Comparison between new financial analysis and ECI-result (2002)

Transcription

1 REPORT FEHMARNBELT FIXED LINK Financial Analysis - February 23 Comparison between new financial analysis and ECI-result (22) Prepared by Sund & Bælt / Femer Bælt March 23 A division of Sund & Bælt Holding A/S Vester Søgade 1 DK-161 Copenhagen V Tel Fax Reg. no CVR no

2 TABLE OF CONTENTS PAGE 1. Introduction Updated traffic forecast and new assessments of railway payment Results of Financial Analysis Financial results for the BOT model Financial results for the PPP-model (State Guaranteed model) Impact on Governments Economy Alternative traffic Scenarios Financial sensitivities Partial sensitivities Borderline scenarios Conclusions...12 APPENDIX I: General assumption in the financial calculations...15 APPENDIX II: Support and Revenues for the two Governments...16

3 1. Introduction In 21/22 an ECI (Enquiry of Commercial Interest) was carried out where the Private Sector s interest in the implementation of the Fehmarnbelt Fixed Link project was investigated. On the basis of the Private Sector s response different business cases were developed to illustrate how the Private and Public Sector could organise themselves to realise the project under financially viable conditions. In continuation of the ECI report 1 a number of analyses related to the Fehmarnbelt project have been carried out. Among these an update of the 1999-traffic forecast and new assessments of the railway sectors ability to pay for the utilisation of the Fixed Link have given rise to recalculate two of the previously reported business cases for the Fehmarnbelt Fixed Link project. Below in part 1 the new regarding traffic forecast and railway payment will be compared to the previous. In part 2 the summarized financial results of the February 23 recalculation of the BOTmodel and the PPP-model (State Guaranteed model) will be presented as well as the consequences for the Governments economy. In part 3 the financial results of four alternative traffic scenarios are stated. In part 4, the calculations of the Project s sensitivity to changes in some of the basic are presented. Finally, Part 5 summarizes the conclusions of the financial analysis. 2. Updated traffic forecast and new assessments of railway payment The updated traffic forecast has been prepared by Fehmarnbelt Traffic Consortium (FTC) under two different sets of regarding the future development of the transport sector (Base Case A, Base Case B). The Base Case A is based on the Bundesverkehrswegeplanung Integration scenario containing significant changes in transport user costs in particular in favour of rail transport. The Base Case B is based on an extrapolation of the transport user costs of the 1999 Fehmarnbelt forecast with some revisions to reflect changes that have occurred since the forecast was made. The updated 22-traffic forecast shows the following figures compared to the 1999-traffic forecast, also prepared by FTC. 1 FDJV, Fehmarnbelt, An infrastructure investment, Finance and Organisation, June 22 1

4 Table 1: Traffic forecasts Vehicles pr. year 1999-forecast ECI report 22-forecast Base Case A Year forecast Base Case B Year 215 Year 21 Passenger cars 2,268, 2,736, 2,842, Trucks 481, 413, 452, Buses 59, 47, 47, Total 2,88, 3,196, 3,341, Average daily traffic 7,693 8,756 9,153 The 1999-traffic study forecasted the number of vehicles on the Fixed Fehmarnbelt Link in year 21. A Fixed Link will not be implemented in 21 and the new study, therefore, forecasts the number of vehicles on the Fixed Link in year 215. For that reason a direct comparison is difficult. In the financial calculations shown below, the number of vehicles for a possible opening year 212 has been stipulated which makes a direct comparison with the results presented in the ECI report possible. The financial model operates with a four year ramp-up period meaning that the level of the traffic forecast is reduced with 2%, 15%, 1% and 5%, respectively, in the first 4 years of operation. Further, it is assumed that the traffic has an underlying growth of 1.7% per year in the operation period. This assumption is maintained from the ECI-calculations and it is the mid-point in the FTC-trend forecast where the range is defined to be % per year. The new stipulated traffic forecast in the first year of operation (year 212) compared to the 1999-stipulated forecast is as follows: Table 2: Stipulated traffic forecasts year 212 (incl. ramp-up effect) 1, vehicles forecast ECI report 22-forecast Base Case A 22-forecast Base Case B Passenger cars 1,877 2,81 (+11%) 2,161 (+15%) Trucks (-21%) 344 (-14%) Buses (-25%) 36 (-25%) Total 2,324 2,431 (+5%) 2,541 (+9%) Average daily traffic 6,367 6,66 6,962 Note: In brackets the percentage change in relation to the ECI report. The table shows that the 22 traffic forecasts stipulate a higher total number of vehicles than the 1999-forecast. However, the composition of vehicles is changed with a 11-15% higher volume of passenger cars paying the low toll and a 14-21% smaller volume of trucks and 25% smaller volume for buses both paying the high toll. 2

