Q U I C K A P P R A I S A L R E P O R T

AUTOVÍA DEL GUADALHORCE (A-357)/TRAMO:CASAPALMA-ZALEA

CCI 2011ES161PR006

Prepared for

European Commission – Directorate General Regional PolicyUnit G1

B-1049 BrusselsBELGIUM07th July 2012

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CCI 2011ES161PR006, July 2012

TABLE OF CONTENTS

1 INTRODUCTION.............................................................................................................1

1.1 Project Appraisal Fundamentals......................................................................................... 1

1.1.1 Applicant and project managing authority ........................................................................... 1

1.1.2 Documentation available.................................................................................................... 1

2 PROJECT STRATEGY AND OBJECTIVES ................................................................2

2.1 Strategic objectives of the project....................................................................................... 2

2.2 Project description ............................................................................................................. 2

2.3 Functional objectives of the project .................................................................................... 7

2.4 Consistency with Other Union Policies ............................................................................. 11

3 TECHNICAL FEASIBILITY, PROJECT COSTS AND DEMAND ANALYSIS..........13

3.1 Technical Feasibility......................................................................................................... 13

3.1.1 Feasibility Study............................................................................................................... 13

3.1.2 Technical Concept ........................................................................................................... 13

3.1.3 Environmental assessment .............................................................................................. 14

3.1.4 Project implementation scheme and time schedule .......................................................... 15

3.2 Project costs .................................................................................................................... 16

3.3 Demand analysis ............................................................................................................. 18

4 COST BENEFIT ANALYSIS ........................................................................................21

4.1 Financial analysis............................................................................................................. 21

4.1.1 Cash out-flows................................................................................................................. 21

4.1.2 Cash in-flows................................................................................................................... 22

4.1.3 Funding Gap and Financial Indicators .............................................................................. 22

4.1.4 Public Contribution Viability.............................................................................................. 22

4.2 Socio-economic analysis.................................................................................................. 23

4.2.1 Conversion of market to accounting prices ....................................................................... 24

4.2.2 User benefits estimation................................................................................................... 25

4.2.3 External benefits estimation ............................................................................................. 25

4.2.4 Effects on employment and other non-monetized effects.................................................. 26

4.2.5 Economic performance indicators .................................................................................... 26

4.2.6 Risk assessment and sensitivity analysis ......................................................................... 26

5 KEY FINDINGS AND CONCLUDING REMARKS.....................................................28

5.1 Key questions for project appraisal................................................................................... 28

5.2 Concluding remarks ......................................................................................................... 32

CCI 2011ES161PR006, July 2012 1

1 INTRODUCTION

1.1 Project Appraisal Fundamentals

This Quick Appraisal (QA) is prepared in accordance with the “QA Check List” for majortransport investments agreed with the EC – Directorate General Regional Policy FinancialGreffe REGIO.

The objective of this QA is to support a constructive dialogue between the EU and theApplicants providing recommendations and suggestions, based on an in depth analysis of theapplication form and annexed documentation.

The structure of this report is in line with the sections and headings of the Quick AppraisalCheck List and the Investment Application Form.

Along with the description of the findings of the analysis in each Chapter or Section of Chapterin relation to which: a) the quality of the information provided and available is not satisfactory, orb) the quality of the project is deemed to be improved, or c) the methodological and technicalsolutions adopted to undertake the CBA analysis, demand studies and project design aredeemed as not adequate or reliable, the comments are highlighted in a recommendations andsuggestions box.

In the concluding remarks Chapter we summarize the main findings of our appraisalcommenting on the essential elements of the project, and suggesting any potential solution thatcan improve its quality according to the findings of the analysis as appropriate. This sectionhighlights any important issue that should be considered before the Commission can approvethe project.

1.1.1 Applicant and project managing authority

The Applicant is the Dirección General de Fondos Europeos y Planificación who is responsiblefor developing the road related investments to be funded by the European Union according tothe principles and objectives set in the Programa Operativo FEDER de Andalucía 2007-2013 .

The Beneficiary of the project is the Dirección General de Infraestructuras Viarias .

1.1.2 Documentation available

The application documents made available in electronic format through the CIRCABC system ofthe European Commission include the following annexes to the application form:

Natura 2000 declaration and technical summary of the project design and EIA relatedprocess, in support of the request of the Natura 2000 certificate;

Cost-Benefit Analysis;

EIA Declaration including the information requested under point 3.2.2 of the application form.

The project dossier is complete and complies with the EC Regulations. The information providedis consistent with Art. 40 Reg. 1083/2006, Annex XXI and Commission Regulation 1828/2006.

CCI 2011ES161PR006, July 2012 2

2 PROJECT STRATEGY AND OBJECTIVES

2.1 Strategic objectives of the projectThe investment under appraisal is expected to speed up the completion of the Autovia A-357 –Autovia del Guadalhorce – Section Enlace de Casapalma – Enlace de Zalea .

The project consists in the upgrade of a regional road corridor in the Andalucía Region, betweenCasapalma and Zalea in the municipalities of Cártama and Pizarra in the Malaga District. Theproject will improve accessibility between 8 municipalities located in the Guadalhorce valley andthe metropolitan area of Malaga. Overall the traffic to and from the territories between the North-Western Part of the Andalucía region and the Costa del Sol may benefit from the investment,which will contribute to the improvement of the main road network between Málaga and theautovía A-92, through Campillos, Osuna, Estepa or Roda de Andalucía.

The investment contributes to the realization of the objectives of the priority axis IV of the POFEDER 2007-2013 of the Andalucía Region. Its development was originally planned in the PlanDirector de Infraestructuras de Andalucía PDIA 1997-2007; the investment is also included inthe Plan de Infraestructuras para la Sostenibilidad del Transporte en Andalucía – PISTA 2007-2013.

2.2 Project description

The Autovia A-357 is a regional corridor located in the Andalucía Region. The road is about 70km long and runs from Malaga to Campillos (See Figure 1). Particularly the final section of theroad – close to the metropolitan area of Malaga – is characterized by higher levels of traffic –particularly in the peak hours – and the road was planned to be upgraded to two lines perdirection in its final 30 km.

This upgrading project was originally assumed to be divided into 4 operational phases. The firstthree operational phases between Malaga and Casapalma were already constructed and are inoperation, the length of the upgraded section totalling about 22 km.

The Section Enlace de Casapalma-Enlace de Zalea major project, subject of this appraisal,represents the fourth phase of the upgrading project for this road. Although in a first instancethis section was assumed to be implemented as one single project, in 2009 the Authoritiesdecided to develop this operational phase dividing it into two separate sections (See alsoFigures 1 and 2 below):

Autovía del Guadalhorce (A-357). Subtramo I: Enlace de Casapalma – Enlace de Cerralbaof about 3.84 km;

Autovía del Guadalhorce (A-357). Subtramo II: Enlace de Cerralba – Enlace de Zalea ofabout 4.15 km.

The table below summarizes the unit of analysis identified based on the analysis of the projectdossier and additional available documentation; which are acceptable. For the scope of thisappraisal, we will refer to the Section Enlace de Casapalma-Enlace de Zalea as the 4th

operational phase – tramo – of the upgrading project of the Autovia A-357, divided into the twoabove mentioned operational works – subtramos.

Table 1 Units of analysis

Engineering works includingtechnologies

4th Operational phase – Operational Work I new road section Casapalma - Cerralba4th Operational phase – Operational Work II new road section Cerralba - Zalea

Procurement and contracting4th Operational phase – Operational Work I new road section Casapalma - Cerralba4th Operational phase – Operational Work II new road section from Cerralba - Zalea

EIA 4 th Operational phase – new road section from Casapalma – Zalea

Raod management and operation4th Operational phase – Operational Work I new road section Casapalma - Cerralba4th Operational phase – Operational Work II new road section from Cerralba - Zalea

Economic and financial analysis 4 th Operational phase – new road section from Casapalma – Zalea

CCI 2011ES161PR006, July 2012 3

Figure 1 A-357 Between Malaga and Campillos

Source: Junta de Andalucía – Guía de Carreteras 2012

CCI 2011ES161PR006, July 2012 4

Figure 2 End of the existing double line infrastructure at Casapalma

Source: Google Earth 2012

CCI 2011ES161PR006, July 2012 5

Figure 3 Map of the Autovía del Guadalhorce – Section Casapalma-Zalea to be upgraded

Source: Application Dossier

CCI 2011ES161PR006, July 2012 6

Figure 4 Map of the Autovía del Guadalhorce – Sections Casapalma-Cerralba and Cerralba-Zalea

Source: Google Maps 2012

CCI 2011ES161PR006, July 2012 7

2.3 Functional objectives of the project

The beneficiaries of the project have been correctly identified and the investment is expected tospeed up the implementation and completion of the upgrading of the final 30 km of the A-357.Without the community contribution the project could not be implemented.

