The figure of €600 million to buyout the National Toll Roads (NTR) operation on Dublin's M50 is underestimated, and an analysis of the sums involved shows the final price is likely to be around €1 billion.
The figure of €600 million quoted at the Dáil Public Accounts Committee was based on 2005 revenues.
The buyout price is calculated on the revenue accruing to the toll operator in the previous 12 months prior to the ending of the agreement, multiplied by the number of years left to run in the contract.
So, based on 2005 revenues of €40 million with 15 years left to run, the Dáil Public Accounts Committee arrived at €600 million. But significant differences will have crept into the equation when the deal is done in two years.
Firstly, the opening of the Dublin Port Tunnel later this year will deliver at least 2,200 extra lorries a day to West-Link creating a windfall. Each four-axle lorry would pay at least €5.60, increasing annual revenue by almost €5 million. Secondly, NTR's share of toll revenue has risen by nearly €7 million a year over the last three years - from €27.3 million in 2003 to €40 million in 2005. Although the road is operating at near capacity at peak times - about 100,000 vehicles a day on weekdays - annual average daily traffic is still about 90,000 vehicles, indicating there is still capacity left.
Slight changes to layout, more use of Eazy Pass and off-peak travel could see growth of the same level continue for the next two years. In 2008 NTR's revenue would be €61 million, plus about €12 million from more than two years of the Dublin Port Tunnel windfall - giving the company total revenue for buyout purposes of €73 million.
So, in 2008 the multiplier with 12 years then left in the contract would give a total of €876 million. Add the revenue for 2006 and 2007, which is projected to be €101 million and the figures show National Toll Roads with expectations to earn €977 million between 2006 and the contract termination date in 2020. But for the taxpayer the picture is even worse. There is still the 3.2 kilometre stretch of road from the West-Link to the N3 Blanchardstown roundabout over which NTR has certain rights and responsibilities. The buyout figure here is entirely unknown. If it were just €3 million - and sums that small now look like coinage - the NTR buyout figure stands at €1 billion.
The figures - based on those supplied to the Dáil committee and others already in the public domain are put in context by the fact that €1 billion is considerably more than the State expects to receive from the proposed sale of Aer Lingus. Any hopes that the payment might amount to less appears dashed for two reasons.
Firstly, chairman Jim Barry made no secret of the fact that NTR is a well-run commercial company seeking to maximise its business entitlements. He also referred to the commercial risk undertaken by the company.
Secondly, any reduction in the amount acceptable to NTR would almost certainly be based only on the availability of a large lump sum.
The Government has said it plans to use the on-going toll collection to fund the buyout and M50 upgrade, suggesting an ongoing annual payment to NTR, instead of a lump sum. In this way the billion euro buyout will not come from Government coffers but from motorists using the West-Link.