5 Compared to the traffic forecast the new traffic forecast is based on a new set of assumed toll rates for passing the Fixed Fehmarnbelt Link. The new set of toll rates is the underlying toll rates used to determine the traffic volumes in the 22-forecast. Table 3: Tolls for passing the Fixed Fehmarnbelt Link EUR excl VAT 1999-forecast 22-forecast 212-prices ECI report Passenger cars 71 5 (-3%) Trucks (-5%) Buses (+4%) Railway payment (m EUR) (-43%) Note: In brackets the percentage change in relation to the ECI report. The basis for the tolls in the 22-forecast has been the fares on the existing ferry line between Rødby and Puttgarden. The tolls for trucks and buses are estimated average ferry fares where different forms of discounts have been taken into account. The toll for passenger cars is the list price - 46 in 22-prices. This assumption covers the expectation that frequent users probably will be granted a certain discount and users with caravans or trailers have to pay an extra charge. It has been assumed that the development in the tolls will follow the assumed general inflation of 2.5% p.a. from 22 and to the end of the operation period. It should be noted that present the ferry fare for a passenger car corresponds to 6 EUR (212-prices excl. VAT). However, it has been assumed that the consumer expenditure for crossing the Fehmarn Belt after opening of the Fixed Link has to be unchanged compared with the ferry service. According to the current EU VAT-laws transport of passenger cars by ferry is exempted for VAT, but the toll for passenger cars paid for passing a fixed link is imposed VAT. The net result of this difference is a reduced income for the project, corresponding to the VAT on tolls for passenger cars. The reduction due to VAT is 1 EUR (VAT 2.5% average of VAT in Germany and Denmark). Therefore the income for the project per passenger car is 5 EUR (212-prices). The possible payment of the railway sector for the utilisation of the Fixed Link has been investigated by Tetraplan. The assessment has been made on basis of the stipulated railway traffic and takes different forms of savings that arise from the change of route through Denmark from the Great Belt fixed link to the Fehmarnbelt into consideration. The savings consist of savings in operation, saving in infrastructure charges and value of time savings. All elements are considered for passenger trains as well as for freight trains. The results are a minimum annual railway payment of 45 m EUR (22-prices) excluding value of time savings and a maximum annual railway payment of 71.8 m EUR where all three elements are included. 3

6 The Ministries of Transport of Denmark and Germany have decided to leave value of time savings out of account and have set an total income for the project from the railway operators of both passenger and freight traffic to 5 m EUR per year (22 prices) corresponding to 64 m EUR (212-prices) for financial calculation purposes for both investigated Base Cases. Previous financial calculations (the ECI-report) have assumed 113 m EUR (212-prices) as the annual railway payment. All in all the basis for the 23 financial calculations has been substantial reductions in the assumed toll rates for passenger cars and for the payment from the railway sector. The consequences of these changes are illustrated by the changes in the expected income from the traffic in the opening year 212. Table 4: Revenue in 212 M EUR 1999-forecast 22-forecast 22-forecast 212-prices ECI report Base Case A Base Case B Passenger cars (-22%) 18 (-22%) Lorries (-24%) 83 (-19%) Buses 13 1 (-23%) 9 (-31%) Income Road (-24%) 2 (-2%) Railway (-43%) 64 (-43%) Total (-3%) 264 (-27%) Note: In brackets the percentage change in relation to the ECI report. It can be concluded that the revenue arising from the traffic in year 212 is reduced 27-3% depending on the underlying Base Case compared to the 1999-forecast in the ECI-report. The revenue for the rest of the operation period is assumed to rise by the inflation and the traffic growth both in the ECI calculation and in the February 23 calculations. Consequently, the total revenues in the February 23 are reduced 27-3% compared to the ECI calculation for the whole operation period. A more detailed list of the can be found in Appendix I. 3. Results of Financial Analysis The BOT-model (Business Case A) and the PPP-model (State Guaranteed model) (Business Case D) have been selected for further financial analysis of the impact of the updated traffic forecast and the new railway payment. In the following the changes of the financial results will be described and compared with the financial results for the same two ECI Business Cases A and D. 4

