Regulation and licensee companies in the Italian Highways Network

Transcription

1 Regulation and licensee companies in the Italian Highways Network Dr. Andrea Greco Università degli Studi di Bergamo Facoltà di Economia Dipartimento di Scienze Economiche Convegno: Highways: cost and regulation in Europe Bergamo, November 26 th, 27 th Bergamo 1

2 Index INDEX...2 TABLE INDEX DEVELOPMENT OF THE ITALIAN HIGHWAYS NETWORK: A SHORT HISTORY BEFORE THE SECOND WORLD WAR FROM THE SECOND WORLD WAR UNTIL 1975 ( LAW 462/75) FROM 1975 UNTIL TODAY REGULATION ANAS: PLAYER AND REGULATOR PRICE CAP P X β q FREE AND TOLLS HIGHWAYS: REASON OF DIFFERENCES LICENSEE COMPANIES TWO MAIN GROUP AND SEVERAL SMALL COMPANIES PRIVATIZATION OF AUTOSTRADE SPA BUDGET DATA FROM THE MAIN GROUPS Autostrade spa Autostrada Torino Milano (ASTM) Autostrada del Brennero A SEGMENTED NETWORK DIFFICULTIES IN FINANCING IMPROVEMENT FOR SHORT HIGHWAYS EUROPEAN DIRECTIVE: NOT IN ITALY CONTENT OF THE PROPOSAL FOR AN EUROPEAN DIRECTIVE WHY NOT? ATTACHMENT

3 Table index TABLE 1 COMPARISON WITH OTHER EUROPEAN HIGHWAYS NETWORK...5 TABLE 2 TRAFFIC AND HIWAYS NETWORK TREND...6 TABLE 3 GROWTH OF TRAFFIC AND DEVELOPMENT OF THE TOLL HIGHWAYS...6 TABLE 4 ITALIAN HIGHWAYS NETWORK, TABLE 5 TREND IN ACCIDENTS IN THE MILANO MARE NETWORK...13 TABLE 6 INCREASE IN ACCIDENTS BY DIFFERENT TYPE OF ROAD...14 TABLE 7 INCOME FROM TOLL HIGHWAYS, TABLE 8 MAIN BUDGET DATA, AUTOSTRADE PER L'ITALIA...18 TABLE 9 MAIN INVESTMENT BY AUTOSTRADE PER L'ITALIA ACCORDING TO THE CONTRACT SIGNED ON AUGUST 4TH, TABLE 10 MAIN BUDGET DATA, ASTM...19 TABLE 11 MAIN BUDGET DATA, AUTOSTRADA DEL BRENNERO...20 TABLE 12 PRIVATE EQUILIBRIUM AND SOCIAL EQUILIBRIUM...22 TABLE 13 MARGINAL EXTERNAL COST, INFRAS_IWW/UIC 2000, EURO/1000 VEHICLE/KM IN ITALY...23 TABLE 14 NUMBER OF KM OF THE HIGHWAYS NETWORK DIVIDED BY NUMBER OF LANES...26 TABLE 15 PRIORITY INFRASTRUCTURES LIST, TABLE 16 AUTOSTRADE PER L'ITALIA GROUP...28 TABLE 17 ASTM GROUP

4 1 Development of the Italian highways network: a short history 1.1 Before the second world war During the first years of the 19th Italy had an inadequate road system, specially if compared to the main countries of West Europe. In order to fill the gap, the government decided to built highways. In 1922 the word autostrada was used for the first in the Puricelli s relation called Road network for motor vehicles where he described the project for Autostrada dei Laghi. The new infrastructure was planned to allow vehicles to proceed fast for a quick transportation of people and freight. It should be built as straight as possible and without obstacles. The project met a general interest and only two years later the first part of the highway was opened. Since the Puricelli relation, the word autostrada was literally translated in many languages (autoroute in France, autopistas in Spain, autobahn in Germany). At the end of 1922 fascism take the power. The new government was very interested in the development of the highways system due to the positive effects on the economy and on the internal and international prestige. One of the first acts of the new government was the establishment of government owned company called Società Anonima Autostrade with 50 million lira of capital. It was December 1 st,1922. Only eleven years later were fixed by the law the characteristic of an highways ( Regio Decreto n.1740). By that years several highways were opend: Milano Laghi (84 km), Milano Bergamo (1927, 81 km), Napoli Pompei (1929, 23 km), Brescia Bergamo (1931, 48 km), Milano Torino (1932, 127 km, Firenze Mare (1933, 81 km), Padova Mestre (1933, 25 km). All these road were easy to built because they were mainly in flat areas. Except Napoli Pompei they were in the north of Italy or in the centre (only Firenze Mare) where there were the richest area and the real need to carry people and freight. Two years later, in 1935 the highway Milano Genova was opened. This was the first mountain highway and was build very quickly if you consider the technology of the time and the difficulties for the geological conformation. From that year the first objective were to improve the existing network and to add a second carriageway if it had been not already built. Aass had the license for the maintenance of the highways network. A plan to build an integrated network of highways of 6850 km was approved but the war stopped the project. The plan started to be operative twenty years later, in 1955 but it still incomplete. 1.2 From the second world war until 1975 ( law 462/75) During the second world war the whole transport system was seriously damaged bridge, 50% of the cars, 60% of the locomotives and almost all the lorries were destroyed, km of national road were damage and the industry had decreased their production capacity of steal by 30%. On June 27 th, 1946 Anas was founded with the scope of restructuring, rebuilding and improving the road network. The damages of the war were completely repaired by1954 manly thanks to the Marshall plan. The highways network still consisted of 311 km. One of the most important project was the highway link between Milan and Naples. In 1950 Autostrade Concessioni e Costruzioni was founded by the government inside the IRI group and six years later signed the agreement with ANAS for the Milano Napoli 4

