A23 Motorway in Spain

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Appendix 4 – A23 Motorway in Spain

This chapter presents the results of the ex post analysis for the project covering the construction of four sections of the A23 motorway in Spain.

4.1 Introduction

4.1.1 Project overview

Location The Cohesion Fund contributions for the period 2000-2006 cover two sections of the A23 motorway, between Teruel and Calamocha and between Huesca and Nueno.

Figure 1. A23 Motorway. Sections funded by the Cohesion Fund 2000-06

Nueno

Huesca

Calamocha

Monreal del Campo

Santa Eulalia

Teruel

Source: Openstreetmap.org

The A23 motorway in Spain (also called Autovía Mudéjar) is a high capacity road connecting Sagunto, on the Mediterranean coast just north of Valencia, and the Somport road tunnel. The tunnel connects Spain and France through the central Pyrenees. It was opened in 2003. 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. Currently, the A23 motorway is completed between Sagunto and Nueno. The remaining sections between Nueno and the Somport tunnel are either under construction or in advanced planning stages. At this point, it is

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unclear when the A23 motorway will be completed. Recent budget cuts announced by the Spanish government in July 2010 are likely to cause delays.1

Description The project under analysis comprises four subprojects, namely one 11.5 km-long segment between Huesca and Nueno, and three adjacent segments between Teruel Norte and Calamocha, for a total of 63.5 km. The two sections are 178 km apart. Table 1 summarises the subprojects considered in this evaluation, indicating also their completion date and total cost (including the share provided by the Cohesion Fund). All four segments are located in Aragon, in north-east Spain, bordering with France to the north, in the Pyrenees. The capital city of Aragón is Zaragoza, the fifth largest Spanish city. Aragón has three provinces: Zaragoza, Huesca and Teruel. The A23 sections considered in this analysis are located in the provinces of Huesca and Terual. Both provinces cover a total extension of 30,000 km2 (about the size of Belgium) and have a total population of 370,000 people.

Table 1. Subprojects making up the project

Subprojects (province) Completion Description of the Cost - code date subproject (% CF)

Huesca to Nueno (Huesca) - 11.5 Km motorway including 23 € million December 2000 1999ES16CPT002 a viaduct of 70 metres long (85%)

Monreal del Campo to 34 € million Calamocha (Teruel) - July 2001 14.8 Km motorway (85%) 1999ES16CPT003

Santa Eulalia del Campo to 78 € million Monreal del Campo (Teruel) - July 2001 21.9 Km motorway (85%) 1999ES16CPT004

Teruel (N) to Santa Eulalia del 26.8 Km motorway, with two 70 € million Campo (Teruel) - December 2005 viaducts of 100 and 231 (85%) 2003ES16CPT029 metres long

Source: Application forms

In the three subprojects with code 1999ES16CPT002, -003, -004, works started between 1998 and 1999 and finished between the end of 2000 and mid 2001. In the fourth subproject, 2003ES16CPT029, works started in 2002 and finished at the end of 2005.

1 http://www.fomento.es/NR/rdonlyres/BD8EBB62-047D-42C2-8639- 8C79651C83BE/76288/Impactoajustepresupuestario.pdf

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4.1.2 Context

Socio-economic context The project was developed during a period of high and sustained economic growth in Spain. While we focus the description of the socio-economic context on the provinces of Teruel and Huesca, to provide some perspective we also refer to figures at the regional and the national for comparison. Regional and national figures are useful because they also account for the impact of other infrastructure projects being developed at the same time as the A23. For example, the high-speed rail line between Madrid and Barcelona arrived to Zaragoza at about the same time this project was completed.2 Figure 2 and Figure 3 show time series of GDP per capita and unemployment in the provinces of Teruel and Huesca, in Aragón and in Spain. The charts show the period of sustained growth that lasted until 2007. Figure 3 also shows the effects of the economic crisis on unemployment from 2008 onwards. The evolution of both series is similar in all the areas considered, although the levels of unemployment in Aragon, and Teruel and Huesca, are lower that those for Spain.

Figure 2. GDP - Evolution of GDP per capita.

25,000

20,000

15,000 Huesca (province)

Teruel (province)

Aragon (region)

GDP per capita (EUR) capita GDPper 10,000 SPAIN

5,000

0 1996 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: Instituto Nacional de Estadística (INE)

2 The some sections of the AVE Madrid – Barcelona that received Cohesion Funds during the period 2000- 2006 are also subject in the current exercise.

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Figure 3. Unemployment - Evolution of unemployment rate.

25% Huesca (province) Teruel (province) Aragon (region) 20% SPAIN

15%

10% Unemployementrate

1996TI 1997TI 1998TI 1999TI 2000TI 2001TI 2002TI 2003TI 2004TI 2005TI 2006TI 2007TI 2008TI 2009TI 2010TI 1996TIII 1997TIII 1998TIII 1999TIII 2000TIII 2001TIII 2002TIII 2003TIII 2004TIII 2005TIII 2006TIII 2007TIII 2008TIII 2009TIII

Source: Encuesta de Población Activa (EPA) available at the Instituto Nacional de Estadística (INE)

Figure 4 shows the population growth in all four areas considered, before and after the opening of three segments of the A23 under analysis. In the first period, before the first three segments opened, the population in the provinces of Huesca and Teruel was growing at much lower rates than in the rest of Spain (Teruel even showed a negative rate). In the second period, both provinces showed higher population growth rates, similar to those recorded for Spain as a whole.

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Figure 4. Population growth rate. Average of annual growth rates in period

Teruel (province) Huesca (province) Aragon (region) SPAIN 1.50%

1.25%

1.00%

0.75%

0.50%

0.25% Populationrate growth (annual averages in period) 0.00% 1999-2001 2002-2008

-0.25%

Source: Instituto Nacional de Estadística

It is not possible to establish a causal link between the construction of four sections on the A23 and the changes in population growth. Nonetheless, the new motorway might have help to bring these peripheral areas closes to larger centres. This probably turned them into more feasible locations to reside and work.

Strategic policy context The A23 was one of the fifteen motorways identified by the National Infrastructure Plan 1993-2007.3 This Plan was later updated into the Infraestructure Plan 2000-2007.4 The main objective of the A23 was to transform the existing road axis Valencia- Zaragoza-Somport (French border) into a motorway. This would facilitate the freight traffic between the Levante (Eastern Spain) and Aragón, in Spain, as well as France and the rest of Europe. The new was designed to become the natural route through the central Pyrenees, replacing the existing wide road connections between Spain and France in both extremes of the Pyrenees, Irun-Hendaya to the West and La Jonquera to the East. Additional strategic objectives have been identified in the Funding Applications for each of the four subprojects.

3 Ministerio de Obras Públicas, Transportes y Medio Ambiente, “Plan Director de Infraestructuras 1994- 2007”, approved in 1994. 4 Ministerio de Fomento, “Plan de Infraestructuras 20000-2007”.

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 To complete the national motorway network as envisaged in the Infrastructure Plan in the early 1990s. The A23 was identified as the fifteenth and last corridor in the Spanish government’s analysis on missing links in the Spanish motorway network.

 To improve the communications with non-coastal areas of Spain, which were located far from existing main road corridors. Before the project, the links between Huesca and Teruel and the rest of Spain were slow and congested, despite their central location.

 To achieve significant time savings in a slow roads. In the four segments under study average speeds were expected to increase.

