Japan Expressway Holding and Debt Repayment Agency (Incorporated Administrative Agency) http://www.jehdra.go.jp 1. Summary of operations implemented using FILP funds Japan Expressway Holding and Debt Repayment Agency aims to reduce the public financial burden related to expressways and assist smooth operations related to expressways by the expressway companies through efforts including speedy and sure repayment of debts inherited from the four former Japan highway public corporations as well as the ones related to such operations as new construction and reconstruction of other expressways, other than the holding of expressway assets and lending for expressway corporations. Overview of Expressway Operations Government Agreements Japan Expressway Holding and Debt Repayment Agency Lease of assets Rent and Hanshin No-interest loans Capital Injection After completion, Road assets After completion, debts payable Each Company (East, Central, West,, Hanshin) Loans from private sector Investment-andloan bonds Government Guarantee Fund (investment-and -loan) Loans from private sector Bonds Market Expressway Construction Operations Note: the Bridge Expressway Company Limited does not undertake expressway construction operations 2. Amount of lending under FY 2011 FILP FY 2011 FILP Estimated outstanding amount of FILP lending at the end of FY 2010 1,720.0 22,693.9-125 -
3. Outcome and social and economic benefits of operations The construction and/or improvement of toll roads generates various direct or indirect benefits for local communities and road users, for example, less traveling time, reduced traveling costs, and decreased road accidents. Specific benefits include: - Enhanced associations and exchanges among regions and local cities - Development or creation of industries - Increased employment opportunities - Increased asset value - Reduced price of products and services - Maintaining of alternative routes in the event of disaster - Eliminated traffic congestion un urban areas Among the beneficial effects of such expressway construction and/or improvement are reductions in driving time, driving expenses and traffic accidents after the completion of the network that are available for qualitative measurement. The direct benefits of such reductions as at the end of FY2020 accrued from the portion become available FY2011 and after can be estimated as follows: in the case where the social discount rate is set to 4%; 8.8620 trillion yen in the case where the social discount rate is set to that of the policy cost analysis; 13.1414 trillion yen Note: The estimates on quantitative benefits adopted the method for benefit estimation and basic units in the "Cost-Benefit Analysis Manual (in November, 2008 City and Regional Development Department, Road Bureau, Ministry of Land, Infrastructure and Transport)." 4. Estimated policy (subsidy) cost analysis of the project Policy (subsidy) cost FY2010 FY2011 Fluctuation 1. Subsidies, etc. from the Government - - - 2. Money transferred to the Government - - - Subtotal (1+2) - - - 3. Opportunity cost of capital investments, etc. from the Government 2,430.4 2,181.1-249.3 Subtotal (1+2+3) 2,430.4 2,181.1-249.3 4. Decrease in retained losses - - - (1+2+3+4=policy cost(a)) 2,430.4 2,181.1-249.3 Analysis period ( years ) 35 34-1 Breakdown of policy cost by the time of the provision of funds FY2010 FY2011 Fluctuation (A) Policy cost (previously cited) 2,430.4 2,181.1-249.3 1) Opportunity cost of capital investments, etc. provided before the beginning of 1,976.6 1,801.4-175.2 the analysis period 2) Policy cost expected to be newly accrued during the analysis period 453.8 379.7-74.1 Subsidies, etc. from the Government - - - Money transferred to the Government - - - Policy cost accrued with a change in surplus funds - - - Opportunity cost of capital investments, etc. 453.8 379.7-74.1 Year-to-Year comparison analysis FY2010 FY2011 Fluctuation (A) Policy cost (previously cited) 2,430.4 2,181.1-249.3 (A ) Policy cost obtained by re-calculating (A) using the same assumed interest 2,430.4 2,397.4-33.0 rate as in the FY2010 analysis (B) Policy cost of (A') generated in FY2011 or later 2,427.7 2,397.4-30.3 Policy cost in FY2011 is 2,181.1 billion. The analysis shows a decrease of 30.3 