5 construction and maintenance. Eight years later the new highway was opened. In this period the highways network grew very quickly until In twenty years 5000 of highways were build and other 665 were under construction km were planned. For what concern legal aspects, the law 463/1955 impose the principle that every highways should finance itself, with government contribution between 20% and 30% of the total cost, with a maximum level of 36% for the Milan Naples. If the income will exceed the level expected in the financial plan, the company was forced to pay the excess after the 5 th years to the government, keeping only 10% of the additional income. Six years later, in 1961 a new law was approved (729). It introduced a regulation based on the cost of service and reduced the independence of the highways companies giving the power to decide tolls to the transport minister. Profit should be given to the state except a share of 5%. The government offered its guarantee on the licensees debt and offered to pay up to 52% of the cost of the new highways. The financial remuneration were fixed at 6,5%. In 1968 delay and high increase of costs forced Anas and Autostrade to sign a new agreement. The last company increase its road network from 2230 km to 2896 km with the provision to give back the whole network by the end of In 1970 Italy had a very good network with 3913 km of highways which was more than two times than in France, three time than in UK and 10 times than in Spain 1. After Germany, the Italian network was the longest in Europe and also the more difficult to build due to the geological conformation. In the following years countries continued to increase the size of their network. By 2000 France and Spain have a network 50% longer than Italy. Only United Kindom has shorter network. Other countries in Europe have shorter network but they are not comparable with Italy for GDP and number of inhabitants. year D E F I NL A P S UK Table 1 Comparison with other european highways network 1.3 From 1975 until today The petrol crisis in the early seventies and internal factor push the highways sector in a deep crisis and some companies faced big financial problems. The Italian government made a radical and disputable decision stopping all the new highways with the law 492 on October 16, Only highways already contracted were allowed to be built. It is interesting to note that even if the construction of the toll highways slowed down and stopped, the traffic growth has increased almost linearly from 1970 to Source: Eurostat, International Road Federation, National Statistics 5

6 Table 2 Traffic and hiways network trend Table 3 Growth of traffic and development of the toll highways 1 It is possible to state another important conclusion: the new law had no immediate effects due to the long period needed for approval and construction phase. The network stopped to increase only five years later, in Also the improvement in existing roads stopped in the same year. In the meantime politicians had already realized that it was important to resume the investment program in road infrastructure even before seeing the effects of the law 492. The improvement of the highways network was approved at the end of 1978 but only 8 years later new lanes started to be opened. In 1981 most of the works hadn t been yet contracted. This delay is very relevant. It shows that infrastructure had lost their role against recession and crisis. Investments in highways haven t been an anticycling role due to the delay between the decision and the realization. After that, we should remember that nowadays highways (and specially bridges and tunnels) are mainly capital intensive and not labour intensive. The improvement in the highways network in those years was provided by ANAS and by the existing highways concessionaires, mainly building highways already planned. In fact strong legal limit stopped the new constructions. All the new roads and railway lines need the agreement of all the crossed municipalities. Some years later only qualified majority was needed and then the simple majority. But obviously the municipalities try to keep their land free of transport infrastructure or asked rich compensations. This increased both time of approval and cost of infrastructure. A lot of money was spent in compensation measures and in not related works like tennis field, school, museum and others just to obtain the approval. An interesting example is the so called service conference for the high speed line Milan Turin. The final approval phase lasted six (6) years just to obtain the approval of the municipalities. The highway Pedementana Lombarda was proposed for the first time in 1962 and 4 different projects were realized 1 Aiscat informazioni, luglio settembre e ottobre dicembre

