October 2019 - ec.europa.eu · Parkings - CSSP Eating@ CEF-Parkings 10 year Concession CSSP Group...

October 2019

CBA of a

CEF | Case Study

Safe and Secure Parking for trucks

Innovationand Networks Executive Agency

Table of Contents

I - Introduction ........................................................................................................................................................................................ 2

II - Project Description ........................................................................................................................................................................ 2

III - Project Objectives ......................................................................................................................................................................... 4

IV - Options and Demand Analysis .............................................................................................................................................. 5

Options analysis .......................................................................................................................................................................... 5

Safe and Secure Parking Demand Analysis ................................................................................................................. 7

V - Project Costs and Revenues of selected option ........................................................................................................... 8

Scope of analysis ........................................................................................................................................................................ 8

Investment Cost ........................................................................................................................................................................... 9

Operation and maintenance cost .................................................................................................................................... 10

Replacements ............................................................................................................................................................................. 12

Residual value ............................................................................................................................................................................ 12

Operating Revenues................................................................................................................................................................ 12

Sources of financing .............................................................................................................................................................. 14

VI - Financial and Economic Analyses .................................................................................................................................... 14

Financial analysis and EU grant calculation ............................................................................................................. 14

Socio-economic analysis ...................................................................................................................................................... 18

VII - Risk Assessment ....................................................................................................................................................................... 23

Sensitivity analysis .................................................................................................................................................................. 23

Risk analysis................................................................................................................................................................................ 25

VIII - Conclusions ................................................................................................................................................................................ 26

IX - Abbreviations ............................................................................................................................................................................... 27

Acknowledgment and disclaimer

Authors: INEA Financial Engineering team (Julien Bollati, Gauthier Clar)

The authors gratefully acknowledge very useful comments by Frederik Rasmussen, Deputy Head of Unit, C1 Road Transport, European Commission DG MOVE as well as by experts from JASPERS and ESPORG. In some cases, constraint of time or scope of the case study have limited the possibility to fully include all the suggested changes. All remaining omissions and errors are responsibility of the authors.

The European Commission and the authors accept no responsibility or liability whatsoever with regard to this document. All data in this description is purely fictional. This material is for general information and not intended to address the specific circumstances of any particular individual or entity. In conclusion, this case study is not meant to offer professional or legal advice.

Reproduction and quotation are authorised as long as the source is duly acknowledged.

Cover photo courtesy of the TOTAL parking area in Kalken.

CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING AREAS FOR TRUCKS

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I - Introduction

The objective of this case study is to ease the understanding and the practical application of CBA to

the sector of Safe and Secure Parking areas.

The present case study is only intended as a worked example and essentially expands the “Guide to

Cost Benefit Analysis of Investment Projects – Economic Appraisal tool for Cohesion Policy 2014-

2020”1 to specific features of projects in this sector applying to the Connecting Europe Facility

programme.

Although the project example might be partially based on real data, this has been simplified and

modified in many ways to make explicit those aspects of the CBA that are sector specific, such as

the typical economic costs and benefits, evaluation methods, reference period, etc.

This case study is also gathering a number of CBA specific recommendations provided in CEF Guide

for Applicants and Frequently Asked Questions released for past CEF Call for proposals.

The case described should not be seen as a standard project for the sector. It is only an illustrative

case and does not cover the variety of possible projects eligible under the safe and secure parking

priority of CEF call for proposals. Similarly, none of the assumptions contained here is meant to be

seen as representative or standard, but rather as illustrative example.

In addition, the case study is intentionally short and many details were left out. CBA to be

submitted to CEF call for proposals are expected to exceed or match this level of detail. In fact, CBA

documents are required to be at least 20 pages long.

This case study should be read in conjunction with other tools provided by the INEA in the context

of CEF Call for proposals, such as the CBA Cash Flow template and the “CBA checklist”.2

II - Project Description

The company “CEF Safe and Secure Parkings” (CSSP), which operates safe and secure parking areas

in several Countries of the EU, plans to upgrade its non-secure parking area in EasternLand3 at km

328.1 of motorway A3. This section of the motorway is part of the TEN-T Core Network linking a

TEN-T core port “Main Sea Port” with the Capital city of this Cohesion Country.

The current parking consists of a parking area for 155 trucks, a rest room, few picnic tables, some

benches and rubbish bins on an area of 30,000 m2. In addition to adding safety features and the

1 https://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/cba_guide.pdf 2 For the 2019 CEF Transport MAP call these documents can be found at the following links https://ec.europa.eu/inea/sites/inea/files/cba_cash_flow_template_cef_2019_map.xlsx https://ec.europa.eu/inea/sites/inea/files/2019-cef-transport-map-cba_checklist.pdf 3 EasternLand is a fictional country. All parameters and values are realistic but do not correspond to any specific country of the EU.

https://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/cba_guide.pdf

https://ec.europa.eu/inea/sites/inea/files/cba_cash_flow_template_cef_2019_map.xlsx

https://ec.europa.eu/inea/sites/inea/files/2019-cef-transport-map-cba_checklist.pdf


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upgrade of the parking facility, the project involves also the construction of new toilets and

showers as well as a catering facility/snack bar with a capacity of 30 seated meals 24/7. The

operation of this snack bar will be ensured by a 10 year concession to the sister company

“Eating@CEF-Parkings”. Customers will have access to free WiFi in the whole parking area.

In the same service area there is currently a fuel station managed directly by the project promoter.

To ensure trucks can fill also without paying for the access to the safe and secure parking two self-

service pumps will be moved beyond the safe and secure perimeter.

The level of security that is targeted by the promoters for the parking area corresponds to the level

“Silver” of the common EU standard for the required levels of security and service.4 The perimeter

will be covered by CCTV and lightened at 20 Lux. The overall design optimises visibility both at the

perimeter and inside the parking area. There will be a clear zone of 1 meter between the fence and

the parking area. The entry gate will be equipped with barrier and a CCTV recording the vehicles

entering the parking area. In addition only freight vehicles and authorized vehicles will be allowed

to enter. A turnstile will ensure access for pedestrians.

The creation of a small separate area dedicated for vehicle transporting dangerous goods and the

setting up of clear zones to optimise visibility will reduce the capacity of the parking area from 155

to 146.

Staff trained by an accredited training provider will be available 24/7 in an onsite control centre

and will perform two inspection of the parking area each day (one at daytime, one at night).