billion in real policy cost over FY2010 when the effect of change in the assumed interest rate for FY2010 and FY2011 is eliminated and the policy costs that accrue in FY2011 and thereafter are compared. The decrease in real cost is considered to be attributable to the following factor: Decrease in costs due to the decrease in opportunity costs in line with reduced investments (-30.3 billion yen) Sensitivity analysis (cases where assumptions change) Changed assumption and extent of change Policy cost (Fluctuation) Without change With change in Interest rates on funds raised +1% in discount factor discount factor 2,376.1 (+ 195.0) 2,959.6 (+ 778.5) Fluctuation in opportunity cost + 195.0 + 778.5 Income from toll revenue -10% 2,557.1 (+376.1) Fluctuation in opportunity cost +376.1 (Reference) Budgeted amount of subsidies and capital investment in FY 2011 Subsidies: - Capital investment: \83.7 billion *Components in each column may not add up to the total because of rounding. - 126 -
5. Outline of estimation and project prospect in the analysis 1) The highway projects are the subject of the estimates. 2) The targets are 8,520 km for national expressways, 1,071 km for ordinary toll roads, 323km for the Expressways, 264 km for the Hanshin Expressways and 173 km for Bridge Expressways. The length of national expressways opened to traffic as of the end of FY2010 was 7,751 km, while 953 km for ordinary toll roads, 304 km for the Expressways, 246 km for the Hanshin Expressways and 173 km for Bridge Expressways were opened to traffic. 3) The administration costs are estimated in consideration of the cost reduction (by 30%) based on the "Concerning Basic Frameworks for Privatization of Four Road-Related Public s (the Agreement between the government and the ruling party on December 22, 2003)" 4) The toll revenue is estimated based on the toll structure, toll level and discount system of each corporation under the present agreement. 5) The Agency and each Company will decide lending fees based on the above toll revenue and administration costs. (Unit: billion yen) Result Estimated Planned Trial assumption FY Operational Revenue (lending fees) 2005 (2nd half) 2006 2007 2008 2009 2010 2011 864.9 1,971.2 1,974.6 1,862.4 1,484.4 1,530.8 1,752.4 21,380.2 23,918.2 18,114.6 181.6 65,346.9 2012-2021 2022-2031 2032-2041 2042-2044 2011-2044 6. Reasons for granting of subsidies, mechanism and underlying laws The Agency receives capital investment from the national and local governments and subsidies from the national and local governments in order to reduce the public financial burden related to expressways and assist smooth operations related to expressways by the expressway companies through efforts including loans to the East Nippon Expressway Company Limited, Central Nippon Expressway Company Limited, West Nippon Expressway Company Limited, Expressway Company Limited, Hanshin Expressway Company Limited and Bridge Expressway Company Limited and speedy, sure repayment of the debts inherited as well as the ones related to such operations as new construction and reconstruction of other expressways. (Underlying laws and regulations) Capital investment: [Article 6 of the Act on Japan Expressway Holding and Debt Repayment Agency: Capital] 2. The Agency may, if necessary, increase its capital upon obtaining the approval from the Minister of Land, Infrastructure, and Transport. 3. The national government or local governments stipulated by cabinet order may invest in the Agency within the limit specified in the budget when the Agency increases its capital under the above provision. Subsidies: [Article 25 of the Act on Japan Expressway Holding and Debt Repayment Agency: Subsidies] The government may subsidize the Agency for the expenses necessary for the operations under the provisions of 1, Paragraph 5, Article 12 within the limit specified in the budget. [Article 12 of the Act on Japan Expressway Holding and Debt Repayment Agency: Scope of Operations] 5. To lend a part of the funds for expenses necessary for disaster recovery of expressways as interest-free loans to the Companies with the revenue source of capital from the government. 