PUBLIC PRIVATE PARTNERSHIP IN THAILAND HIGHWAYS A CASE STUDY ON AN EXTENSION OF DONMUANG TOLLWAY PROJECT

Transcription

1 PUBLIC PRIVATE PARTNERSHIP IN THAILAND HIGHWAYS A CASE STUDY ON AN EXTENSION OF DONMUANG TOLLWAY PROJECT Pruethipong Singhatiraj 1, Chatchai Chuangching 1 and Boonkua Janbanjong 1 1 Department of Highways, Ministry of Transports, Thailand ABSTRACT: Due to the rapid economic development in Bangkok since 1990s, traffic congestion became problem in the urban area. Accordingly, the Don Muang Tollway, a 22 kilometers elevated tollway project, was proposed to alleviate traffic problems on the Highway No. 31, the mainstream road that connects Bangkok metropolis to the Upper central, northern and northeastern regions of Thailand. The Donmuang Tollway was implemented as a BTO project and opened to traffic in Presently, the traffic in the upper part of the Greater Bangkok area is very crowd. To lessen the traffic problem, consequently, the idea of extending the existing Tollway to its north is initiated by the Department of Highways. The Northern Extension Project is 18 kilometers Elevated Tollway extended from the existing project north to the Bang-Pa-In junction, the junction that combines traffic from the northern region and northeastern region to Bangkok. Apart from traffic relieving, the benefits of the new project are the savings in terms of time, fuel consumption, and the reduced accident risk. Moreover, it can facilitate the economic development on the areas served by them. The total cost for the extension project is estimated at 30,570 Million Baht. The traffic forecasting on the proposed project is discussed on this paper. To make project feasible, PPP and other types of investment model are researched in this study. INTRODUCTION Donmuang Tollway opened to traffic in It is an expressway that linked between Bangkok and the upper Central, North, and Northeast regions of Thailand. The project was aimed to reduce the traffic congestion on its area. Presently, the Donmuang Tollway has total distance of approximately 28 kilometers. The project is elevated tollway above Highway No.31 with 15 entrances and 16 exits in the inbound and outbound, respectively, and has total 14 toll plazas.

2 Currently, the Donmuang Tollway Project has 2 sections. The first section is toll charge section managed by the concession company in the distance of roughly 22 kilometers, opened for traffic in The second part is zero toll charge section run by Department of Highways in distance of nearly 6 kilometers, opened for traffic in The first section is operated under Tollway Concession Agreement made between the Department of Highways (DOH) and a concession company. The concession is in BTO system (Build-Transfer-Operate), i.e., the private company designed and built the tollway with its own funds, and was awarded the concession right to manage the tollway, including toll collection, traffic management, and rescue work, while the ownership of the project has been transferred to the Department of Highways. FIG.1. Donmuang Tollway Project At present, the traffic in the upper part of the Greater Bangkok area, Highway No.1, is very crowded, especially during rush hour. From the data in 2011, the Annual Average Daily Traffic (AADT) in the project area was 289,000 PCU per day. To cope with this, the idea of extension of the existing Tollway to its north is initiated by the Department of Highways. The Northern Extension Project is planned to be 18 kilometers Elevated Tollway extended from the existing project north to the Bang-Pa- In junction which is a major junction that combined traffic from the northern region, central region and northeastern region to Bangkok. Apart from relieving traffic congestion, the benefits of the new project are the savings in terms of time, cost, and accident saving.

3 FIG. 2. Project Location PROJECT DETAILS The northern extension project will be extended from the existing tollway along the Highway No.1, beginning at KM34 and end at KM52 where a major junction of road transport in Thailand is located. The project is approximately 18 km length of precast concrete box girder bridge. There are 2 interchanges and 7 toll plazas. FIG. 3. Highway No. 31 (Present)

4 FIG. 4. Northern Extension Project PROJECT COST & TOLL CHARGE The project cost is calculated based upon the assumption below:- Assumption 1. Project duration is 30 years. 2. Material costs are based on the market price as of Year Labor and machine costs are estimated based on the data collected from the local contractors. 4. Design & Construction supervision cost are set at 3.65 percent of the construction cost. 5. Land acquisition is 3 Million baht. 6. Operation and maintenance expenses are routine maintenance and periodic maintenance. From the assumption mentioned above, the total project cost is illustrated as the following Table:

