Analysis of the New Management Scheme for the A-8 Motorway in Guipúzcoa (Spain)



Analysis of the New Management Scheme for the A-8 Motorway in Guipúzcoa (Spain)

Authors

J Garcia, C Bonnelly, INECO, ES

Description

Abstract

1 INTRODUCTION
This paper is going to resume the process that has followed the first Spanish toll motorway (A-8 Bilbao-Behobia) to revert to the Government, in this case, a Local Authority, the Diputación Foral de Guipúzcoa (Basque Country). Some Spanish concessions have finished their concession periods, but all of them have renegotiated their contracts in order to continue with the operation. That is why, this toll motorway is different and unique. For the first time in Spanish concession history, a Local Authority, has come to the point to decide the kind of management of the motorway for the future.

Because of different reasons (that will be explained in the definite paper), the Diputación Foral de Guipúzcoa decided to summon a bid for a new operation contract. As the road was completely repaid, it was decided to charge a low toll to the users of the road in order to make a third lane on the motorway and other several improvements.

2 GENERAL DESCRIPTION OF THE MOTORWAY
In the definite paper we will describe the motorway more deeply but now are going to give some information about the A-8 Bilbao-Behobia Motorway, as it is one of the most important motorways is Spain (it belongs to one important Trans European Corridor which links Spain and France).

The actual concession period is of 35 years, started in 1968 and it will expire the 6th of June of 2003. The total length of the motorway is 105,6 km. The total number of vehicles that used the motorway in 2002 was approximately 40 million. The toll revenues for the concessionaire were approximately of 120 M?uros in 2002.

3 PROCESS
The Diputación Foral de Guipúzcoa decided that the project necessarily had to consider the non-budgetary financing and the direct management of the contract, and that is why it could not be used the typical concession contract (indirect management). The project was structured in three different parts: technical, legal, and economical-financial, each of them involving different tasks in order to conclude with the final objective of the project: the design and implementation of the new Management Contract for the A-8 Bilbao-Behobia Motorway.

The scheme of this project is a typical project finance but with some differences that make it interesting to other governments that wish to develop a project based in the direct management but involving the private sector. Basically, the main difference is that a Public Society, with the Regulator?s role, has been set up between the government and the Private Agent.

Briefly, the previous scheme is described in the following lines:

* Users:
Up to the date, the users of the road have been paying a toll, quite expensive according to other Spanish roads (due to the high construction cost). When the actual concessions finishes (June 2003), the toll will be reduced approximately 50 %. The reason to continue with the toll is not only to finance the third lane and other improvements, but also as a measure to regulate the intense traffic on that important Trans European corridor.

* Private Operator:
The Private Operator is going to rehabilitate the existing road, but also has to maintain and operate the road for a period of ten years. This Private Operator has to collect the toll and transfer it to the Regulatory Agency, which afterwards will pay the Operator according to the vehicles-kilometre registered on the motorway. The payments of the Regulatory Agency to the Private Operator are based on a ?band payment structure? with a cup limit for the revenues. This peculiar system is being very used nowadays, mostly in shadow tolls, but in this case it has been used in a normal toll motorway. In the definite paper we will explain in detail how it works.

* Regulatory Agency
The Regulatory Agency receives the revenues from the Private Operator. This Agency uses part of these revenues to finance the third lane of the motorway and other improvements (which are carried out by the Construction Companies) and the other part to pay the Private Agent according to the vehicles-kilometre registered on the motorway.

The Regulatory Agency receives from the Diputación Foral de Guipúzcoa (government) the commission to regulate the new BOT contract (finance, design, construct, maintenance and operate), and the final obligation of the Regulatory Agency is to control the whole scheme, and in particular, finance the construction and pay de Private Operator.

The Regulatory Agency will be in charge of the Commended Management for a period of 24 years approximately, and after that it would have to return the motorway to the Diputación Foral de Guipúzcoa. This period has been established according to the amortization of the investments that are going to be carried out on the motorway. It is not the aim of the Regulatory Agency to make any profit of the Commended Management of the road as it is Public Society.

In Spanish law, a Public Society works in a different way to the Government. Although in the definite paper this aspect would be explained in more detail, now we would say that the main difference is that the Public Society is more agile in the daily work than the Administration and this is very positive to the project.

* Contract between Regulatory Agency and the Private Operator
The Regulatory Agency will sign at least three different contracts during the 24-year period that the Government has commended the Management of the motorway, with different Operators.

This contract is also unique within Spanish concessions. It is based on ?quality standards?. Although it has not been the first time it has been used in Spanish concessions, it has been the first to use so many quality standards to control de motorway.

In this kind of contract, the Private Agent, or Operator, has to carry out all the quality standards settled in the General Specifications for Tenders. If the Operator does not meet with the required standards it can be penalised. On the other hand, if the Operator improves the requirements of the General Specifications for Tenders, he can be rewarded.

4 CONCLUSIONS
To conclude we are going to highlight the main advantages of this kind of contract:

* One of the most important features of the project is the non-budgetary finance. European Union countries have to carry out a economic stability programme involving that the budget deficit has to be within a limit of 3%. Some countries even have a more restrictive condition (for example Spain with a limit of 0%), that is the reason why governments are trying to bring in, now more than ever, the Private Sector to finance Public Infrastructures.

* Although the Government has not got to finance any part of the project, it can control it through the Regulatory Agency created with 100 % Public capital.

* The contract between the Regulatory Agency and the Private Agent is based on Quality Standards. These kinds of contracts involve that the Private Agent has to do an effort to keep the motorway in optimum conditions attending to the requirements of the General Specifications for Tenders.

Publisher

Association for European Transport