 To decrease the number of accidents and improve overall safety conditions in the corridor. The previous Cohesion Fund contributions (1994-1999) had already financed some sections of the A23 motorway, namely Zaragoza to Huesca and Gilet to Soneja, and the Somport tunnel.5

4.1.3 Sources We have relied on a variety of different sources of information provided by DG REGIO and by stakeholders in Spain. DG REGIO made available the Funding Applications and Funding Decisions for each of the four subprojects. Each application provided a detailed description of each subproject, its objectives and the costs and benefits that it was expected to generate. DG REGIO also provided additional supporting documentation, such as the initial overall cost- benefit analysis and final reports for each of the four subprojects. In addition, the Unidad de Carreteras de Teruel (part of the Dirección General de Carreteras, a directorate within Ministerio de Fomento) have provided the initial study done by the Spanish authorities regarding the segment Teruel – Zaragoza of the A23, which contains three of the four projects under study.6 Table 2 provides the complete list of documents we have used for this evaluation.

5 http://www.sifemurcia- europa.com/2002/fondos/pdfs/programa_operativo_fondo_cohesion_feder_2007_2013.pdf 6 Ministerio de Obras Públicas, Transportes y Medio Ambiente, “Estudio Informativo de la Autovía Levante Aragón, Tramo Teruel – Zaragoza”, Estudio de Rentabilidad, 28 Febrero 1994.

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Table 2. Summary of project-related documentation

Documents Obtained from

Funding Applications DG REGIO All subprojects Funding Decisions DG REGIO All subprojects Ex ante CBA (one for each subproject) DG REGIO Estudio Informativo, for the three subprojects in Teruel, segment Teruel - Ministerio de Fomento Zaragoza (February 1994) (Teruel, Zaragoza and for the subproject in Huesca, Villanueva de Gállego - Huesca Units) Nueno (1992) Methodology used in the economic analysis of the projects, “Recomendaciones para la Evaluación Ministerio de Fomento Económica de Estudios y Proyectos de Carreteras”, 1992. Ministerio de Fomento Studies on traffic in the A23 around Teruel (Teruel, Unit) Study on socio-economic effects caused by the Government of Aragon motorway Somport – Sagunto, CREA, 1992 In order for us to carry out the ex post analysis of the project, the Dirección General de Carreteras from the Ministerio de Fomento made available significant amounts of data, including outturn costs (both investment and maintenance), traffic data and journey times for each of the subprojects. We were also provide with data on accidents and updated values for other parameters. Table 3 lists the data we have received along with the source.

Table 3. Summary of Primary & Secondary Data Availability

Data Source

Ministerio de Fomento – Demarcacion de Carreteras Traffic data de Aragón. Website of MInisterio de Fomento

Ministerio de Fomento – Demarcacion de Carreteras Infrastructure investment costs de Aragón

Infrastructure maintenance costs Ministerio de Fomento

Value of time Ministerio de Fomento

Fuel costs and vehicle operating costs Ministerio de Fomento

Finally, we held meetings with members of the Demarcación de Carreteras del Estado en Aragón (Ministerio de Fomento), one in Teruel regarding the three

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subprojects of the A23 in Teruel and one in Zaragoza regarding the subproject in Huesca. In both meetings we discussed the following key issues.

 Our understanding of the calculations and assumptions underpinning the ex ante CBA, and of the usefulness of the CBA and other analysis carried out in the decision-making process leading to the approval of the project.

 Our understanding of the post-opening data and the expected future developments of such figures, such as traffic volumes.

 The wider impacts that could be attributed to the A23, especially in the areas surrounding the subprojects considered in this analysis. Throughout the study, we have been in close contact with the Dirección General de Carreteras (Ministerio de Fomento) in order to obtain supplementary documents and updated parameter values to carry out our ex post CBA.. We have also been in contact with the Regional Government of Aragón (various departments) and the provincial administration in Teruel (Diputación de Teruel) to better understand the impact of this infrastructure in the territory. We understand that the Ministerio de Fomento is a stakeholder at national level. Despite this, our experience and the dialogue established with its regional units have proven successful to both to understand the technical aspects of the project and also to identify its wider impacts.

4.1.4 Overall issue and challenges with the evaluation. The project under study comprises four subprojects covering two non-adjacent segments of the new A23. Individual ex ante CBAs exist for each of the four subprojects. The first available profitability analyses of these segments were included in two separate Estudios Informativos, one covering the segment Teruel-Zaragoza and the other Villanueva de Gállego-Nueno. The latest ex ante CBAs were prepared together with the applications for funding of each subproject. In addition to presenting the results of the ex ante CBA for each project separately, we have also calculated aggregate economic indicators covering the four subprojects. In the ex post CBA, we have calculated the costs and benefits corresponding to each subproject and again we present them both separately and as an aggregate.

4.2 Ex post cost-benefit analysis We have carried an ex post CBA for each of the four funded in the period 2000- 2006. Traffic data differ for each segment, both in terms of volumes and timing (the segments opened in different years). The ex post analysis compares the net

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benefits of the implemented subprojects with the counterfactual situation in which only the old road exists. While we have calculated the net economic benefits for each subproject, we present the aggregate results for the project as a whole, using a common discount rate and the same base year. For each subproject we consider, as in the ex ante analysis, a 31-year lifetime, over which the net benefits are calculated from the opening of the segment to traffic.

4.2.1 Headline results from the analysis: This section contains the key results of the economic and financial analysis. These results can be later compared with those obtained in the ex ante analysis.

Economic analysis To carry out the ex post CBA for each of the four subprojects we have considered a Low Case and a High Case. These scenarios use different assumptions regarding the traffic growth on the four segments after 2008. The High Case (optimistic scenario) assumes a constant traffic growth rate, equal to the average of the long-run traffic growth on the four segments. This is about 5% per year. The Low Case (pessimistic scenario) assumes a constant 2.5% traffic growth rate after 2008. We have calculated single economic indicators (NPV, IRR and BCR) covering all the four subprojects under study, using a 5.5% discount rate. To be consistent with the ex ante analysis, we have used 1998 as the base year. Table 4 summarises the results of the ex post analysis under both scenarios. We note that in the Low Case, the NPV of the project is negative.

Table 4. Summary of ex post economic analysis (2010 prices)

Low case High case

Net Present Value (€m) -27.7 27.6

Economic IRR (%) 4.6% 6.3%

Benefit-cost ratio 0.9 1.1

Source: Own calculation

Annexe I provides the detailed results of the cost benefit analysis for each option, following the structure used in the 2008 EC Guide. The values in these figures are non-discounted and are expressed in 2010 prices.

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Financial analysis The Funding Applications did not include any financial analysis for any of the four subprojects under study. This is because the A23 is a toll free motorway and therefore has no revenues. Nonetheless, we have done an ex post financial analysis for the whole project, calculating the annual cashflow. Table 5 summarises the results of the ex post financial analysis. As the project cashflow is always negative, the IRR is non- defined. Low Case and High Case yield the same financial NPVs. This is because capital and maintenance costs are not traffic-related. Hence, they do not change between scenarios. This assumption is based on the information provided by the Ministerio de Fomento.

Table 5. Summary of ex post financial analysis (2010 prices)

Low / High case

Net Present Value – Investment (€m) -230

Financial IRR – Investment (%) Not available

Net Present Value – Capital (€m) -55

Financial IRR – Capital (%) Not available

Source: Own calculation

Annexe 1 provides the detailed results of the financial analysis.

