M50 buyout 'good value' - C&AG

The State’s buy-out of the M50 toll bridge contract from National Toll Roads for €600 million represented "good value for money", according to the annual report of the Comptroller and Auditor General (C&AG), John Buckley.

In its examination of the purchase of the West-Link contract on behalf of the State by the National Roads Authority (NRA), the C&AG said the price paid "reflected very closely the then market value" of the rights to operate the tolling system on Dublin's orbital route.

The toll barriers on the M50 were a significant cause of traffic congestion for the approximately 100,000 motorists who used the route daily.

Under the deal, the NRA will make index-linked payments of €50 million per annum to NTR from August 2008 until March 2020. The NRA took control of the M50 toll bridge in August last year and has introduced barrier-free tolling.

NTR subsequently sold its rights to this income stream for €488 million to an unnamed financial institution.

The decision to buy-out NTR was part of a project to widen the route to three lanes to improve traffic flow and capacity.
The original agreement granted NTR exclusive rights to operate and toll the West-Link bridge.

However, because the original contract made no provision for a compulsory buy-out, the State had only two options to acquire the rights.

The first was to abolish tolls, thereby triggering a clause allowing the State to remove the barriers.

In return the State would have then been liable to pay NTR the value of the toll revenue for the preceding year for the 12 remaining years on the contract.

Based on toll revenues for the 12 months prior to July 2008 this would have been €47 million per annum, according to the C&AG.

One significant obstacle to this approach was that the tolling rights would have remained with NTR.

The option chosen by the State was to negotiate a fee of €600 million, based on annual payments of €50 million.

The C&AG noted this was higher than NTR would have been entitled to had tolls been abolished, but said the State acquired the tolling rights to the West-Link as part of this deal.

The C&AG said the State was not willing to forego revenue from tolling because it needed to pay for the upgrade and buying-out NTR.

The report says upgrade work on the M50 between 2006 to 2008 meant traffic volumes were lower than normal (estimated at between 4 and 11 per cent), resulting in lower toll revenues and consequently a lower purchase price because the deal took toll revenues for the preceding year into account.

The C&AG concludes the agreement represented good value-for-money based on the stated objectives of improving traffic flow and raising capacity.