ECONOMIC AND FINANCIAL ANALYSIS

Transcription

1 Road Rehabilitation Project (RRP KIR 44281) ECONOMIC AND FINANCIAL ANALYSIS 1. Base and project alternatives. The base case against which changes in road provider and road user costs are compared for the road sections covered by the Road Rehabilitation Project in Kiribati is for the rehabilitation to be deferred until By that time, it is expected that the roads will have deteriorated to an unmaintainable level and a do-nothing base case scenario would be unrealistic. The with-project case involves reconstruction and strengthening of the existing pavement, double bitumen surface treated chip seal pavement, and improvements to the vertical profile to improve drainage. Periodic maintenance of the rehabilitated pavement, comprising an overlay, is triggered by deterioration of the pavement to an international roughness index greater than 4 meters per kilometer. In the case of the feeder and access roads, the base case is for periodic grading and regravelling. The with-project case involves construction of a double bitumen surface treated chip seal pavement. 2. Costs. Economic costs were derived from financial costs and include the cost for construction, operation, and maintenance. Economic costs exclude price contingencies, taxes, duties, subsidies, and royalties and are considered to be 80% of the financial costs an average for developing countries. The project roads are expected to have an economic life of 20 years, with periodic maintenance and strengthening applied part way through the evaluation period. 3. Benefits. The benefits to road users were estimated by comparing the differences between road user costs for the with- and without-project cases. Quantified road user benefits comprise savings in vehicle operating costs and journey times and reductions in traffic delays. 4. Modelling. The World Bank Highway Development and Management Model was used to compare the annual streams of economic capital and operating costs and benefits and derived net present values (at a discount rate of 12%) and economic internal rates of return. All costs and benefits are expressed in 2010 constant prices. The analysis period was 20 years from 2011 to Sensitivity and risk. Sensitivity testing was applied to the economic internal rate of return against construction cost, base traffic level, and traffic growth rate. 6. Road user costs. Unit cost data for vehicle replacement, tires, fuel, and oil was collected from local suppliers. In the case of gasoline and diesel, the economic cost has been assessed using the current retail prices and removing duties and taxes. Fuel costs are volatile, but the present level is judged to be suitably representative of the medium-term outlook. Fuel forms a significant component of road user costs. A summary of economic user costs is in Table 1 and with- and without-project vehicle operating costs are in Table 2.

2 2 Table 1: Economic Road User Costs Passenger Passenger Light Item Car Van Truck Vehicle cost ($) 29,500 41,250 83,250 Tire cost ($) Fuel cost ($/liter) Lubricant oil cost ($/liter) Crew cost ($/hour) Maintenance labor ($/hour) Passenger time cost ($/hour) Annual utilization (kilometer/year) 15,000 60,000 60,000 Number of passengers (#) Table 2: Vehicle Operating Costs With and Without Project ($) Without Project With Project Passenger Passenger Light Passenger Passenger Light Section Car Van Truck Car Van Truck Betio Causeway St. Anness Airport intersection Airport Road Temaiku Road Feeder roads No allowance has been made for changes in accident costs. While the improved road surface is a potential safety improvement, the increased traffic speeds may lead to more severe crash injuries. The outcome will depend on effective traffic management, particularly through or close to villages, as well as good signage and policing. 8. Project roads. The roads sections to be rehabilitated are part of the main road from the airport through the town of Bairiki to the seaport at Betio. A schematic of the links is in the following figure.

