Appendix 1 High speed railway Madrid Barcelona in Spain

Transcription

1 March 2011 Frontier Economics, Atkins, ITS 1 This chapter presents the results of the ex post cost-benefit analysis of the high speed railway line between Madrid and Barcelona. 1.1 Introduction Project overview Location & Description The LAV (Línea de Alta Velocidad ) Madrid Barcelona French border is a high speed railway line connecting Madrid to the French border via Barcelona. The route is shown in Figure 1 below. The figure shows the section that is already operational (Madrid to Barcelona) as well as the remaining section along the coast to the French border. This section is currently under construction. We have therefore excluded it from this evaluation. Figure 1. High speed railway Madrid Barcelona French border Girona Zaragoza Lleida Barcelona Tarragona Madrid Source: Openstreetmap.org

2 2 Frontier Economics, Atkins, ITS March 2011 The line connects the two most densely populated urban areas in Spain, Madrid and Barcelona, with intermediate connections in Guadalajara, Calatayud Zaragoza, Lleida, Tarragona (station in Camp de Tarragona, between Tarragona and Reus). The LAV is part of the TEN-T Priority Project 3 (high-speed railway axis of south-west Europe), whose main objective is to provide high-speed rail connections between the Iberian Peninsula (Portugal and Spain) and the rest of Europe. The LAV between Madrid and Barcelona covers 621 kilometres, and it was developed in three stages: Section Madrid Lleida: opened in October 2003, and covering around 442 km of high speed rail. Section Lleida Tarragona: in operation since December 2006, adding 78 km of railway line to the previous section. Section Tarragona Barcelona (Sants station): operational since February 2008, with an additional length of 100 km. The LAV is still under construction in the section Barcelona to Figueres in Spain, with 132 km expected to be completed in The section between Figueres and Perpignan in France was completed in Currently, the new railway line allows speeds up to 300 km/h, with future improvements increasing the maximum commercial speed up to 350 km/h. This implies current journey times for the commercial AVE service (Alta Velocidad Española) between Madrid and Barcelona of between 2h 38min and 3h 19min, depending on the number intermediate stations. The AVE service, operated by RENFE is the fastest railway service offered on the LAV. RENFE is the unique railway operator offering railway services on the LAV. Current journey times for the AVE are shown in Table 1.

3 March 2011 Frontier Economics, Atkins, ITS 3 Table 1. AVE journey times between Madrid and Barcelona Stopovers Non stop Zaragoza Zaragoza, Lleida and Tarragona All stations Duration 2h 38min 2h 52min 3h 12min 3h 19min Source: RENFE The project, as defined in the TORs, comprises 12 subprojects that account for the construction of 72 km of rail bed and the installation of 610 km of railway tracks. The total cost of the 12 subprojects was around 1,719 million, of which 1,442 million was eligible for funding. The total Cohesion Fund contribution for these subprojects in the period was around 1,042 million, equal to 72.25% of the eligible project costs.

4 4 Frontier Economics, Atkins, ITS March 2011 Table Subprojects making up the project Subprojects Start date Description of project and length CF contribution (% of eligible cost) Madrid - Lleida 1999ES16CPT001 June 1999 Supply and installation of track material (485km, 52km of viaducts, tunnels and bridges) 642,214,556 (72.25%) Lleida-Olérdola 2003ES16CPT004 March 2003 Supply and installation of track material (125.5 km) 165,781,097 (72.25%) Lleida-Martorell 2000ES16CPT005 November 2000 Rail bed construction (18.54 km) 164,034,000 (72.25%) Martorell-Barcelona. 2004ES16CPT003 July 2002 Rail bed construction (5.88 km) 69,168,327 (72.25%) Accesos ferroviarios de estación de Zaragoza 2000ES16CPT003 November 2000 Rail bed construction (8.5 km) 77,755,000 (72.25%) Subtramos XI-A and XI-B entre Lleida y Martorell 2001ES16CPT009 November 2001 Rail bed construction (6.3 km) 67,070,000 (72.25%) Gelida-Sant Llorenç d'hortons- Sant Esteve Sesrovires 2003ES16CPT010 March 2003 Rail bed construction (6.0 km) 57,797,005 (72.25%) Subtramos IX-A Lleida y Martorell 2001ES16CPT005 Sept Rail bed construction (5.8 km) 49,088,000 (72.25%) Subtramos XI-C Lleida y Martorell 2001ES16CPT010 November 2001 Rail bed construction (6.2 km) 52,928,000 (72.25%) Subtramos IX-B Lleida y Martorell 2001ES16CPT006 November 2001 Rail bed construction (8.1 km) 41,772,000 (72.25%) Sant Esteve Sesrovires-Martorell - Río Llobregat 2003ES16CPT026 March 2003 Rail bed construction (2.3 km) 29,380,257 (72.25%) Río Llobregat - Costa Blanca - Conexión Vallés 2003ES16CPT027 March 2003 Rail bed construction (2.6 km) 25,152,553 (72.25%) TOTAL 1,041,946,723 (72.25%) Source: DG REGIO We understand that the investments corresponding to the LAV Madrid Barcelona segment cover a much larger number of projects than those included in the ToRs. However, in order to carry out a meaningful ex post CBA we have considered the whole set of projects leading to the completion of the high-speed rail line between Madrid and Barcelona, and not only those included in the ToRs.