The project is designed to address the need of targeted clients that require safe and secure parking

but are unable to find such service on their route. Currently, truck drivers travelling on A3 who

require an overnight rest need to leave the motorway and drive on average 12 km to find a suited

location such as private depots/terminals. 4 https://sstpa.eu-study.eu/download/16/long-manual-for-operators-of-parking-areas/1175/technical-specifications.pdf

Safe and Secure Parking

Fuel station(existing)

Snack bar

CEF Safe and Secure Parkings - CSSP

Eating@CEF-Parkings

10 yearConcession

CSSP Group

Owns 100%

Owns 60%

Revenues

Revenues

Revenues

Concession fee

Customers

Customers

Customers

https://sstpa.eu-study.eu/download/16/long-manual-for-operators-of-parking-areas/1175/technical-specifications.pdf

https://sstpa.eu-study.eu/download/16/long-manual-for-operators-of-parking-areas/1175/technical-specifications.pdf


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GUIDANCE ON STRATEGIC ASSESSMENT

Parking areas need to be the object of a strategic assessment that goes beyond the single project. This is typically done at the level of a Country or main road axis and it defines a strategic plan for the set-up of parking facilities (several small parking areas or few large ones) and the additional functionalities provided. More than the CBA of the specific project, this assessment is the occasion to study key demand drivers such as the national and neighbouring country regulation in relation to traffic restrictions for HGV or the security situation in that geographical area. Further key element to assess is the number and type of equipments provided (ITS, catering, accommodation, hygienic equipment, added value services such as the WiFi or other entertainment) and if there will be a petrol station the fuel prices (on and off motorway but also across different countries for cross-border routes). Obviously all these factors and business consideration feed also into the demand analysis (see below).

III - Project Objectives

The project contributes to the development of a denser network of safe and secure parking areas in

line with the TEN-T regulation (EU Regulation 1315/2013), which refers in article 39(c) to safe and

secure parking areas on motorways for trucks and commercial vehicles approximately every 100

km.

The general objective of the project is to ensure a reliable safe and secure parking service on a

section of the core network busy for freight transport.

Specific objectives include:

reducing travel time for reaching a safe and secure parking spot

improving the social conditions of professional HGV drivers, through increased quality

standards; and

decreasing cargo crimes on motorway A3

As a secondary effect, it is expected that the site can also serve as waiting areas (buffer) before

the port allowing for just-in-time arrival and delivery/pick-up for truck requiring a safe and secure

parking.

The project objectives are in line with the national strategies related to the transport sector in

terms of the improving the attractiveness of Main Sea Port and efficiency of the national transport

sector.


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IV - Options and Demand Analysis

Options analysis

Before specifying the project, a list of alternative strategies to achieve the intended objective have

been identified. These main strategic options considered were:

Option 1: Creating a brand new safe and secure parking area with direct access to

motorway A3. Given the strong demand also for unsecured parking, this option allows

serving the drivers requiring secure parking without penalising other users.

Option 2: Upgrading a 155 existing non-secure parking area at km 328.1 of motorway A3.

Option 3: Upgrading a 190 existing non-secure parking area 24 km away from Main Sea

Port. This option would allow serving the freight route to the Capital and potentially others.

Option 1 was not retained because

most of the A3 motorway crosses a

protected forest (Natura 2000 site)

where new constructions are

restricted and land in sections of the

motorway close to urban areas is

scarce and expensive. Option 3 has

been excluded because this location

is too close from the port to properly

address the demand for

long/overnight rests.

The three options were analysed also

for their vulnerability to climate risks

and if adaptation measures are

required. A3 route is parallel to the

river “Calmstream” and Main Sea Port

is located on its estuary. Because the

number of heavy rainfall events in

northern EasternLand is expected to

increase by 25 to 40 days by 2050

and gale force wind to happen with

more regularity, coastal areas, including the location of Option 3, will be more prone to flooding.

The 155 place existing non-secure parking area is relatively close (1.2 km) to Calmstream but it is

possible to increase the resilience of Option 2 by reinforcing the existing ditch around the site. This

is expected to cut by two the likely downtime due to flooding.


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GUIDANCE ON CLIMATE PROOFING

It is recommended that the option analysis demonstrates a reflexion on the effects of climate change on the Project. If relevant, the option analysis should identify a scenario containing adaptation measures improving the resilience of the project to these changes. In this process, it is recommended to analyse the climate proofing of the projects using the DG CLIMA guidance prepared for Major Projects applying to ESIF. This guidance called ”Climate Change and Major Projects - Outline of the climate change related requirements and guidance for major projects in the 2014-2020 programming period” is available at https://ec.europa.eu/clima/sites/clima/files/docs/major_projects_en.pdf but will soon be updated in anticipation of the 2021-2027 programming period.

After choosing the strategic option 2, different technical solutions have been compared. In

particular the implementation of 3 different levels of security.

Option 2a: Upgrading the 155 non-secure parking area to the Bronze security level.

Option 2b: Upgrading the 155 non-secure parking area to the Silver security level.

Option 2c: Upgrading the 155 non-secure parking area to the Gold security level.

Based on interviews with potential customers, the strategic plan for safe and secure parking areas

in Easternland concluded that the Bronze level could be insufficient for attracting drivers currently

using private rest areas and warehouses. While they would be ready to shift to Gold and Silver

security levels, the benefits of the Gold standard that can be charged by the parking area operators

to users do not appear to justify the higher costs. For this reason, the retained project scenario is to

upgrade the 155 non-secure parking area to the Silver security level (Option 2b).

GUIDANCE ON THE ASSESSMENT OF FUNCTIONALITIES

As already mentioned in the guidance box of the previous chapter, for this type of projects the strategic assessment is fundamental at defining at a Country or Corridor level the need for the project, what functionalities could be useful and what safety standard to reach. The main conclusions of this analysis have been summarised in the present case studies but the number of functionalities and technological considerations is in reality broader. Functionalities that could be offered at the HGV parking area are traffic control, toll control, veterinarian control, axle load control, occasional custom and border control off border, maintenance facilities, winter maintenance and winter chain switching. With respect to the technology to be chosen one should look at the compatibility with other parking areas of the network or other areas managed by the project promoter.

https://ec.europa.eu/clima/sites/clima/files/docs/major_projects_en.pdf


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Counterfactual

The option analysis is based on a common baseline (counterfactual) scenario assuming CSSP

continues to operate the area as a non-secure parking with the current level of periodic

maintenance costs and no revenues.

Safe and Secure Parking Demand Analysis

The parking area addresses the need of drivers active in the road freight transport market for “long

stay resting” in international and domestic long-distance transport. This need to rest is also legally

required by the current driving and resting time regulation (EU Regulation 561/2006) which forces

45 minutes rest breaks after 4.5 hours of driving (driving break) and 11 consecutive hours of rest

in 24 hours (daily rest period).

Compared to this established need and legal requirement, the current offer of safe and secure

parkings appears insufficient. A detailed surveys of all private certified and noncertified truck

parking areas as well as other parking facilities (e.g. at fuel stations) in the Northern part of the

Country highlighted that there is currently only 1 site with similar level of security as the project in

the 3 provinces crossed by motorway A3. This site offers 261 places and it is located on the bypass

of the capital city.

The demand for secure parking areas, in particular for overnight parking from vehicles transporting

high value cargoes, is currently met by private not certified parking areas at depots and distribution

centres that are on average 12 km away from the A3.

While statistics for these private areas are not always available, studies suggest that all the

existing capacity is used and there is a potentially an unmet demand due to an increasing rate of

long hauled goods. Furthermore, these private parking areas are close to urban centres in locations

saturated in terms of traffic.