Wider socio-economic impacts The A23 represents a major step-change in the road network of the Aragón region, and especially in the provinces of Teruel and Huesca. Discussing with various stakeholders (such as regional and local authorities), we explored the impact that the A23 has had so far on the territory. We note that the subprojects under analysis in this evaluation are relatively minor compared to the whole of the A23. It is therefore difficult to establish causality links between these investments and any wider impact. Moreover, the A23 is one of the many interventions that affected the region during the same period. For example, the high-speed rail link between Madrid and Barcelona, reached Zaragoza in 2005. However, for the purpose of this evaluation, we managed to isolate the impacts that are more specific to the segments considered. In relation to the three subprojects located in the province of Teruel, we obtained information about two new infrastructure projects (an industrial park

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and an airport) developed in the area since the opening of the first road segments. In addition, two new road connections with the A23 are currently under study or in advanced planning stages. In relation to the subproject Huesca – Nueno, new infrastructures (an industrial park, a technology centre, and new university buildings) have been developed along the A23 near Huesca since the opening of the new road. We note however that these developments are located alongside an older section of the A23 (built in the previous funding period). Therefore, the causality link with the subproject under analysis is more tenuous.

4.2.2 Costs We have grouped costs into two different categories. One-off costs are the capital investment costs incurred to build the infrastructures. On the other hand, annual road maintenance is an ongoing cost. The same cost categories were used in the ex ante analysis.

One-off costs In general, actual total capital costs did not exceed the expected expenditure (about €204m). While the subproject Huesco-Nueno was completed with lower than expected capital costs, the subproject Teruel (N) – Santa Eulalia del Campo generated some cost overruns. These effects almost offset each other. Figure 5 shows the evolution of capital expenditure over time. Expenditure peaked in 2000, when three of the four subprojects approached completion, and then again in 2004 and 2005 for the completion of the last project.

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Figure 5. Capital expenditure 1998 to 2005 (€, 2010 prices)

30 EUR (Millions) EUR

0 1998 1999 2000 2001 2002 2003 2004 2005

Source: Ministerio de Fomento

Unit cost calculation The Ministerio de Fomento provided us with disaggregated cost information (Level 2) regarding the subprojects Huesca (N) to Nueno and for the project Teruel – Santa Eulalia. Table 6 provides the results of the Level 2 unit cost calculation. Data disaggregated at Level 3 is not available.

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Table 6. Summary of ex post unit costs (2010 prices)

Non-discounted NPV (@ 5.5%)

Level 1 „All-in‟ (€/km) 2.67 1.939

Land (€m/ha) 0.233 Not available

Roadworks (€m/km) 0.621 Not available Level 2 Tunnels (€m/km) Not available Not available

Bridge (€m/km) 6.62 Not available

Source: Ministerio de Fomento

Ongoing costs The methodology used in the ex ante analysis, which is still in use today to evaluate new road projects in Spain, assumes that road maintenance costs in Spain are independent of the volume of traffic. For consistency, we have followed the same approach for the ex post analysis. In practice, while it simplifies the analysis, this assumption is not material. Due to the actual absolute volumes of traffic, maintenance costs are likely to be very similar under both the Low Case and High Case scenario. Ministerio de Fomento informed us that the annual maintenance costs of the segments of the A23 in Teruel and the segment in Huesca are 18,036 €/km and 26,344 €/km respectively. In addition to the ordinary maintenance costs, Ministerio de Fomento informed us that in 2006 there some exceptional costs, just above €1m in the segment Santa Eulália del Campo – Monreal del Campo.

4.2.3 Direct benefits To calculate the project’s benefits, we have used the same approach recommended by Ministerio de Fomento in its 1992 methodological document. The same methodology was used to prepare the ex ante cost benefit analysis. Ministerio de Fomento regularly updates the parameters it uses to estimate the monetary value of time savings, vehicle operating costs and fuel costs. We used the most updated available values.

Traffic volumes Ministerio de Fomento provides, through its website, data on historic traffic for the segments of the A23 under study and for the corresponding segments of the old road. For the three segments between Teruel (N) and Calamocha, the old

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road is the road N-234. For the segment Huesca – Nueno, the old road corresponds to the N-330a. We discussed about the appropriate use of this traffic data with Ministerio de Fomento. They confirmed that the A23 motorway did not generate any induced traffic or modal shift. We were also told that, contrary to what it had been expected, between 2,000 to 2,500 vehicles (about 20% of total traffic) still use the old road every day. Using the historic data, we have calculated the average annual growth rate of traffic in the segments covered by our study. The average growth rate of traffic across the four segments considered was 5% between 1999 and 2008. In order to carry out the ex post CBA for this project we have identified two possible scenarios for traffic growth, a High Case and a Low Case. The scenarios differ in the assumed level of traffic growth from 2010 onwards. We have defined the two scenarios as follows:  High case: we assume that in each year after 2010 traffic on the A23 motorway grows at 5%. This is equal to the actual average annual growth rate of traffic on the corridor of the A23 between 1999/2000 and 2008.  Low case: we assume a traffic growth rate in this case is 2.5%, equal to half of the one assumed in the high case scenario. Our analysis is based only on the traffic on the A23. This is because:  there has not been any new traffic (induced or modal shift) on the A23; and,  the costs and benefits associated with the traffic that remains on the old road are the same with or without the A23 being implemented.

Time savings Most of the direct benefits of the project come from time savings. In the ex ante cost-benefit analysis, the benefits related to the time savings more than compensate the negative impact arising from the higher vehicle operating costs and higher fuel consumption, which we address below. Ministerio de Fomento provided us with data on average speeds on both the new and on the old road. We have used this information to calculate the time savings generated by the new road.

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Table 7. Time savings (minutes) generated by the new road

Time savings (minutes) Subprojects Car and LGV HGV Huesca to Nueno 0.6 4.7

Monreal del Campo to Calamocha 2.7 0.9

Santa Eulalia del Campo to Monreal del Campo 3.2 0.4

Teruel (N) to Santa Eulalia del Campo 6.5 3.3

Source: Frontier Economics

The Ministerio de Fomento also provided us with the parameter of the value of time currently used in road projects in Spain. The value of time currently used in Spain for road projects is 14.63 €/hour for cars and light-goods vehicles (LGVs) and 25.08 €/hour for heavy-goods vehicles (HGVs). Table 8 summarises the total value of the time spent travelling on the new road and the old road, respectively. The difference between the two is the time saving generated by the new road.

Table 8. Time benefits generated by the new road (2010 prices)

NPV of Cost of Time NPV of Time Benefits (€m) (€m)

With new road 688.20 172.86 With old road (counterfactual) 861.06

Source: Frontier Economics

Vehicle operating costs Vehicle operating costs are higher in the new A23 than in the old road. This is due to the higher speeds that the A23 allows, resulting in higher fuel and oil consumption and quicker deterioration of car components, mainly tyres, in the new road. As the length of the two roads (old and new) is almost the same, differences in speed translate proportionally in different VOC and fuel consumptions. Because of the increase in VOC, the new road generates a loss compared with the old one. Ministerio de Fomento provided us with the parameter values for the cost of fuel, oil and tyres currently used in road projects in Spain. These are summarised in Table 9.