7 Compared to the previous ECI business cases all other for the financial calculations remain unchanged, including opening year in 212 and a 3 years concession period. A more detailed list of the can be found in Appendix I. 3.1 Financial results for the BOT model Using the 22 traffic forecast, the new toll and the new railway payment the financial calculations show the following changes compared to the ECI calculations in Government support to the project for the BOT model: Table 5: Government Support in the BOT model NPV (22), m EUR Base Case A Base Case B ECI report Changes in traffic volumes Changes in tolls Changes in railway payment February 23 calculation 1,561 1) 1,467 2) 1) Corresponding to 258 m EUR/year in the operation period 2) Corresponding to 243 m EUR/year in the operation period. The table shows that the need for Government Support has increased considerably for both Base Cases to 1,561 m EUR and 1,467 m EUR (net present values) depending on the underlying traffic forecast. These amounts correspond to an annual support of 258 m EUR and 243 m EUR in the operation period ( ). 3.2 Financial results for the PPP-model (State Guaranteed model) For the PPP-model the Debt Payback Period is the most relevant result of the financial calculation. In the table below the changes arising from each of the changed are stated as well as the total period for the February 23 calculations with respect to the Debt Pay Back period. Table 6: Debt Payback Period in the PPP-model Number of years Base Case A Base Case B ECI report Changes in traffic volumes +1-1 Changes in tolls Changes in railway payment February 23 calculation

8 The February 23 calculations show that the new traffic forecast, the new toll rates and the new railway payments result in an extension of the Debt Payback Period with 1-14 years. For the PPP-model it has been necessary to expand the calculation period to more than the previously assumed 3 years. The impact coming from the traffic volumes differs due to the changes in the composition of the traffic. In Base Case A the reduction in the expected traffic volumes for trucks paying the high tolls is greater than the reduction in Base Case B because of the different about user costs in the two Base Cases. In addition the rise in number of passenger cars is greater in Base Case B than in Base Case A. These two facts result in an increase of one year in Debt Payback Period for Base Case A and a reduction of one year in Base Case B. The impact coming from reduction in tolls is bigger for Base Case A then for Base Case B due to lower total traffic volumes especially lower number of trucks. The impact coming from a reduction in railway payment is obviously the same for the two cases. 3.3 Impact on Governments Economy The economy for the two governments will obviously be affected by an increased support but also by a lower corporate tax and a lower VAT income as a consequence of lower revenue coming from the assumption of lower tolls and the assumed lower railway payment. In the ECI report different surplus/deficits were calculated including the so-called surplus/deficit IV, illustrating the total economy for the two governments seen in a more macroeconomic perspective. The table below summarizes this surplus/deficit IV for the two selected business cases under the two different traffic forecasts and. More details regarding support and revenues for the two governments are presented in the appendix. Table 7: NPV (22), M EUR Surplus/Deficit IV for the two Governments under different forecast 1999-forecast ECI report 22-forecast Base Case A 22-forecast Base Case B BOT-model -38-1,253-1,132 PPP-model

