TRACECA Appraisal Manual Guidelines for Pre-Feasibility of Transport Projects with Exercises ...

155 Pages·2012·3.1 MB·English

TRACECA Appraisal Manual
Guidelines for Pre-Feasibility of Transport Projects
with Exercises and Case Studies
A project implemented by TRT Trasporti e Territorio in association with:
Alfen Consult, Dornier Consulting, PTV

Project Title : Transport dialogue and interoperability between the EU and its
neighbouring countries and Central Asian countries
Short Name : IDEA (Transport Interoperability and Dialogue between the
EU, Caucasus and Asian)
Project Number : EuropeAid 2008 / 155-683
Countries : Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan,
Moldova, Tajikistan, Uzbekistan and Ukraine. Bulgaria,
Romania and Turkey associated to the project as TRACECA
member
Contractor
Name : TRT Trasporti e Territorio SRL
Address : Via Rutilia, 10/8 20141 Milano, Italy
Tel. Number : [phone]
Fax number : [phone]
E-mail : [email protected]
Contact person : Dr. Silvia Maffii / Team Leader
Autors of Report : S. Maffii, R. Parolin, M. Brambilla, R. Scatamacchia

This Appraisal Manual is prepared by the TRACECA IDEA (February 2012).
The IDEA project is implemented by TRT Trasporti e Territorio in association with:
Alfen Consult, Dornier Consult, PTV.