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Table 9. Unit costs for fuel and tyres

Car and LGV HGV

Petrol (€/litre) 0.58

Diesel (€/litre) 0.59

Oil (€/litre) 4.21 4.71

Tyres(*) 386 5,285

Source: Frontier Economics (*) 4 tyres in cars and LGVs, 6 tyres in HGVs Petrol and diesel consumption depends on speed. The ex ante analysis provides value tables for petrol and diesel consumption, as a function of speed and the characteristics of the road in the subsections under analysis. We have revised the fuel consumption values using this information and the actual speeds provided by Ministerio de Fomento. We have used a similar approach to quantify any change in oil consumption. To calculate tyre consumption, we have used the parameters provided by the ex ante analysis, which links tyre wearing to speed and road conditions.

4.2.4 Externalities

Safety Safety conditions on the A23 are significantly better than on the old road, for all sections considered in this analysis. Table 10 shows the annual average number of accidents on the new A23, with the data for the old road, before the opening of the A23. The total number of accidents on the A23 is less than half the number of accidents in the old road. Fatalities have been reduced to zero, from 15 on the old road, while casualties have fallen from around 120 in 1999 to 20 in 2009.

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Table 10. Number of fatalities and injuries

Segment Fatalities Injuries Vehicles/day Year

Huesca to Nueno 4 38 7,773 1999 OLD ROAD Teruel(N) to Calamocha 11 84 7,900 (average) 2000

Huesca to Nueno 0 8 9,224 2009 NEW ROAD Teruel(N) to Calamocha 0 12 9,450 (average) 2009

Source: Ministerio de Fomento

Note: Injuries includes severe and non-severe injuries Ministerio de Fomento provided us with the parameter values related to the monetary value attached to fatalities and casualties currently used in road project appraisal in Spain.

Table 11. Monetary value for fatalities and casualties (€, 2010 prices)

Fatalities Casualty

Monetary value 258,342 34,100

Source: Ministerio de Fomento

Accident costs are calculated using the values shown in Table 11. Given the historic information on accidents in the subsections, provided by the Ministerio de Fomento, we have calculated the ratios for fatalities and casualties per vehicle/day and held this ratio constant for all years in the analysis.

Environmental (noise, pollution, CO2) The A23 has not generated any induced traffic or any modal shift. Therefore, in the analysis we have assumed that that externalities related to changes in noise or pollution levels, if any, are negligible and can be ignored. We understand that the similar approach was used for the ex ante analysis.

4.2.5 Wider impacts We have considered the wider impact of these projects in each province.

Teruel Two new developments took place after the completion of the A23.

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 The first is a new logistic and industrial park, PLATEA, developed by the Government of Aragón and managed by Platea Gestión S.A. The objective of this park is to promote economic and social development in the southern region of Aragón. It covers an area of around 2.5 million m2. Its location was chosen thanks for the advantageous position of Teruel, half way between the Mediterranean coast and the Ebro Valley.

 The second is an industrial aeronautical platform, PLATA, offering space for long-term parking, recycling and maintenance of aircrafts and other related aeronautical sector activities. PLATA has been developed by the Government of Aragón and the Teruel City Council. This aeronautical platform is currently under construction (expected to be completed by late 2010) on the area of the previous Caudé aerodrome and covers an area of around 2 million m2. In addition to these developments, the Spanish Government is considering two new road connections, providing links to the A23. The first and more advanced project, from Alcolea to Monreal del Campo, is a direct link between the A2 (Madrid to Barcelona) and the A23 roads and will provide more capacity to the Madrid-Levante corridor. The second, from Cuenca to Teruel, will allow the road traffic on the axis South-West to North-East of Spain to avoid going through the congested road around Madrid.

Huesca Some developments also took place in the region following the completion of the A23. However, we note that these are all located alongside a section of the motorway developed prior to the one considered here. Even though we can not relate these developments to the road segment under study, it is worth mentioning them, given their proximity and significance. All have recently opened in the outskirts of Huesca.

 New industrial park, PLHUS. It covers an area of around 1.150.000 m2. It is located near the city of Huesca, halfway between the Cantabrian and the Mediterranean coastlines along the planned Pamplona - Huesca - Lleida dual carriageway. The industrial park is located two kilometres southeast of the city centre.

 The technology park, WALQA. It is situated in the outskirts of Huesca, on the dual carriageway Autovía Mudéjar that directly links to Madrid. It covers an area of 529.000 m2. Since its opening in 2002 it has been devoted to bring together technological companies. Its main objective is to become a centre of interest to R&D innovation, especially in the fields of communications technology, Internet and e-commerce, contributing to the economic development of Huesca and consequently of the Aragón region.

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 A business innovation centre, CEEI. The European Centre of Enterprises and Innovation of Aragon, CEEIARAGON, is a business incubator with the mission to support the creation of innovative industries or services that generate wealth in Aragon. Its main objective is to help entrepren€ial ventures to consolidate and develop during the first years of life. In addition to these developments, two new high capacity roads are currently under construction and will connect to the A23 motorway in Huesca. The A22 motorway will connect Huesca to Lleida. The A21 will connect Pamplona and Huesca. These two new motorways form an East – West axis road to the south of the Pyrennes and are a complement to the A23.

Environmental requirements The four subprojects included in the project under study were covered by two Estudios Informativos, Villanueva de Gállego to Nueno and Teruel – Zaragoza. The Spanish Government approved the corresponding DIAs (Environmental Impact Declaration) related to this two Estudios Informativos in published in the official state gazette (BOE) on 2nd September 19927 and 26th April 19978, respectively. Both documents established that the projects were environmentally viable.

Utilisation rates We have been informed by the Ministerio de Fomento (Demarcación de Carreteras de Aragón) that the maximum capacity of the new road ranges from 7,478 vehicles/hour in the Huesca – Nueno section to 8,000 vehicles/hour for the Teruel – Calamocha section. We have calculated actual utilisation rates based on traffic demand data for 2008, provided by the Ministerio de Fomento, and expected utilisation rates for 2036 based on our traffic growth assumptions. Table 12 presents the results.

7 http://www.boe.es/boe/dias/1992/09/02/pdfs/A30318-30323.pdf 8 http://www.boe.es/boe/dias/1997/04/26/pdfs/A13511-13517.pdf

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Table 12. Utilisation rates

2008 2036 High case 2036 Low case

Huesca – Nueno 5.0% 19.6% 10.0%

Teruel - Calamocha 4.8% 18.8% 9.6%

Source: Frontier Economics

Other projects Various high capacity roads are currently under construction/study and will be linked to the A23 motorway on or close to the segments considered in this analysis. The new A21 and A22 roads connecting Huesca to Pamplona and Lleida are currently under construction. Two additional roads, connecting Teruel to Cuenca and Alcolea (on the A2) to Monreal del Campo, are currently under study. These new road infrastructures will establish additional links with the A23 motorway, enhancing its potential to achieve the stated objectives for these projects.

Unintended effects The ex ante cost-benefit analysis assumed that, after opening the A23, the old road would only carry residual traffic (tráfico de agitación). In reality, the N-234 in Teruel and the N-330 in Huesca still carry a significant volume of traffic, currently between 2,000 and 2,500 vehicles a day.

4.2.6 Uncertainty and sensitivity analysis The ex post analysis carried out for this project uses comprehensive historic data on traffic until 2008. We have had make an assumption regarding the traffic growth rate parameter when considering the two scenarios in the analysis.

Historic data and current impacts Historic traffic data for this project is available through website of the Ministerio de Fomento. We also received more data and guidance on how to use it during the stakeholder meetings we had with members of the Ministerio de Fomento, in Teruel and Zaragoza (this last regarding the segment Huesca). Apart from receiving data we were informed that according to their analysis the A23 has not generated new traffic, either induced or modal shift.