9 The total Government Economy is of course worsening for both business cases. In the BOT model the deficit is worsening 8-95 m EUR (NPV) coming from the increased Government support and less VAT and corporate tax payments. In the PPP-model the surplus is reduced m EUR (NPV) coming from a lower NPV from project cash flow (NPV-value is negative for the 3 years period) and from less VAT and corporate tax payments. In the ECI-report it was stated that the difference between the BOT-model and the PPPmodel amounting to 1,156 m EUR could be seen as an expression of the price for the Governments of transferring the different forms of risks to the Private Sector. This difference has been increased by adopting the new traffic forecast and the new assessment of railway payment. The difference amounts to 1,448 m EUR and 1,396 m EUR for the 22-forecast. The financial results of the two different organizational models are not directly comparable, because in the State Guaranteed model the Government will handle the majority of the risks associated with the project, while in the BOT-model most of the risks are carried by the Private Sector. The value of those risks are a product of the cost and probability of such risks materializing, thus their associated costs. In theory a full comparison of the BOT-model and the PPPmodel would require a pricing of all risks. Such a calculation can be made when the project is more advanced, i.e. concretely defined. It is, however, judged that in financial terms such cost of risk will not fully remove the significant gap shown by the differences calculated above. 4. Alternative traffic Scenarios In an attempt to test the sensitivity of the calculated traffic demand the FTC study has forecasted predicted the traffic on the Fixed Link in 215 for four alternative traffic scenarios. The four scenarios are defined as follows: Scenario 1: Increased ferry services i.e. higher ferry frequency and faster vessels on the competing ferry lines on the Baltic Sea. Scenario 2: Increased ferry services (as in scenario 1) combined with a 25 % reduction in ferry fares for the competing ferries and 25 % rise in tolls and ferry fares on the Øresund. Scenario 3: Decreased ferry services combined with a 25 % rise in ferry fares for the competing ferries and a 25% drop in tolls and ferry fares on the Øresund. 7

10 Scenario 4: Like scenario 2 combined with a competing ferry service Rødby-Puttgarden operating in parallel with the Fixed Link. The scenarios are only investigated for the Base Case A and result in the following predicted average daily traffic in year 215: Table 8: Average daily traffic for the different scenarios, 215 Number of vehicles Base Case A Scenario 1 Scenario 2 Scenario 3 Scenario 4 Average daily traffic 8,756 8,395 (-4%) 8,14 (-8%) 9,449 (+8%) 7,359 (-16%) Note: In brackets the percentage change in relation to the Base Case A. In spite of the fact that the ferry fares and the tolls in the scenarios vary considerably the predicted average daily traffic varies only between + 8 % and -16 %. It can be concluded that the demand for crossing the Fehmarnbelt is fairly stable and inelastic. The corresponding changes in the needed Government support in the BOT model are: Table 9: Government Support needed in the different scenarios m EUR (NPV Base Case A Scenario 1 Scenario 2 Scenario 3 Scenario 4 22) Government Support 1,561 1,627 (+4%) 1,724 (+1%) 1,41 (-1%) 1,851 (+19%) Note: In brackets the percentage change in relation to the Base Case A. The needed Government Support is varying inversely with the average daily traffic and the maximum support is calculated to 1,851 m EUR in scenario 4 and the minimum support is calculated to 1,41 m EUR in scenario 3. These amounts should be seen in relation to the total investment of app. 2,825 m EUR (NPV). The Debt Payback Period in the PPP-model shows corresponding changes. Table 1: Debt Payback Period for the different scenarios Number of Years Base Case A Scenario 1 Scenario 2 Scenario 3 Scenario 4 Debt Payback Period The PPP-model shows the same effect as for the BOT-model. The maximum Debt Payback Period of 55 years can be found in scenario 4 and the minimum period of 32 years in scenario 3. 8