5 Table 1. Project Cost Item Million baht 1.Construction Cost 24,560 2.Construction Supervision Cost Land Acquisition Cost 3 4.Routine Maintenance Cost 4,290 5.Periodic Maintenance Cost 820 Total 30,570 FIG. 5. Project Structures

6 In the study, the sensitivity of the toll rate on the total revenue is also analyzed. It is found that the toll charge of 2.00 baht per kilometer contributes the highest total daily revenue, shown in FIG. 6. Therefore, the toll charge of 2.00 baht per km. is used for the traffic forecast and economic & financial analysis in this study. FIG. 6. Sensitivity Analysis (Year 2019) TRAFFIC FORECAST Based upon the toll fare of 2.00 baht per km, the traffic forecast at the opening Year (2019) is 81,480 PCU/day. The majority of the traffic characteristic (roughly 80%) is the trip between Bangkok and its vicinity. The highest traffic volume locates at the project starting point, approximately 55,500 PCU/day. The 30 years traffic forecast is calculated as following. Table 2. Traffic Forecast Traffic Year 2019 Year 2034 Year 2048 Out Bkk To Bkk Out Bkk To Bkk Out Bkk To Bkk Volume/day 35,560 45,920 51,590 66,610 73,000 94,260 Total Volume/day 81, , ,260 ECONOMIC ANALYSIS With the assumption below, a summary of the results of the economic analysis is shown in Table 3. The benefits of the proposed project are calculated in terms of Value of Time saving (VOT), Value of Cost saving (VOC), and Accident Cost Saving. Assumption 1. Discount Rate: 12% 2. Project duration: 30 years

7 Table 3. Economic Analysis VOT saving VOC saving Accident saving EIRR B/C (Million THB) (Million THB) (Million Discount 12% 32,762 8, % 2.23 FINANCIAL ANALYSIS Based on the above mentioned forecast of the road traffic in Table 2 and the assumed toll rate in Table 4, the financial analysis is shown in Table 5. Table 4. Financial Assumption Toll Fee 2 baht / km./ PCU Min. Charge 25 baht Fee Adjustment every 5 years Minimum Fee Adjustment 5 Baht every 5 years Project Duration 30 Years Discount Rate 4.675% Scenario Table 5. Financial Analysis FIRR NPV at Discount 4.675% B/C at Discount 4.675% New project 2.70% -8, INVESTMENT PLAN The total cost for the extension project is estimated at 30,570 Million Baht. To create various alternatives of investment plan for decision maker, PPP and different types of investment models (i.e., foreign loan, local loan and infrastructure fund) are discussed in the study. 1. PPP Public-private partnership (PPP) takes a wide range of forms varying in the extent of involvement and risk taken by the private party. The terms of a PPP are typically set out in a contract or agreement to outline the responsibilities of each party and clearly allocate risk. The picture below depicts the spectrum of PPP agreements. Normally, government projects in Thailand have been mainly financed through conventional procurement method. However, due to the high costs associated with infrastructure procurement, it is difficult for the Thai government to deliver infrastructures without incurring burdens on government s balance sheet. Therefore, the Thai government increases the role of the private sector by introducing PPP in government s procurement. Since the early 90 s, PPP has been used in various

8 sectors, including power/electricity, telecom, ports, water and sanitation and transport sectors. FIG. 6. Extent of private sector participation ( The type of PPP structure used depends on the nature of the project to be implemented. The most common structures in Thailand are 1. Build-Transfer- Operate (BTO), 2.Build-Operate-Transfer (BOT), and 3.Build-Own-Operate (BOO). For PPP method, the financial analysis using the following assumption is shown in the Table 6. Assumption 1. Discount Rate: 6.58% (MLR) 2. Project duration: 30 years 2. Foreign Loan Table 6. Financial Analysis Results Item Value (Million Baht) 1. Net Present Value -13, B/C 0.52 The average interest for foreign loans is 3.0%. From this rate, the calculation of the benefit ratio for this case is depicted in Table Government Bond Table 7. Financial Analysis Results Item Value (Million Baht) 1. Net Present Value -1, B/C 0.94 The average coupon rate for Government Bond is 4.675%. From this rate, the calculation of the financial results is indicated in Table 8.