The overall strategy and functional objective of the project are reasonable overall, although thecase to invest in this project seems to be more justifiable under the infrastructural rather thansocioeconomic stand point (See also Section 4.2 below). Considering that the infrastructure upto Casapalma has already been upgraded, it is reasonable completing these works upgradingthe road up to Zalea, where the Autovía A-357 intersects with the following other relevant roadsof the regional main road network: A-343, A-354 and A-7077 (See Figure 1 above). On the otherhand the existing traffic levels on the road do not strongly support the case for this investmentand the socio-economic indicators for the area suggest adopting more conservativeassumptions for future traffic estimations, than the ones effectively assumed in the applicationdossier. The impact of the financial crisis of the past years on the economic structure of thecountry should be also reflected in the analysis and application dossier, which is not the case. Itshould be also noted that the infrastructure costs, due to several expensive works such as theviaducts and underpasses, makes it difficult obtaining positive results given the limited length ofthe stretch (See also Section 3.3 and Chapter 4).

We provide below additional comments and considerations on the strategic and functionalobjectives of the project confirming the considerations in the paragraph above.

Figure 5 Transport Infrastructure in the Andalucía Region at 2010

Source: http://www.juntadeandalucia.es/institutodeestadisticaycartografia/anuario/anuario12/anuario12c09.htm#c424

The picture above confirms that the upgrading of the road is actually located in proximity of themetropolitan area of Malaga thus improving the accessibility between the municipalities andpopulation living in the North-Western part of the Andalucía Region and of the Malaga Districtand the Costa del Sol and the city of Malaga. To this respect it is also worth noting that the

CCI 2011ES161PR006, July 2012 8

District registered a higher population growth than the regional and national territories in the pastdecade and is also expected to grow in the future more than Andalucía and Spain.

Table 2 Demographic trends in Spain, the Andalucía Region and its Districts (growth % year on year ifnot otherwise specified)

2001 2011 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011CAGR

'11-'01

CAGR'21-'11

Spain 41116842 47190493 1.8 2.1 1.1 2.1 1.4 1.1 2.1 1.3 0.6 0.4 1.4 -0.1

Andalucía 8594346 8424102 1.0 1.7 1.1 2.1 1.6 1.1 1.8 1.2 0.8 0.6 -0.2 0.3

Almería 533168 702819 2.5 3.4 2.6 5.6 3.8 1.7 3.2 2.5 1.6 1.0 2.8 0.0

Cádiz 1131346 1243519 0.8 1.3 0.7 1.4 1.1 1.1 1.1 0.8 0.5 0.5 0.9 0.3

Córdoba 769625 805857 0.2 0.6 0.5 0.6 0.5 0.5 0.8 0.6 0.1 0.1 0.5 0.0

Granada 812637 924550 0.8 1.1 1.6 2.3 1.8 0.9 1.9 0.7 1.2 0.7 1.3 0.2

Huelva 461730 521968 0.7 1.6 0.9 1.5 1.7 1.1 2.1 1.1 0.9 0.8 1.2 0.3

Jaén 645781 670600 0.2 0.6 0.4 0.9 0.4 0.3 0.4 0.4 0.1 0.0 0.4 -0.4

Málaga 1302240 1625827 2.1 3.4 1.7 4.0 2.6 1.8 3.0 1.9 1.0 1.0 2.2 0.6

Sevilla 1747441 1470069 0.6 1.4 0.5 1.2 1.2 0.8 1.4 1.3 0.9 0.6 -1.7 0.5

2021 2035 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021CAGR

'35-'21

CAGR'21-'11

Spain 45585574 47760810 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.2 -0.2 -0.2 0.3 0.1

Andalucía 8475564 8802464 0.4 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.3 0.2

Almería 688176 772157 -0.1 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 0.4

Cádiz 1262463 1272547 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.1 0.1

Córdoba 786447 806294 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.1 -0.1 -0.1 0.2 0.0

Granada 925919 964206 0.3 0.2 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.3 0.2

Huelva 521967 554700 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.4 0.3

Jaén 629321 641744 -0.3 -0.3 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 0.1 -0.2

Málaga 1694827 1800385 0.7 0.7 0.7 0.6 0.6 0.6 0.5 0.5 0.4 0.4 0.4 0.4

Sevilla 1966444 1990431 0.6 0.6 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.3 0.1 1.3

Source: INE

At the same time the population living in the 8 municipalities directly benefiting from the projectis minimal overall, with the largest city with about 21,500 inhabitants – Cártama – already servedby the upgraded road up to Casapalma, 1 city with a population of about 13,500, other 2 witharound 8,500 inhabitants and 4 additional villages with less than 5,000 thousands inhabitants,according to 2009 data (see also page 5 of the application 4, for the data at 2008). Onlyconsidering the population of the municipalities of Cártama and Pizarra – where the new sectionwill actually be located – the population would total only about 30,000 inhabitants.

Concerning the road infrastructure indexes for this region and for the provinces, it is worthconsidering how this is lower for the region than the average for Spain. Specifically concerningMalaga, the indicators in Table 4 show that the district has a higher value than Andalucía andSpain in terms of road infrastructures per km2 and a lower one per inhabitant. This ispresumably due to the higher population density on the coast and in the metropolitan area ofMalaga.

CCI 2011ES161PR006, July 2012 9

Table 3 Territorial and Road infrastructure indicators for Spain and its Regions

RegionsSurfacein km2

Population% onTotal

PopulationDensity

TotalLengthof Major

RoadNetwork

% onTotal

One Lineper

Direction

Km ofmajor road

networkper 1000

Inhabitants

Km ofmajorroad

networkper

1000km2

Andalucía 87,598 8,370,975 17.8% 95.6 23,485 14.2% 20,844 2.8 0.3Aragón 47,721 1,347,095 2.9% 28.2 11,483 6.9% 10,702 8.5 0.2AsturiasPrincipado de

10,602 1,084,341 2.3% 102.3 5,001 3.0% 4,593 4.6 0.5

Baleares IsIas 4,992 1,106,049 2.4% 221.6 2,151 1.3% 1,968 1.9 0.4Canarias 7,447 2,118,519 4.5% 284.5 4,462 2.7% 4,154 2.1 0.6Cantabria 5,321 592,250 1.3% 111.3 2,563 1.5% 2,343 4.3 0.5Castilla-LaMancha

79,462 2,098,373 4.5% 26.4 19,633 11.8% 17,824 9.4 0.2

Castilla y León 94,227 2,559,515 5.4% 27.2 32,725 19.7% 30,424 12.8 0.3Cataluña 32,113 7,512,381 16.0% 233.9 12,056 7.3% 10,720 1.6 0.4ComunidadValenciana

23,255 5,111,706 10.9% 219.8 8,364 5.0% 6,936 1.6 0.4

Extremadura 41,634 1,107,220 2.4% 26.6 9,191 5.5% 8,446 8.3 0.2Galicia 29,575 2,797,653 5.9% 94.6 17,570 10.6% 16,515 6.3 0.6MadridComunidad de

8,028 6,458,684 13.7% 804.6 3,333 2.0% 2,360 0.5 0.4

Murcia Regiónde

11,313 1,461,979 3.1% 129.2 3,728 2.2% 3,098 2.5 0.3

NavarraComunidadForal de

10,390 636,924 1.4% 61.3 3,946 2.4% 3,566 6.2 0.4

País Vasco 7,230 2,178,339 4.6% 301.3 4,198 2.5% 3,600 1.9 0.6Rioja La 5,045 322,415 0.7% 63.9 1,834 1.1% 1,669 5.7 0.4Ceuta y Melilla 33 156,613 0.3% 4,761.7 63 0.0% 60 0.4 1.9Total 505,986 47,021,031 100.0% 92.9 165,787 100.0% 149,822 3.5 0.3

RegionsStateRoads

% on TotalTwoLines perdirection

Two LinesHighways

TollRoads

% onTotal

CarsCars/1000Inhabitants

% onTotal

Andalucía 2,642 16.5% 251 2,194 197 6.6% 3,755,645 448.7 17.0%Aragón 781 4.9% 76 548 157 5.2% 573,660 425.8 2.6%AsturiasPrincipado de

408 2.6% 14 372 22 0.7% 498,750 460.0 2.3%

Baleares IsIas 183 1.1% 89 94 0 0.0% 650,541 588.2 2.9%Canarias 308 1.9% 91 217 0 0.0% 982,865 463.9 4.4%Cantabria 220 1.4% 2 218 0 0.0% 285,390 481.9 1.3%Castilla-LaMancha

1,809 11.3% 34 1,536 239 8.0% 971,841 463.1 4.4%

Castilla y León 2,303 14.4% 109 1,914 280 9.4% 1,246,949 487.2 5.6%Cataluña 1,336 8.4% 136 568 632 21.1% 3,355,779 446.7 15.2%ComunidadValenciana

