CBA of a Safe and Secure Parking for trucks - CEF | Case Study
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October 2019
CBA of a Safe and
Secure Parking
for trucks
CEF | Case Study
Innovation
and 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.
2 CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 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. 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 in EasternLand 3 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.
CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 3
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.
Safe and Revenues
Secure Customers
Parking
Owns 100% CEF Safe and Secure
Parkings - CSSP
Fuel station Revenues
(existing)
Customers
CSSP Group 10 year Concession
Concession fee
Revenues
Eating@CEF-Parkings Snack bar Customers
Owns 60%
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. 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. 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 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.pdf4 CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS
GUIDANCE
Parking areas should 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 parkings 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.CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 5
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 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 at km 328.1 of motorway A3.
• Option 3: Upgrading a 190 existing non-secure parking 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 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.6 CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS
GUIDANCE
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 to the Bronze security level.
• Option 2b: Upgrading the 155 non-secure parking to the Silver security level.
• Option 2c: Upgrading the 155 non-secure parking to the Gold security level.
Based on interviews with potential customers, the strategic plan for safe and secure parkings 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 to the Silver security level (Option 2b).
GUIDANCE
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.CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 7 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.
8 CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS
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
the supply of secure parking 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
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
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 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.
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
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.CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 9
POTENTIAL MISTAKE
Analysing only the parking space would be a mistake. The upgrade of the parking 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
Using a time horizon of 10 years based on the shorter duration of the snack bar concession would be a
mistake. The time horizon should 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.pdf10 CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS
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, 221,000 - 221,000
electric cabin)
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
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 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 (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).
- 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.CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 11
- 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 (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 & - 28,000 28,000 28,000 28,000 28,000 28,000 28,000
cleaning
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
Direct taxes, such as taxes on capital or income, should not be considered to calculate the financial
profitability of the project (FNVP(C)). They should be 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.12 CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 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 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 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).
CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 13
POTENTIAL MISTAKE
Including all revenues from the refuelling stations in the analyses would be a mistake. Only revenues
that are incremental, compared to counterfactual, should 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
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 should 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.14 CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 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 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 secure parking 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.
CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 15
POTENTIAL MISTAKE
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 CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS
NPV @
‘000€ 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
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
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 should 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.CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 17
Return on investment
with 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 - - - - - - - - - - - - -
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 - -
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(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 CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS
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 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 Remark 8
applied
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 0.86 Standard Conversion Factor (SCF) calculated as the ratio
costs, maintenance, utilities 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.CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 19
Direct impacts
The direct impact for the users of the parking is three fold: the security provided by the facility, the
reduced transport cost to reach a safe parking, 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
parkings will benefit only from the last two. New users of the safe and secure service will benefit
from the first and last one.
Value of security
The value of security has to be measured in comparison with the situation without the project.
Because we are assuming that most of the users will be already using private parking areas, we
should define 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
quite difficult to compare. Because of these limitations and to keep the analysis on the
conservative side, the safety improvements for these users are considered null.
For the users coming from non-secure parkings we carried out a dedicated survey with shippers
operating on A3 to estimate the willingness to pay for using the safe and secure parking. This
shows that the maximum value that they are willing to pay for a secured parking equivalent to the
silver security level for medium-high value cargo (>15 €/kg) is approximately 1.4 € per hour. Based
on the total estimated usage of 724,744 hours per year, 72,474 hours will come from divers who
didn’t park in safe areas before the project. The annual value for the safety benefit is 101,464 €.
GUIDANCE
A dedicated survey asking to put a value to pictures showing exactly the type of facility proposed
(“stated preference”) is in principle a respectable approach to estimate the willingness to pay. However,
this method is quite 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 willing to pay for secured parking
is estimated at approximately EUR 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 deduce up to 10% of annual premium upon presentation of sufficient Safe and Secure
Parking receipts. Nevertheless, even in Countries where insurance companies apply
premiums/deductibles such data is not always readily available.
9
https://ec.europa.eu/transport/sites/transport/files/modes/road/parking/doc/2010_04_background_information
_and_considerations_for_secure_truck_parking.pdf20 CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS POTENTIAL MISTAKE Trying to measure the reduction of cargo crime would be a double counting. Indeed, the willingness to pay for a safer parking 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 the crime avoidance as 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 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 will be probably 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 impedes 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. Because the safety standards of A3 are relatively high, road accidents are not frequent on this stretch of highway network and it was decided to keep this benefit as a qualitative element but not quantify it. In addition, only the incremental usage as buffering zone should be taken into account and this can be considered as already included in the estimated daytime usage of the parking. Avoided transport costs With a safe and secure parking 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. As on average they currently drive about 20 minutes to reach such area, given the number of users estimated in the demand analysis (90% of the total users), this sums up to 54,356 hours less 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 escalated 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 (fuel consumption, tyre replacement, maintenance, etc.). With an average operating cost of 0.21 € per km the annual saving can be estimated at 456,589 €. Conversely, the project will have a negative impact for the current users of the non-secured and free access parking. Indeed, they will need to look for an alternative parking solution. Here we consider the most pessimistic case where all other parking areas on A3 are already full and that they will need to find for a rest area somewhere else not on the motorway. Since non-secured parking areas are much more common, we have assumed that current users of the parking 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 makes 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.
CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS 21
The net effect on avoided transport costs is therefore: 315,711 € of time saving and 321,148€ for
operational costs savings. In total the benefits are 636,859€ per year.
Value of other services
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 didn’t take hot and seated meals before the project will start doing 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 benefits is null.
POTENTIAL MISTAKE
Including the value for the fuelling service in the economic analysis would be a mistake.
The actual usage (fuel consumption) 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
Further benefits to the 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 leads to saving 2,174,232 km per year. On the other hand, the
107,492 current users that will need to find a new location will drive 322,477 km more per year for
the 6 km round-trip route.
According to the Handbook on external costs of transport 10 the unit value of externalities per km
travelled by an HGV in EasternLand are the following:
• 0.102 € for the air pollution
• 0.069 € for the greenhouse gas emissions
• 0.013 € for the risk of accidents
• 0.077 € for the noise emissions
Summing these four effects, implementing the project will generate 567,475 € of positive
externalities and 168,333 € of negative externalities every year.
10
https://ec.europa.eu/transport/sites/transport/files/studies/internalisation-handbook-isbn-978-92-79-
96917-1.pdf22 CEF CASE STUDY – CBA OF A SAFE AND SECURE PARKING FOR TRUCKS
POTENTIAL MISTAKE
In the case described, adding road safety as a benefit would be a mistake.
Only projects that increase the number of parkings 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 parkings on the A3. Because the number of parking spaces 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 investment cost -2,549 -2,549 - - - - - - - - - - - - -
Replacement cost -388 - - - - - - - - - - -807 - - -
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
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.You can also read