7 in order to avoid the opposition of the municipalities. The highway is still a line on the map The law Merloni ter 109/94 allows private companies to propose to finance totally or partially new transport infrastructures if they were included in the programmatic documents but in the meantime the law 492/1975 didn t allowed new toll highways. The law 340 of 24/11/2000 resolved the situation allowing the construction of new highways if they are listed as a priority in the General Transport Plan and in the three years plan. One year later, on December 21 st the parliament delegated the government to write a new policy of the sector with the law 443. The new rules (190/2002) removed the power of municipalities to stop infrastructure and reduced the service conference to a simple advisory organ with no more than 6 moth available to discuss the project. 7

8 Table 4 Italian highways network,

9 2 Regulation 2.1 ANAS: player and regulator ANAS is a public company which has several tasks. It manages km of both ordinary roads and free highways. In the meantime it has important participations in many highways companies. For example ANAS is the first shareholder of SITAF which runs the highways Torino Bardonecchia and the Freyus Tunnel. At the same time ANAS has a regulatory task. It should control the licensees, deciding on the level of tolls and all the parameters included in the price cap structure. New investments must be approved by ANAS both from the economical and engineering aspects. It is now clear why ANAS has a controversial task. It is in the same time the regulator and the player as shareholder of some highway licensee. Renew of concessions is also a critical point. Autostrade per l Italia benefited from a renew from 2018 to 2048 just before the privatization without any auction. The 4 th of August 1997 Anas and Autostrade signed the new concession but on October Corte dei Conti rejected the document which was approved only 4 month due to the formal request of the government. Also the European Union asked adjustments to the concession. In particular it asked that the management of the network be separated from construction and that no subsidiaries of Autostrade should participate to the construction auctions. Other objections of the European Commission were related to the public contribution and the juridical regime of the highways assets. All those point were improved in following convention on March 29 th, April 28 th and May 21st 1999 Very often legal procedures between ANAS and licensee companies were solved postponing the end of the concession. It is also very common to postpone the end of the concession if the company increased the investment plan. Since benefits for the companies of the renew are far in the future they should be actualized at interesting rate and are uncertain due to difficulties in simulating situation far in the future. The European Union has contested this procedure. Autobrennero had almost 550 million euro of credits vs Anas because had not increased tolls from 1991 to ANAS has proposed to convert the debt into a renew of the concession which will end in 2014 instead of The treasury minister approved the transaction in june The European Commission communicated anobjecting to the renewal hich was justified by ANAS because it compensated investments already made. The problem is that if a different company will win the auction for renewal in 2014 it should pay back the investment done between 2005 and Il Mondo, Jne 4th

10 2.2 Price cap Cipe (Interministerial Committee for Economic and Financial Planning) decided to adopt price cap as a general criterion to adjust tariffs for the public utilities on April 24 th 1996, including highways. In this sector the increase in toll depends by three factors: planned inflation, productivity and quality of service. The following formula illustrate the mechanism of deciding the level of fares. T P X + β Q P P is the planned inflation. It doesn t reflects the real inflation but just the expected level included in the last Economic and Financial Planning Documents (DPEF) according to the resolution number 30 on Marc 17, The criterion is similar to the one adopted for labour agreement. If the expected inflation differs from the real inflation no changes are made and it is what has happened in the last years. Instead, according to the contract between Anas and concessionaries, the differences between planned and real inflation in the first 5 years should be recovered in the following 5 years X X is a parameter which is different for each companies. It is composed mainly by four aspects. Capital remuneration Future investment plan Objective of productivities variation Expected variation in demand The capital remuneration is calculated on the basis of the ROI of the previous period according to the agreement between ANAS and licensees. CIPE has stated a different orientation on his session on December 20 th, According to this governmental organ companies are allowed to keep profits exceeding the expected level for five years but after this period the financial plan should be revised in order to guarantee normal profit for the licensee. This mechanism (claw back) should encourage companies to improve their efficiency and in the meantime to prevent that their level of earning should be too high. As anticipated before, it is not clear if claw back should be applied or not due to different interpretation of the agreement and the governmental decision. This is the reason why ANAS and NARS had different position for what concern the level of fares in the Autostrade per l Italia network. The law 47/2004 postpone the revision of the X parameter every ten years instead of five years. This means that claw back should be applied only five years later. Autostrade, for example, has increased its ROI from 6,8% in 1997 to 15,5% in 2001 and this extra profit will be held by the companies which 10