Forecast of impacts In order to carry out the ex post CBA for this project we have identified two possible scenarios, an optimistic and a pessimistic one. Both scenarios differ in

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the assumed level of traffic growth from 2010 onwards. To decide on the traffic growth rate for each scenario, we have taken into account the actual traffic growth rate in each segment since opening.  High case: we assume that in each year after 2010 traffic on the A23 motorway grows at 5%. This is equal to the actual average annual growth rate of traffic on the corridor of the A23 between 1999/2000 and 2008.  Low case: we assume a traffic growth rate in this case is 2.5%, equal to half of the one assumed in the high case scenario. We note that we have not considered the possible network effects that the construction of the Somport tunnel will have on the whole traffic demand, especially for the Huesca – Nueno segment. This is because the tunnel is not expected to be finalised in the near future.

4.3 Review ex ante cost-benefit analysis The first assessments of the four subprojects included in this project were carried out in 19929 and 1994.10 These were part of public information procedures (Estudio Informativo) covering large segments of the A23 (Villanueva de Gállego – Nueno and Teruel – Zaragoza). These assessments included a profitability analysis for each of the subprojects under analysis. They also considered costs and benefits of different alternatives for each subproject. Later, in 1999 and 2003, and before the submission of the application for subsidies were submitted for each subproject, the Ministerio de Fomento prepared an ex ante CBA of the main implementation option for each subproject. We have focused the review of the ex ante CBA on these analyses. For all four of them, the methodology used is the one recommended by the Spanish Public Works Ministry in 1992.11 Given that a unique ex ante CBA covering all four subprojects does not exist, we present the results of the four individual ex ante CBA carried out at the time. Note that the four ex ante CBA do not use the same base year and discount rates to calculate the net present value and IRR indicators. We start reporting the figures included in the original submissions and then present the same indicators using a common base year and discount rate.

9 Ministerio de Obras Públicas, Transportes y Medio Ambiente, “Estudio Informativo de la Autovía Levante Aragón, Tramo Villanueva de Gállego - Nueno”, Estudio de Rentabilidad, 1992. 10 Ministerio de Obras Públicas, Transportes y Medio Ambiente, “Estudio Informativo de la Autovía Levante Aragón, Tramo Teruel – Zaragoza”, Estudio de Rentabilidad, 28 Febrero 1994. 11 Ministerio de Obras Públicas y Transportes – Dirección General de Carreteras, “Recomendaciones para la Evaluación Económica de Estudios y Proyectos de Carreteras”, 1992.

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4.3.1 Headline results from the analysis

Economic analysis The ex ante CBAs prepared by Ministerio de Fomento, and used to prepare the four applications for funding, considered just the option implemented. They assessed it against the counterfactual of the old road being maintained. In all four subprojects, the economic costs and benefits were calculated over a period of 34 years. In the three 1999 submissions the net economic benefits were calculated using a 6% discount rate. The only difference between these three CBAs was the starting year in which the net benefits were calculated. In the Huesca-Nueno subproject the base year was 1998, while in the other two subprojects, in the Teruel province, the costs and benefits were discounted to 1999. In the 2003 submission, Teruel (N) to Santa Eulalia del Campo, the net economic benefits were calculated using 2002 as a base year and a 5% discount rate. Table 13 shows the economic indicators for each of the four subprojects included in the analysis, together with the underlying assumptions regarding the base year and discount rate used in the calculations. In all four cases the economic costs and benefits have been calculated over a period of 34 years, assuming 3 years of constructions and 31 years of operations thereafter. The subproject Teruel(N) to Santa Eulalia del Campo should significantly larger economic benefits than the other the projects. We have not been able to pin down the specific causes for this, although we believe that the reported NPV does not include a significant amount of the initial capital costs.

Table 13. Results of ex ante cost benefit analysis

Subproject Discount Base Net Present Value Economic BCR rate year (€ million) IRR (%)

Huesca to Nueno 6% 1998 2.60 7.05 1.12

Monreal del Campo to 6% 1999 15.98 9.45 1.51 Calamocha

Santa Eulalia del Campo to 6% 1999 1.57 6.15 1.02 Monreal del Campo

Teruel(N) to Santa Eulalia del Campo 5% 2002 90.80 16.65 2.93

Source: Ministerio de Fomento

We have re-calculated these economic indicators using common assumptions regarding the base year and the discount rate. By doing so, we have been able to calculate a unique NPV, IRR and BCR covering all four subprojects under study.

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We have assumed a discount rate equal to 5.5% (as used in the ex post CBA) and used 1998 as base year. Overall, the whole project has a positive NPV and satisfactory IRR and benefit-cost ratio.

Table 14. Results of ex ante cost benefit analysis – Revision

Net Present Value Economic IRR BCR (€ million, 1998 prices) (%)

Whole project 86.54 9.14 1.56

Source: Frontier Economics using data from Ministerio de Fomento

Financial analysis The A23 motorway is a toll free road. The applications for funding submitted in 1999 and 2003 do not include any financial analysis for any of the subprojects under study.

4.3.2 Key aspects of ex ante CBA

Demand analysis The ex ante cost-benefit analysis assumed that the new segments in the A23 were not going to generate any induced traffic. On the other hand, the assumed traffic growth during the period under study ranged between 0.88%, for the last 25 years in the Teruel – Santa Eulalia del Campo subproject (with assumed 1.9% in the first 5 years), and 3%, for the whole period in the 2 subprojects covering Santa Eulalia del Campo to Calamocha. In the subproject Huesca to Nueno a 4% traffic growth was assumed throughout the considered period. Growth assumptions are based on historical information for the 1987-1996 period. In terms of percentages of heavy goods vehicles the ex ante analysis considered a minimum of 12 in the Huesca to Nueno subproject, and 27 in the 2 subprojects covering Santa Eulalia del Campo to Calamocha.

Direct benefits One of the objectives of the A23, listed in the various applications for funding, was to achieve significant time savings, thanks to the increase in speeds and the lower traffic congestion in the new road compared to the old one. In the four segments under study the speeds were expected to increase, from 63-90 Km/h to 120 Km/h for cars and light good vehicles, and from 51-73 Km/h to 90-97 Km/h for heavy good vehicles.

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Table 15. Time savings (minutes) generated by the new road

Time savings (minutes) Subprojects Car and LGV HGV Huesca to Nueno 4.4 5.4

Monreal del Campo to Calamocha 5.9 7.3

Santa Eulalia del Campo to Monreal del Campo 9.7 11.8

Teruel Norte to Santa Eulalia del Campo 7.1 8.7

Source: Ministerio de Fomento

In all the four subproject-specific ex ante CBAs time savings appear to be the main driver of economic benefits. For all four subprojects the benefits related to the time savings more than compensate the costs arising from the increase in vehicle operating costs and fuel consumption. VOC and fuel consumption are higher in the new road due to higher speeds. According to the ex ante analysis, operating costs and fuel consumption were expected to increase, on average for the four subprojects, by 15% for cars and LGV and by 26% for HGV, with the new road. On the contrary, costs related to time consumption were expected to decrease by 39% for cars and LGV and 38% for HGV. In addition to the time savings, vehicle operating costs and fuel consumption, the other relevant element included in the calculation of costs and benefits are the benefits related to the accidents occurring in the road. In all four subprojects the net benefits related to the reduction of accidents are always positive and significant. Specifically, the average reduction of unitary costs related to accidents for the four subprojects is 43% for cars and LGV and 46% for HGV.