In addition to the currently unmet demand, predictions from the Easternland Ministry of Transport

show the demand will further increase: road freight transport along motorway A3 is expected to

grow between +26% (low scenario) and +48% (high scenario) by 2050.

Projections based on this trend suggest that the additional need for safe and secure parking spaces

will be of over 1,000 places by 2030. This figure only counts for HGVs making long distance loaded

trips, and not those waiting at the start or end of their journeys or waiting for new consignments.

This representation is consistent with the European mapping exercise “Study on Safe and Secure

Parking Places for Trucks Mapping Demand and Supply”5 that concludes there is a significant gap in

5 https://sstpa.eu-study.eu/download/19/final-report/1188/final-report-sstpa-28022019-isbn.pdf https://sstpa.eu-study.eu/download/15/comprehensive-mapping-report/1160/comprehensive-mapping-report.pdf

https://sstpa.eu-study.eu/download/19/final-report/1188/final-report-sstpa-28022019-isbn.pdf

https://sstpa.eu-study.eu/download/15/comprehensive-mapping-report/1160/comprehensive-mapping-report.pdf

https://sstpa.eu-study.eu/download/15/comprehensive-mapping-report/1160/comprehensive-mapping-report.pdf


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the supply of secure parking areas in this Easternland. Cargo crime in the area has increased by

31% in the last 5 years while the supply of safe and secure parking has not changed in the same

period. In addition, the economic evolution of Easternland is progressively shifting the mix of cargo

travelling on motorways to goods with higher black market value (e.g. the amount of consumer

electronics increased by 47% in the last 15 years).

The shipping sector is particularly cost sensitive and the demand analysis has carefully studied the

effect of prices on the expected usage of the parking (i.e. its price elasticity). The study highlighted

that a number of truck drivers would not afford or would refuse paying the access fee if this was

to be paid directly from their pocket. However, the decision for using safe and secure parking areas

usually comes from the shippers and for high value goods they tend to stick to demanding safe

and secure parking also at a price of 10-12€ for the overnight stay.

GUIDANCE ON THE ESTIMATION OF THE DEMAND

Standard traffic modelling tools are not very useful to estimate the demand for parking areas. We propose to estimate the demand by looking at traffic flows of a standard week and estimating “turn in rates” based on rates observed at comparable existing rest stops on the network. Such estimates are not always very reliable as “turn in rates” are dependent on trip patterns and are very context specific (e.g. rates are generally much lower on commuter routes and higher on inter-regional routes). Also, the decision for the use of safe and secure parking areas may not be entirely with the driver, the operators may have agreements with providers of private parking and service facilities for a bundle of services.

V - Project Costs and Revenues of selected option

Scope of analysis

The scope of the analysis encompasses the parking space itself but also the ancillary activities that

contribute to the overall service offering of the activity as well as other activities (or other business

lines) that benefit from or are adversely affected by the existence and operation of the investment

planned. 6 This is why the fuel station and the snack bar are included as well.

6 This approach is particularly relevant for the financial analysis in order to provide a fair and comprehensive

view of the financial flows of the project promoter.


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POTENTIAL MISTAKE WITH THE SCOPE OF THE ANALYSIS

Analysing only the parking space would be a mistake. The upgrade of the parking area will not bring a capacity increase to the fuel station nor add new fuel types (e.g. CNG or LNG). Yet, the presence of these functionalities (fuel station etc..) influences the decision of drivers to use the safe and secure parking instead of resting in the premises of a local partner company. The fuel station shall be included to capture all potential changes in its operational cash flows due to the implementation of the project. In this particular case, incremental capital investment is required.

All costs and revenues in the analysis are at constant prices and net of VAT. The time horizon for

the assessment is 30 years in line with the guide to cost benefit modelling for SSTP areas.7

POTENTIAL MISTAKE WITH THE TIME HORIZON

Using a time horizon of 10 years based on the shorter duration of the snack bar concession would be a mistake. The time horizon need to refer to the most relevant part of the project and in this case, the functional role as well as the size of cash flows of the safe and secure parking are predominant. If the concession was for the safe and secure parking itself, a reference period shorter than 30 years would be acceptable at two conditions. The first is that the financial analysis includes the residual value of the asset (including any termination indemnity expected). The second condition is that the economic analysis has a residual value calculated using the discounted net cash flows for the years remaining until the end of the economic life of the asset (year 30). These two conditions would ensure that all relevant cash flows are still captured by the CBA despite the shorter time reference.

Investment Cost

In this upgrade project, all implementation costs are incurred in the first year while operations are

planned to start already in the second year. This is possible because CSSP already owns all the land

and permits have already been obtained.

The 200 m2 land for the snack bar has already been purchased for 75,000€. Because the works

have not been tendered yet, the estimation of the remaining investment costs is based on detailed

planning. The total cost is expected to reach about 3 m€.

Most of the costs (1,880,000€) relate to engineering work: renovating the pavement and reworking

the driveway entrances, demolish and rebuild new toilets, building showers plus a washing facility

room, erecting the control room, the snack bar and public utilities. These engineering works include

also digging a wider ditch to ensure resilience to flooding.

In the second phase of the implementation, a fair number of equipment will be installed: the

surveillance system (CCTV cameras, control room equipment), non-intrusion systems such as the

7 https://sstpa.eu-study.eu/download/16/long-manual-for-operators-of-parking-areas/1180/cba-annex-to-the-manual.pdf

https://sstpa.eu-study.eu/download/16/long-manual-for-operators-of-parking-areas/1180/cba-annex-to-the-manual.pdf

https://sstpa.eu-study.eu/download/16/long-manual-for-operators-of-parking-areas/1180/cba-annex-to-the-manual.pdf


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turnstile; erecting the physical perimeter and barriers; installing gates, entrances and exits and their

related access control systems as well as the lighting system.

(€) Total costs Ineligible costs Eligible costs

Planning/design fees 135,000 - 135,000 Land purchase 75,000 - 75,000 Plot preparation and utilities (sewage, wiring, electric cabin)

221,000 - 221,000

Pavement renovation and new driveway 920,000 - 920,000 Relocation of two self-service fuel stations 73,000 73,000 - Construction toilets, shower and washing rooms 249,000 - 249,000 Control room 171,000 - 171,000 Barriers and gates 245,000 - 245,000 Camera systems 135,000 - 135,000 Light towers 65,000 - 65,000 Construction of snack bar 490,000 490,000 - Equipment and furniture for the snack bar 235,000 235,000 -

TOTAL 3,014,000 798,000 2,216,000

POTENTIAL MISTAKE WITH INELIGIBLE COSTS

Excluding from the analysis the investment costs related to the snack bar because they are ineligible to CEF funding or because Eating@CEF-Parkings is not applying to any EU grant would be a mistake. The snack bar is a crucial element of the overall service offering and all its investment costs have to be included in the analysis. Land purchase costs are eligible only for projects applying to CEF Cohesion Calls and with a ceiling of 10% of the total eligible costs.