5 March 2011 Frontier Economics, Atkins, ITS 5 Without all these projects, most of the services currently offered on the line would not be operational. Capital investments corresponding to the LAV between Madrid and Barcelona amount to 7,336 million, with total Cohesion Fund contributions around 3,389 million during the period Socio-economic context The LAV goes through the Spanish regions (Comunidades Autónomas) of Madrid, Castilla la Mancha, Aragón and Cataluña. In order to describe the socioeconomic context of the project we focus on the regions of Madrid, Aragón and Cataluña and the cities of Madrid, Zaragoza, Lleida and Barcelona. 1 Even though, anecdotally, it is believed that the LAV has had a significant socioeconomic effect on these regions, we can not conclude that changes in population, employment and GDP per capita are a direct and only consequence of the LAV. Moreover, regional figures might also include the impact of other infrastructure projects being developed contemporaneously, for example the A23 motorway through in Aragón. 2 Figure 2 shows the evolution of the GDP per capita between 2001 and 2008 for the three regions involved, as a percentage of GDP per capita in Spain. Unemployment rate between 2000 and 2010 for Spain, Madrid, Aragón and Cataluña are presented in Figure 3. Overall, the evolution of the four series is very similar but the levels of unemployment in Aragon, Madrid and Cataluña, are lower throughout the period than in the rest of Spain. 1 We believe that the impact of the LAV on the region of Castilla la Mancha (stop in Guadalajara-Yebes) is rather limited given the low number of high-speed rail services stopping there. This equally applies to the cities of Guadalajara and Calatayud. The case of Tarragona is different, but the location of the station (Camp de Tarragona), 12 km away from the city centre, suggests a more limited impact of the LAV in Tarragona than in other cities. 2 The sections of the Autovia A23 that received Cohesion Funds during the period are considered in this report as a separate case study.

6 6 Frontier Economics, Atkins, ITS March 2011 Figure 2. GDP per capita in regions (as % of GDP per capita in Spain) 140% 130% 120% Aragon Cataluña Madrid 110% 100% Source: Instituto Nacional de Estadística (INE) Figure 3. Unemployment - Evolution of unemployment rate Spain Aragon Cataluña Madrid Source: Instituto Nacional de Estadística (INE) Figure 4 shows the average growth rate of population in Zaragoza and Lleida before and after the LAV was completed. Both cities have seen their population increase following the arrival of the high-speed train. This result might be due to the fact that the new infrastructure has brought these cities closer to Madrid and

7 March 2011 Frontier Economics, Atkins, ITS 7 Barcelona, making them more attractive areas to reside and work. We explore this aspect further in the wider socio-economic impacts section. Figure 4. Average annual population growth in capital cities ( ) 2.5% 2.0% 1.5% 1.0% Before AVE ( ) After AVE ( ) 0.5% 0.0% Zaragoza Lleida Total Spanish capital cities Source: Instituto Nacional de Estadística (INE) Strategic policy context The application forms of the 12 subprojects included in the ToRs list the objectives to be achieved by the LAV Madrid Barcelona French border. These were: significant reduction in travel times between Madrid, Zaragoza and the four province capitals in Cataluña (Lleida, Tarragona, Barcelona and Girona); increase rail s market share on global transport demand for the Madrid Barcelona corridor making it more competitive with respect to road and air transport; increase passenger demand for both long distance and regional rail services; increase safety standards with the adoption of the latest automated train driving technology, fencing of the whole railway and eliminating levelcrossings along the new railway line; increase capacity and regularity thanks to the dual railway line; and, increase comfort with the adoption of improved rolling conditions.

