Limerick Tunnel guarantee clause to cost taxpayer €4.7m this year

Mike Dwane


Mike Dwane

THE LIMERICK Tunnel will continue to rely on state subvention for the next 30 years, the state spending watchdog has predicted.

THE LIMERICK Tunnel will continue to rely on state subvention for the next 30 years, the state spending watchdog has predicted.

The Comptroller and Auditor General’s report finds that under a revenue guarantee clause, €5.2 million was shelled out by taxpayers in 2011 to the operators of the Limerick Tunnel and a second tolled PPP road - the M3 Kells to Clonee scheme. That figure is likely to rise to €6.7 million for the two roads in 2012.

Sean O’Neill, National Roads Authority, told the Limerick Chronicle that of the projected payout in 2012, around €4.7 million related to the Limerick Tunnel scheme. These figures were a “worst-case scenario” projected over the next 30 years.

“Unfortunately, that’s where we are right now because the traffic levels are so low. We are not thrilled about it but it is where it is,” Mr O’Neill said.

“On the plus side, the Mid-West still has a fantastic piece of infrastructure that benefits the economy.”

Around €180 million of the €600 million costs of the Limerick Tunnel scheme were met by the state, with the remainder met by the Direct Route consortium which will continue to collect toll revenue until 2041.

The NRA has previously explained that built in to the PPP contract was a revenue guarantee clause where the state would compensate Direct Route if traffic fell short of projections. This reflected the risk the private consortium was taking on in financing the scheme.

And with the tunnel having opened in the middle of the recession two years ago, traffic has yet to meet the levels hoped for when the contract was agreed. And this, according to the C&AG’s report, is likely to remain the case for the entire duration of the concession.

“The Limerick Tunnel contract provides for a 6% increase in the 2012 level of traffic over 2011. Subsequent increases are smaller but continue until 2035, after which the traffic guarantee will remain unchanged,” the C&AG report states.

A graph in the report shows the projection for 2012 is about 5,000 motorists per day short of what was originally hoped for.

It is currently assumed that traffic volumes for the scheme will increase at 2.5% per annum.

Based on that modest growth assumption, “the projected traffic levels using the Limerick Tunnel will not reach the guaranteed traffic levels and the State will make additional payments to the PPP company for the whole duration of the contract (i.e. until 2041),” the C&AG report finds.