Operation and maintenance cost

The operation and maintenance costs of the safe and secure parking area are as follows:

- Non-Skilled labour: 11 non-skilled employees (24,600 €/person per year) are needed to cover the 24/7 opening time: 4 are required for cleaning and onsite customer service and 7 for guarding, monitoring and inspection. All will be certified at the expense of CSSP.

- Skilled Labour: 2 skilled employees will be required. Skilled employees cost 46,000 €/person per year and are required for coordination and administrative roles.

- Utilities: utility bills will grow with the increase of the usage of the parking area (water in particular). However, a significant part of them (e.g. electricity for the illumination and the monitoring systems) are non variable costs and will be entirely born already in the first year of operations.

- Maintenance: a full service/maintenance contract for all the security equipment will be signed with a third party provider for an expected 55,000 € per year (roughly 2% of the investment cost).


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- Administrative expenses: this category encompasses many activities including marketing and communication, consulting, auditing, damage repair and insurances. A lumps sum value of 50,000 € per year is foreseen.

- Bathroom consumables: the annual expenses for soap, hand towels, toilet rolls etc. will not exceed 8,000 €.

Year

(€) 1 2 3 4 5 10 20 30

Personnel cost - 362,600 362,600 362,600 362,600 362,600 362,600 362,600 Utilities - 11,200 13,600 16,000 16,000 16,000 16,000 16,000 Maintenance - 55,000 55,000 55,000 55,000 55,000 55,000 55,000 Admin costs - 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Consumables - 8,000 8,000 8,000 8,000 8,000 8,000 8,000

The operation and maintenance costs of the snack bar are as follows:

- Labour: personnel will consist in 2 waiters at 24,600 €/person per year and 2 cooks at 32,200 €/person per year. Cooked meals will be available only from 6:00 till 23:00.

- Maintenance and cleaning: these activities will be fully outsourced to a third party provider at 28,000 € per year

- Food ingredients: the cost for produces and other culinary ingredients will increase together with the uptake of the frequentation of the safe and secure parking area (and consequently of the snack bar)

- Concession fee: Eating@CEF-Parkings is paying an annual 50,000 € concession fee to CSSP for the exploitation of the snack bar in the safe and secure parking area.

Year

(€) 1 2 3 4 5 10 20 30

Personnel cost - 113,600 113,600 113,600 113,600 113,600 113,600 113,600 Maintenance & cleaning

- 28,000 28,000 28,000 28,000 28,000 28,000 28,000

Food ingredients - 139,300 202,600 241,200 241,200 241,200 241,200 241,200 Concession fee - 50,000 50,000 50,000 50,000 50,000 50,000 50,000

POTENTIAL MISTAKE WITH TAXES

Direct taxes, such as taxes on capital or income, should not be considered to calculate the financial profitability of the project (FNVP(C)). They are added only for the verification of the financial sustainability. Nevertheless, especially for private sector productive investments, including them is not a substantial mistake as the main reasoning for their exclusion relies on avoiding the complexity of tax rules across time and countries.


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Replacements

CSSP will have to completely replace all the security equipment, especially the IT components, after

15 years. At the same time, renovation works will be necessary also for the facilities and some of

the infrastructure components.

However, only the replacement costs that would not have been required in the business as usual /

counterfactual scenario have been retained: for this reason, costs associated with the replacement

of the pavement have not been reflected.

The value of replacement costs reaches 950,000 € and it includes also the equipment of the snack

bar paid by Eating@CEF-Parkings.

Residual value

The residual value of the fixed investments is null because the reference period equals the useful

life of the assets. This essentially means that at the end of the analysis wear will have driven the

value of the parking area to basically zero. To use it again, new investments will be needed to

renovate it.

This is true also for the equipment that has been replaced halfway during the operational period:

by year 30 this equipment will be reaching again the end of its useful life.

Operating Revenues

Based upon the demand analysis, the occupancy rate of the parking area is estimated to be 50% in

the first year of operations. Throughout the following years, the average occupancy rate for each of

the 365 days of the year is estimated to rise to 70% and then 85% where it is expected to

stabilise.

While the main usage for secure parking area will consist in overnight stops (12 hours fee at 10 €

including the usage of the showers), we have assumed that the parking space will get an additional

usage of at least 4 hours (fee of 4 €) per day.

The vast majority of users will shift from existing private parking areas and only 10% of the

demand comes from drivers not using safe and secure parkings before.

The revenues from the refuelling stations are expected to be stable after the implementation of the

project. Making sure that two pumps are accessible for drivers not using the safe and secure

parking service is instrumental in making sure that this stream of revenues do not decrease

compared to the counterfactual scenario (the scenario without the project).


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POTENTIAL MISTAKE WITH REVENUES FROM THE REFUELLING STATION

Including all revenues from the refuelling stations in the analyses would be a mistake. Only revenues that are incremental, compared to counterfactual, need be added. Because free access to the service station is ensured, revenues will not substantially change with the project. Therefore, in this case incremental fuel revenues will be zero.

CSSP will also collect an annual fee from the concession of the snack bar. The annual fee of

50,000 € will be maintained also for the next concession contracts (the current concession is for 10

years).

The snack bar will be used by 60% of the drivers and the average spending (breakfast, lunch and

dinner) will be 8.7€. Over 470.000 € of revenues will be collected every year by the concessionaire.

Year

(€) 1 2 3 4 5 10 20 30

Night parking fee - 266,450 373,030 452,965 452,965 452,965 452,965 452,965 Day parking fee - 106,580 149,212 181,186 181,186 181,186 181,186 181,186 Concession fees - 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Snack bar - 278,174 389,443 472,895 472,895 472,895 472,895 472,895

POTENTIAL MISTAKE WITH CONCESSION FEES

Including the concession fee paid by Eating@CEF-Parkings only among the costs of the project would be a mistake. Because the analysis is consolidating the snack bar, this amount shall be reflected as both a cost for Eating@CEF-Parkings and a revenue for CSSP. Because the two entries cancel out, it is also possible to omit completely the concession fee from the analysis but for the sake of transparency, it is better to include it as a positive and negative entry. It also follows that the net revenues (incremental) generated with the snack need to be reflected in the analysis. For projects where the conceded asset is not consolidated with the project promoter (i.e. asset operated by entities outside promoter’s control), the concession fee shall be the only cash flow appearing. Differently from above the analysis should not include any cost or revenues from the operation of the asset.


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Sources of financing

CSSP and Eating@CEF-Parkings will respectively invest 550,000 € and 50,000 € of equity.

The remaining 1,571,920 € of capital requirements will be borrowed from commercial banks.

Eating@CEF-Parkings will get a 200,000€ loan matching the duration of the concession (10 years).

The catering company has negotiated one year of grace period and the interest rate in real terms is

3.5%. CSSP will borrow 1,486,920 for a duration of 20 years with an interest rate in real terms of

4%.