7. Special remarks 1) The road assets will be opened to public at no charge after the completion of the debt redemption and restored to the national or local governments. It is important, however, to note that the policy cost analysis does not consider their residual value. 2) As for this organization, the policy cost analysis treated the figures of the Japan Expressway Holding and Debt Repayment Agency, East Nippon Expressway Company Limited, Central Nippon Expressway Company Limited, West Nippon Expressway Company Limited, Expressway Company Limited, Hanshin Expressway Company Limited and Bridge Expressway Company Limited in an integrated manner. Note: The increase in assets and debts through constructions of expressways by the Companies will be inherited by the Agency, and the Agency will lend assets of expressways to Companies, then receive the revenues from road lending fee from the Companies. The Agency will return the capital investment to the government by this road lending fee during the redemption period, so the opportunity cost as the capital investment during the period will be the policy cost. 3) The interest rate used in the analysis is set as a common precondition in the analysis and is not the same as the future interest rate used by the Agency and Companies in the preparation of recoupment plans. 4) The toll road operations are a part of the road maintenance and improvement plan along with the government operations and the like, generating social and economic effects including smoother traffic, improvement of convenience in life and promotion of industry. As an example of the beneficial effects of expressway operations, looking at the benefits of direct users such as shortened driving time, the estimate suggests that the effects generated will amount to \9.9884 trillion for the new services in and after FY2010 alone after the completion of the network at the end of FY2020. 5) Changes in policy cost to date are as indicated below. FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 \2,922.6 billion \2,605.6 billion \2,635.2 billion \2,188.3 billion \2,430.4 billion \2,181.1 billion - 127 -
(Reference) The respective costs in FY 2011 for the four former road-related public corporations are estimated as follows: Policy (subsidy) cost Japan Hanshin 1. Subsidies from the Government - - - - - 2. Money transferred to the Government - - - - - Subtotal (1+2) - - - - - 3. Opportunity cost of capital investment from the Government 892.3 271.6 184.8 832.4 2,181.1 Subtotal (1+2+3) 892.3 271.6 184.8 832.4 2,181.1 4. Decrease in losses - - - - - (1+2+3+4=policy cost (A)) 892.3 271.6 184.8 832.4 2,181.1 Analysis period (years) 29 31 34 25 34 Breakdown of policy costs by timing of the funding Japan Hanshin (A) Policy costs (previously cited) 892.3 271.6 184.8 832.4 2,181.1 1) Opportunity cost such as capital investment made before the 892.3 230.2 163.0 515.9 1,801.4 beginning of the period under analysis 2) Policy costs expected to newly accrue during the period under analysis - 41.4 21.8 316.5 379.7 Subsidies from the Government - - - - - Money transferred to the Government - - - - - Policy costs in connection with increase/decrease in surplus - - - - - Opportunity cost such as capital investment - 41.4 21.8 316.5 379.7 Year-to-Year comparative analysis Japan Hanshin (A) Policy cost (previously cited) 892.3 271.6 184.8 832.4 2,181.1 (1) Policy cost in the analysis for FY2010 and that are expected to accrue in or 1,008.3 311.2 206.9 901.3 2,427.7 after FY2011 (2) Policy cost recalculated based on the figures under (A) with the interest rate 986.3 298.9 203.3 908.8 2,397.4 assumed in the analysis for FY2010 Increase/Decrease (2)-(1) -21.9-12.3-3.5 +7.5-30.3 The case if assumption is changed Changed assumption and extent of change (Increase/Decrease) Interest rate on funds raised +1% (Without change in discount rate) (With change in discount rate) Income from toll revenue -10% Japan 982.9 (+90.6) 1,239.5 (+347.2) 1,069.1 (+176.8) 290.8 (+19.2) 369.8 (+98.2) 314.2 (+42.6) Hanshin Expressway Public 198.3 (+13.5) 248.4 (+63.6) 210.8 (+26.0) Bridge Authority 904.1 (+71.7) 1,101.9 (+269.5) 963.0 (+130.6) 2,376.1 (+195.0) 2,959.6 (+778.5) 2,557.1 (+376.0) *Components in each column may not add up to the total because of rounding. - 128 -