1,427 8.9% 311 749 367 12.3% 2,384,022 466.4 10.8%

Extremadura 745 4.7% 77 668 0 0.0% 544,059 491.4 2.5%Galicia 1,055 6.6% 94 634 327 10.9% 1,451,547 518.8 6.6%MadridComunidad de

974 6.1% 221 609 144 4.8% 3,297,220 510.5 14.9%

Murcia Regiónde

630 3.9% 103 412 115 3.8% 688,004 470.6 3.1%

NavarraComunidadForal de

380 2.4% 24 218 138 4.6% 297,770 467.5 1.3%

País Vasco 598 3.7% 63 281 254 8.5% 949,655 436.0 4.3%Rioja La 165 1.0% 6 40 119 4.0% 133,473 414.0 0.6%Ceuta y Melilla 3 0.0% 3 0 0 0.0% 80,285 512.6 0.4%Total 15,965 100.0% 1,703 11,271 2,991 100.0% 22,147,455 471 100.0%

Sources: Ministerio de Fomento. Anuario estadístico; Note: the figures highlighted in red show a lower indicator thanthe average for Spain

CCI 2011ES161PR006, July 2012 10

Table 4 Road infrastructure indicators for the Andalucía Region and Its Districts

Andalucía Almería Cádiz Córdoba Granada Huelva Jaén Málaga Sevilla Spain

Length of thenetwork (km)

23,524 2,418 2,152 4,002 3,070 2,082 3,426 2,543 3,832 165,463

Network/surface(km/km2)

0.27 0.28 0.29 0.29 0.24 0.21 0.25 0.35 0.27 0.33

Network/population(km por 1.000 inh.)

2.81 3.48 1.74 4.97 3.34 4.02 5.11 1.58 2.00 3.52

Lengthtoll/shadow, andtwo laneshighways (km)

2,632 352.0 361.0 200.0 380.0 185.0 222.0 441.0 493.0 15,112

Length oftoll/shadow andtwo laneshighways/surface(km/km2)

0.0300 0.0401 0.0485 0.0145 0.0300 0.0183 0.0164 0.0603 0.0351 0.0299

Length oftoll/shadow andtwo lanes highways/population (km por1.000 inh.)

0.31 0.51 0.29 0.25 0.41 0.36 0.33 0.27 0.26 0.32

Sources: Consejería de Obras Públicas y Transportes. Dirección General de Carreteras; Ministerio de Fomento.Anuario estadístico

As mentioned above, these socio-economic data do not contrast with the strategic andfunctional objectives of the project, although they do not support the demand growth assumptionas assumed in the application form. The future population trend will still be a growing one but atlower rates than in the past. In addition to this the case to invest in this project is alsoundermined by road traffic trends in Spain. Particularly the trend in freight traffic suggestsadopting a conservative methodology when estimating the demand for road transportinvestments, due to the presence of a clear “bubble phenomenon”. Passenger traffic alsoincreased significantly between 1992 and 2004, since when (even before the crisis started in2008), it shows a lower growth pattern.

Figure 6 Road Traffic Trends in Spain (growth in %)

Sources: Ministerio de Fomento. Anuario estadístico

Under the functional stand point it is finally worth commenting on the trends in traffic accidents.

0

50

100

150

200

250

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

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6

200

7

200

8

200

9

201

0

People*km

Travellers*km

Passengers*km

Tons*km

CCI 2011ES161PR006, July 2012 11

Figure 7 Trend in Accidents with Injured People in Spain and Andalucía Region

Sources: Junta de Andalucía – Statistic Bulletin

Despite the fact that Spain and Andalucía show a similar pattern in traffic accidents, the figuresillustrated in the table below show slightly worse indexes for the region and particularly for theprovince of Malaga if compared to Spain (See Table 5 below). This would support theinvestment although the CBA analysis shows that the project would not produce a positiveimpact on road safety (See also Section 4.2 below).

Table 5 Road Traffic Accidents Indicators – 2009

Andalucía Almería Cádiz Córdoba Granada Huelva Jaén Málaga Sevilla SpainLength ofroadnetwork

23,524 2,418 2,152 4,002 3,070 2,082 3,426 2,543 3,832 165,463

AccidentswithInjuredPeopleper km ofroadnetwork

0.3 0.2 0.5 0.1 0.3 0.3 0.2 0.4 0.4 0.2

FatalAccidentsper km ofroadnetwork

0.013 0.011 0.014 0.006 0.015 0.014 0.010 0.017 0.017 0.010

Sources: Junta de Andalucía – Statistic Bulletin

2.4 Consistency with Other Union Policies

The sources for the financing of the Autovia A-357 – Autovia del Guadalhorce – Section Enlacede Casapalma – Enlace de Zalea are detailed at page 27 of the application form. The project isgoing to be financed only by mean of public funds and the ERDF.

Feasibility and design related studies were co-financed during the programming period 2000-2006 presumably for previous operational phases of the upgrading project of the Autovía A-357.At page 28 – point I.1.2 of the application form the Acesso al P.T.A. – Cártama – Casapalmasection is indeed mentioned, which should be in any case the section before the Casapalma-Zalea under appraisal. It is not clear whether also feasibility and design studies for the sectionsunder appraisal were also co-financed. To this respect it is worth considering that the costs for

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Andalucía

España

CCI 2011ES161PR006, July 2012 12

the design presented in Table H.1. are considered as not eligible, which may let assume thesewere also financed under the priority Axis VI – measure 6.1. of the POIA 2000-2006. Wesuggest confirming this information, checking as appropriate the scope and results of thesestudies with the ones included in the application dossier.

The publicity measures, described at page 29 of the application form are in line with therequirements of the EU regulation. The cost for these measures is however not specified in theapplication dossier, although we do not expect the mentioned measures will result in any highcost, compared to the total investment costs.

B.2. Recommendations and suggestions

The project description is only partially satisfactory and relevant information should be updatedand confirmed. Thanks to additional information available on the Website of the Junta deAndalucía Region for the Section Enlace de Cerralba-Enlace de Zalea [Memoria ProyectoAutovía del Guadalhorce (A-357).Tramo: Casapalma-Zalea – 2009 and Estudio de viabilidad dela Concesión de Obra Pública – Autovía del Guadalhorce (A-357).Tramo: Enlace Cerralba-Enlace Zalea – 20111], it has been also possible to be more precise in our requests forclarification. Although thanks to this additional analysis it is possible to conclude that the projectis technically sound and the overall cost reliable, most of the information relating to the strategicand functional objectives of the project and representing an input to the CBA analysis are notdescribed and provided in an appropriate way, several of this is not updated and some other isomitted; these particularly refer to demand analysis and traffic forecasts, project implementationscheme and time-schedule.

More in detail, the analysis of the most relevant socio-economic and traffic trends relating to theimplementation of the project do not contrast but also do not significantly support the case toinvest in the major project under appraisal.

From the analysis of the information included under point I.1.2 of the application form – page 28– it is not clear whether the feasibility and design studies for this project were co-financed underthe priority Axis VI – measure 6.1. of the POIA 2000-2006. We suggest confirming thisinformation, checking as appropriate the scope and results of these studies with the onesincluded in the application dossier and additional feasibility and design studies referred to in thisreport.

1http://www.juntadeandalucia.es/obraspublicasyvivienda/estaticas/sites/consejeria/areas/carreteras/documentos/Viabilidad/A-

357/Memoria.pdf

http://www.juntadeandalucia.es/obraspublicasyvivienda/estaticas/sites/consejeria/areas/carreteras/documentos/Viabilidad/A-

357/Viabilidad_A357_CERRALBA_ZALEA.pdf

CCI 2011ES161PR006, July 2012 13

3 TECHNICAL FEASIBILITY, PROJECT COSTS AND DEMAND ANALYSIS

3.1 Technical Feasibility

3.1.1 Feasibility Study

As reported in Table D.1. Calendario, of the application form, feasibility studies were undertakenbetween 2003 and 2005.

The analysis of the demand and traffic on the A-357 is commented in Section 3.3 below.

Figure 8 Project layout alternatives

Concerning the selection of the alternatives, the application form summarizes the results of thefeasibility studies referring to the main operational phase, Section Enlace de Casapalma-Enlacede Zalea. Among the 4 identified alternatives, the denominated alternative 1 was selectedaccording to a multicriteria analysis. The methodology and rationale adopted for the selection ofthis alternative are sensible and acceptable. The picture above from the Memoria ProyectoAutovía del Guadalhorce (A-357).Tramo: Casapalma-Zalea , show the different assessed layoutalternatives.