11 5. Financial sensitivities 5.1 Partial sensitivities The February 23 calculations have been based upon the same financial as the calculations in the ECI-report. Among the most important can be mentioned: Real interest rate 4 % p.a. Inflation 2.5 % p.a. Risk premium 2% p.a. Corporate tax 34 % Traffic growth 1.7% p.a. In order to test the sensitivity of the financial results separate calculations have been carried out for each of the following individual changes: Sensitivity: Sensitivity: Sensitivity: Railway payment changed by +/- 2% to 4/6 m EUR pr. year Real interest rate changed with +/- 1% to 3% or 5 % p.a. Traffic growth changed with +/-.5% to 1.2 % or 2.2 % pr. year The results of the sensitivity calculations for the BOT-model are: Table 11: NPV (22), M EUR Sensitivity: Government support needed Base Case A Base Case B February 23 calculation BOT model 1,561 1,467 Sensitivity: Railway payment 6 m EUR pr. year 4 m EUR pr. year 1,479 (-5%) 1,633 (+5%) 1,391 (-5%) 1,546 (+5%) Sensitivity: Real Interest Rate 5 % p.a. 3 % p.a. Sensitivity: Traffic Growth 2,2 % pr. year 1,2 % pr. year 1,827 (+17%) 1,31 (-2%) 1,53 (-4%) 1,615 (+3%) 1,739 (+18%) 1,213 (-17%) 1,41 (-4%) 1,519 (+3%) Note: In brackets the percentage change in relation to the February 23 calculation is stated 9

12 The partial sensitivity analysis shows that 2% change in railway payment and approx. 3% change in traffic growth result in small changes (3-5%) in the Government Support. On the other hand a 25% changes in the real interest rate shows a significant change (17-2%) in the Government Support. The results of similar sensitivity calculations for the PPP-model (State Guaranteed model) are: Table 12: Sensitivity: Debt Payback Period Number of years Base Case A Base Case B February 23 calculation PPP-model Sensitivity: Railway payment 6 m EUR pr. year 4 m EUR pr. year Sensitivity: Real Interest Rate 3 % p.a. 5 % p.a. Sensitivity: Traffic Growth 2.2 % pr. year 1.2 % pr. year 34(-3) 4(+3) 3(-7) 52(+15) 33(-4) 43(+6) 31(-2) 36(+3) 28(-5) 45(+12) 3(-3) 38(+5) Note: In brackets the change in numbers of years in relation to the February 23 calculation. Similar to the BOT model the sensitivity analysis shows that 2% change in railway payment and approx. 3% change in traffic growth result in small changes (3-6 years) in the Debt Payback Period. It also shows that a 25% change in the real interest rate has an impact of 5-15 years for the Debt Payback Period. 5.2 Borderline scenarios In order to illustrate the financial viability of the Fehmarnbelt project two borderline scenarios are designed. The scenarios are regarded as a best/optimistic case and a worst/pessimistic case. In each of the scenarios a few decisive parameters are chosen to be changed simultaneously in the financial calculation. The parameters are set as the outcome of an assessment based on the experience from the construction of the Fixed Links across the Great Belt and the Øresund combined with some common sense. The changed parameters are not the same for the two cases. 1

13 The likelihood for the case where all parameters are developing in a positive or a negative direction simultaneously has not been estimated but is probably small. It should be noted that the February 23-calculation must be regarded as cautious illustrated by the relatively high real interest rate, the four years ramp up period for the traffic, relative high operation and maintenance costs as well as the reduced income flow. The results of the February 23 calculations for the BOT-model and the PPP-model will form the basis for the calculations. The best/optimistic case is defined as follows: 1. Base Case B traffic 2. Real Interest Rate decreases by 1% to 3% 3. The traffic growth is set to 2.5% per year 4. Railway payment is set to 6 m EUR per year 5. Operation and maintenance costs reduced with 1 m EUR per year. The worst/pessimistic case is defined as follows: 1. Base Case A traffic 2. The investment cost is increased by 15 % 3. Traffic growth is set to 1.2% 4. Railway payment is set to 4 m EUR per year. The results of the calculations are: Table 13: Financial results of the best/optimistic and worst/pessimistic cases Best/Optimistic case February 23 calculations Worst/Pessimistic case Government Support in the BOT-model measured as m EUR,NPV ,561 2,71 Debt Payback Period in the PPP-model in years The two scenarios show that the Fehmarnbelt project in the optimistic case could be paid back in 23 years, which is extraordinarily well for a project of this type and scale. However the pessimistic case shows that organising the project as a BOT-project is not realistic and a 66 years Debt Payback Period in the PPP-model would probably not be regarded as acceptable. 11

