Road Infrastructure Concession Practice in Europe
In a road infrastructure concession, a public authority grants specific rights to a private, or semi-public company to construct, overhaul, maintain, and operate infrastructure for a given period. By contract, the public authority charges that company with making the investments needed to create the service at its own cost, and to operate it at its own risk. The price paid to the company comes from the service's users, the public authority, or both. In 1999, out of roughly 51,000 kilometers of European motorways, about 17,000 kilometers (33 percent) were concessioned - 16,400 kilometers by toll, and 670 kilometers by shadow toll (design, build, finance, and operate arrangements). Of these, 73 percent are managed by the public sector, and 27 percent by private companies. State-owned companies have been important in European motorway concessions. Systems vary among countries, for example, in how they share risks between the concession authority, and the concession company. As the motorway network has grown denser, attributing commercial risk has become more difficult. Increasingly, public authorities must play a greater regulatory role. Already, bad experiences have made the private sector reluctant to bear the commercial risk. Ant the commercial risk is sometimes too great to be carried by the concession company alone. Commercial risk should be controlled by mechanisms incorporated in the contract, but control of the commercial risk must not eliminate incentives. In addition to safeguarding the community's interests, the public concession authority, must increase citizen awareness about concession decisions, to ensure their social acceptability. Formulas for determining toll charges, differ through Europe. So do criteria for selecting concession companies. In 1999, the main criteria used were these: 1) the amount of public subsidy required; 2) the credibility of the financial arrangements; 3) the project's technical quality; 4) the operating strategy, and price policy; and, 5) the reputation of the concession company (whether it has a construction company among its shareholders, for example). The increasingly frequent use of private funding, must be taken into account when defining the training required by personnel responsible for monitoring the concessions.
| Summary: | In a road infrastructure concession, a
public authority grants specific rights to a private, or
semi-public company to construct, overhaul, maintain, and
operate infrastructure for a given period. By contract, the
public authority charges that company with making the
investments needed to create the service at its own cost,
and to operate it at its own risk. The price paid to the
company comes from the service's users, the public
authority, or both. In 1999, out of roughly 51,000
kilometers of European motorways, about 17,000 kilometers
(33 percent) were concessioned - 16,400 kilometers by toll,
and 670 kilometers by shadow toll (design, build, finance,
and operate arrangements). Of these, 73 percent are managed
by the public sector, and 27 percent by private companies.
State-owned companies have been important in European
motorway concessions. Systems vary among countries, for
example, in how they share risks between the concession
authority, and the concession company. As the motorway
network has grown denser, attributing commercial risk has
become more difficult. Increasingly, public authorities must
play a greater regulatory role. Already, bad experiences
have made the private sector reluctant to bear the
commercial risk. Ant the commercial risk is sometimes too
great to be carried by the concession company alone.
Commercial risk should be controlled by mechanisms
incorporated in the contract, but control of the commercial
risk must not eliminate incentives. In addition to
safeguarding the community's interests, the public
concession authority, must increase citizen awareness about
concession decisions, to ensure their social acceptability.
Formulas for determining toll charges, differ through
Europe. So do criteria for selecting concession companies.
In 1999, the main criteria used were these: 1) the amount of
public subsidy required; 2) the credibility of the financial
arrangements; 3) the project's technical quality; 4)
the operating strategy, and price policy; and, 5) the
reputation of the concession company (whether it has a
construction company among its shareholders, for example).
The increasingly frequent use of private funding, must be
taken into account when defining the training required by
personnel responsible for monitoring the concessions. |
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