3.1.2 Technical Concept

The proposed technical solution is correct (or even over-dimensioned) for the existing and futuretraffic in this section of the A-357, the future traffic growth not expected to reach the levels asidentified in the application dossier, which are deemed too optimistic (it should also be notedthat the upgrading of this road is planned to be in parallel to the existing one, which will continueserving part of the traffic on the corridor). On the other hand it is functionally appropriate tocomplete the upgrading of the section already in operation up to the intersections between theA-357 and the A-343, A-354 and A-7077 at Zalea. An additional two line per direction roadsection will of course improve accessibility in the area, as well as reduce congestion during pick

CCI 2011ES161PR006, July 2012 14

hours, and reduce road transport related emissions, as well as improve road safety and mitigatethe effects of traffic accidents. In this terms the proposed technical solution for the SectionEnlace de Casalba-Enlace de Zalea, parallel to the existing road is sensible, although theresults of the CBA presented in the application dossier are not positive (See also Section 4.2below).

Based on the description of the project provided in the application dossier – also complementedwith the analysis of additional available documentation such as the Memoria Proyecto Autovíadel Guadalhorce (A-357).Tramo: Casapalma-Zalea and Estudio de viabilidad de la Concesiónde Obra Pública – Autovía del Guadalhorce (A-357).Tramo: Enlace Cerralba-Enlace Zalea –2011 – it can be concluded that the project is technically sound. Assuming that the design asdetailed in the Memoria Proyecto Autovía del Guadalhorce (A-357).Tramo: Casapalma-Zalea –2009 is still updated and that it will not change significantly at future stages of itsimplementation, this overall positive conclusion, is valid for all aspects of the project eitherrelated to the structure, materials, construction techniques as well as signalling andenvironmental impact related mitigation, corrective and compensation measures.

B.3.1.2. Recommendations and suggestions

No additional more detailed information is publicly available for the Section Enlace deCasapalma-Enlace de Cerralba, except the one included in the application dossier, the mostdetailed one specifically relating to the Viaduct on the ES6170033 Natura 2000 Area on the RioGuadalhorce. We expect this project is also in line with the best practice of project design inSpain and in the Andalucía Region, although given that since 2009 it is still to be constructed,we would suggest requesting clarifications on this element, in order to exclude any technicalproblem caused the delays in its implementation.

3.1.3 Environmental assessment

Environmental Impact Assessment. An Environmental Impact Assessment process has beenundertaken and its related procedures completed for the whole Section Enlace de Casapalma-Enlace de Zalea of the A-357. An environmental declaration DIA has been issued accordinglyon the 3rd of April 2007 by the Consejería de Medio Ambiente, Delegación Provincial delMálaga. The DIA was published on the Boletín Oficial de la Provincia de Málaga on the 28th ofSeptember 2007.

The environmental decision (DIA annexed to the application form) includes provisions andobligations regarding environmental impact monitoring and effectiveness of mitigation, correctiveand compensation measures during construction and post-execution phases. At least based onthe analysis of the Memoria Proyecto Autovía del Guadalhorce (A-357).Tramo: Casapalma-Zalea – 2009, these measures including the Programa de Vigilancia Ambiental and the Proyectode Restauración Paisajística are overall included in the project design for the Section Enlace deCerralba-Enlace de Zalea.

The costs for the identified preventive and mitigation measures have been estimated to be equalto the 15% of the investment. A description of these measures is provided in the applicationform which is satisfactory, although, given the overall amount of resources absorbed by thesemeasures, the costs details for them should be requested.

The environmental law which applies to the project (Ley 7/2007, de 9 de Julio, de GestiónIntegrada de la Calidad Ambiental) establishes that the DIA has a validity of five years. Thismeans that the project is at risk of re-starting its EIA process and related procedures.

Strategic Environmental Assessment . The application form states that the project is notincluded in a plan subject to SEA Directive. However as part of the environmental impact

CCI 2011ES161PR006, July 2012 15

assessment related process, the preparation, publication and consultation of the EstudioInformativo for the operational phase and works under appraisal were done in line with theprovisions of the SEA Directive.

Natura 2000. A certificate dated 10th December 2009 from the regional environmental authority– Secretaria General de Planificacón, Cambio Climático y Calidad Ambiental Consejeria deMedio Ambiente – Junta de Andalucía) has been enclosed to the application form (Annex I)stating that the project is unlikely to have impacts on any classified Natura 2000 Area.

More in detail the application dossier clarifies on how the impacts on the LIC ES6170033 Natura2000 Site will be avoided thanks to the construction of a 250.9 meters long viaduct on the RioGuadalhorce, also providing the maps for this infrastructure passing over the mentioned Natura2000 Site. The application also states that the construction of this infrastructure will beundertaken without affecting the animal and vegetation species living in the site.

The mitigation and corrective measures as already identified under the EIA related process andparticularly the ones relating to the monitoring of the impacts [tests and analysis are alsopredicted to be put in place associated to the Programa de Vigilancia Ambiental and relatedPlan de Seguimento e Vigilancia Ambiental] should ensure all impacts are correctly and timelyidentified and monitored; this should also allow undertaking appropriate action both during theconstruction and post-execution stages of the implementation of this project.

B.3.1.3. Recommendations and suggestions

The environmental law which applies to the project (Ley 7/2007, de 9 de Julio, de GestiónIntegrada de la Calidad Ambiental) establishes that the DIA has a validity of five years. Thismeans that the project may be at risk of re-starting its EIA process and related procedures. Thispossibility implies a risk of delay in the implementation of the major project.

3.1.4 Project implementation scheme and time schedule

The first operational work Section Enlace de Casapalma-Enlace de Cerralba , was alreadytendered by Gestión de Infraestructuras de Andalucía, S.A. (GIASA) in 2009 and a contractorselected – UTE Dragados, S.A./Construcciones Otero2. According to Table D.1. of theapplication form, the construction for this section was assumed to start beginning of 2012,although it seems this has not started yet. The tender process for the construction of the SectionEnlace de Cerralba-Enlace de Zalea is expected to start in December 2012.

According to the project dossier and other public available information – despite someinconsistencies between the indicated time-schedule – an overall period between 30 (as offeredby the contractor for the Section Enlace de Casapalma-Enlace de Cerrablba) and 38 months ismentioned for the construction of each of the two sections. On one hand we consider this aconservative estimation and assess it feasible to complete the project by end of theprogramming period. On the other hand the reason for the delay in the start of the constructionof the Section Enlace de Casapalma-Enlace de Cerralba are not clear; land acquisition is still tostart for both sections; the EIA process is at risk to be re-started. In addition to this no time isactually indicated for the preparation of the tender documentation for the Section Enlace deCerralba-Enlace de Zalea.

This last element may be also related to the fact that the implementation scheme is somehowstill to be defined as relevant information on the implementation of this section is actually omittedfrom the application dossier. It is indeed worth noting that although the application form wasfinalized in July 2011, it omits considering the possibility at least for the Section Enlace de

2http://legislacion.derecho.com/anuncios-particulares-30-marzo-2009-1734032; http://www.ymalaga.com/pdf.php?id_article=28008

CCI 2011ES161PR006, July 2012 16

Cerralba-Enlace de Zalea, to be implemented though a PPP scheme based on availability, asclearly assumed and analysed in the referred Estudio de viabilidad de la Concesión de ObraPública – Autovía del Guadalhorce (A-357).Tramo: Enlace Cerralba-Enlace Zalea – published inMarch 2011.

B.3.1.4. Recommendations and suggestions

An updated description of the time-schedule of project implementation should be requestedclarifying on the risk for the need to re-start the EIA process due to its expiry after 5 years sinceits completion. Additional information should be provided concerning the project implementationscheme, clarifying on the possibility to adopt a PPP scheme based on availability as clearlyassumed and analysed in the referred Estudio de Viabilidad de la Concesión de Obra Pública –Autovía del Guadalhorce (A-357).Tramo: Enlace Cerralba-Enlace Zalea – published in March2011 and not mentioned in the application dossier. The beneficiary and applicant should confirmfor how many sections this scheme will be adopted – if it will effectively be adopted – and theapplication dossier should be revised as appropriate.

3.2 Project costs

The application dossier only provides the costs for the entire Section Enlace de Casapalma-Enlace de Zalea. From other public available information it has been possible to identify the costfor the two sections. In particular for the Section Enlace de Cerralba-Enlace de Zalea these arequite detailed as illustrated in the two following tables.

Table 6 Memoria Proyecto Autovía del Guadalhorce (A-357).Tramo: Casapalma-Zalea – 2009

CCI 2011ES161PR006, July 2012 17

Table 7 Estudio de Viabilidad de la Concesión de Obra Pública – Autovía del Guadalhorce (A-357).Tramo: Enlace Cerralba-Enlace Zalea - 2011

For the Section Enlace de Cerralba-Enlace de Zalea, the same detail of information is notavailable and we only know the presupuesto base de licitación was € 37,524,285.09 and thatthe contractor who won the bid – Ute Dragados, S.A./Construcciones Otero – offered €27,828,009.82 euros, both prices including VAT.

Although the application dossier would benefit from the inclusion of the project costs in the formas detailed in Table 6 above, we can conclude that the costs under Table H.1 of the applicationform are in line with these ones.