9 4. Infrastructure Mutual Fund Table 8. Financial Analysis Results Item Value (Million Baht) 1. Net Present Value -8, B/C 0.71 The survey of five largest mutual funds that listed in the Stock Exchange of Thailand shows that the average dividend yield is 5.16%. From this rate, the calculation of the financial analysis is presented in Table 9. Table 9. Financial Analysis Results Item Value (Million Baht) 1. Net Present Value -9, B/C 0.65 The summary of the Financial Models as discussed earlier is presented in Table 10. Table 10. Summary of the Investment Plan Financial Models Net Present Value B/C PPP Foreign Loan -1, Domestic Loan -8, Infrastructure Fund -9, In conclusion, from the financial analysis, the project may not promote itself to attract the private sector. This is because the Benefit Cost Ratio (B/C) is only To bring the new project possible, it, therefore, has to be invested by the government. For government budget, the best way is to use the foreign loan and then following by government bond and infrastructure fund, respectively. However, to promote the participation of private sector to deliver infrastructure to public without incurring burdens on government budget that has some limit portion, the new alternative is, therefore, proposed in this study. This new option is to combine the new project with the second part of the existing tollway (6 km. length) which is previously stated that it is presently managed by the Department of Highways (DOH) and is zero toll charge. The calculation of the financial analysis for the new alternative is shown in Table 11. Table 11. Financial Analysis Results Scenario FIRR NPV at Discount 6.58% B/C at Discount 6.58% New project + 6 km DOH Tollway 4.70% -6,

10 From the results, it is shown that the addition of the second part of the existing tollway to the new extension project renders the FIRR rising from 2.7% to 4.7% and B/C increasing from 0.52 to There are a number of international studies which have sought to compare the performance of PPP with traditional procurement. The results reveal that PPP exhibit cost efficiency over traditional projects, which can range from 30.8% when measured from project inception, to 11.4% when measured from contractual commitment to the final outcome [Danny G.]. Moreover, PPP were found to be completed 3.4% ahead of time on average, while traditional projects were completed 23.5% behind time [Danny G.]. Therefore, the impact of the cost efficiency of PPP over the conventional procurement on the FIRR is also carried out in this study. The results are shown in Table 12. Table 12. Financial Analysis Construction Cost Saving FIRR 0% 4.70% (Conventional Procurement) 10% 5.22% 15% 5.50% 20% 5.80% 25% 6.12% 30% 6.45% From the calculations, the FIRR is lifted from 4.7% to 6.45% when the construction cost saving is 30%. This result can help to confirm the possibility of introducing PPP in the transportation project in Thailand. SUMMARY The 18 km. of Northern Extension Project can help to relieve traffic congestion in the northern part of Bangkok, especially during rush hours. The project is proved by the economic analysis to be feasible for investment. However, from the financial analysis, the project itself may not financially attract to the private sector. The financial internal rate of return (FIRR) is only 2.7%. To deliver the project, it, therefore, has to be invested by the government. For government budget, the best way is by the foreign loan and following by the government bond and the infrastructure fund, respectively. However, using of the loan may deal with the problem of national public debt. Consequently, the practical solution to drive the project is, therefore, the PPP. But the financial result is the obstacle. As shown in the study, however, the inclusion of the second part of the existing Tollway system which is operated by the DOH to the new extension project makes the project more attractive to investors. The Financial Internal Rate of Return (FIRR) rises from 2.7% to 4.7%. Moreover, with the benefit of cost efficiency from PPP over the conventional procurement, the FIRR can be elevated from 4.7% to maximum of 6.45%, which depends on the construction cost that can be saved. This result can

11 promote the possibility of private sector to deliver infrastructure to public without incurring burdens on government budget that has some limit supply. REFERENCES Department of Highways (2015). Feasibility Study of the New Extension Project of Donmuang Tollway, Bangkok, Thailand. Danny Grahan. Value for money in PPP Procurement, Danny Graham, NSW Treasury,