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BUDAPEST METRO LINE 4 FEASIBILITY STUDY Oktober 1996 |
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FINANCIAL APPRAISAL |
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This chapter sets out a determination of cash flows
based on the patronage forecasts and assessments of operating,
capital and financing costs. Our analysis has been undertaken
for four alternatives: Kelenföld to Keleti main alignment built in one stage, referred to Base alternative Budaörs to Keleti alignment, referred to extended alternative Kelenföld to Kálvin alignment, referred to partial alignment
Two Stage construction of Base alternative
A computer spreadsheet model has been developed on
both a nominal and a real (that is, ignoring the impact of inflation)
basis in both ECUs and HuF for all these alternatives. In all,
16 spreadsheets have been calculated and are included within the
Working Paper F02, attached to the report. The rest of this chapter sets out the assumptions used and provides a summary of the results of the analysis. Assumptions
In producing our analysis a key issue is defining
and agreeing the assumptions and data to be used. This includes
defining the alignment to be analysed, patronage and revenue forecasts,
construction and operating costs, sources of funding and financing
terms. We have undertaken discussions with the Hungarian Ministry
of Finance, the Municipal Assembly of Budapest and its financial
advisers and have advised the European Commission and the European
Investment Bank of the assumptions we have used. The financial model is based on a 30 year evaluation period from the opening of the metro. Calendar years are used throughout with the assumption that the line will open in the year 2005, with the exception of the phase construction where the section between Kálvin square and Keleti opens in 2010. Input Assumptions
For the nominal spreadsheet assumptions have to be
made with regard to the rate of inflation that will prevail over
the construction and 30 year evaluation period. Assumptions for
ECU and HuF inflation rates are set out below.
Using the above inflation rate differentials between ECU and HuF, an exchange rate between the two currencies has been derived for the period covered by the analysis starting with a 1996 rate of 185.3 HuF to the ECU. Financial Assumptions
Six main sources of finance have been assumed. Firstly, a loan
covering 30 per cent of all capital costs from the European Investment
Bank. The terms of the loan are assumed to be as follows: Term 20 years Capital repayment holiday 5 years
Interest rate 7% fixed
The second source of funding is from the municipality.
This has been estimated at 3 bn HuF (16M ECU) in real terms for
each year of construction. An equal contribution has been assumed
to be provided from the Hungarian Government. The fourth source
of funding is the European Commission's PHARE programme which
is assumed to match the contribution provided locally, that is,
by the Municipality and the national government. The balance
of the capital costs of the scheme are assumed to be provided
by a further loan. The terms of the loan are assumed to be the
same as that for the EIB loan except the interest rate is 8.5%
fixed. The final funding source comes from BKV operating cost savings resulting from the opening of the new metro line. Unlike the other finance sources this income arises once the metro opens and can help to make a contribution towards principal and interest repayments. Repayment of interest and principle
It is assumed that the loans are received at the
start of the year and repayment is made at year end. Interest
is therefore payable from the year in which the loan is received
to the year it is finally repaid. For those spreadsheets that
are in HuF the repayment of EIB and other loans is assumed to
be in ECUs and therefore are calculated using the HuF:ECU exchange
rate applicable in the year in question No assumptions have been made regarding which authority will be responsible for the repayment of interest and capital. Capital assumptions
The total construction and rolling stock costs for
each alternative are set out in the table D-9 below. Given the
relatively small number of train sets required it is assumed that
all rolling stock is purchased in the year before the line opens
even though not all the train sets will be needed at this time.
The one exception is for the phased alternative when rolling
stock will be purchased in two phases in line with when both sections
of the line are opened.
No assessment has been made of the costs of rolling stock refurbishment or the replacement/upgrading of train control/signalling systems. Traffic Assumptions
From the traffic analysis, daily patronage figures have been estimated
for each alternative. These are shown for the opening year (2005)
and 2034 the end of the analysis period. To calculate annual
usage the daily patronage figures are multiplied by 300. The
present average fare of 13 HuF (in 1996 prices) is used in the
analysis. It has been assumed that no real fare increase will
apply although it is fairly common to increase ticket prices by
the increase in real wages which are usually higher than increases
in price levels.
Operating costs are also taken from the traffic analysis. Analysis and results
A total of sixteen spreadsheets have been calculated
and this section briefly highlights some of the results.
The table below D-11 highlights the maximum nominal
annual contribution required under each alternative to repay the
principal and interest taking account operating surplus and BKV
contribution. That is, for the base alternative the Municipality
and or Government will need to pay in a single year up to 46M
ECU to finance the debt on the metro extension. This level of
debt funding is beyond the scope of the Municipality alone which
can probably support 20M ECU in the years concerned.
The total contribution that either the Municipality and or Government
will need to make up to the date when the line becomes self-financing
are shown in the table D-12 below.
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