POTENTIAL MISTAKE WITH INTERESTS

Using nominal interests to calculate the interest payments would be a mistake. As the analysis is carried out at constant prices (i.e. assuming no variation of revenues nor costs due to general inflation), the interest rate negotiated with the financial institution must be cleaned from inflation before its usage in the CBA. Moreover, including the financing costs (interests) in the calculation of the return on investment or the funding gap would be a mistake. However, these are to be included in the calculation of the financial sustainability and the return of the private sector (equity).

VI - Financial and Economic Analyses

The analysis is performed using a 30-years reference period and consolidates the cash flows of

CSSP – owner of the safe and secure parking area and bearing the replacement costs – and

Eating@CEF-Parkings as concessionaire – exploiting the catering facility against payment of a

concession fee and bearing operation and management costs. The consolidation has the effect of

neutralising intra-group cash flows.

Financial analysis and EU grant calculation

The financial discount rate used for the assessment is 7.4%. This has been estimated using the

Weighted Average Cost of Capital (WACC) of CSSP Group – parent company owing 100% of CSSP

and 60% of Eating@CEF-Parkings. The WACC has been calculated assuming the following

parameters: average cost of debt of 4%, current debt/equity ratio of 60/40.


15

POTENTIAL MISTAKE WITH THE FINANCIAL DISCOUNT RATE

Using the default financial discount rate of 4% recommended for public investment operations is possible but may not be appropriate given the nature of this project. For private investors, concession/PPP as well as in case of productive investments that are subject to market risk (e.g. demand fluctuations), different (higher) discount rates are allowed if a justification is provided. For these projects (assuming that the level of risk of the project is not lower than the implicit risk level in the WACC), the discount rate may be derived from the promoters WACC with appropriate explanations. When the WACC is not readily accessible by project promoters (such as unlisted companies or SME), promoters may derive their cost of equity as a reasonable multiple of their cost of debt or by reference to WACC of players in the same sector (logistics companies would be acceptable in the case of SSP).

Return on investment

without CEF ‘000€ NPV @ 7.4%

1 2 3 4 5 6 7 8 9 10 (…) 15 (…) 20 (…) 25 (…) 30

Project investment cost -3,014 -3,014 - - - - - - - - - - - - -

Replacement cost -326

- - - - - - - - - - -950 - - - Project O&M costs -10,847

- -823 -887 -930 -930 -930 -930 -930 -930 -930 -930 -930 -930 -930

Total revenues 13,070

- 701 962 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 Residual value of investment -

- - - - - - - - - - - - - -

FNPV(C)- -1,117

-3,014 -122 74 227 227 227 227 227 227 227 -723 227 227 227

FRR(C)- 3.6%

The financial profitability of the investment is weak (FRR(C) = 3.6% < 7.4%) and the financial net

present value is negative (FNPV(C) = -1,116,697€): the project requires EU assistance the form of

grant to become viable.

On an incremental basis, the discounted revenues stemming from the fares paid by users for using

the services of the project exceed the discounted operating costs (amount d in the table below). The

project is therefore a net revenue-generating project and the EU contribution needs to be

modulated.

The modulation of the grant amount is based on the proportion of the funding gap f) against the

present value of the investment cost e). The funding rate derived from this modulation may in any

case not exceed the maximum co-funding rate. This is the reason why despite the maximum co-

funding rate of 85% applicable to CEF Cohesion Calls the EU grant for this project cannot exceed

37.1% of the eligible costs.


16

‘000€ NPV @ 7.4%

a) Discounted revenues 13,070 b) Discounted costs (net of savings transferred) -11,172 c) Discounted residual value -

d) Discounted net revenues 1,897 (a+b+c)

e) Discounted investment cost 3,014

f) Funding Gap 1,117 (d-e)

g) Funding Gap Rate 37.1% (f/e)

h) Max Cofunding Rate 85%

Modulated Co-funding rate 37.1% min(g,h)

POTENTIAL MISTAKE WITH THE MODULATION OF THE CO-FUNDING RATE

Applying Art. 61.5 EC Regulation 1303/2013 valid for the cohesion policy would be a mistake. The grant amount is calculated in a different way in the CEF programme. Using the terminology of Regulation 1303/2013, if the “Pro-rata application of discounted net revenues” (i.e. the funding gap rate) is lower than the Maximum co-funding rate, under CEF the “Community contribution” is equal to the “Decision amount”. If the Maximum co-funding rate is lower than the “Pro-rata application of discounted net revenues”, the “Community contribution” is the product between the maximum co-funding rate and the Eligible Costs.

Applying the modulated co-funding rate only to the investment costs that constitute the eligible

costs, the requested EU Support reaches 821,035 €.

The EU grant significantly increases the financial return of the investment (FRR(C after CEF) =

6.1%) but it remains below the financial discount rate of 7.4%. This is because the capital

investment costs related to the snack bar and those related to the relocation of two fuel stations

are not eligible and for those activities the return is not boosted by the grant.

Nevertheless, we consider the difference with the WACC of 7.4% to be only moderate. Therefore,

assuming the EU support is provided the project would proceed without the need for additional

grants.

GUIDANCE ON THE FINANCIAL VIABILITY AFTER CEF

Given the commercial nature of the projects and of the promoter, the promoter’s view on the stimulating effect of the CEF funding is required. In particular, when the financial viability after the CEF support still remains significantly insufficient compared to the promoters’ investment criteria (e.g. WACC) the promoter need to provide objective reasons explaining why or under which condition it would still proceed with the investment. Objective reasons could be associated with overly conservative scenario, synergies not reflected in the CBA, or other subsidies.


17

Return on investment

with CEF ‘000€ NPV @ 7.4%

1 2 3 4 5 6 7 8 9 10 (…) 15 (…) 20 (…) 25 (…) 30


CEF contribution 821 821

Replacement cost -326 - - - - - - - - - - -950 - - -

Project O&M costs -10,847 - -823 -887 -930 -930 -930 -930 -930 -930 -930 -930 -930 -930 -930

Total revenues 13,070 - 701 962 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157

Residual value of investment - - - - - - - - - - - - - - -

FNPV(C after CEF)- -296 -2,193 -122 74 227 227 227 227 227 227 227 -723 227 227 227

FRR(C after CEF)- 6.1%

The consolidated return on the equity investment for CSSP and Eating@CEF-Parkings reaches 8.2%

and it is on the low side in comparison to international returns for the sector but acceptable for the

national context of Easternland.

Return on private sector

(equity) ‘000€ NPV @ 7.4%

1 2 3 4 5 6 7 8 9 10 (…) 15 (…) 20 (…) 25 (…) 30

Private equity -600 -600 - - - - - - - - - - - - -

Loan repayment (incl int) -1,210 - -102 -129 -129 -129 -129 -129 -129 -129 -129 -102 -102 - -


Project O&M costs -10,847 - -823 -887 -930 -930 -930 -930 -930 -930 -930 -930 -930 -930 -930

Total revenues 13,070 - 701 962 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157

Residual value of investment - - - - - - - - - - - - - - -

FNPV(Kp)- 88 -600 -224 -54 98 98 98 98 98 98 98 -826 124 227 227

FRR(Kp)- 8.2%

Sustainability

The concluding step of the financial analysis is to verify the financial sustainability of the venture.