(Reference) Road Account Balance Sheet Financial Statements tem End of FY2009 End of FY2010 End of FY2011 (Estimated) (Planned) (Assets) ( Liabilities and equity) Current assets 385,918 256,975 296,654 Current liabilities Cash and deposits 561 518 515 Japan Expressway Holding and Securities 183,500 100,500 148,500 Debt Repayment Agency bonds Accounts due for road assets to be repaid within one year 133,130 143,200 146,030 lending fee, etc. Discount on bonds payable (-) Accounts due 26,005 129 129 Long-term borrowings to be Short-term loans 41,714 11,658 514 repaid within one year Inventory goods 966 966 966 Account payable Other current assets 41 3 - Accrued expense Fixed assets 40,911,908 40,717,495 40,488,533 Other current liabilities Tangible fixed assets 40,541,112 40,314,541 40,025,552 Fixed liabilities Buildings 290,028 289,094 287,841 Asset collateral liabilities Structures 28,841,533 28,672,660 28,409,633 Asset return subsidies Machinery and equipment 624,577 603,730 577,372 Asset return contributions Tools and equipment 1,385 1,611 1,788 Japan Expressway Holding and Debt Repayment Agency bonds Land 8,416,430 8,500,149 8,563,778 Discount on bonds payable (-) Temporary account for 2,367,160 2,247,297 2,185,140 constructions Long-term bonds Intangible fixed assets 251,897 252,139 252,286 Leasehold interests 250,589 250,649 250,658 Other intangible fixed assets 1,307 1,490 1,628 Investment and other assets 118,899 150,815 210,696 Long-term loans 118,741 150,657 210,537 Deposits and guarantees 158 158 158 Long-term accrued liabilities Reserves Reserve for retirement benefits Reserves, etc. under the ordinance Reserve for Highway Convenience Improvement Project ( liabilities) Capital Government investments Local governments investment Capital surplus Capital surplus Reserves under Chapter 15 of the enforcement Act of the Act for the Privatization of the Four Highway-Related Public s Earned surplus Reserves Unappropriated income for the current year (of this, gross profit) ( equity) End of FY2009 (Unit : million yen) End of FY2010 End of FY2011 (Estimated) (Planned) 4,239,652 3,456,577 3,239,914 1,726,820 675,500 985,880-247 -27-79 2,355,272 2,596,013 2,099,843 64,695 91,785 59,122 93,058 93,249 95,092 55 57 57 27,248,724 27,563,783 27,259,599 44,914 42,568 40,222 21,828 20,599 19,371 23,086 21,969 20,851 21,102,040 23,402,880 25,025,060-138,001-131,840-121,708 5,752,432 3,764,517 1,832,393 487,329 485,642 483,618 10 15 13 2,227,072 1,782,533 1,524,242 33,715,448 32,802,893 32,023,755 4,962,660 5,093,484 5,234,234 3,701,136 3,779,881 3,863,589 1,261,524 1,313,603 1,370,645 847,608 847,608 847,608 35 35 35 847,573 847,573 847,573 1,772,109 2,230,484 2,679,591 1,404,492 1,772,109 2,230,484 367,617 458,374 449,107 (367,617) (458,374) (449,107) 7,582,378 8,171,576 8,761,433 assets 41,297,826 40,974,469 40,785,188 liabilities and equity 41,297,826 40,974,469 40,785,188 Road Account Income Statement FY2009 FY2010 (Estimated) FY2011 (Planned) (Expenses) Ordinary expenses 1,452,451 1,452,520 1,476,874 Operating expenses of road assets lending 903,947 907,034 922,703 Management effort aid expense 185 3,713 1,064 General administration costs 1,547 1,569 1,557 Financial expenses 505,847 499,068 508,482 Interest paid 497,975 488,888 500,783 Bond issuing cost 7,582 9,895 7,320 Other financial expenses 290 286 380 Expenses related to acquisition of road assets 40,746 40,915 43,059 Miscellaneous losses 179 221 10 Temporary losses 539 174 8,290 Loss on sales of fixed assets 531 174 - Loss on transfer of fixed assets - - 8,290 Loss on loss/profit revisions for the previous year 9 - - Net profit 367,617 458,374 449,107 (Revenues) Ordinary income Income from the road assets lending fees Other income Asset collateral liabilities Financial revenue Miscellaneous income Nonrecurring profit Reversal of reserve for Highway Convenience Improvement Project Gain on sale of fixed assets Other nonrecurring profit FY2009 FY2010 (Estimated) (Unit : million yen) FY2011 (Planned) 1,422,158 1,465,570 1,675,980 1,413,731 1,457,868 1,668,936 4,028 4,021 3,831 2,170 2,346 2,346 2,186 1,048 867 43 287-398,450 445,497 258,291 394,045 444,539 258,291 1,101 70-3,304 888-1,820,608 1,911,068 1,934,271 1,820,608 1,911,068 1,934,271 Note : s may not agree due to rounding. - 129 -