innovations, development ● no limits for the working hours
To develop ● how to manage the changes in the norms and other requirements ● discussion ”how and how much one can bind the future funding” ● extra cost of private funding falls to the client
27.5.2013 • Seppo Mäkinen 20 www.fta.fi
E18 Muurla–Lohja – the 2nd PPP project of FINNRA
27.5.2013 • Seppo Mäkinen www.fta.fi E18 Muurla–Lohja motorway
27.5.2013 • Seppo Mäkinen www.fta.fi 27.5.2013 • Seppo Mäkinen www.fta.fi Use of the life-cycle model in E 18 Muurla-Lohja, Finland
● Decision-in-principle of the Finnish Government’s Ministerial Committee for Economic Policy 12/2003: The life-cycle (PPP) model can be used for traffic infrastructure projects ● The Ministerial Committee’s decision in February 2004 on use of the life- cycle model for the E18 Muurla–Lohja motorway project ● Good experiences with the life-cycle model in Finland and internationally. ● The EU promotes use of the life-cycle model for traffic infrastructure construction. ● Quick completion of the project is particularly important, and the life-cycle model makes faster completion possible. ● Preliminary calculations indicate that the life-cycle model is the most economic overall solution. ● The life-cycle model provides the opportunity to implement other traffic infrastructure projects in the near future.
27.5.2013 • Seppo Mäkinen www.fta.fi Procurement model of E18
● Finnish application of the PPP model: life-cycle model ● The client orders the long-term service entity by means of a service contract - Contract period autumn 2005 - autumn 2029 ● The service provider must establish a special purpose company (SPC) to take responsibility for construction design, construction, maintenance and financing. ● The service requirements are described as ● performance specifications (top surface of the road, environmental factors, fittings and equipment etc.) ● technical product requirements (long-term structures) ● The payment mechanism combines the quality and quantity of services produced with the service fee ● availability of service defines the basic amount ● monitored criteria create variability
27.5.2013 • Seppo Mäkinen www.fta.fi E18 Muurla–Lohja
● Part of the Nordic Triangle, prioritized by the EU ● Currently a two-lane highway that is geometrically poor: weak traffic safety and smoothness of traffic ● Conversion to a motorway on the basis of legally valid road plans (12/2003) ● The order authorization 700 million euros (budget of the State in 2004, nominal value)
27.5.2013 • Seppo Mäkinen www.fta.fi Tunnels
27.5.2013 • Seppo Mäkinen www.fta.fi Schedule for the bidding process
2004 2005 2006 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
13.2.2004: decision on applying life-cycle model
6.3.2004 procurement announcement
30.7.2004 12.00 deadline for pre-qualification registration
preparation of the bidding documentation
calculation period
opening the bids
negotiations
service contract
contract period until 2029
27.5.2013 • Seppo Mäkinen www.fta.fi Structure of contract (investment period)
27.5.2013 • Seppo Mäkinen www.fta.fi Status of the project
● Motorway opened for traffic in two phases : 19th Nov 2008 and 28th Jan 2009, due date for both phases 15th Nov 2008 ● short delays because of difficulties related to traffic management and tunnel safety systems ● arbitration procedure focusing in change and additional works and responsibility for delays – three wise men (expert group for settlement of disputes) ● investment period closing Sept 2009, yet some problems remaining in the functionality of the traffic management system ● the interface between the client´s traffic center and the Road Company challenging ● conclusion: accurate technical requirements for definition of traffic management and tunnel safety systems instead of performance specifications
27.5.2013 • Seppo Mäkinen www.fta.fi The goals for the E18 procurement (invitation to tender October 2004)
● Quick opening of the motorway to traffic ok ● High quality road maintenance service for road users performance spesifications for the maintenance period and availability are the basis for the payment mechanism expected to be ok
● Good traffic safety motorway standard, payment mechanism ok ● Reduction of congestion such as traffic safety ● Optimal implementation of risk distribution ok (the client´s view) ● The most economic overall solution even taking residual value into consideration expected to be ok? ● Sufficiency of order authorisation for the entire contract period including changes in cost level, additional and change work, client´s procurement expenditures expected to be ok ?