8 8 Frontier Economics, Atkins, ITS March 2011 As mentioned above, the project is part of the TEN-T Priority Project 3 (highspeed railway axis of south-west Europe). This axis is expected to enable rail connections between the Iberian Peninsula (Portugal and Spain) and the rest of Europe without the need for reloading as a result of the gauge difference between the rail networks in Spain/Portugal and the rest of Europe. The Madrid Barcelona French borer high-speed railway line represents a decisive step for the interoperability of Spain s high-speed network, as well as the improvement of connectivity within different regions of the Spanish territory and between Spain and the rest of Europe. The railway connection between Madrid and Barcelona means that the two biggest cities in Spain are linked by train in two hours and a half Sources We have relied on a variety of different sources of information provided by DG REGIO and by stakeholders in Spain. This allowed us to review the ex ante analysis used in the applications for EU funding. We have obtained the funding applications and the funding decisions for each of the 12 subprojects listed above from DG REGIO. Each application provided a detailed description of the respective subproject, its objectives and the expected costs. DG REGIO also provided us with additional supporting documentation, such as the initial overall cost-benefit analysis and the final reports for each of the 12 subprojects. We also contacted the Transport Documentation Centre (Centro de Documenatación del Transporte) from Ministerio de Fomento which provided us with the methodology used in the economic analysis of railway projects. The complete list of documents obtained, mainly related with the review of the ex ante analysis, is provided in Table 3.

9 March 2011 Frontier Economics, Atkins, ITS 9 Table 3. Summary of project-related documentation Documents Obtained from Funding Applications All subprojects Funding Decisions All subprojects Ex ante CBA INECO Report. Rentabilidad de la Línea Madrid Barcelona Figueres, May 2001 Methodology used in the economic analysis of the projects, Manual de evaluación de inversiones en ferrocarriles de vía ancha", Dirección General de Infraestructuras del Transporte Ferroviario, 1987 DG REGIO DG REGIO DG REGIO Ministerio de Fomento To carry out an ex post analysis of the project, we had meetings in Madrid with representatives of ADIF (the railway network operators) and of RENFE (the train operating company) Both institutions made available significant amounts of data. From ADIF, we have received information on investment and operational costs. They have also provided us with an updated version of the cost-benefit analysis of the Madrid Barcelona French border high-speed train. RENFE s data request was made through the Ministerio de Fomento. They have provided information on passenger s demand, rolling stock investment and operating costs. Table 4 summarises the data we have received along with the respective source.

10 10 Frontier Economics, Atkins, ITS March 2011 Table 4. Summary of Primary & Secondary Data Availability Data Source Issues Infrastructure investment costs Infrastructure operating costs Cost benefit analysis Passenger number Rolling stock investment costs Operator s operating costs ADIF ADIF ADIF RENFE RENFE RENFE Actualización del estudio de determinación de la capacidad de autofinanciación en la construcción del trazado ferroviario de alta velocidad Madrid-Frontera francesa, April Ex post cost-benefit analysis We have carried an ex post cost benefit for the LAV between Madrid and Barcelona. While the LAV is part of a longer corridor between Madrid and the French border, our analysis only focus on the Madrid Barcelona segment. The segment between Barcelona and the French border is still under construction. No outturn data is available to conduct an ex post CBA. The analysis considers costs and benefits between 1997, year in which the first investments took place, and 2033, 25 years after the opening of the fully highspeed rail line between Madrid and Barcelona. To carry out the ex post analysis, RENFE has provided us with data corresponding to all rail services using exclusively or partially the high-speed rail line. The ex post analysis compares the net benefits generated by the services offered on the new line with the counterfactual (no LAV and, therefore, no highspeed services) Headline results from the analysis This section contains the headline results of the economic and financial analysis. Economic analysis To capture the uncertainty about future benefits, we have considered a Low case and a High case. These two scenarios use different assumptions regarding the traffic growth on the services using the new rail line, from 2009 onwards. Table 5 shows the assumptions on passengers growth used in each case.