11 in the meantime will be allowed to increase tolls and hasn t already realized the planned investments. The future investment plan include all the investments expected by the company to improve the network and built new highways. Often those investment are far in the future and not at all defined due to the uncertainty in the project and in the time required for the approval. So often companies increase tolls but don t realize the work because the public authorities don t give the authorization or give it on delay. The same law 47/2004 improve the precedent legislation imposing that the first increase will be realize after the approval of the project by the conference of service while the following increase should be applied considering the real state of progress of the works. Another element which is included in the X factor is productivity. It is determined for each companies taking care about the chance to improve efficiency. Anas take care about some productivities indicators concerning the operating cost tendency and the number of vehicles km made in the last five years in order to consider the higher operating cost in case of traffic growth. Traffic is usually a risk sustained by the licensee. To say the truth, traffic is generally higher than expected (except in the alpine highways) and this generated additional profit to the companies. But sometime traffic variations should be expected, for example if a new parallel highways goes into service and absorbs a part of traffic which were in the existing highway. In this case the variation of traffic (which should be positive or negative) should be included in the financial plan. ANAS considers also the general economic situation in the area in order to make more precise prevision of the traffic trend β q q is (or should be) an indicator for the quality of highways. Its purpose is to stimulate the licensee to invest in the road to maintain a good level of safety and good pavement. Q is composed by two elements, Ipav and Is. The first measure the quality of pavement considering two factors: Ia1(roughness) and Ia2 (regularity). The second measure the level of accidents (Is). In particular Q is the result from the following formula Q = (Ipav)(0.60) + (Is)(0.40) Where 0.60 and 0.40 are the weight of each parameter and Ipav is Ipav = (Ia1) (0,60) + (Ia2) (0,40) The roughness index is measured by cars equipped with special instruments direcly by the licensees and then the results of the tests are send to ANAS in order to be elaborated and to decide tolls for the following year. Accidents are registered by the road police and compared with the traffic and with the year before. 11

12 β is a value between 0 and 0,50 and is related with the quality of the highways of the last five years. Different values for β are included in the tables in the contract according to different level of service. This system presents mainly two different kind of problems. The first is related with the real power of licensee to reduce accidents thanks to his policy. Actually accidents are related mainly with two factors, speed and traffic. Number of death is proportional to the fourth power of the average speed of the traffic flow. The number of serious injured persons increases with the third power of speed, the total number of persons injured increases with the square of speed while the number of accidents increase by 2% for an increase in speed of 1 km/h 1. According the this study the best way to reduce accidents is simply to reduce the average speed. If the licensee will be able to reduce the average speed then it will be allowed to increase fares. But average speed should be an interesting indicator of the level of service. People pays tolls in order to go faster, otherwise they would choose the ordinary road. An interesting example is the company Milano Mare Milano Tangenziali which introduced very low speed limits in the urban highways since July 20, 1999: 50km/h for lorries and 90 km/h for cars. In this way the company reduced accidents in the first year (1999) but in the meantime it reduced time of travel and increased congestion. A lot of pressure were made on the licensee and only 20 days later the speed limit for lorries were upgraded to 70km/h and remained only during the day. Cars limit became definitive. The service worsted due to the congestion created by the lower average speed and due to the lower speed allowed itself. But the company were allowed to increase tolls. In the following table you can see trend in accidents during the last years in the Milano Mare Milano Tangenziali highways network. In 1999 there were a minimum point thank to the reduced speed limits. To meet another increase in safety we have to wait 4 years, in During that year, on June 30 the law 151 were approved. The new law increase the punishment for people who doesn t respect the driving policy. Every time that police find a driver who doesn t respect such policy, the driver license lose one or more point (until 10) as far as he have still point (at first every driving licence has 20 points). When one driver loose all his point he has to give another driving exam. This law had a strong impact on drivers habits and accidents fall down by 19% in the first year. This reduction is evident also in the table. It is also evident that such results are obtain by the government policy. But all the highways licensee had another chance to increase fares. 1 Un approccio integrato per il miglioramento della sicurezza stradale Scenari, linee d azione e proposte di ricerca Consiglio nazionale delle ricerche, progetto finalizzato Trasporti 2,

13 Milano Mare accidents accidents accidents year Table 5 Trend in accidents in the Milano Mare network The following table compare the number of accidents in the highways network and in the other roads. In the ordinary road the increase in accidents is slightly going down. This tendency is quite clear. More irregular is the trend in the highways. The price cap were introduced from 1997 so the first relevant data is the increase between that year and In 1998 accidents decrease by more than 20% compare to the years before. The following two years accidents were reduced very much but from 2001 accidents started to increase again like in other road and even more in It is difficult to state that price cap has reduce accidents in highways because there isn t a clear tendency. Instead, in the ordinary road increase in accidents is going sharply to zero even without any incentive like price cap. 13