Considering the presupuesto de ejecución material as indicated in the tables above andestimating its value for the Section Enlace de Casapalma-Enlace de Zalea , it may be concludedthat the total cost per kilometre for the whole section would be quite high if compared to the“efficiency ratios” ranges published in December 2010 by Ministerio de Fomento – pages106251 to 1062533 as well as to our experience in the region which shows a highway costbetween €4 and 6 million; this can be however explained by the incidence on such a shortsection of the viaducts and underpasses related costs.

The costs relating to planning, design, supervision and land acquisition as specified at Table H1of the application form are deemed to be also appropriate, although slightly high.

As already said under Section 3.1.4 above, based on the information included in the projectdossier, a number of mitigation, compensation and corrective measures are to be implemented.In the application form this is expected to result into expenditures equal to the 15% of theinvestment costs, which is a considerable amount.

B.3.2. Recommendations and suggestions

The total project cost is reasonable; the slightly high unitary cost per kilometre reflecting thenumber of viaducts and underpasses to be constructed in a relatively short stretch of road – 8km.

3Orden FOM/3317/2010, de 17 de diciembre, Instrucción sobre las medidas específicas para la mejora de la eficiencia en la

ejecución de las obras públicas de infraestructuras ferroviarias, carreteras y aeropuertos del Ministerio de Fomento;

http://www.boe.es/boe/dias/2010/12/23/pdfs/BOE-A-2010-19708.pdf

CCI 2011ES161PR006, July 2012 18

The costs for each of the two sections included in the operational phase under appraisal shouldbe provided in the same detail as presented under Table 6 above.

Since the environmental mitigation and preventive measures have a relevant weight (15% oftotal cost), the inclusion of a detailed justification of the budget in addition to the qualitativedescription of these measures as provided in the project dossier is recommended. This isparticularly relevant as according to Table 6 above the corrective measures (at least the ones forthe Section Enlace de Cerralba-Enlace de Zalea) are limited in their value (albeit this amountdoes not include the mitigation and the preventive/compensation ones).

3.3 Demand analysis

The results of the demand analysis are presented under item C.1.1 of the application form. Theoverall presentation of the analysis is poor, and it doesn’t include a clear description of themethodology and assumptions adopted to develop the forecasts and to estimate the futuretraffic growth rates.

The information included in the application form is consistent with the traffic projections includedin the Memoria of the Proyecto autovía del Guadalhorce (A-357). Tramo: Casapalma-Zalea ,which is available on the website of the Junta de Andalucía. This document provides anadditional description of the traffic analysis, and we have used it in our assessment to completethe information available in the dossier.

In order to evaluate the soundness of the traffic forecasts included in the application andadopted as input to the CBA, we have gathered the traffic count data collected by the monitoringsystem of the Junta de Andalucía. The same source also provides the historical veh*km on theentire A357, which we could use to derive the trend of the Annual Average Daily Traffic. Thefollowing graph shows that the traffic volumes have been growing significantly in the period2000-2006, and that subsequently volumes were almost constant until 2010.

Figure 9 A357 Campillos – Málaga (64 km). Average Annual Daily Traffic (AADT)

Source: Junta da Andalucía

We have then compared the forecasted volumes on the Casapalma – Zalea section to thevolumes recorded by the traffic monitoring system at the count station PR-166, which is close tothe road segment under appraisal (section Cartama – Zalea, near Casapalma, just south of theintersection with the A355).

CCI 2011ES161PR006, July 2012 19

Table 8 A-357 Cartama – Zalea. Observed traffic volumes (2005-2010)

YearAADT

(veh / day)% Composition

Light vehicles Heavy vehicles

2005 16.754 97,30% 2,70%

2008 18.686 97,10% 2,90%

2009 19.187 97,30% 2,70%

2010 18.350 97,00% 3,00%Source: Junta da Andalucía

We therefore see that the average traffic volumes forecasted on section under appraisal (16,132veh/day in 2007) are reasonably similar to the volumes observed on this specific section. Thetwo data cannot be compared exactly - as the forecast refers to the average over the entireproject length and the observed to one specific section, which is also located just south of theproject - but they are sufficiently similar to consider that the demand assumptions concerningthe base year (2007) volumes are acceptable.

Finally, we have compared the historical growth rates on the A-357 to the projected trafficgrowth, as shown in the following graph (to compare traffic trend only, the traffic volumes havebeen scaled to 1 in 2007).

Figure 10 A357 Casapalma –Zalea. Historical and projected traffic volumes (2007 =1)

We notice that the projections assume a significant traffic growth for the period 2007-2012 (from16.132 veh/day to 21.284 veh/day) and then until 2015, which is in line with the historical trend(or even slightly higher), but doesn’t take into account that the traffic has stopped growing sincethen. The current economic outlook also would suggest weak growth expectations for the next 2or three years, until the opening of the new road.

CCI 2011ES161PR006, July 2012 20

We also consider that given the short length of the project, there will be zero or negligible trafficinduction nor additional demand would be captured from other existing road, given that no otheralternatives route are available – therefore we do not see any reason why the projected trafficvolumes at the road opening should be so significantly higher than the observed ones on theexisting A-357.

We therefore indicated in the previous graph that we consider the traffic projectionsoverestimated at the opening year by around 34%, corresponding to the lack of growth of theperiod 2007-2012. Also, more conservative growth assumptions should be adopted for theoperational phase, limited to the range 1%-2% per year.

B.3.3. Recommendations and suggestions

The information concerning the demand analysis is incomplete and unsatisfactory, both interms of results and methodology.

Based our assessment, also supported by the information publicly available, while weconsider acceptable the assumption concerning the 2007 traffic volumes, we are of theopinion that the traffic growth rates are significantly overestimated, and do not take intoaccount the effect of the current economic recession since 2007. We therefore suggestrevising the growth rates both for period 2007-2012 and for the following period.

Finally, the assumptions of the demand study concerning the opening of the new road (2012)should be updated according to the updated time plan, which foresee the completion of theconstruction phase in 2014 for the Subtramo I and in 2015 for the Subtramo II.

CCI 2011ES161PR006, July 2012 21

4 COST BENEFIT ANALYSIS

According to the CBA report (Anexo 2. Estudio Coste / Beneficio) included in the project dossier,the CBA analysis has been developed according to the following guidelines:

Ministerio de Obras Pública, Transportes y Medio Ambiente, “Recomendaciones para laevaluación económica, Coste-Beneficio, de estudios y proyectos de carreteras” , 1990;

European Commission Directorate General Policy “Guide to Cost Benefit Analysis ofInvestment Project”, July 2008.

The overall quality of the financial and socioeconomic analysis is quite poor. Most of the inputsand assumptions are not provided or explained, not enabling a detailed assessment of thereliability of the approach to the CBA; some of the results requested in the application form arenot included or inaccurate (such as the financial and economic indicators); also, we haveidentified some inconsistencies between the application form, the Anexo 2 and the appendix tothis last document (Apéndice 1. Resultados of the Anexo II. Estudio Coste / Beneficio).

The incremental approach is adopted for the analysis, but only in the final tables of the CBAreport (Apéndice 1. Resultados of the Anexo II. Estudio Coste / Beneficio). In the calculation ofthe financial and socioeconomic performance indicators included in the application form, weunderstand that the incremental approach was not correctly applied.

The unit of analysis for the CBA is the A-357 (Casapalma - Zalea section). The do nothingscenario is not described in the documentation, even if some results for it are presented inAnnex II. We however understand that the do nothing scenario simply assumes that the currentsituation is maintained over time unchanged, ensuring the correct level of ordinary andextraordinary maintenance of the existing road.

4.1 Financial analysisThe financial analysis is based on the following general assumptions:

The accountancy unit is the Public Administration, which is the Beneficiary of the EU fundsand the owner of the infrastructure;

The financial discount rate is assumed 5% net of inflation, which is acceptable;

The time horizon for the analysis is 28 years including the 3 years construction period;

No residual value of the investment is included in the analysis, which we don’t considercorrect, given that a well-maintained road will still be functional at the end of the period;

Moreover, the following project cash flows have been included in the financial analysis:

Investments costs, as included in the application form;

Cash out-flows: operating costs, including only ordinary and extraordinary maintenance, asthere are no personnel, technology or admin costs related to tolling operations;

Cash in-flows: no cash in-flows are included, as the road is not tolled.

The Financial Analysis is developed net of VAT, which is also not included in the eligible costs.

4.1.1 Cash out-flows

Investment costs for the projects are € 68.8 million (net of VAT); the annual budget time plan isnot explicitly included in the documentation, but according to the table at page 6 of the CBAreport the cost are distributed equally over the three construction years from 2012 to 2015. Thisassumption seems over-simplified, and should be further clarified to allow estimating more indetail the time plan of the EU contribution. According to the documentation (Item E.1.2 of theapplication form), the present value is € 62.9 million, while considering a 5% discount rate, a 3year construction period and an uniform allocation of the costs to each construction year, wewould get a present value equal to € 62.5 million.