27.5.2013 • Seppo Mäkinen www.fta.fi Overall economy of the E18 Muurla–Lohja contract
● Main benefits of the life-cycle model in comparison to budget-financed implementation ● quick and cost-effective construction ● degrees of freedom made possible by responsibility period of more than 20 years ● Reasons for quick implementation ● initiation of service fees only after the road is taken into use encourages the designers, builders and sponsors to focus on quick implementation in a competitive situation ● the private sector has more flexible and free procurement procedures compared to the public sector ● the private sector also has better capacity to optimise financing during construction ● efficient project management and capacity to react quickly to the need for changes direct the entire value chain of the project towards optimal implementation ● Net present value savings in investment, maintenance and financing costs of about 3.5 % ● In addition, savings in driving costs of about EUR 34 M
27.5.2013 • Seppo Mäkinen www.fta.fi Proposals for changes in future life-cycle model projects
● Procurement procedure similar in type to that for E18 ● Consolidate/simplify the service contract and payment mechanism ● Risk distribution that makes it possible to reduce capital costs (especially equity costs)? ● Ensure the degrees of freedom for technical requirements already in the previous planning phase; consolidating the requirements ● Clarify interaction between the client and the road company concerning technical issues
27.5.2013 • Seppo Mäkinen www.fta.fi Objective for the E18: Achieving motorway level by 2015 in compliance with approved EU-level plans
Project Road Cost est. 2009 2010 2011 2012 2013 2014 2015 2016 H1 Mw 1 Muurla-Lohja, completion 2009 299 H2 Ring III Vanhakartano-Lentoas.tie 255 H4 Mw 7 Hamina Bypass 175 H3 Mw 7 Koskenkylä-Loviisa-Kotka 285 H5 Mw 7 Hamina-Vaalimaa 196
= PPP project (actual construction time) = direct budget funding (actual building time) = PPP project (completion time)
27.5.2013 • 34 Seppo Mäkinen www.fta.fi 34 General information about the E18 Motorway Koskenkylä- Kotka project
Measures and key indicators Measures and key indicators
New motorway 36 km Construction cost estimate EUR 285 285 million Widening current road to motorway 17 km motorway Agreement authorisation for PPP implementation EUR 650 million Multilevel junctions, new and renovated 7 + 3 pcs renovated Noise protection structures 37 km Other road arrangements 52 km Groundwater protection 4 km
Bicycle and pedestrian routes 19 km Markkinamäki Tunnel 500 m New bridges 78 pcs Traffic telematics Porvoo-Kotka 87 km
27.5.2013 • Seppo Mäkinen www.fta.fi Koskenkylä-Kotka, cost estimate
Koskenkylä-Loviisa 32.3 MEUR Jumalniemi multilevel junction 20.8 MEUR Road construction
Geotechnical issues
Noise protection
Bridges
Environmental issues Tunnells
Loviisa-Kotka 212.8 MEUR Noise prevention in the Kotka area Design & Planning 5.3 MEUR
27.5.2013 • Seppo Mäkinen www.fta.fi Procurement model of E18
• Finnish application of the PPP model: life-cycle model • The client orders the long-term service entity by means of a service contract - Contract period autumn 2011 - autumn 2029 • The service provider must establish a special purpose vehicle (company) (SPV) to take responsibility for construction design, construction, maintenance and financing. • The service requirements are described as
• performance specifications (top surface of the road, environmental factors, fittings and equipment etc.)
• technical product requirements (long-term structures)
• the payment mechanism combines the quality and quantity of services produced with the service fee
• availability of service defines the basic amount
• monitored criteria create variability
27.5.2013 • Seppo Mäkinen www.fta.fi Structure of the project
Customer Finnish Transport Agency
Shareholders Lenders Service provider, SPV -contractors EIB, NIB, -investors Commercial banks Main Maintenance constructor contractor
Sub- Planning contractors consultants & Suppliers
27.5.2013 • Seppo Mäkinen www.fta.fi The client´ s cashflow in traditional (DB) and life-cycle model
27.5.2013 • Seppo Mäkinen www.fta.fi E18 Koskenkylä-Kotka – Procurement schedule
tender notice Jun/ 2010
procurement of consultants prequalification Sep/ 2010 preparation of tender documents tender period 15.11-2.5.
right-of-way plan legal March 2011 Preferred bidder 31 August Contract 30 November
27.5.2013 • Seppo Mäkinen www.fta.fi Art Along The Motorway 4
Courtesy of Nelostie Oy
• www.fta.fi Art Along The Motorway
Courtesy of Nelostie Oy
• www.fta.fi Art Along The Motorway 4
Courtesy of Nelostie Oy
• www.fta.fi Art Along The Motorway 4
Courtesy of Nelostie Oy
• www.fta.fi
Art Along The Motorway 4
Courtesy of Nelostie Oy
• www.fta.fi Art Along The Motorway 4
Courtesy of Nelostie Oy
• www.fta.fi THANK YOU FOR YOUR ATTENTION !