Sensitivity analysis A sensitivity analysis was carried out in each of the four ex ante CBAs. In all cases two scenarios were tested, regarding the assumed traffic growth and the value of time. Scenario 1 assumes a lower traffic growth rate in each of the four subprojects. In Scenario 2, the value of time for cars and LGVs was reduced in order to induce a 20% reduction in the series of net benefits.

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Table 16 shows the economic IRR indicators obtained in the sensitivity analysis for each of the four subprojects.12 The sensitivity analysis shows a negative NPV for the subproject Monreal del Campo to Calamocha under both alternative hypothesis. Also, the subproject Huesca to Nueno shows a negative NPV when a lower value of time is considered. In all other cases the sensitivity analysis does not change the sign of the economic indicators. In addition to these two hypothesis, an additional hypothesis assuming a higher traffic growth was considered for the subproject Teruel(N) to Santa Eulalia del Campo, resulting in a 24.75% economic IRR.

Table 16. Results of the sensitivity analysis

Economic IRR Discount Subprojects rate Original Scenario 1 Scenario 2

Huesca to Nueno 7.1% 6.4% 3.6% 6%

Monreal del Campo to 9.5% 8.5% 7.2% 6% Calamocha

Santa Eulalia del Campo to 6.2% 5.3% 4.2% 6% Monreal del Campo

Teruel Norte to Santa Eulalia 16.7% 15.6% 14.0% 5% del Campo

Source: Ministerio de Fomento

4.3.3 Quality of ex ante CBA Overall, the quality of the ex ante Cost Benefit Analysis of the four subprojects is high. We have found that all of them follow a well established methodology proposed by the Ministerio de Fomento. Another positive aspect of the ex ante CBAs is that it is clearly stated the parameters used (i.e. unit costs, unit consumptions, value of time, etc.) and their source. As mentioned above, ex ante CBAs also included sensitivity analysis. Two alternative scenarios were included regarding the assumed traffic growth and the value of time.

12 The sign of the other indicators can be easily deducted from this. An IRR higher than the discount rate results in a positive NPV and a BCR above one. An IRR lower than the discount rate results in a negative NPV and a BCR below one.

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On the other hand, the main drawback of the ex ante CBAs of the four subprojects is related to the quality of the demand forecast. Based on the documentation we have reviewed, the methodology used to estimated future demand is unclear. Also, the assumption that the new infrastructure would not generate induced traffic is questionable. Finally, it should be mentioned that ex ante CBAs consider as counterfactual that the old road would be closed, but actually it was maintained opened and it currently a significant volume of traffic.

4.4 Differences between ex post and ex ante analysis Table 17 compares the aggregate results of the ex ante economic analysis with the results of the ex post CBA for all the four subprojects included in this study, segments Teruel (N) to Calamocha and Huesca to Nueno.

Table 17. Comparison ex ante and ex post economic CBA (2010 prices)

Ex ante Ex post

Low case High case

Net Present Value (€m) 120.3 -27.7 27.6

Economic IRR (%) 9.14 4.6 6.3

Benefit-cost ratio 1.56 0.9 1.1

Source: Own elaboration with data from the Ministerio de Fomento

As mentioned in section 4.3.1, the ex ante economic indicators for the whole project have been calculated using the series of net economic benefits corresponding to the four subprojects. We have recalculated these series using a common base year, 2010, and the discount factor suggested by the EC Guide to Cost-Benefits Analysis (5.5%). The original ex ante economic analysis used either 1998 or 2002 as the base year and a discount factor equal to 5% or 6%. The economic IRR resulting from the ex ante analysis is 9.14%. This result is above the range of the ex post CBA carried out in this exercise. However, the high case scenario in the ex post analysis confirms that the economic benefits of the project exceed its costs. We note the high case scenario assumes a long-run growth rate of traffic equal to the growth observed in the corridor since the completion of the first segments. There main differences between the two analyses stem from the following areas:  parameters for the value of time and cost of fuel

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 time savings  volume of traffic and percentage of HGV  safety conditions

Value of fuel and time In both the ex ante and the ex post analyses, the higher driving speeds achieved on the new road generate two opposite effects in terms of induced benefits. On the one hand, higher speeds result in time savings that generate positive economic benefits. On the other hand, these speeds cause high fuel consumption and higher vehicle operating costs which result in negative economic benefits. Net economic benefits from time savings use parameters for the value of time for cars, LGV and HGV that Ministerio de Fomento keeps regularly updated. Ministerio de Fomento also updates regularly the parameters for the cost of fuel parameters and vehicle operating costs.

Table 18. Parameters for value of time, fuel costs and VOC

Ex ante Ex post

Value of time (€/hour)

Car and LGV 9.3 14.63

HGV 16 25.08

Fuel and VOC

Petrol (€/litre) 0.28 0.58

Diesel (€/litre) 0.25 0.59

Oil (€/litre) 3.06 (3.42) 4.21 (4.71)

Tyres(*) 281 (3,845) 386 (5,285)

Source: Ministerio de Fomento (*) 4 tyres in cars and LGVs, 6 tyres in HGVs Table 18 shows that fuel cost parameters have increase by more than 100% since the ex ante analysis was carried out. In contrast, the value of time has increased by approximately 50%. Time savings and fuel costs are the main drivers of the net economic benefits induced by the project. The significant decrease of the economic indicators in the ex post analysis is mainly the result of the change in relative values of these two parameter sets.

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Time savings The ex ante analysis forecast a total amount of time savings along the four segments considered equal to 27 and 33 minutes for cars/LGVs and HGVs respectively. In the ex post analysis, and according to the speed data obtained from the Ministerio de Fomento, actual time savings achieved through the four segments are 13 and 9.3 minutes, significantly lower that what was originally assumed.

Traffic volumes The ex ante analysis forecast that traffic growth on the new A23 would be around 3% annually. Historic traffic data shows that the long-run annual growth rate of traffic has been around 5%. This 5% has been used as the traffic growth rate after 2010 in the optimistic scenario of the ex post analysis.

Safety conditions Information provided by the Ministerio de Fomento used in the ex post CBA suggests that safety condition were undervalued in the ex ante analysis. The average reduction of fatalities and injuries per km in the ex ante analysis was 53% and 13% respectively. Ex post information considers an average reduction of 100% and 83% respectively.

4.5 Role of CBA in decision-making process We have talked with Ministerio de Fomento - Unidad de Carreteras de la Demarcación de Aragón regarding the role of CBA in the decision making process. We have received confirmation that the decision to construct the A23 was mainly political. Despite this, the decision among different alternatives regarding the exact configuration of the road was based on two economic analyses undertaken by the Demarcación de Carreteras del Estado en Aragón. For the three subprojects in the province of Teruel, they were included in a study covering the segment “Teruel - Zaragoza”.13 The Huesca to Nueno was included in a study covering the segment “Villanueva de Gállego – Nueno”.14 The methodology used in both economic analyses followed the recommendations to evaluate road projects in Spain published by Ministerio de Obras Publicas y Transportes at the time. The study covering the segment “Teruel - Zaragoza” followed the methodology still used today and published in

13 Ministerio de Obras Públicas, Transportes y Medio Ambiente, “Estudio Informativo de la Autovía Levante Aragón, Tramo Teruel – Zaragoza”, Estudio de Rentabilidad, 28 Febrero 1994. 14 Ministerio de Obras Públicas, Transportes y Medio Ambiente, “Estudio Informativo de la Autovía Levante Aragón, Tramo Villanueva de Gállego - Nueno”, Estudio de Rentabilidad, 1992.