CCI 2011ES161PR006, July 2012 22

The ordinary and extraordinary maintenance costs are included in the cash out-flows. No detailsare provided concerning the split between work, labour, equipment and services or by technicalactivities. After project completion (do something scenario), ordinary maintenance in the projectscenario is estimated to be between € 50 thousands and 80 thousands, which seemsreasonable taking into account the road length (8 km). The extraordinary maintenance costs are€3.6 million every 10 years, which also seems a reasonable value, taking into account plannedroad repaving.

We understand (Description of the Alternative 1, page 9 of the application form) that the newroad will not replace the existing one, which will still be used as access road. Thesocioeconomic analysis should therefore include the maintenance costs for the existing A-357also in the do something scenario, taking into account that once most of the traffic will bediverted to the new road, the maintenance needs for the existing A-357 will be reduced.

4.1.2 Cash in-flows

The project is not generating any annual revenue, given that the road is not tolled. No residualvalue of the investment is included in the analysis, which we don’t consider correct, given that awell-maintained road will still be functional at the end of the period.

4.1.3 Funding Gap and Financial Indicators

The project is not revenue generating, therefore the funding gap method is not applicable. Thevalues of the financial performance indicators - FNPV(C), FRR(C), FNPV(K), FRR(K) - don’tseem correct. Based on the values included in the analysis (Tables E.1.2 and E.1.3), weunderstand that the incremental approach for the operating costs was not adopted in theanalysis, but rather that the performance indicators were calculated based on the total costs forthe project scenario, and not on the incremental costs only.

4.1.4 Public Contribution Viability

As described in the application form, the project is financed by national funds and the EUfinancial assistance is considered essential for the realization of the project.

Concerning the determination of the EU contribution, Table H.1 seems correct – eligible costsdo not include VAT. However, no clarification is provided concerning the split between eligibleand non-eligible costs.

Also Table H.2.1 of the application form is correct and in line with the results of the financialanalysis. The co-financing rate is 65% of the eligible costs. Table H.3 is correct with respect ofthe total value of the EU contribution, but the calendar is not correct, as the construction will becompleted in 2015 and not in 2013. Also the table do not correspond with the table at page 6 ofthe CBA report, showing a uniform distribution over the three construction years (2012-2015).

B.4.1. Recommendations and suggestions

The overall quality of the financial analysis is very poor. Many inputs and assumptions are notprovided, not enabling a detailed assessment of the reliability of the approach to the CBA; also,some of the results, such as the financial indicators, seem inaccurate. We would thereforerecommend requesting a complete revision of the financial analysis, including the following mainimprovements:

Overall, the detailed input and results of the analysis should be provided, allowing a fullunderstanding of the assumption and methodology adopted in the analysis;

The do nothing scenario should be clearly described in the documentation;

The assumption underlying the O&M cost estimate should be provided, also clarifying the

CCI 2011ES161PR006, July 2012 23

year by year variation;

We understand (Description of the Alternative 1, page 9 of the application form) that the newroad will not replace the existing one, which will still be used as access road. Thesocioeconomic analysis should therefore include the maintenance costs for the existing A-357 also in the do something scenario, taking into account that once most of the traffic willbe diverted to the new road, the maintenance needs for the existing A-357 will be reduced;

The financial performance indicators should revised, as we understand that the incrementalapproach was not implemented in the identification of the operating costs to be included inthe financial analysis: based on the EU guidelines, only incremental costs should beincluded, and not the total operating costs for the do something scenario, as it is in thesubmitted application;

A sensible residual value of the investment should be included in the analysis, given that awell-maintained road will still be functional at the end of the period;

Table H.3 is correct with respect of the total value of the EU contribution, but the calendar isnot correct, as the construction will be completed in 2015 and not in 2013. Also the table donot correspond with the table at page 6 of the CBA report, showing a uniform distributionover the three construction years (2012-2015).

While these improvements are recommended to ensure the consistency and the quality of thedocumentation, these remarks do not affect the determination of the total amount of the EUgrant (€ 40.5 million), given that the project is not revenue generating.

4.2 Socio-economic analysis

The documentation provided for the socioeconomic analysis is very poor and incomplete. Themain results of the analysis (expected economic benefits, performance indicators) are notprovided and we found inconsistencies between the application form and the Anexo II. EstudioCoste / Beneficio.

Commenting on these inconsistencies, we will refer both to the summary of the socioeconomicanalysis included in the application form under item E.2 and to the documentation provided inthe Anexo II; also, within the Anexo II, we would mainly refer to the final tables included in theCBA Report (Apéndice 1. Resultados, beginning at page 77 of the file Anexo XXI A_357Casapalma Zalea.pdf), which provide the most complete and detailed information. In order toallow a more complete assessment, we would recommend requesting the resubmission of theapplication providing consistent and clearer information.

The socioeconomic analysis is based on the following main assumptions:

The social discount rate is 5.5% according to the application form and the Anexo II; however,the tables with the detailed results (Apéndice 1. Resultados) are based on a 5% discountrate; this inconsistency should be clarified; we also note that both the adopted values arerelatively high; based on the DG Regio Working Document n.4, we would also consideracceptable a lower discount rate (3.5%);

The base year considered in the analysis is not clarified; however, we assume it is 2011 asmentioned for the financial analysis;

The time horizon for the socioeconomic analysis (26 years including the construction period)is shorter than for the financial analysis; considering the three years of the constructionperiod, we would suggest to adopt a longer period, covering 25 years of operations for allsections;

CCI 2011ES161PR006, July 2012 24

As in the financial analysis, no residual value of the investment is included in the analysis,which we don’t consider correct, given that a well-maintained road will still be functional atthe end of the period;

In association with the project costs based on the financial analysis, the CBA also includethe users’ transport benefits and costs, based on the methodology depicted in the“Recomendaciones para la evaluación económica, Coste-Beneficio, de estudios y proyectosde carreteras”, published by the Ministerio de Obras Pública, Transportes y Medio Ambiente .

While we will further comment in the following sections on the key element of the CBA, it isworth highlighting that the inconsistencies in the documentation do not allow understandingwhether the project is expected to reach a positive socioeconomic performance (as thesocioeconomic indicators included in the application forms seem suggesting), or rather its costwould exceed the expected benefits (as the values provided in the Apéndice 1. Resultados ofthe Anexo II. Estudio Coste / Beneficio would show).

The table below provides a comparison of the two results, showing that the detailed resultsforesee the project having a negative impact on users’ vehicle operating costs and on the safety.We also note that the application form includes in the summary of the project costs the total O&M costs, and not only the incremental ones, as required by the EU guidelines.

Table 9 Key socioeconomic results and performance indicators according to the Application Form andthe CBA report (Anexo II. Estudio Coste / Beneficio - Apéndice 1. Resultados)

Item

Discounted Value (€ 2011 thousands)

Application Form(Item E.2)

Anexo II. Estudio Coste /Beneficio (Apéndice 1.

Resultados)

Benefits

Va lue o f t rave l ti me sav ings 102,130 102,130

Vehicle operating costs n.a. -30,567

Emissions 9 9

Safety n.a. -8,717

Costs

Investment -62,937 -62,937(*)

O&M -4,992 -3,768

ENPV (C) 34,210 (**) -3,850

ERR (C) n.a. 4,5%Source: Application form (Item E.2) and Anexo II. Estudio Coste / Beneficio. (Apéndice 1. Resultados)Notes: (*) Investment costs are based on the financial analysis, as no conversion factor is introduced in the CBA

(**) The ENPV is based on the difference of the single values included in the table; the application form doesnot provide a correct estimate of the ENPV. The value in E.2.3 is clearly wrong as doesn’t include thebenefits.

Based on these considerations, we would recommend to the commission requesting theBeneficiary to clarify which are his conclusion and comments on these results, and the reasonwhy some of the calculated project social outcomes (vehicle operating costs and safety) werenot presented in the table included in the application form.

4.2.1 Conversion of market to accounting prices

According to the 2008 EU CBA guidelines, socio economic prices of inputs and outputs to beconsidered for CBA should be net of VAT and of other indirect taxes. Also, financial cash flowsshould be converted from market to accounting prices, in order to reflect the social opportunitycost of inputs and outputs. Generally, prices in highly competitive markets do not need to becorrected – as it is the case of easily traded goods.

CCI 2011ES161PR006, July 2012 25

Based on the documentation provided, we understand that no conversion factors were appliedin the socioeconomic analysis: in fact, the economic value of the investment is the same as thefinancial value of it. While we understand that no fiscal correction may be appropriate, given thatthe prices in the financial analysis are already net of VAT, we would expect including a shadowwage taking into account the opportunity cost of labour in Andalucía, which would reduce theeconomic cost of the investment.

4.2.2 User benefits estimation

The Value of Time used to convert travel times to monetary values are illustrated in the tablebelow.