Table of contents
Table of contents
Table of contents ................................................................................................. I 
List of figures ................................................................................................... IV 
List of tables ....................................................................................................... V 
List of abbreviations ........................................................................................ VII 
1  Introduction ................................................................................................. 1 
1.1  Premise .............................................................................................................2  
1.2  Project appraisal .................................................................................................2  
1.3  The guidelines ....................................................................................................3  
2  Project identification .................................................................................... 7 
2.1  Overview ...........................................................................................................8  
2.2  Project objectives and definition of project solution .................................................. 8 
2.3  Definition of the reference or “do minimum” solution .............................................. 10 
2.4  Analysis of the demand ...................................................................................... 10 
2.4.1  Generalised costs ...................................................................................................... 11 
2.4.2  Demand forecast ...................................................................................................... 13 
2.4.3  Check list for demand analysis ................................................................................... 14 
2.5  Problems ......................................................................................................... 15 
3  Financial analysis ....................................................................................... 17 
3.1  Overview ......................................................................................................... 18 
3.2  Rationale of the financial analysis ........................................................................ 18 
3.3  Investment costs, operating costs and revenues .................................................... 19 
3.4  Financial discount rate ....................................................................................... 21 
3.5  Performance indicators: Financial Return on Investment and Internal Rate of Return .. 22 
3.6  Profitability analysis ........................................................................................... 22 
4  Economic analysis ...................................................................................... 25 
4.1  Overview ......................................................................................................... 26 
4.2  Change in transport user benefits ........................................................................ 27 
4.2.1  Components of the generalised cost ............................................................................ 28 
4.2.2  Consumer surplus and Willingness to Pay (WTP) ........................................................... 28 
4.2.3  Transport user benefits: Consumer surplus and the Rule of Half ..................................... 30 
4.2.4  Diverted and induced demand .................................................................................... 33 
4.2.5  Introduction of completely new modes ........................................................................ 33 
4.2.6  Special treatment of unperceived costs ........................................................................ 34 
4.3  Change in system operating costs and revenues .................................................... 35 
4.3.1  Producer surplus ....................................................................................................... 35 
4.3.2  Taxation and Government revenue effects ................................................................... 36 
4.4  Change in external costs .................................................................................... 37 
4.4.1  Environmental costs .................................................................................................. 38 
4.4.2  Air pollution ............................................................................................................. 40 
I
Table of contents
4.4.3  Noise ....................................................................................................................... 43 
4.4.4  Global warming ........................................................................................................ 43 
4.4.5  Safety ..................................................................................................................... 44 
4.5  Value transfer ................................................................................................... 45 
4.6  Project investment costs .................................................................................... 46 
4.6.1  From financial to economic costs ................................................................................ 48 
4.7  The project appraisal period. ............................................................................... 49 
4.8  Constant prices, common currency and base year .................................................. 50 
4.9  Treatment of values over time ............................................................................ 50 
4.10  The problem of evaluation in cross-border projects ................................................ 51 
4.11  Flows of benefits and costs ................................................................................. 52 
4.12  Social discount rate ........................................................................................... 53 
4.13  Decision criteria ................................................................................................ 54 
4.14  Social analysis of costs and benefits ..................................................................... 56 
4.15  Problems ......................................................................................................... 58 
5  Risk assessment ......................................................................................... 69 
5.1  Overview ......................................................................................................... 70 
5.2  Sensitivity analysis ............................................................................................ 71 
5.3  Probability distribution of critical variables ............................................................ 72 
5.4  Calculation of the distribution of the performance indicators and evaluation of acceptable
levels of risk ..................................................................................................... 73 
5.5  Risk mitigation .................................................................................................. 75 
5.6  Problems ......................................................................................................... 75 
6  Case studies ............................................................................................... 77 
6.1  Foreword ......................................................................................................... 78 
6.2  Construction of additional berths ......................................................................... 79 
6.2.1  Introduction ............................................................................................................. 79 
6.2.2  Traffic and terminal servicing time .............................................................................. 79 
6.2.3  Project benefit .......................................................................................................... 80 
6.2.4  Optimum timing of the project (with three berths) ........................................................ 84 
6.2.5  Conclusion ............................................................................................................... 85 
6.2.6  Further remarks ....................................................................................................... 86 
6.3  Electrification of a railway line ............................................................................. 87 
6.3.1  Introduction ............................................................................................................. 87 
6.3.2  Traffic ..................................................................................................................... 87 
6.3.3  Costs of diesel fleet renovation (reference solution) ...................................................... 87 
6.3.4  Costs of electrification ............................................................................................... 88 
6.3.5  Results .................................................................................................................... 88 
6.4  Paving gravel road ............................................................................................ 92 
6.4.1  Introduction ............................................................................................................. 92 
6.4.2  Investment and maintenance costs ............................................................................. 92 
6.4.3  Traffic ..................................................................................................................... 92 
II
Table of contents
6.4.4  Benefits from reduced generalised costs ...................................................................... 93 
6.4.5  Other benefits .......................................................................................................... 95 
6.4.6  Project performance .................................................................................................. 96 
6.5  Investment in a railway line and modal shift ......................................................... 97 
6.5.1  Introduction ............................................................................................................. 97 
6.5.2  Traffic analysis ......................................................................................................... 98 
6.5.3  Investment costs ...................................................................................................... 98 
6.5.4  Project benefits ........................................................................................................ 99 
6.6  Social analysis ................................................................................................ 105 
6.6.1  Introduction ........................................................................................................... 105 
6.6.2  Solution ................................................................................................................. 105 
Appendix 1: Glossary ...................................................................................... 107 
Appendix 2: Value of Time (through SP) ........................................................ 111 
Appendix 3: Suggested solutions to problems ................................................ 117 
References ..................................................................................................... 142 
III
List of figures
List of figures
Figure 1 - 1: Components of the Guidelines ............................................................. 5
Figure 2 - 1: Structure of the technical solutions analysis ........................................... 8
Figure 3 - 1: Structure of the financial analysis ....................................................... 19
Figure 4 - 1: Structure of the economic analysis ..................................................... 27 
Figure 4 - 2: Transport demand curve ................................................................... 29 
Figure 4 - 3: Consumer surplus without the project ................................................. 30 
Figure 4 - 4: Consumer surplus with the project ..................................................... 31 
Figure 4 - 5: Change in consumer surplus .............................................................. 32 
Figure 4 - 6: Possible demand curves of a new mode............................................... 34 
Figure 4 - 7: Variation in producer surplus ............................................................. 36 
Figure 4 - 8: The additional tax revenues ............................................................... 37
Figure 5 - 1: Example of triangular distribution ....................................................... 73 
Figure 5 - 2: Example of probability distribution for NPV .......................................... 74 
Figure 5 - 3: Example of cumulative probability distribution for NPV .......................... 74
Figure 6 - 1: Port layout in reference solution (left) and project scenario (right) .......... 79 
Figure 6 - 2: Estimated traffic [ships/year] ............................................................ 80 
Figure 6 - 3: Extent of time benefits with three berths at year 11 .............................. 82 
Figure 6 - 4: Graphical depiction of project’s IRR .................................................... 91 
Figure 6 - 5: Road alignment and cross-section in reference solution (above) and project
scenario (below) ................................................................................................ 92 
Figure 6 - 6: Surplus change for trucks ................................................................. 95 
Figure 6 - 7: Project plan in reference solution (above), Option 1 (middle) and Option 2
(below). The road corridor is black and the rail line is red (each line depicts a track). ... 97 
Figure 6 - 8: Rail line typical cross-section in reference solution (left) and project
scenario (right) .................................................................................................. 98 
Figure 6 - 9: Change in user surplus for rail travellers (Option 1 with respect to reference
solution) ......................................................................................................... 100 
Figure 6 - 10: Economic performance of investment options ................................... 102 