This is to verify that the commitment from the EU budget is not at risk and that the expected

benefits will actually materialise by demonstrating that the project will not stop because of

insufficient financial resources at any time over the expected reference period.

With respect to the project implementation phase, the investment costs are matched by an equal

amount of financing sources (own equity and commercial bank loans).

Regarding the operational phase, revenues during the ramp-up phase are insufficient to match

fixed costs and losses appear in the first two years of operation. These losses and shortfall of cash

(for a cumulated value of 278,819 €) will be matched by own-resources equity backing that the

CSSP and Eating@CEF-Parkings commit to contribute. Following the ramp up period, the cumulated

cash flow remains always positive and sufficient to absorb the replacement cost without additional

contribution from the promoter or external financing. It can be concluded that the project

sustainability is satisfactory.


18

Financial Sustainability ‘000€

1 2 3 4 5 6 7 8 9 10 (…) 15 (…) 20 (…) 25 (…) 30

Project investment cost -3,014 - - - - - - - - - - - - -

Sources of financing 3,014 - - - - - - - - - - - - - Loan repayment (including interests) - -102 -129 -129 -129 -129 -129 -129 -129 -129 -102 -102 - -

Replacement cost - - - - - - - - - - -950 - - -

Project O&M costs - -823 -887 -930 -930 -930 -930 -930 -930 -930 -930 -930 -930 -930 Taxes - - - -20 -20 -20 -20 -20 -20 -20 - -25 -47 -47 Total revenues - 701 962 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 Other resources - 224 54 - - - - - - - - - - -

-

Net cash flow- - - - 78 78 78 78 78 78 78 -826 99 180 180

Cumulated net cash flow- - - - 75 156 235 313 391 469 548 196 592 1,412 2,314

Socio-economic analysis

The economic analysis investigates the impact on society of improving the safety standards of the

non-secure parking area at km 328.1 of motorway A3 in Easternland.

In line with the DG REGIO guidance for projects implemented in a Cohesion Country, the social

discount rate to discount the cash flows of the economic analysis is set at 5%.

The preparation of the socio-economic analysis starts from the cost and revenues of the financial

analysis and entails the correction of market values for fiscal and price distortions. Direct impacts

are gauged replacing revenues with the willingness to pay of users and adding market (and where

relevant non-market) impacts for all stakeholders in the primary market of the project. Impact on

secondary markets are ignored to minimise the risk of double counting but externalities are

quantified and added to the analysis.

Corrections for distortions

The following conversion factors have been applied to the financial costs to estimate the economic

value of the resources used by the project:

Cost item Correction

applied

Remark8

Skilled Labour 1 Competitive market. The shadow wage is essentially equal to the market wage

Non-Skilled labour 0.72 High regional unemployment. The shadow wage is approximated by the unemployment benefit

Equipment 0.91 The shadow price is approximated by its border price Civil works 0.81 The conversion factor is calculated by making a weighted

average of the shadow wage for labour and the other costs Consumable, administrative costs, maintenance, utilities

0.86 Standard Conversion Factor (SCF) calculated as the ratio between all import and export of the country at their border prices and this same amount including also duties on imports (but not on export)

Other items 1 No conversions were deemed necessary

8 More details on the type of corrections and estimation approaches are available in section 2.8.3 of the DG REGIO guidance to CBA.


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Direct impact

The direct impact for the users of the safe and secure parking area is three fold:

1) the security provided by the facility,

2) the reduced transport cost to reach a safe and secure parking area,

3) the presence of additional services such as the showers and the snack bar.

Not all users will benefit from them in the same way. Those already using private safe and secure

parking areas will benefit only from 2) and 3). New users of the safe and secure service will benefit

from 1) and 3).

Value of security

The value of security needs to be measured in comparison with the situation without the project.

Assuming that most of the users will be already using private parking areas, we need to assess the

safety standards of the existing private facilities. While typically lower than the silver security level,

the safety standards of these private parking areas are not homogenous and difficult to compare.

The safety improvements for these users are considered zero because of these limitations and the

need to keep the analysis on the conservative side.

GUIDANCE ON THE VALUE OF SECURITY

A specific survey when users are asked to say how much they are ready to pay presenting them graphical representations or pictures showing exactly the type of facility proposed (“stated preference”) is in principle a respectable approach to estimate the willingness to pay of users. However, this method is demanding and it could be excessive for this type of project. Applying the values of other studies (“benefit transfer” method) could be an appropriate solution. Yet it is necessary to find comparable assessments (in terms of security standard achieved and transport crime in the specific geographical area). A very rough starting point is the EU study “Background Information and Considerations for Secure Truck Parking“9 where the willingness to pay for secure parking areas is estimated at approximately 1.5 € per hour for medium-high value cargo (≥ 16€/kg black market value). In theory, a further alternative approach would be to look at the value that insurance companies give to the reduced risk of theft (application of the “revealed preference” method). For example, some insurance companies take off up to 10% of annual premium upon presentation of sufficient Safe and Secure Parking receipts. However, even in Countries where insurance companies apply premiums/deductibles, such data is not always readily available.

For the users coming from non-secure parking areas we carried out a specific survey with shippers

operating on A3 to estimate the willingness to pay for using the safe and secure parking area. The

results show that the maximum amount that users are willing to pay for a secure parking area is

9https://ec.europa.eu/transport/sites/transport/files/modes/road/parking/doc/2010_04_background_information_and_considerations_for_secure_truck_parking.pdf

https://ec.europa.eu/transport/sites/transport/files/modes/road/parking/doc/2010_04_background_information_and_considerations_for_secure_truck_parking.pdf

https://ec.europa.eu/transport/sites/transport/files/modes/road/parking/doc/2010_04_background_information_and_considerations_for_secure_truck_parking.pdf


20

circa 1.4 € per hour.10 Based on the total estimated use of 724,744 hours per year, 72,474 hours

will come from drivers who did not park in safe areas before the project. Therefore, the annual

value for the safety benefit is 101,464 €.

POTENTIAL MISTAKE WITH ESTIMATING CARGO CRIME

Trying to measure the reduction of cargo crime would be a double counting. Indeed, the willingness to pay for a safer parking area already includes the expected reduced probability of theft. Measuring it separately counts twice for the same benefit. Where relevant, it is always possible to develop a sophisticated approach to estimate crime avoidance as the main component of the willingness to pay for this service. In general terms, it is important to stress that crime avoidance is a benefit specific to the users of the service. On a global scale, it is unlikely that a single safe and secure parking area will have a tangible effect on the overall number of cargo crimes in a given region or country. Indeed, the reduction of crime for users of the safe and secure parking area will probably be balanced by an increase somewhere else.

The parking area can be used as a buffering zone when the A3 is blocked by traffic accidents, bad

weather conditions impede operations at the Main Sea Port or when there are other problems. This

buffering function does not save time for drivers, but it allows them to spend their waiting time

more efficiently, for instance by taking rest which may save time later. The safety standards of A3

are relatively high and so road accidents are not frequent on this stretch of highway network.