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1992.15 The study covering the segment “Villanueva de Gállego – Nueno” used a previous methodology of 1990. In both cases the methodology recommended by Ministerio de Fomento proposes the use of a multi-criteria analysis to choose among different alternatives for each of the sub-segments in which the overall project has been previously determined. In the analysis reviewed the option to use the current road is included among the alternatives considered. Even though the decision to construct the A23 motorway was mainly political, the choice of alternatives regarding the configuration of the new road appears to have been based on a sound economic analysis.

15 Ministerio de Obras Públicas y Transportes – Dirección General de Carreteras, “Recomendaciones para la Evaluación Económica de Estudios y Proyectos de Carreteras”, 1992.

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Annexe 1: Detailed results

A23 Motorway in Spain

Figure 6. A23 Motorway – Spain. Economic analysis (€m, 2010 prices) – Low case

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

BENEFITS Consumers Surplus Time Benefits 0.0 0.0 0.0 1.8 3.2 3.2 3.4 3.4 8.0 9.0 10.1 10.4 10.6 Vehicle Operating Costs 0.0 0.0 0.0 -1.3 -2.5 -2.7 -2.8 -2.8 -3.1 -3.4 -4.0 -4.1 -4.2 Environmental Benefits 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Accident Reduction 0.0 0.0 0.0 2.8 4.2 4.3 4.7 4.6 7.0 7.9 8.7 8.9 9.1

TOTAL BENEFITS 0.0 0.0 0.0 3.3 4.8 4.9 5.3 5.2 12.0 13.5 14.8 15.1 15.5

COSTS Investment Costs Land Purchase / Construction / … No breakdown figures available Other Total Investment costs 2.2 34.0 74.3 46.0 13.7 22.0 27.8 27.0 0.0 0.0 Maintanance Costs 0.0 0.0 0.0 0.6 1.0 1.0 1.0 1.0 2.6 1.5 1.5 1.5 1.5 TOTAL COSTS 2.2 34.0 74.3 46.6 14.7 22.9 28.8 28.0 2.6 1.5 1.5 1.5 1.5

NET BENEFITS -2.2 -34.0 -74.3 -43.3 -9.9 -18.1 -23.5 -22.9 9.4 12.0 13.3 13.7 14.0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

BENEFITS Consumers Surplus Time Benefits 10.9 11.2 11.5 11.8 12.0 12.3 12.7 13.0 13.3 13.6 14.0 14.3 14.7 Vehicle Operating Costs -4.3 -4.4 -4.6 -4.7 -4.8 -4.9 -5.0 -5.2 -5.3 -5.4 -5.6 -5.7 -5.8 Environmental Benefits 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Accident Reduction 9.3 9.6 9.8 10.0 10.3 10.5 10.8 11.1 11.4 11.6 11.9 12.2 12.5

TOTAL BENEFITS 15.9 16.3 16.7 17.1 17.5 18.0 18.4 18.9 19.4 19.9 20.4 20.9 21.4

COSTS Investment Costs Land Purchase / Construction / … No breakdown figures available Other Total Investment costs Maintanance Costs 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 TOTAL COSTS 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5

NET BENEFITS 14.4 14.8 15.2 15.7 16.1 16.5 17.0 17.4 17.9 18.4 18.9 19.4 19.9

2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

BENEFITS Consumers Surplus Time Benefits 15.0 15.4 15.8 16.2 16.6 17.0 17.4 17.9 16.7 9.9 10.1 10.4 10.6 Vehicle Operating Costs -6.0 -6.1 -6.3 -6.4 -6.6 -6.8 -6.9 -7.1 -6.4 0.3 0.3 0.3 0.3 Environmental Benefits 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Accident Reduction 12.9 13.2 13.5 13.8 14.2 14.5 14.9 15.3 11.3 4.4 4.5 4.6 4.8

TOTAL BENEFITS 21.9 22.5 23.0 23.6 24.2 24.8 25.4 26.1 21.5 14.5 14.9 15.3 15.6

COSTS Investment Costs Land Purchase / Construction / … No breakdown figures available Other Total Investment costs Maintanance Costs 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.2 0.5 0.5 0.5 0.5 TOTAL COSTS 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.2 0.5 0.5 0.5 0.5

NET BENEFITS 20.4 21.0 21.6 22.1 22.7 23.3 23.9 24.6 20.4 14.0 14.4 14.8 15.1

Discount Rate 5.5% ENPV -27.7 ERR 4.6% B/C Ratio 0.9

Source: Own calculations

Annexe 1: Detailed results

32 Frontier Economics, Atkins, ITS | March 2011

Figure 7. A23 Motorway – Spain. Financial return on investment (€m, 2010 prices) – Low case

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

TOTAL REVENUES 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Land Purchase / Construction / … No breakdown figures available Other TOTAL INVESTMENT COSTS 2,2 34,0 74,3 46,0 13,7 22,0 27,8 27,0 0,0 0,0 0,0 0,0 0,0

Maintenance 0,0 0,0 0,0 0,6 1,0 1,0 1,0 1,0 2,6 1,5 1,5 1,5 1,5 TOTAL OPERATING COSTS 0,0 0,0 0,0 0,6 1,0 1,0 1,0 1,0 2,6 1,5 1,5 1,5 1,5 TOTAL OUTFLOWS 2,2 34,0 74,3 46,6 14,7 22,9 28,8 28,0 2,6 1,5 1,5 1,5 1,5

CASH FLOW -2,2 -34,0 -74,3 -46,6 -14,7 -22,9 -28,8 -28,0 -2,6 -1,5 -1,5 -1,5 -1,5

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

TOTAL REVENUES 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Land Purchase / Construction / … No breakdown figures available Other TOTAL INVESTMENT COSTS 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Maintenance 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 TOTAL OPERATING COSTS 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 TOTAL OUTFLOWS 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5

CASH FLOW -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5

2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

TOTAL REVENUES 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Land Purchase / Construction / … No breakdown figures available Other TOTAL INVESTMENT COSTS 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Maintenance 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,2 0,5 0,5 0,5 0,5 TOTAL OPERATING COSTS 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,2 0,5 0,5 0,5 0,5 TOTAL OUTFLOWS 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,2 0,5 0,5 0,5 0,5

CASH FLOW -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,2 -0,5 -0,5 -0,5 -0,5

Discount rate 5,0% FNPV (C) -230 FRR (C) #DIV/0!