14 6. Conclusions The impact of the 22 traffic forecast and the new assessment of the toll rates and the railway payment lead to a deterioration of the financial result of the project regardless of the chosen model (BOT or PPP). Compared to the ECI-calculations the BOT-model needs a doubled Government Support in the order of m EUR (NPV). In relation to the total investment of app. 2.8 m EUR (NPV) a Government Support of this magnitude indicates that the BOT-model is probably not suited as a financial model for the Project under the stated. As a result of the changed the Debt Payback Period for the PPP-model is extended to 1-14 years compared with the ECI-calculation resulting in a period of years. A Debt Payback Period of this length is in line with the Debt Payback Periods known from calculations of the Debt Payback Period for the Øresund and the Great Belt projects under similar. The new traffic study forecasts a higher total number of vehicles but also a changed composition of traffic categories. In total these changes have only small impacts on the financial result of the project. But the changed of tolls and lower railway payment have a significant impact on the financial result of the project. The changed assumption results in approximately a 5 % increase in the needed Government Support in the BOT-model and an increase in the Debt Payback Period of 6-8 years in the PPP-model. The impacts from the changed tolls show that the determination of the toll level is of the utmost importance for the financial viability of the project. The traffic scenarios with varying degrees of competition from the ferries across the Baltic Sea show that even dramatic changes in the price relation between the ferry fares and the tolls on the fixed link result in moderate changes in the traffic demand and correspondingly in the financial result. In the FTC report (March 23) the alternative traffic scenarios have been used to calculate the cross price elasticity for the Fehmarnbelt. The cross price elasticity is in this case an expression of how much the demand for one good is changed as consequence of a percentage change in the price in a good that can substitute the first one. In this case the elasticity expresses the change in the demand on the Fixed Link as a consequence of a change in the ferry fares at the competing ferry lines. The FTC report calculates price elasticity of for passenger cars and of for Lorries. These figures are regarded fairly low especially for passenger cars. It can be concluded that the total demand of road traffic on the fixed link is fairly inelastic and should to some extent give possibility to optimize the income flow for the project by 12

15 raising the tolls which improves the financial results considerably. However, too strong regulation of the tolls will leave room for a competing ferry line or result in a strengthened competition from the Great Belt Fixed Link. However, other analyses have shown that the competition between a Fixed Fehmarnbelt Link and the Great Belt Fixed Link is small due to the costs of a detour of 15 kilometres between Copenhagen and Hamburg via the Great Belt Fixed Link. The new assessment of the railway payment has a severe negative effect on the financial result of the project. The railway payment is determined on the basis of infrastructure change and operation cost savings for the railway operators but without regard to time savings. The reduction in railway payment is critical to the project and the amount of new railway payment covers only a small part of the railway related investment. The railway payment could be higher if time savings were taken into consideration, but from the interviews with railway operators in Denmark and Germany this seems not to be realistic in the current market if the railway sector is to maintain or even improve its competitive ability towards especially lorry transportation of freight. The sensitivity analysis demonstrates that the financial result of the project is sensitive to changes in the real interest rate. Compared to the realized real interest rates for the Great Belt project and the Øresund project the assumed real interest rate of 4% must be regarded as relatively high. For the Great Belt Fixed Link the realised real interest rate has been 3.49% in the period and for the Øresund Fixed Link it has been 2.5% in the period The analysis shows indeed that the financial result can be strongly affected by a row of changes all pointing in the same direction. If the optimistic approach is chosen the Government Support in the BOT-model only amounts to 995 m EUR corresponding to approx. two thirds of the February 23 calculation. For the PPP-model the Debt Payback Period is reduced by 1 years to 23 years (Base Case B). On the other hand the project is not viable if the pessimistic approach is chosen. This is illustrated by the Debt Payback Period of 66 years, which normally would be regarded as unacceptable even for a public infrastructure investment. For the BOT-model the pessimistic scenario leads to an increase in government support to 2,71 m EUR (NPV) corresponding to app. 95 % of the total investment costs of app. 2,825 m EUR (NPV). The February 23 financial calculation illustrates in summary that the Fehmarnbelt project will be financially viable if carried out as a PPP-model. The basis for the project is an expected stable and inelastic demand for transport, which to some extent gives possibility to optimize the income flow from the road part. A solution where a larger part of the railway investment were paid either by the railway sector or by public subsidies (e.g. TEN) would improve the financial result of the project. 13