Consequently, it was decided to keep this benefit as a qualitative element and not quantify it. In

addition, only the incremental use as buffering zone need to be taken into account and this can be

considered as already included in the estimated daytime use of the parking area.

Avoided transport costs

The implementation of the project will deliver benefits in the form of reduction of driving time and

less operating costs for the HGV. Indeed, with a safe and secure parking area directly on the A3,

drivers looking for this service will not need to drive further to reach an appropriate area for their

daily rest period. Conversely, the project will have a negative impact for the current users of the

non-secure and free access parking area. Indeed, they will need to look for an alternative parking

solution.

As on average drivers are currently driving about 20 minutes to reach a private safe and secure

area and given the number of users estimated in the demand analysis (90% of the total users), the

project allow saving 54,356 hours of driving per year. The average truck driver salary in

Easternland is 7.54 € per hour. This value is used even if drivers in neighbouring countries, also

travelling on A3, are paid slightly more. However, the average salary of 7.54 € is increased by 1%

each year to capture the expected growth of wages (in real terms).

The reduced travelling distance of 12 km to reach a safe and secure location has another direct

market impact for shippers as operating costs will also decrease (such as fuel consumption, tyre

10 This amount correspond to the silver security level for users with medium-high value cargo (>15 €/kg)


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replacement and maintenance). With an average operating cost of 0.21 € per km the annual saving

can be estimated at 456,589 €.

With respect to the current users of the non-secure and free access parking area looking for an

alternative parking solution will increase their transport costs. Here we consider the most

pessimistic case where all other parking areas on A3 are already full and they will need to find a

rest area somewhere else not on the motorway.

Since non-secure parking areas are much more common, we have assumed that current users of

the parking area will take about 5 minutes time (3 km of driving) to find an alternative parking

solution. The current 155 parking places are used on average 95% around the year. This amount to

an additional 8,958 hours and 322,477 km per year. The increased driving distance is equivalent to

63,958 € in terms of time and 64,135 € for the additional operating costs.

Therefore, the net effect on avoided transport costs is: 315,711 € of time saved and 321,148€ for

operational costs savings. In total the benefits would be 636,859€ per year.

Value of other services

The presence of additional services such as the snack bar in the safe and secure parking area is a

further advantage for users.

The market prices of the meals bought at the snack bar are considered a good proxy for the actual

willingness to pay for the services (i.e. the market is efficient). However, it is assumed that only

10% of customers who did not take hot and seated meals before the project will start doing this

now. For this smaller group the average price paid of 8.7€ is directly used as willingness to pay for

the snack bar in the economic analysis. For all the others there is no improved benefit in

comparison to the situation before the project and the benefit is zero.

POTENTIAL MISTAKE WITH BENEFITS FROM THE FUEL STATION

Including the value for the fuelling service in the economic analysis would be a mistake. The actual use fuel station is not expected to change and therefore there is no increased/decreased benefit for society related to the provision of this service on the safe and secure parking area.

Externalities

After correcting the market values and assessing the direct benefits, we concentrate to the effects

beyond are not captured by any market transaction (so called externalities).

For example, an impact to society come from the reduced negative externalities due to the driving

of trucks. The 24 km round-trip route currently driven on average by 90% of the 90,593 expected

users of the safe and secure parking area leads to saving 2,174,232 km per year. In contrast, the

107,492 current users who will need to find a new location will drive 322,477 km more per year

for the 6 km round-trip route.


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According to the Handbook on external costs of transport11 the unit value of externalities per km

travelled by an HGV in EasternLand are the following:

0.102 €/km for the air pollution

0.069 €/km for the greenhouse gas emissions

0.013 €/km for the risk of accidents

0.077 €/km for the noise emissions

In total these effect would generate 567,475 € of positive externalities and 168,333 € of negative

externalities every year.

POTENTIAL MISTAKE WITH ROAD SAFETEY BENEFITS

In the case described, adding road safety as a benefit would be a mistake. Only projects that increase the number of parking places available can claim such benefit (and only for the additional places created) The project does not improve the road safety in comparison to the counterfactual as it does not increase the supply of parking places on the A3. Because the number of parking places is stable, users of the project will not come from the pool of drivers parking inappropriately (on roads shoulders or on rest areas entry and exit ramps) and this benefit does not exist.

Results

The resulting cash flows of the economic analysis and their present values are shown in the

following table

‘000€ NPV @ 5% 1 2 3 4 5 6 7 8 9 10 (…) 15 (…) 20 (…) 25 (…) 30



Project O&M costs -10,716 - -624 -679 -716 -716 -716 -716 -716 -716 -716 -716 -716 -716 -716

Residual value - - - - - - - - - - - - - - -

Total economic costs -13,654 -2570 -693 -787 -787 -787 -787 -787 -787 -787 -787 -1,523 -787 -787 -787

WTP for safe and secure 1,480 - 60 84 101 101 101 101 101 101 101 101 101 101 101

WTP for snack bar 690 - 28 39 47 47 47 47 47 47 47 47 47 47 47

SSP users Time savings 7,540 - 241 344 426 435 444 452 461 471 480 541 585 646 714

SSP users Operating savings 6,635 - 242 376 457 457 457 457 457 457 457 457 457 457 457

SSP users Avoided pollution 3,223 - 117 183 222 222 222 222 222 222 222 222 222 222 222

SSP users Climate change 2,180 - 79 124 150 150 150 150 150 150 150 150 150 150 150

SSP users Accidents 411 - 15 23 28 28 28 28 28 28 28 28 28 28 28

SSP users Noise emission 2,433 - 89 138 167 167 167 167 167 167 167 167 167 167 167

Prev users Time savings -1,937 - -135 -138 -140 -143 -146 -149 -152 -155 -158 -178 -193 -213 -235

Prev users Operating savings -2,051 - -135 -135 -135 -135 -135 -135 -135 -135 -135 -135 -135 -135 -135 Prev users Avoided pollution -996 - -66 -66 -66 -66 -66 -66 -66 -66 -66 -66 -66 -66 -66 Prev users Climate change -674 - -45 -45 -45 -45 -45 -45 -45 -45 -45 -45 -45 -45 -45 Prev users Accidents -127 - -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 -8 Prev users Noise emission -752 - -50 50 50 50 50 50 50 50 50 50 50 50 50

Total economic benefits 17,433 - 432 869 1,155 1,160 1,166 1,174 1,178 1,184 1,191 1,232 1,261 1,302 1,347

ENPV / Net benefits 3,779 -2,549 -192 190 439 445 451 457 463 469 475 -292 546 587 632

ERR 13.4%

B/C RATIO 1.28

11 https://ec.europa.eu/transport/sites/transport/files/studies/internalisation-handbook-isbn-978-92-79-96917-1.pdf

https://ec.europa.eu/transport/sites/transport/files/studies/internalisation-handbook-isbn-978-92-79-96917-1.pdf

https://ec.europa.eu/transport/sites/transport/files/studies/internalisation-handbook-isbn-978-92-79-96917-1.pdf


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The results of the socio-economic analysis (ERR = 13.4%, ENPV = 3.8 m€) show that the project

generates a positive welfare change: benefits of the projects are significantly more than the costs

(B/C ratio: 1.28).