Table 10 Values of Time in the CBA and in the EU guidelines

SegmentAnexo II. Estudio Coste

/ Beneficio(€2011/h)

HEATCOLong distance trips

(€2010/h)

Private vehicles 9 10.68(*)

Trucks 15 n.a.

Note: (*) assuming 20% commuters, 9% business and 71% others (own elaboration based on National MobilitySurvey, Movilia 2006/2007)

The time saving value used in the application for passengers is lower than the values suggestedby HEATCO (long distance traffic). However, taking into account the lower GDP pro-capita ofthe Andalucía region, this difference is reasonable.

The application form doesn’t provide any clarification concerning the value of time applied to thefreight transport (15 €/h); we consider this value acceptable, provided that it reflects the cost fordriving; this should not be therefore included in the vehicle operating costs for trucks in order toavoid double-counting.

No information is provided concerning how the travel time savings were estimated in thedifferent scenario; the methodology and assumptions should be clarified allowing assessingwhether the values provided are sensible.

No information is provided concerning the methodology and the unitary operating cost for heavyand light vehicles. We see that the results included in the tables annexed to the CBA reportshow that the project is expected to increase the Vehicle Operating Costs, which is possibleconsidering that the incremental demand using the corridor might travel longer distance;however, the documentation doesn’t provide any justification or comment on this element; also,given the short length of the project, we would assume this impact to be actually relatively small.

4.2.3 External benefits estimation

The external users’ benefits include the reduction of environment pollution (air emission andnoise) and the improvement of road safety. The information doesn’t provide any clarificationconcerning the assumptions and methodology adopted to develop the assessment. However,we notice that according to the tables annexed to the CBA report, the project is expectedproducing a positive environmental benefit, but a negative impact on the road safety. Asgenerally these two parameters depend as a first approximation on the total vehicle travelleddistance, we would expect being both either positive or negative; actually, we would expect thesame sign of the vehicle operating costs (which is negative), so the reason why the project isgenerating a positive environmental benefit should be clarified as it doesn’t seem consistent withthe results concerning the vehicle operating costs and the road safety.

CCI 2011ES161PR006, July 2012 26

4.2.4 Effects on employment and other non-monetized effects

The CBA includes the evaluation of the impact of the project on the employment, in terms ofstaff directly employed in the construction and operational phase. No quantification of indirectimpact on employment is included in the application dossier.

4.2.5 Economic performance indicators

As discussed earlier (see § 4.1), the documentation present inconsistencies and the economicindicators included in the application form under item E.2.3 do not correspond the detailedtables included in the CBA report (Apéndice 1. Resultados).

Our analysis also shows (see § 3.3) that the demand projections are overestimated and do notreflect the current weak economic environment and prospect. This consideration should lead toa revision of the assumptions, which in turn would reduce the scale of the expected socialbenefit.

Based on these considerations, we would recommend to the commission requesting theBeneficiary to revise the submitted application providing a consistent set of results andcommenting on them.

4.2.6 Risk assessment and sensitivity analysis

A sensitivity analysis is included in the application form, in line with the Community guidelines(Guide to Cost Benefit Analysis of Investment Projects, July 2008 European Union ). Thesensitivity analysis allows the determination of the ‘critical’ variables or parameters of thesocioeconomic assessment. The critical variables are those variables or parameters for which arelative variation of 1% around the central estimate produce a corresponding variation of notless than 1% (one percentage point) in the ERR and not less than 5% in the ENPV.

The sensitivity analysis only covers the investment and O&M costs. No variable was identifiedas critical and therefore no risk analysis was undertaken. Given unclear and contradictoryresults of the socioeconomic analysis, we recommend revising the risk analysis based on animproved socioeconomic analysis; also, we would recommend testing other variables, at leastincluding the traffic demand, the value of time and the travel time savings.

B.4.2. Recommendations and suggestions

The overall quality of the socioeconomic analysis is very poor. Many inputs and assumptions arenot provided, not enabling a detailed assessment of the reliability of the approach to the CBA;also, some of the results, such as the economic indicators, seem inaccurate, while we alsonotice a number of inconsistencies in the documentation provided, especially between theapplication form and the Anexo II. Estudio Coste / Beneficio and its appendix (Apéndice 1.Resultados).

We would therefore recommend requesting a complete revision of the socioeconomic analysis,including the following main improvements (some of which confirm the recommendationsconcerning the financial analysis):

Overall, the detailed input and results of the analysis should be provided, allowing a fullunderstanding of the assumption and methodology adopted in the analysis; also, thedocumentation should provide a consistent set of assumptions and results;

The do nothing scenario should be clearly described in the documentation;

The assumption underlying the O&M cost estimate should be provided, also clarifying theyear by year variation;

We understand (Description of the Alternative 1, page 9 of the application form) that the newroad will not replace the existing one, which will still be used as access road. The

CCI 2011ES161PR006, July 2012 27

socioeconomic analysis should therefore include the maintenance costs for the existing A-357 also in the do something scenario, taking into account that once most of the traffic willbe diverted to the new road, the maintenance needs for the existing A-357 will be reduced;

A sensible residual value of the investment should be included in the analysis, given that awell-maintained road will still be functional at the end of the period;

Appropriate conversion factors should be introduced in the analysis to reflect the socialopportunity cost of labour;

Our analysis shows (see § 3.3) that the demand projections are overestimated and do notreflect the current weak economic environment and prospect. This consideration should leadto a revision of the assumptions, which in turn would reduce the scale of the expected socialbenefit.

The quantification of all user benefits should be included in the main CBA report andcommented; the value of time for the heavy vehicle should be explained; the methodologyand unitary values for the vehicle operating costs should be provided and explained;

The methodology and results of the external project impacts should be included in thedocumentation; actually, we would expect the same sign for the incremental vehicleoperating costs (which is negative), the safety impact (which is also negative) and theenvironmental impact (which is instead positive); the reason why the project is generating apositive environmental benefit should be clarified as it doesn’t seem consistent with theresults concerning the vehicle operating costs and the road safety;

The economic performance indicators (ENPV, ERR; B/C) should be correctly calculated andprovided.

Finally, it is worth highlighting that the inconsistencies in the documentation do not allowunderstanding whether the project is expected to reach a positive socioeconomic performance(as the socioeconomic indicators included in the application forms seem suggesting), or ratherits cost would exceed the expected benefits (as the values provided in the Apéndice 1.Resultados of the Anexo II. Estudio Coste / Beneficio) would show.

Based on these considerations, we would recommend to the commission requesting theBeneficiary to clarify which are his conclusion and comments on these results, and the reasonwhy some of the calculated project social outcomes (vehicle operating costs and safety) werenot presented in the table included in the application form.

CCI 2011ES161PR006, July 2012 28

5 KEY FINDINGS AND CONCLUDING REMARKS

5.1 Key questions for project appraisal

(a) Is the application dossier complete?

The project dossier is complete and complies with the EC Regulations. The information providedis consistent with Art. 40 Reg. 1083/2006, Annex XXI and Commission Regulation 1828/2006[See § 1.1.2].

(b) Does the project meet the expected strategic and functional objectives?

The project description is only partially satisfactory and several, relevant information should beupdated and confirmed. Thanks to additional information available on the Website of the Juntade Andalucía Region for the Section Enlace de Cerralba-Enlace de Zalea [Memoria ProyectoAutovía del Guadalhorce (A-357).Tramo: Casapalma-Zalea – 2009 and Estudio de Viabilidad dela Concesión de Obra Pública – Autovía del Guadalhorce (A-357).Tramo: Enlace Cerralba-Enlace Zalea – 20114], it has been also possible to be more precise in our requests forclarification. Although thanks to this additional analysis it is possible to conclude that the projectis technically sound and the overall cost reliable, most of the information relating to the strategicand functional objectives of the project and representing an input to the CBA analysis are notdescribed and provided in an appropriate way, several of this is not updated and some other isomitted; these particularly refer to demand analysis and traffic forecasts, project implementationscheme and time-schedule [See Recommendation and Suggestions box B.2].

More in detail, the analysis of the most relevant socio-economic and traffic trends relating to theimplementation of the project do not contrast but also do not significantly support the case toinvest in the major project under appraisal [See Recommendation and Suggestions box B.2, §2.3 and § 2.2].

(c) Is the project consistent with the EU policies?

The project is consistent with EU policies and in particular with the regional cohesion andeconomic development policies of the DG Regio.

From the analysis of the information included under point I.1.2 of the application form – page 28– it is not clear whether the feasibility and design studies for this project were co-financed underthe priority Axis VI – measure 6.1 of the POIA 2000-2006. We suggest confirming thisinformation, checking as appropriate the scope and results of these studies with the onesincluded in the application dossier and additional feasibility and design studies referred to in thisreport. [See Recommendation and Suggestions box B.2 and § 2.4].