16 By experience some financial parameters develop in a negative direction and some in a positive direction but the central assessment under the taken for the calculations is that the project as a PPP-model (State guaranteed model) can be paid back in a 3-4 years period which from a financial point of view is regarded as acceptable for a project of this kind and scale. This evaluation is based upon experience from the Great Belt and the Øresund project where lenders in the international financial market have been willing to fund the projects in spite of the fact that the calculations have shown similar Debt Payback Periods. If the project is organised as a BOT-project, the Governments have to support the project directly with approx. 1.6 m EUR (NPV) corresponding to 5-6% of the total investment of the project. The financial results of the two different organizational models are not directly comparable, because it must be emphasized that in the State Guaranteed model the Governments will carry the majority of the risks associated with the project, while in the BOT-model most of the risks are carried by the Private Sector. The value of those risks is a product of the cost and probability of such risks materializing, thus their associated costs. In theory a full comparison of the BOT-model and the State Guaranteed model would require a pricing of all risks. Such a calculation can be made when the project is more advanced, i.e. concretely defined. It is, however, judged that in financial terms such cost of risk will not remove the significant gap shown by the differences calculated above. 14

17 APPENDIX I: General assumption in the financial calculations Construction costs (m EUR current prices) 4,34 Operation costs (m EUR 212-prices) 67 Real Interest Rate 4% Risk Premium 2% Inflation Rate 2.5% Annual Debt Service Coverage Ratio (ADSCR) 1.4 Discount Rate 9.7% Depreciation Historical costs Debt Instalment Profile Annuity Corporate Tax 34% Traffic Growth 1.7% Lending Fees 1.5% Ramp-up-period 4 years TEN support (m EUR current prices) 45 Railway payment (m EUR 212-prices) 64 Opening year 212 Concession period for BOT-model 3 years IRR 17% 15

18 APPENDIX II: Support and Revenues for the two Governments In the ECI-report four different forms of surplus/deficits for the two Governments economy were defined. In order to be able to compare the February 23 calculation to the ECI figures the same definition has been used in the tables below where the support and revenues for the BOTmodel and the PPP-model is stated. In this connection it has to be mentioned that the railway payment now is an assessment of the payment ability of the railway sector where it in the ECI-report was regarded as a state guaranteed payment. Government support and revenues in the BOT-model NPV (22), m EUR Base Case A Base Case B Government Investment Government Subsidy TEN Support Railway Payment Total Public Support Concession Fee NPV from the Project Cash Flow Total Government Revenues 1,561 1) ,145 1,467 2) ,51 Surplus/Deficit I -2,145-2,51 EU Support (TEN) received Surplus/Deficit II -1,897-1,83 Railway Payment re-gained Surplus/Deficit III -1,561-1,467 Corporate Tax VAT Surplus/Deficit IV -1,253-1,132 1) Corresponding to 258 m EUR/year in the operation period 2) Corresponding to 243 m EUR/year in the operation period. 16

19 Government support and revenues in the PPP-model NPV (22), m EUR Base Case A Base Case B Government Investment Government Subsidy TEN Support Railway Payment Total Public Support Concession Fee NPV from the Project Cash Flow Total Government Revenues Surplus/Deficit I EU Support (TEN) received Surplus/Deficit II Railway Payment re-gained Surplus/Deficit III Corporate Tax VAT Surplus/Deficit IV