IV
List of tables
List of tables
Table 1 - 1: Stages of the decision making process ................................................... 4
Table 2 - 1: Costs and benefits with separable projects ............................................ 10 
Table 2 - 2: Values of time (Euro, 2010) ................................................................ 12
Table 3 - 1: Outflows and inflows for the profitability analysis ................................... 23 
Table 3 - 2: Evaluation of financial return on investment in a motorway project (Million of
Euro) ................................................................................................................ 23
Table 4 - 1: Consumer surplus variation for modal shifters ....................................... 33 
Table 4 - 2: Values per tonne of CO equivalent emitted (Euro, 2009) ........................ 43 
2
Table 4 - 3: Estimated cost per fatality (USD, 2009) ............................................... 44 
Table 4 - 4: Example of scheduled investment costs with and without the project ........ 48 
Table 4 - 5: Reference evaluation period for the transport sector .............................. 50 
Table 4 - 6: Example of costs and benefits over years for a rail project (Meuro) .......... 53 
Table 4 - 7: Social discount rate for some countries ................................................ 54 
Table 4 - 8: Matrix for the analysis of the distribution of project impacts .................... 56
Table 5 - 1: Significant factors for risk analysis in transport projects .......................... 71 
Table 5 - 2: Switching values for the Economic Net Present Value of a motorway project
....................................................................................................................... 72 
Table 5 - 3: Example of scenario analysis .............................................................. 72
Table 6 - 1: Investment cost per berth and related timing [Meuro/year]. .................... 79 
Table 6 - 2: Annual ship traffic, berth occupancy, ship waiting times and cost of annual
waiting time ...................................................................................................... 81 
Table 6 - 3: Flow of costs and benefits with three berths [Meuro] .............................. 83 
Table 6 - 4: Flow of costs and benefits with four berths [Meuro] ............................... 84 
Table 6 - 5: Economic performance with a postponement of one year ........................ 85 
Table 6 - 6: Consequence of postponement on the discounted flow of costs and benefits
[Meuro] ............................................................................................................ 85 
Table 6 - 7: Scheduled costs in reference solution [Meuro/year] ............................... 87 
Table 6 - 8: Scheduled costs in project scenario [Meuro/year] .................................. 88 
Table 6 - 9: Economic analysis: electrification vs dieselisation [Meuro/year] ............... 89 
Table 6 - 10: Traffic growth rates per year [%] ...................................................... 93 
V
Table of tables
Table 6 - 11: Traffic in reference solution and project scenario [vehicles/day] ............. 93 
Table 6 - 12: Generalised cost per type of road and net of taxes [Euro/vehicle·km] ..... 94 
Table 6 - 13: Benefits yielded per type of vehicle [Meuro/year] ................................. 95 
Table 6 - 14: Net benefits and NPV [Meuro] ........................................................... 96 
Table 6 - 15: Passenger travel demand [Mpassengers/year] and freight flows
[Mtons/year] ..................................................................................................... 98 
Table 6 - 16: Economic investment costs [Meuro] ................................................... 99 
Table 6 - 17: Economic maintenance costs [Meuro/year] ......................................... 99 
Table 6 - 18: Generalised cost [Euro/travel] ........................................................... 99 
Table 6 - 19: Change in user surplus [Meuro/year] ............................................... 100 
Table 6 - 20 Producer surplus and Government fuel tax revenues [Meuro/year] ........ 101 
Table 6 - 21: Estimated external costs benefits [Meuro/year] ................................. 101 
Table 6 - 22: Economic analysis of Option 1 [Meuro/year] ...................................... 103 
Table 6 - 23: Economic analysis of Option 2 [Meuro/year] ...................................... 104 
Table 6 - 24: Costs and benefits yielded by the project [Meuro] .............................. 105 
Table 6 - 25: Matrix for the analysis of the distribution of project’s impact ................ 106 
VI