14 0,25 Increase % in accidents highways ordinary road increase in accidents 0,2 0,15 0,1 0,05 0-0,05-0, year Table 6 Increase in accidents by different type of road 2.3 Free and tolls highways: reason of differences In 2003 there were 5593 km of highways under tolls and 894 km of free highways. Shadow tolls are not applied in the Italian system at the moment even if it has been proposed for some national roads. All the free highways are in the south of Italy while in the north all the highways have tolls. The reasons are both political and economical. First of all south of Italy is quite poor and without a real industrial system. For many years the different governments has tried to fill the gap with other regions simply increasing the public spending in those areas specially in transport infrastructure even if the demand was quite low. Traffic is generally low and a toll system should discourage the already low use of infrastructure. Sometimes traffic is so low that income from tolls are not enough to guarantee maintenance or other kind of investments. The willingness to pay should be low in a poor area and the risk is that traffic should be shifted to the ordinary road system. Some highways (Salerno Reggio Calabria) have a very low standard and someone argues that it shouldn t be considered an highways. On the other hand it is difficult to accept that in some areas highways are free while elsewhere they are not. The problem of acceptability is more relevant if some highways are free compared to the situation that the whole network is under tolls (or completely free) as happens in other Mediterranean countries. In Spain, the acceptability of toll system is poor at the present time, due to the development of 5,000 km of toll-free motorway network 1. If free highways are mainly in one area people may suspect that the area receives a privileged treatment. This suspect is far to be completely wrong. If 1 Road Infrastructure Concession Practise in Europe, Frank Bousquet, Alain Fayard, September

15 we consider the length of the highways network in each region, we would realize that Sicily has the longest network in Italy, even better than Lombardy which has the double of inhabitants and produces one fifth of the Italian GDP. Free highways will soon disappear according to Vincenzo Pozzi, ANAS chairman 1, but only when upgrading works will be completed. The plan includes tolls on Salerno Reggio Calabria (443 km), Raccordo Anulare di Roma, Roma Fiumicino, Catania Siracusa. At the moment no efforts are made in this direction. Proposal for shadow tolls for some national road are included in the DPEF but nothing is already decided. It seem just a financial operation in order to reduce the public deficit for 2005 and postpone costs. In this way ISPA (a public company with financial indipendence) will buy 1500 km of road from the government paying immediately 3000 millions of euro and receiving a fees according to the traffic in the next 40 years. In this way debt is simply transferred from the government to a public company. According to the European rule, the new debt will not be considered as a public debt and the deficit will (virtually) reduce. 3 Licensee companies In Italy there are 24 licensee companies which run 5593 km of highways. Income from tolls are considerably high and also income for the government is not negligible. In 2003 the total income were million of euro. Toll companies rise 3766 millions while VAT accounted 781 million Year Toll companies Warranty Central Fund VAT Total Table 7 Income from toll highways, Two main group and several small companies 1 Interwiev for ACI, 24/09/ Autostrade in cifre 2003, AISCAT 15

16 In Italy there are mainly two big highways group, the first is Autostrade per l Italia with 3400 km of toll road 1 while the second is ASTM - SIAS with about 1000 km of highways 2 plus other 138 km of highways where ASTM has an important share (27%). Both groups are private and Benetton family controls indirectly the first one while the second one is controlled by Marcellino Gavio. In the table in the attachment we can see the group structure of Autostrade spa. It controls companies active in national and international highways management, engineering, parking and high tech. Autostrade spa has 100% of the share of Autostrade per l Italia which maintain directly 2854 km of highways, most of them are the most important in Italy and most congested. The second table shows the participations of ASTM. We have to remember that SIAS is important because it has the control of three important highways licensees like SALT, ADF and Cisa. An important difference of those two groups is related with the their structure. Autostrade has one company which controls most of the network (2854 km compared to the 3400 of the whole group). ASTM SIAS controls many different companies but none of them has a network which is much longer that the others. The longest highways is SATAP which is 169 km long. I will explain later the economic effects of such segmentation. The third group is Autostrada del Brennero which runs 314 km of highways between Modena and the Austrian borders. 85% of the capital is owned by public authorities. Not only road: Austostrada del Brennero has interests also in the rail sector. According to its financial plan it will built the new rail tunnel under Brennero Pass. A subsidiary offers international rail transport for freight (STR Brennero Trasporto Rotaia spa). There are other six independent companies which account 894 km of toll highways. They are mainly public companies or a public private partnership. Finally ANAS has 894 km of free (at the moment) highways which complete the network. 3.2 Privatization of Autostrade spa In the public utilities sector there are mainly three reason to privatize public companies even if there are active in natural monopoly. They are: 1. Liberalization 2. More incentives for improving efficiency 3. Reduce political interference 4. Reduce public debts According to Bognetti the first reason is the most important. We have to note that liberalization is not possible in the highways sector like in other natural monopoly like telecommunications. The only way to encourage competition is the contract before the construction of the highway or at the end of the concession. But after the contract several 1 Budget Autostrade per l Italia Ufficial web site SIAS spa 16