3 3 Figure 1: Project Roads Betio Betio causeway Bairiki St Annes Airport Temaiku Project roads Sources: ADB and World Bank. Roads upgraded in For the purpose of this analysis, the sections were considered separately, taking into account their differing construction costs, traffic volumes, and existing conditions. Table 3 shows the proposed sections, construction options, and unit costs. Table 4 shows the length, existing condition, and average daily traffic of each section or category. Table 3: Road Links Construction Option and Estimated Costs Proposed Unit Total Road Cost Cost Section Work ($/km) ($ million) Betio Causeway Rehabilitate to DBST 300, St. Annes Airport intersection Rehabilitate to DBST 750, Airport Road Rehabilitate to DBST 400, Teimaku Road Rehabilitate to DBST 600, Feeder roads Upgrade to DBST 500, Total DBST = double bitumen surface treatment, km = kilometer. Table 4: Road Links Existing Condition Daily Number Edge Length Surface Traffic Roughness Potholes Break Section (km) Type (veh/day) (IRI, m/km) (no.) (m/km) Betio Causeway 3.20 DBST 6, St. Annes Airport intersection DBST 5, Airport Road 2.25 DBST 3, Teimaku Road 2.85 DBST 2, Feeder roads 6.00 Coral Gravel Total = not available, no. = number, DBST = double bituminous surface treatment, IRI = international roughness index, km = kilometer, m = meter, veh = vehicle.

4 4 10. Road geometry and condition. The atoll terrain is flat, with the road about 3 meters above mean sea level. The road alignment is good and need not be changed but the pavement is generally in poor condition. The average international roughness index of each section was conservatively estimated based on observations after a period of dry weather and repairs. Wet weather causes rapid deterioration of poorly drained sections, many of which have reverted to a gravel surface. In sealed sections, potholes proliferate under wet conditions and it is evident that the base roughness values will rise significantly unless the pavement is urgently rehabilitated. However, the coral limestone forms a good subgrade and pavement failure in the form of rutting, heaving, or shoving is absent from all road sections. 11. Traffic forecast. Vehicle fleet growth has been rapid in recent years but is expected to moderate with a slowing of population growth on South Tarawa. Nonetheless, some increase in vehicle numbers is expected to result from the very significantly improved road conditions the project will deliver. The forecast annual increase in traffic by vehicle type is in Table 5. Current average daily traffic estimates (Table 4) are based on (i) toll booth data at the Betio Causeway, and (ii) one 24-hour single day count at Bairiki (St. Annes) and moving vehicle estimates conducted during the fact-finding mission. Item Table 5: Traffic Forecast (%) Passenger Passenger Car Van Light truck Percentage of daily traffic Traffic growth: Traffic growth: Traffic growth: after Economic internal rate of return and sensitivity analysis. The results of the economic analysis are summarized in Table 6. The results of the sensitivity analysis are in Table 7. The benefit stream for the design life of the St. Annes-to-Airport section is in Table 8. Table 6: Summary of Economic Analysis Net Present EIRR Value, NPV Rate of Return Section ($ million) (%) Betio Causeway St. Annes Airport intersection Airport Road Temaiku Road Feeder roads Total Rehabilitation works Upgrading works Total EIRR = economic internal rate of return, NPV = net present value.

5 5 Table 7: Sensitivity Analysis Base Work Costs Road User Costs Current Traffic EIRR -20% +20% -20% +20% -20% +20% Section (%) (%) (%) (%) (%) (%) (%) Betio Causeway St. Annes Airport intersection Airport Road Temaiku Road Feeder roads 14.3% Total Rehabilitation works Upgrading works Total EIRR = economic internal rate of return. Table 8: Benefit Stream for Rehabilitation of St. Annes-to-Airport Intersection Agency Agency Vehicle Passenger Net Operating Section Year Capital Recurrent Costs Time Benefits St. Annes 2011 (11.55) (11.50) Airport intersection (1.65) (0.35) (2.00) 2019 (1.85) 0.00 (1.90) (0.36) (4.10) (0.17) (0.37) (0.54) (0.05) (0.38) (0.43) (0.39) (0.32) (0.40) (0.19) (0.42) (0.05) (0.43) (0.44) (0.95) (0.45) (1.40) (1.22) (0.46) (1.67) (1.54) (0.47) (2.00) 2030 (0.92) 0.00 (2.18) (0.48) (3.58) EIRR 43.0% ( ) = negative, EIRR = economic internal rate of return.