Source: Own calculations

Annexe 1: Detailed results

March 2011 | Frontier Economics, Atkins, ITS 33

Figure 8. A23 Motorway – Spain. Financial return on capital (€m, 2010 prices) – Low case

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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 0.0 0.0 0.0

Local contribution Regional contrintribution National contribution 0.3 5.2 10.7 7.1 2.2 4.9 6.1 6.0 Total national public contribution 0.3 5.2 10.7 7.1 2.2 4.9 6.1 6.0 0.0 0.0 0.0 0.0 0.0 Maintenance 0.0 0.0 0.0 0.6 1.0 1.0 1.0 1.0 2.6 1.5 1.5 1.5 1.5 Total Operating Costs 0.0 0.0 0.0 0.6 1.0 1.0 1.0 1.0 2.6 1.5 1.5 1.5 1.5 TOTAL FINANCIAL OUTFLOWS 0.3 5.2 10.7 7.7 3.2 5.8 7.1 7.0 2.6 1.5 1.5 1.5 1.5

NET CASH FLOW -0.3 -5.2 -10.7 -7.7 -3.2 -5.8 -7.1 -7.0 -2.6 -1.5 -1.5 -1.5 -1.5

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

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 0.0 0.0 0.0

Local contribution Regional contrintribution 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 0.0 0.0 0.0 Maintenance 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 Total Operating Costs 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 TOTAL FINANCIAL OUTFLOWS 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5

NET CASH FLOW -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5

2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

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 0.0 0.0 0.0

Local contribution Regional contrintribution 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 0.0 0.0 0.0 Maintenance 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.2 0.5 0.5 0.5 0.5 Total Operating Costs 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.2 0.5 0.5 0.5 0.5 TOTAL FINANCIAL OUTFLOWS 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.2 0.5 0.5 0.5 0.5

NET CASH FLOW -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -1.2 -0.5 -0.5 -0.5 -0.5

Discount rate 5.0% FNPV (K) -55 FRR (K) N/A

Source: Own calculations

Annexe 1: Detailed results

34 Frontier Economics, Atkins, ITS | March 2011

Figure 9. A23 Motorway – Spain. Financial sustainability (€m, 2010 prices) – Low case

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

EU Grant 1,9 28,8 63,6 38,9 11,5 17,1 21,6 21,1 Local contribution Regional contrintribution National contribution 0,3 5,2 10,7 7,1 Total national public contribution 0,3 5,2 10,7 7,1 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 Operating subsidies FINANCIAL RESOURCES 2,2 34,0 74,3 46,0 11,5 17,1 21,6 21,1 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 0,0 0,0 0,0 TOTAL INFLOWS 2,2 34,0 74,3 46,0 11,5 17,1 21,6 21,1 0,0 0,0 0,0 0,0 0,0

Land Purchase / Construction / … No breakdown figures available Other TOTAL INVESTMENTS COSTS 2,2 34,0 74,3 46,0 13,7 22,0 27,8 27,0 Maintenance 0,0 0,0 0,0 0,6 1,0 1,0 1,0 1,0 2,6 1,5 1,5 1,5 1,5 TOTAL OPERATING COSTS 0,0 0,0 0,0 0,6 1,0 1,0 1,0 1,0 2,6 1,5 1,5 1,5 1,5 TOTAL OUTFLOWS 2,2 34,0 74,3 46,6 14,7 22,9 28,8 28,0 2,6 1,5 1,5 1,5 1,5

NET CASH FLOW 0,0 0,0 0,0 -0,6 -3,2 -5,8 -7,1 -7,0 -2,6 -1,5 -1,5 -1,5 -1,5 CUMULATED CASH FLOW 0,0 0,0 0,0 -0,6 -3,8 -9,6 -16,8 -23,7 -26,3 -27,8 -29,3 -30,7 -32,2

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

EU Grant Local contribution Regional contrintribution 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 0,0 0,0 0,0 Operating subsidies FINANCIAL RESOURCES 0,0 0,0 0,0 0,0 0,0 0,0 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 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 0,0 0,0 0,0

Land Purchase / Construction / … No breakdown figures available Other TOTAL INVESTMENTS COSTS 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 Maintenance 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 TOTAL OPERATING COSTS 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 TOTAL OUTFLOWS 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5

NET CASH FLOW -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 CUMULATED CASH FLOW -33,7 -35,2 -36,6 -38,1 -39,6 -41,0 -42,5 -44,0 -45,4 -46,9 -48,4 -49,8 -51,3

2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

Land Purchase / Construction / … No breakdown figures available Other TOTAL INVESTMENTS COSTS 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 Maintenance 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,2 0,5 0,5 0,5 0,5 TOTAL OPERATING COSTS 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,2 0,5 0,5 0,5 0,5 TOTAL OUTFLOWS 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,2 0,5 0,5 0,5 0,5

NET CASH FLOW -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,5 -1,2 -0,5 -0,5 -0,5 -0,5 CUMULATED CASH FLOW -52,8 -54,3 -55,7 -57,2 -58,7 -60,1 -61,6 -63,1 -64,2 -64,7 -65,2 -65,7 -66,2

Source: Own calculations

Annexe 1: Detailed results

March 2011 | Frontier Economics, Atkins, ITS 35

Figure 10. A23 Motorway – Spain. Economic analysis (€m, 2010 prices) – High case

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

BENEFITS Consumers Surplus Time Benefits 0.0 0.0 0.0 1.8 3.2 3.2 3.4 3.4 8.0 9.0 10.1 10.6 11.2 Vehicle Operating Costs 0.0 0.0 0.0 -1.3 -2.5 -2.7 -2.8 -2.8 -3.1 -3.4 -4.0 -4.2 -4.4 Environmental Benefits 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Accident Reduction 0.0 0.0 0.0 2.8 4.2 4.3 4.7 4.6 7.0 7.9 8.7 9.1 9.6

TOTAL BENEFITS 0.0 0.0 0.0 3.3 4.8 4.9 5.3 5.2 12.0 13.5 14.8 15.5 16.3 17.1

NET BENEFITS -2.2 -34.0 -74.3 -43.3 -9.9 -18.1 -23.5 -22.8 9.4 12.0 13.3 14.0 14.8 15.6

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

BENEFITS Consumers Surplus Time Benefits 11.7 12.3 12.9 13.6 14.3 15.0 15.7 16.5 17.3 18.2 19.1 20.1 21.1 Vehicle Operating Costs -4.7 -4.9 -5.1 -5.4 -5.7 -6.0 -6.2 -6.6 -6.9 -7.2 -7.6 -8.0 -8.4 Environmental Benefits 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Accident Reduction 10.0 10.5 11.1 11.6 12.2 12.8 13.5 14.1 14.8 15.6 16.4 17.2 18.0

TOTAL BENEFITS 17.1 18.0 18.9 19.8 20.8 21.8 22.9 24.1 25.3 26.5 27.9 29.3 30.7

NET BENEFITS 15.6 16.5 17.4 18.3 19.3 20.4 21.5 22.6 23.8 25.1 26.4 27.8 29.3

2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

BENEFITS Consumers Surplus Time Benefits 22.1 23.2 24.4 25.6 26.9 28.2 29.6 31.1 29.7 18.0 18.9 19.8 20.8 Vehicle Operating Costs -8.8 -9.2 -9.7 -10.2 -10.7 -11.2 -11.8 -12.4 -11.5 0.5 0.5 0.5 0.5 Environmental Benefits 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Accident Reduction 18.9 19.9 20.9 21.9 23.0 24.2 25.4 26.6 20.2 8.1 8.5 8.9 9.4

TOTAL BENEFITS 32.3 33.9 35.6 37.3 39.2 41.2 43.2 45.4 38.4 26.5 27.9 29.3 30.7

NET BENEFITS 30.8 32.4 34.1 35.9 37.7 39.7 41.8 43.9 37.2 26.0 27.4 28.8 30.2

Discount Rate 5.5% ENPV 27.6 ERR 6.3% B/C Ratio 1.1

Source: Own calculation

Annexe 1: Detailed results

36 Frontier Economics, Atkins, ITS | March 2011

Figure 11. A23 Motorway – Spain. Financial return on investment (€m, 2010 prices) – High case