17 factor should change as the Brebemi experience is showing. In this case the contract was based on the preliminary project and the additional investment imposed by Regione Lombardia will force the ANAS to modify the financial plan changing some parameters which was decisive to assign the concession. From 1995 to 1999 Autostrade reduced the average number of employees by 8% while after the privatization their number decreased by 10% in three years, mainly to the diffusion of electronic collecting systems. It is not clear if the efficiency has increased after the privatization 1. It is difficult to say also if political interference are reduced or not. Probably yes in the management but the development of the network remains a political choice since it is not possible to built or propose to build new infrastructure if they are not in the general transportation plan. Also if they are contemplated they need a long list of authorizations from local and national authorities. The last benefits is the reduction of public debt. Most of the network were built 30 and 40 years ago and it is now completely amortized. According to the first convention by 2003 the company should give back the network to ANAS without any payment. Afterward the deadlines was postponed first to 2018 and after to 2048 just before the privatization. Now highways toll are very similar to a tax because the cost of construction is already repaid and other costs are considerably lower. In this way the government sold future cash flow with high actualized rate in order to attract private investors. The fist step was made on 1986 when IRI (a public company) sold 13% of the share of the company with an extremely poor income. 13 years later the remaining shares were sold out. The value for the 100% of the company was 7700 million of euro which is not at all negligible. On the other hand is important to remember that on November 13 th 1999, during the privatization, the price of the share was 6,785 euro. On November 5 th, 2004 the price of the share is 17,84 euro even if in the same period the market met a deep crisis. Private investors has obtained good profits. Who are the main private investor? Schemaventotto spa bought from IRI 30% of the shares of Autostrade spa during the privatization paying 2533 million of euro millions were lent by Credito Italiano while 1326 were made available by an increase of capital of Schemaventotto. In 2000 the company had a profit of 16 millions of euro. In 2001 Schemaventotto has paid 61 million of euro for interests plus 9 million euro spent for risk insurance. The total cost for financing was 69 million euro while income from participations were 99 millions and profits were 22 millions. One year later profits doubled reaching the level of 45 million of euro. Income from participations rose to 127 million of euro while interests remains at the same level than the year before, around 69 million of euro. Debts were 1211 million of euro in 2002, 1227 in 2001 and in Autostrade spa became extremely profitable and at the end of 2002 several rumors about an hostile take over started to be persistent. The old shareholders were probably worried for that and started a public offer to buy Autostrade spa shares at the price of 9,50 euro (then raised to 10 euro). At the end of the offer, on February 21, 2003 Newco28 (100% owned by Schemaventotto) obtained the 54,1% of Autostrade at the cost of 6458 millions of euro. Newco28 and Autostrade 1 Politiche per la regolamentazione del settore autostradale e il finanziamento delle infrastrutture, Giorgio Ragazzi,

18 merged on September 22 nd, The debt was shifted to the highways company which will pay the interest with tolls. On July 12 th 2004 Shemaventotto reduced its participation in Autostrade per l Italia by 10% keeping the 52% of the company. This operation gave about 920 millions euro to Schemaventotto which reduced considerably the debt. At the endo of this process, Schemaventotto has the control of Autostrade (54% of the share). The company has payed all the interest for debts thank to the incame from dividends of Autostrade. In addition, the public offer for acquisition was payed directly by the company due to the merge between Newco28 and Autostrade. 3.3 Budget data from the main groups Autostrade spa Autostrade spa is the most profitable company in the sector. In the following table you can see that profits rise from 151 millions of euro in 1997 until 522 millions of euro in 2003 with an increase of 346% in only 8 years. Revenue rise from 1762 until 2571 with an increase of 146% in the same period. Year Income Ebita Profit Investment Table 8 Main budget data, Autostrade per l'italia For what concern investments it is a slight increase until 2002 and a jump to 1467 million of euro in the following year mainly thank to the improvement of A1 between Bologna and Florence which is an mountain highway. We have to note that most of the work in the Autostrade network is on delay as shown in the following table. According to Autostrade per l Italia most of the work were supposed to be completed by 2002 while at the end of 2004 only the third and the fourth lane on Milano Laghi is completed. This delays were caused by the public authorities but Autostrada took the change to postpone investments. Main Investments Date of completation Contract Real sitution 18