Thus, based on this data, the project respects the eligibility conditions for EU support.

VII - Risk Assessment

Sensitivity analysis

The main purpose of the sensitivity analysis is to determine the “critical” variables that have the

greatest impact on the project’s results. The “critical” variables are conventionally considered those

with an elasticity greater than the unit. An elasticity larger than the unit means that a variation of

1% for such variable gives a corresponding variation in the performance indicators (ENPV and

FNVP(C)) greater than 1%.

Switching values are the values for which the NPV becomes zero. This can also be seen as the

maximum variation range over which the project is still financially unviable and breaking even

economically.

Elasticities and switching values for the financial analysis (return on investment without CEF) are

summarised in the following table.

Variables Elasticities Switching values Total revenues -11.70 8.5% Project O&M costs 9.71 -10.3% Project investment cost 2.70 -37.1% Replacement cost 0.29 -343.0% Residual value 0 n.a.


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The size of initial investment cost of the project is limited and it is therefore not surprising that the

financial results are so sensitive to operational costs (9.71) and revenues (-11.70). In fact, changes

in the range of 10% in any of these variables are sufficient to make the project viable. This means

that if the project has a slightly better commercial success than anticipated or there are cost

savings the EU grant is not required any more.

The results of the sensitivity analysis for the economic analysis is presented below.

Variables Elasticities Switching values Project O&M costs -2.84 35.3% Travel externalities savings for SSP users 2.18 -45.8% Time savings for SSP users 2.00 -50.1% Operating cost savings for SSP users 1.76 -57.0% Time to find parking -0.68 147.6% Project investment cost -0.67 148.2% Travel externalities -0.67 148.3% Operating cost increase -0.54 184.3% Willingness to pay for safe and secure 0.39 -255.3% Willingness to pay for snack bar 0.18 -547.8% Replacement cost -0.10 973.0% Residual value 0 n.a.

The economic analysis is a bit more robust to changes: four variables exceed the critical unitary

value but the switching values are much higher than those of the financial analysis. This is because

cost and benefits are more diffused and a single variable has to swing more to jeopardise the

economic case of the project.


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Risk analysis

The following qualitative risk analysis describes the main risks related to the project

implementation and its operation. The table encompasses the main risk prevention and mitigation

strategies identified.

Risk description P S Risk

level

Risk prevention/mitigation measures Residual

risk Administrative and Institutional risk

Delays dues to administrative procedures

A I Low Even if all relevant permits are already available to CSSP, the project implementation team is in place to liase with the institution/departments.

Low

Unsuccessful CEF application, lack of EU funding

C III Moderate Additional support has been sought to assist in the project development phase (private consultants) to maximise the chances of selection.

Moderate

Implementation risk Investment cost overrun

C III Moderate Investment cost estimates are based on long-term experience in the sector of secure parking projects of CSSP, also in Cohesion Countries, and they already include an element of contingency (10%) to mitigate the first tranche of over-run (if any). Financial penalties for subcontractors will increase the probability of a timely and reliable completion of the installations.

Low

Delays C III Moderate The selected subcontractors are well acquainted with CSSP and are specialised in building this kind of infrastructure. Constant exchange of information and monthly reports will minimise risk of delays. Anyway, CSSP will appoint a Construction Supervisor in addition to the project implementation team to monitor the contracts.

Low

Operational risk Failure of SSP technology (CCTV and monitoring system)

A V Moderate Selection of proven, best-available technology. CSSP is already working with this technology in other parking areas. Supplier will provide manufacturer after-sales service & remote assistance for unexpected failures.

Low

Increased number of parking area floods due to climate change

D III High Upgrade the capacity of the existing ditch around the site.

Moderate

Operating cost overrun C IV High Operating costs are based on long-term experience in the sector of secure parking area projects of CSSP. An element of contingency (10%) has been included in the cost of utilities (energy and water).

Low

Low demand B IV Moderate Advertising campaigns, promotions & discounts programme will be included in seasonal periods. Truck driver awareness.

Low

Evaluation scale


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Probability (P): A. Very unlikely; B. Unlikely; C. About as likely as not; D. Likely; E. Very likely Severity (S): I. No effect; II. Minor; III. Moderate; IV. Critical; V. Catastrophic Risk level: Low; Moderate; High; Unacceptable.

The risk analysis convincingly shows that the measures already implemented to prevent the

occurrence and/or mitigate the impact of the identified risks are effective in keeping the residual

risk at a fully acceptable level.

VIII - Conclusions

Based on the needs of HGV drivers on Easternland motorways, it was highlighted that an untapped

demand for safe and secure parking areas exists on Motorway A3. CSSP proposes to upgrade an

existing non secure parking area for 155 trucks to the silver security level and add a new catering

facility. A number of options have been considered and the socio-economic benefits of the selected

set-up significantly exceed the costs of its implementation and operation (ERR = 13.4% and B/C

ratio = 1.28).

While the results of economic analysis support the conclusion that this project will deliver benefits

to society, the financial analysis highlights that the revenues are insufficient for private investors to

justify the investment. Indeed, the project is not financially viable (the FNPV(C) is negative and the

FRR is lower than the discount rate of 7.4%).

An EU support equal to 37.1% of the eligible costs, calculated using the funding gap approach,

would make the project marginally viable and attractive to the private project promoter.

The risk analysis provides reassurance on the strength of the economic case of the project and that

the promoter has properly considered and taken action toward the most important implementation

and operational risks of the project.


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IX - Abbreviations

B/C Benefit Cost Ratio

CBA Cost-Benefit Analysis

CCTV Closed Circuit Television

CEF Connecting Europe Facility

CNG Compressed Natural Gas

HGV Heavy Goods Vehicle

ENPV Economic Net present value

ERR Economic Rate of Return

ESIF European Structural and Investment Funds

ESPORG European Secure Parking Organisation

EU European Union

FNPV Financial Net present value

FRR Financial Rate of Return

DG CLIMA European Commission's Directorate-General for Climate Action

DG MOVE European Commission’s Directorate General for Mobility and Transport

DG REGIO European Commission’s Directorate-General for Regional and Urban Policy

INEA Innovation and Network Executive Agency

JASPERS Joint Assistance to Support Projects in European Regions

LNG Liquefied Natural Gas

MAP Multi-Annual work Programme

PPP Public-Private Partnership

SME Small and Medium-sized Enterprise

SSP Safe and Secure Parking

TEN-T Trans-European Transport Network

VAT Value Added Tax

WACC Weighted Average Cost of Capital

Innovation and Networks Executive AgencyEuropean CommissionW910B-1049 Brussels, Belgium

http://ec.europa.eu/inea

[email protected]

@inea_eu

INEA – Innovation and Networks Executive Agency

Innovation and NetworksExecutive Agency

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