A NOK 12 billion package
Within a repayment period of 40 years on toll loans, it seems possible to repay a package even if lower tariffs are used for the main bridge than those for the ferry connection today.
A payment period of 40 years for toll loans is not typical today, but there are several signals that this will be acceptable when the projects have a long life, and do not increase the financial costs sharply. A bridge like this has a technical service life of at least 100 years.
If we assume an interest rate of 3.1% for toll loans, that it will not be possible to get an exemption from VAT, but that over a period of 45 years an annual subsidy can be given through the scheme with ferry replacement subsidies, we believe the projects can be repaid with toll rates that do not exceed current ferry prices.
Below are the results from a calculation example where a ferry replacement grant of NOK 20 million has been entered in first year. The scheme also assumes that the subsidy increases by 2.5% per year. It is provided by the Ministry of Local Government and Modernization, and is assumed to be paid through a separate agreement with the County Municipality.
The traditional repayment periods for toll loans of 15-20 years are challenging for large infrastructure projects outside larger cities. The scheme with ferry replacements for ferry connections that are replaced by regular connections, now assumes annual subsidies to be extended from the previous 40 years up to 45 years under the new scheme. This is done so that the scheme will allow for up to 50% of interest costs for any construction loans when the construction takes place.
Financing of such strategic and expensive infrastructure should be considered as investments that can be depreciated and financed in accordance with other investments. For example are loans for municipal facilities and schools currently repaid over 30 and 40 years.
A rough calculation example with moderate traffic growth
- Development package of NOK 12 billion, ex. 18% VAT
- Toll loans NOK 14.2 billion
- Ferry subsidies NOK 20 million annually for up to 45 years
- Traffic of 6500 kjt ÅDT on the bridge over the Trondheimsfiord in the opening year
- Traffic of 3000 kjt ÅDT on the bridge over the Stjørnfiord
- Flat annual traffic growth of 2% traffic growth in all years
- Average toll rate for small vehicles over the Trondheimsfiord NOK 150 and the Stjørnfiord NOK 50
- Annual price adjustment of toll rates 1%
- Interest rate financing 3.1%
With these assumptions, the estimated repayment period for a loan is 35 years.
Assumptions for traffic development, toll rates, and cost estimates will always be discussed. This is not a financing analysis, but an example that aims to shed light on the robustness and financing ability based on a set of assumptions. The basis for choosing calculation assumptions will improve as the analysis work progresses.
It is considered possible to get a discount scheme for those who drive through two toll barriers for cost still to be acceptable. However, the ability to pay into the project seems to be good, and there are good opportunities to modify both the level and structure of the tolls should the need arise.
The investments in the package can be phased, but the assessments indicate that it has little significance for the total repayment ability of the package. However, a phasing in of the investments makes it possible to look at the traffic development that the main bridge will generate after opening. This may have an impact on the guarantees required to obtain favorable interest rates agreements. Even with low toll rates the project is considered financially robust, with good margins in relation to ordinary toll rates.
A normal toll rate in ferry replacement projects is ferry ticket + 40%. It is a challenge with toll-financed projects that the rate is so high that it leads to rejection of traffic. With as low a rate as possible, most of the growth potential for areas with reduced time intervals will be able to be taken out early, and so will not have to wait until the tolls have been removed.