4http://www.juntadeandalucia.es/obraspublicasyvivienda/estaticas/sites/consejeria/areas/carreteras/documentos/Viabilidad/A-

357/Memoria.pdf

http://www.juntadeandalucia.es/obraspublicasyvivienda/estaticas/sites/consejeria/areas/carreteras/documentos/Viabilidad/A-

357/Viabilidad_A357_CERRALBA_ZALEA.pdf

CCI 2011ES161PR006, July 2012 29

(d) Is the project technically sound?

The proposed technical solution is over-dimensioned for the existing traffic in this section of theA-357, the future traffic growth not expected to reach the levels as identified in the applicationdossier, which are deemed too optimistic (it should also be noted that the upgrading of this roadis planned to be in parallel to the existing one, which will continue serving part of the traffic onthe corridor). On the other hand it is functionally appropriate to complete the upgrading of thesection already in operation from Casapalma up to the intersection between the A-357 and theA-343, A-354 and A-7077 at Zalea. An additional two line per direction road section will ofcourse improve accessibility in the area, as well as reduce congestion during pick hours, andreduce road transport related emissions. The new road will also improve road safety andmitigate the effects of traffic accidents. In these terms the proposed technical solution for theSection Enlace de Casalba-Enlace de Zalea to be constructed in parallel to the existing road issensible, although the results of the CBA presented in the application dossier are negative andmay even not improve following the considerations and suggestions from this analysis [See §3.1.2, Recommendation and Suggestions Boxes B.2, B.3.3. and B.4.2].

An updated description of the time-schedule of project implementation should be requestedclarifying on the risk for the need to re-start the EIA process due to its expiry after 5 years sinceits completion. Additional information should be provided concerning the project implementationscheme, clarifying on the possibility to adopt a PPP scheme based on availability as clearlyassumed and analysed in the referred Estudio de Viabilidad de la Concesión de Obra Pública –Autovía del Guadalhorce (A-357).Tramo: Enlace Cerralba-Enlace Zalea – published in March2011 and not mentioned in the application dossier. The beneficiary and applicant should confirmfor how many sections this scheme will be adopted – if it will effectively be adopted – and theapplication dossier should be revised as appropriate [See Recommendation and SuggestionsBoxes B.3.1.5, B.3.1.4].

(e) Are the project costs reasonable?

The total project cost is reasonable; the slightly high unitary cost per kilometre reflecting thenumber of viaducts and underpasses to be constructed in a relatively short stretch of road – 8km. The costs for each of the two sections included in the operational phase under appraisalshould however be provided in a rather more detailed structure [See Recommendation andsuggestions box B.3.2].

Since the environmental mitigation and preventive measures have a relevant weight (15% oftotal cost), the inclusion of a detailed justification of the budget in addition to the qualitativedescription of these measures as provided in the project dossier is recommended. [SeeRecommendation and suggestions box B.3.2].

(f) Are the results of the demand analysis acceptable?

The documentation concerning the demand analysis is incomplete and unsatisfactory, both interms of results and methodology and doesn’t allow a proper assessment of the trafficprojections. While we recommend improving the quality of the application, allowing a morecomplete understanding of the assumptions, we are also of the opinion that the traffic growthrates are significantly overestimated, and do not take into account the effect of the currenteconomic recession since 2007. We therefore suggest revising the growth rates both for period2007-2012 and for the following period. Finally, the assumptions of the demand studyconcerning the opening of the new road (2012) should be updated according to the updatedtime plan, which foresee the completion of the construction phase in 2014 for the Subtramo Iand in 2015 for the Subtramo II. [See Recommendations and Suggestions box B.3.2].

CCI 2011ES161PR006, July 2012 30

(g) Are the results of the Financial Analysis acceptable?

The overall quality of the financial analysis is very poor. Many inputs and assumptions are notprovided, not enabling a detailed assessment of the reliability of the approach to the CBA; also,some of the results, such as the financial indicators, seem inaccurate. We would thereforerecommend requesting a complete revision of the financial analysis, including detailed outputs,assumptions concerning the do nothing scenario (especially concerning the future configurationof the existing A-357), revising the calculation of the FNPV based on the incremental value ofoperating costs and including a residual value as appropriate. While these improvements arerecommended to ensure the consistency and the quality of the documentation, these remarksdo not affect the total amount of the EU grant (€ 40.5 million), given that the project is notrevenue generating [See Recommendations and Suggestions box B.4.1].

(h) Is the value of EU contribution correctly estimated?

The amount of the EU contribution is correctly estimated, without funding gap analysis. VAT isexcluded from the eligible costs. However, the annual distribution of the EU funds in Table H.3of the application form is not consistent with the project time plan and should therefore berevised [See Recommendations and Suggestions box B.4.1].

(i) Are the foreseen socio-economic benefits likely to be attained?

The documentation provided for the socioeconomic analysis is very poor and incomplete. Werecommend that the quantification of all user impacts (including the vehicle operating costs andsafety) is provided in the main CBA report (and not only in the Apéndice 1. Resultados) andcommented.

We are of the opinion (see point (f) above) that the demand projections are overestimated anddo not reflect the current weak economic environment and prospect. This consideration shouldlead to a revision of the assumptions, which in turn would reduce the scale of the expectedsocial benefit.

The methodology and unitary values for the vehicle operating costs and the value of time fortrucks should be provided and explained. Also, the methodology and results concerning theenvironmental and safety externalities should be included in the documentation. [SeeRecommendations and Suggestions box B.4.2].

(j) Are the results of the Cost Benefit Analysis acceptable?

The inconsistencies in the documentation do not allow understanding whether the project isexpected to reach a positive socioeconomic performance (as the socioeconomic indicatorsincluded in the application forms seem suggesting), or rather its cost would exceed the expectedbenefits (as the values provided in the Apéndice 1. Resultados of the Anexo II. Estudio Coste /Beneficio) would show.

The table below provides a comparison of the two results, showing that the detailed resultsforesee the project having a negative impact on users’ vehicle operating costs and on the safety.We also note that the application form included in the summary of the project costs the total O&M costs, and not only the incremental costs, as required by the EU guidelines.

CCI 2011ES161PR006, July 2012 31

Table 11 Key socioeconomic results and performance indicators according to the Application Form andthe CBA report (Anexo II. Estudio Coste / Beneficio - Apéndice 1. Resultados)

Item

Discounted Value (€ 2011 thousands)

Application Form(Item E.2)

Anexo II. Estudio Coste /Beneficio (Apéndice 1.

Resultados)

Benefits

Va lue o f t rave l ti me sav ings 102,130 102,130

Vehicle operating costs n.a. -30,567

Emissions 9 9

Safety n.a. -8,717

Costs

Investment -62,937 -62,937(*)

O&M -4,992 -3,768

ENPV (C) 34,210 (**) -3,850

ERR (C) n.a. 4,5%Source: Application form (Item E.2) and Anexo II. Estudio Coste / Beneficio. (Apéndice 1. Resultados)Notes: (*) Investment costs are based on the financial analysis, as no conversion factor is introduced in the CBA

(**) The ENPV is based on the difference of the single values included in the table; the application form doesnot provide a correct estimate of the ENPV. The value in E.2.3 is clearly wrong as doesn’t include thebenefits.

Based on these considerations, we would recommend to the commission requesting theBeneficiary to clarify which are his conclusion and comments on these results, and the reasonwhy some of the calculated project social outcomes (vehicle operating costs and safety) werenot presented in the table included in the application form. [See Recommendations andSuggestions box B.4.2].

CCI 2011ES161PR006, July 2012 32

5.2 Concluding remarks

The quality of the application is only partially satisfactory and several, relevant informationshould be updated and confirmed. Under the strict infrastructural stand point the Section Enlacede Casapalma-Enlace de Zalea represents the last phase of a larger project aimed at upgradinga regional road corridor in proximity of the metropolitan area of Malaga, directly interconnectingthe sections of the Autovía del Guadalhorce A-457 already upgraded, to other 3 relevantregional and provincial roads, all intersecting at Zalea.

In these terms the project is a sensible one. On the other hand, the analysis of the most relevantsocio-economic and traffic trends relating to its implementation, albeit not contrasting to itsdevelopment, do not clearly support the case to build this additional section, which is also highlyexpensive due to the viaducts and underpasses.

Also, the results of the socioeconomic analysis5 show that the project discounted costs arealmost equal to the benefits (or even slightly lower at the 5% discount rate), and therefore thatthere is not a strong case for implementing the project under appraisal. This conclusion isfurthermore supported by the consideration that the demand assumptions appearoverestimated, and that therefore the socioeconomic performance will most probably be lowerthan suggested by the indicators included in the application.

Based on these considerations, we would recommend the commission not approving thisapplication for co-financing, unless the projects costs are reduced or additional clarifications areprovided supporting the case for this investment.

5Included in the Apéndice 1. Resultados of the Annexo II. Estudio Coste / Beneficio