19 Roma - Orte 2001 Work in progress Milano - Laghi 2001 Finished Bologna - Modena 2002 Work in progress Tangenziale Bologna 2002 Project Variante di Valico? Work in progress Table 9 Main investment by Autostrade per l'italia according to the contract signed on August 4th, Autostrada Torino Milano (ASTM) ASTM is part of the second Italian highways group. The following budget data refers only to ASTM and not to the whole group because it is composed by several different subsidiaries. The trend is very clear and confirm the general increase in both income and profits. Year Incame MOL Profit Table 10 Main budget data, ASTM Autostrada del Brennero Even Autostrada del Brennero has reached in the last years an important increase in incame and profits. In this case we have to note that the company is authorized to create a free tax found according to the economical and financial plan, in order to finance the new Brenner rail tunnel. This fund is the column called Tunnel Found which amount 19

20 at 232 million of euro at the end of This fund should be invested in treasury bond as long as the work will start. (law n /27/1997). Year Incame MOL Profit Tunnel Fund Table 11 Main budget data, Autostrada del Brennero 4 A segmented network As shown before, the highways sector is composed by several different companies even if most of them are under the control of one of the main groups. Autostrade spa has the control of 7 Italian licensees plus several companies which has the licensee or are the promoter for new highways. ASTM SIAS includes 8 different highways companies. The total number of highways licensee is Difficulties in financing improvement for short highways There aren t important technical or economical reasons to have a licensee which accounts more than 50% of the network (and almost 70% of the traffic) with other smaller companies which divide the other part of the market 1. With these word Andrea Boitani argue that there aren t economy of scale in the highways sector. Instead Ragazzi indicates a unique management as the best choice for the highway sector 2. Actually both of them imagine a different scenario as optimal. In the current situation size of the companies is important but not the size of the group due to the current structure of financing new investments. The contract between ANAS and Autostrade spa signed in 1997 includes investments for 4235 million euros 3. The contract covered the period and doesn t foresee any public contributions. The new investments are financed by the general increase of toll in the whole Autostrade network. As remembered before, Autostrade controls also 1 Concorrenza e regolazione nei trasporti. Quali riforme e perché si fanno Andrea Boitani, October Politiche per la regolazione del settore autostradale e il finanziamento delle infrastrutture Giorgio Ragazzi, July Relazioni e Bilancio 1997, Società Autostrade 20

21 other highways companies. One of them is Torino Savona where Autostrade has an almost complete control (99,9%). This highway has a low volume of traffic and also very low standard. At the end of 1900 it was the last highway with a section with a single carriage and with one line for each direction. In 1999 the company started the work to double the carriage and improve service and safety. This intervention cost millions of euro but the company were not able to finance it due to the low income. For this reason ANAS covered the entire cost with an equal contribution. The investment plan of Autostrade was ten times higher without any public contribution but was not allowed to finance also the Torino - Savona because it was a separated company. The ASTM SIAS group has the same problem. The group is composed by several companies but none of them is big enough to collect money for big investment plan. Even if the network in one third of the Autostrade network there are no big plan for investment self financed. One of the most important company is Torino Milano which register the highest traffic of the network of the group. This highway has three narrow lane in each direction but no emergency lane and traffic island with old standard. An upgrading is necessary also to face additional traffic that the new link from Boffalora to the international airport of Milano Malpensa will generate. In the last four years tolls increased by more than 4% each year but it wasn t enough to cover the investment. DPEF 2005 (Economic and financial planning documents) includes a contribution of 1,12 billions of euro to ASTM 2. The new treasury minister is willing to cut this part from the public budget 2005 but the problem exists. 5 European directive: not in Italy 5.1 Content of the proposal for an European directive The European Commission presented on August 29, 2003 a proposal for amending directive 1999/62/CE. The commission is aware that in the transport sector there are important external cost and that it is important to internalize them in order to improve the economic efficiency of the system. Tolls for heavy vehicles should vary according to Distance travelled Place Infrastructure type and speed Vehicle characteristics Time of day and congestion level The most innovative aspect is the goal to reduce external costs differentiating tolls in order to shift traffic from one itinerary to another. If congested road has higher fares and 1 Relazione generale sulla situazione economica del paese, Finanza e Mercati, 27/08/

