Background
Applies to toll roads. It may also apply to bridges and tunnels. Such projects are characterised by:
- Technically simple
- Becomes a little more complex if the terrain is difficult (bridges and tunnels)
- Capital cost very dependent on terrain and rights of way; and can be difficult to predict
- Project may include service areas which will generate additional revenues
- Usually needs a reasonably high volume of traffic to make it economic.
- Traffic forecasts are difficult to predict
- Road resurfacing and/or additional lanes may be required during the life of the project/concession
- Usually with a tolling arrangement. There may be varying degrees of State support. Sometimes the State will pay the concessionaire capacity and operations and maintenance costs. At other times the concessionaire will pay the State.
- Part of the highway may be opened to the public before the whole project is complete. The net revenues from this early opening may be used to fund the rest of the project.
How Promoter handles Toll Road projects
- Promoter carries out a simple design and cost estimate.
- It determines the number of lanes for each operating period through the life of the project in order to maintain a required level of service. It gives the user the option to make an additional investment and add more lanes when necessary.
- It contains procedures for handling periodic road resurfacing and the sinking funds to ensure that funds are available
- It contains a variety of features for handling State support.
- The user places key coordinates so that Promoter can illustrate the network.
- It diverts net operating revenues from early opening to fund parts of the project still under construction
Typical Project Cash Flows
The revenues typically increase over the life of the project. They may reach a plateau if the demand exceeds the design capacity. And there may be a step wise increase in the revenues as the operator increases the tolls. The operating and maintenance costs are usually a small fraction of the revenues.