22 users are well informed of it, they would choose alternative itineraries or different hours if there are differences by time of day. The shift will give interesting benefits as big as will be the traffic reduction in the congested highways (or hour) and the increase in the less congested highway (or hour). In this way accidents, time of travelling and pollution will reduce because all of them are related with traffic conditions. Congestion increases all these factors. Tolls should vary also according to the type of vehicles in order to encourage cleaner engine and to reduce the total number of lorries increasing their size. The commission underlines than taxes on the road transport are not supposed to increase but simply should be transformed in order to stimulate a more rational use of infrastructures and vehicles. If additional fonds are risen, they should be spend in transport infrastructure. In particular area it is allowed an increase until 25% of the average toll in order to finance infrastructure in other modality like railway. Latin countries have applied different tolls according to the distance but central and north European country have applied flat fare for the annual use of such infrastructure (Eurovignette). In Italy different fares are currently applied to different highways but the goal is very different. The European Commission suggest to impose higher tolls in congested highways in order to reduce traffic while in Italy differences are simply justified by the financing plan. No discrimination by time of the day and congestion level are applied at the moment in Italy while some tests are made in France. Finally in Italy vehicles pays according to the number of axles and not according to the weight or the pollution they cause. We should explain the European purpose thought the following graft. Table 12 Private equilibrium and social equilibrium The demand for transport is the line D while the supply is S. Where the two lines cross there is the equilibrium point (x, p). The price include only the private costs but doesn t 22

23 include cost created by transport on other people. External costs like congestion and pollution are not considered by the user if the authorities doesn t impose tax. The system is not efficient because it doesn t reach the social optimum. If the authority impose a taxation, the supply curves shift and the output is lower and prices are higher. In A the society reach the optimum point where both internal and external costs are considered. The difference between P and P is the Pigou tax. External costs in the highways sector are variable depending on level of congestion, time of the day, area and other conditions. Since external cost are variable also tolls should be variable in order to guarantee the social optimum. External costs are usually higher around big cities and this is the reason why tolls should encourage other itineraries. Here the Pigou tax (tolls in this case) should be lower than around big cities. The purpose of the European Commission isn t to increase fare to reduce traffic and external cost but it is to reach a more rational use of infrastructure and technology. Marginal cost are extremely relevant and a different use of infrastructure may reduce them considerably. min % max % CO % 37 1% Air pollution 9,6 7% 12,1 0,3% Noise 11,4 8% 56,9 2% Accidents 52,6 38% 121,5 4% Congestion 26 19% % Total with congestion Total without congestion 136,6 3323,5 110,6 227,5 Table 13 Marginal external cost, Infras_Iww/Uic 2000, euro/1000 vehicle/km in Italy As shown in the table, cost should vary considerably according the situation. Congestion cost has the more relevant variation as increase from 26 to 3096 Meuro veichle km and from 19% to 93% of the total marginal costs. A small decrease of the traffic gives big gain in term of reduction of marginal externality. This is the reason why is important to transfer traffic to alternative itineraries or to other time of the day. 5.2 Why not? AISCAT is the Italian association for toll motorways companies and it is part of ASECAP which has the same role at European level. Both these organizations have criticized the amending proposal due to the problem that can cause to the concession 23

24 system. For example AISCAT showed that criterions for choosing tolls were not enough clear. In addition introducing higher tolls in some special areas should distort the market and innovative parameter in the toll scheme should cause both technical and economical problem after considerable investment. The creation of separate authorities in each country should double tasks and competence with the existing ones. Finally the existing and new concession regime is not completely protected. For all these reason AISCAT has argued that the amended directive shouldn t include highways under concession. Also ASECAP has promoted the same idea at European level and on April the 20 th 2004 the European Parliament approved an article which exclude highways under concession from the amended directive. The vote obtain a large majority, mainly thank to the Italian and French delegates. We have to remember that Italy and France has the longest tolled motorway a stronger representation inside ASECAP. Finally on June 10 11, 2004, the European Council has recognized the impossibility to find an agreement between the members including on the policy adopted for motorways under concession. Since in Italy 86% of the motorway sector is under concession it seem very hard that the directive will give interesting results because it will be eventually applied only to 14% of the network. This is a very low portion and wouldn t give big benefits even in the zone where will be applied because it will not be possible to take advantages from a more rational use of the whole network. For example it will be not possible to shift traffic from on highway to another because it will not be possible to reduce or increase tolls in the highway under concession. 24

25 6 Attachment 25

26 Table 14 Number of km of the highways network divided by number of lanes 26

27 Table 15 Priority infrastructures list,

28 Table 16 Autostrade per l'italia group 28

29 Table 17 ASTM group 29