11 March 2011 Frontier Economics, Atkins, ITS 11 Table 5. Assumed growth rates of passengers on the LAV Short run ( ) Medium run ( ) Long run ( ) LOW case 2.5% 1.25% 0.6% HIGH case 5% 2.5% 1.3% Source: Frontier Economics We have calculated the economic indicators (NPV, IRR and BCR) covering the LAV between Madrid and Barcelona and using a 5.5% discount rate. We have used 2008 as the base year, following the choice of that as base year in the 2009 ADIF analysis. Table 6 summarises the results of the ex post analysis under both scenarios. In both cases, the NPV of the project is negative. Correspondingly the benefit-cost ratios are below 1, indicating that the project s costs have exceeded its benefits. Table 6. Summary of ex post economic analysis (2008 prices) Low case High case Net Present Value ( m) -2,736-1,948 Economic IRR (%) 2.63% 3.70% Benefit-cost ratio Source: Own calculation Annexe 1 provides the detailed results of the cost benefit analysis for each option, following the structure used in the 2008 EC Guide. The values in these figures are non-discounted and are expressed in 2008 prices. Financial analysis We have done an ex post financial analysis for the whole project, calculating the annual cash flows related to the new rail services using the infrastructure. Table 7 summarises the results of the ex post financial analysis. We have used a 5% discount rate.

12 12 Frontier Economics, Atkins, ITS March 2011 Table 7. Summary of ex post financial analysis (2008 prices) Low case High case Net Present Value Investment ( m) -4,766-4,288 Financial IRR Investment (%) -0.45% 0.65% Net Present Value Capital ( m) Financial IRR Capital (%) 3.7% 4.5% Source: Own calculation Costs Annexe 1 provides the detailed results of the financial analysis. Wider socio-economic impacts A study supporting this ex post evaluation of the Madrid-Barcelona high speed train (HST) investment, Bellet (2010), 3 identifies that most studies carried out on wider socio-economic impacts conclude the HST is not a sufficient condition to cause major transformations in the cities and regions connected by it. The HST only facilitates socio-economic changes that may be already underway. However, the same study also points out that access to HST services may provide important competitive advantages to those cities that are on the HST network compared with those that are not in the network and have therefore less train services. According to the economic literature and experience in other European countries where HST services have been introduced before suggest the main wider economic impacts of HST infrastructure and services are impact on mobility and accessibility, socio-economic structures, urban image and spatial effects. The same applies to the cities connected by the Madrid-Barcelona HST line, particularly Zaragoza and Lleida. In sum, in terms of wider economic impacts, the advantages provided by the HST may accompany or support wider economic changes that are already underway rather than induce or generate new changes. We have grouped costs into two different categories. One-off costs. These costs include the capital investment costs incurred by the network operator (ADIF) to build the infrastructures and the rolling stock costs incurred by the railway operator (RENFE). 3 Bellet, Carme, Efectos socieconómicos de la LAV Madrid Barcelona, mimeo, 2010.

13 Million Euros March 2011 Frontier Economics, Atkins, ITS 13 Ongoing costs. The costs including the operational and maintenance costs incurred by ADIF and RENFE on annual basis. One-off costs ADIF provided us with the nominal value of the capital investments for the LAV Madrid Barcelona. We have used IMF inflation and exchange rate data to convert these nominal figures into figures into 2008 Euros. Figure 5 shows the evolution of capital expenditure over time. Expenditures started in 1997 and peaked up in 2001, just before the Madrid Lleida section was finished. Investment costs decreased substantially from 2009, once the whole Madrid Barcelona section was opened. Figure 5. Capital expenditure 1997 to 2010 (, 2008 prices) 1,800 1,600 1,400 1,200 1, Source: ADIF We assume that ADIF will not incur any further capital costs as the Madrid Barcelona segment is completed. We also assume that without this project ADIF would have not incurred any additional capital cost in the railway line between Madrid and Barcelona. Rolling stock costs have been estimated using information available in the 2009 ADIF analysis. Specifically, that document provides information related to the number of initial trains bought by RENFE to operate a certain rail service on the LAV, and the additional trains expected to the bought in the following 30 years. In the absence of information on when these additional trains will be acquired, we have evenly spread the acquisition of these trains along a 30 years period. In order to calculate the residual value of the rolling stock, we have used the

14 Thousand Euros 14 Frontier Economics, Atkins, ITS March 2011 approach followed in the ex ante CBA, where it is assumed that annual rolling stock depreciation is 11.29%. As it can be observed in Figure 6, investment costs peaked in 2008 when whole Madrid Barcelona line became operational. The chart also shows the residual value of the rolling stock in As the chart shows costs, the residual value is shown as a negative value. Figure 6. Rolling stock costs (, 2008 prices) 600, , , , , , , , ,000 Source: ADIF and Frontier Economics Unit cost calculation Table 8 summarises the ex post unit costs of the project, using the methodology developed in the context of the WP10 study. The table shows the Level 1 unit cost as well as some Level 2 unit costs, calculated on the basis of the available data.

15 March 2011 Frontier Economics, Atkins, ITS 15 Table 8. Summary of ex post unit costs (2008 prices) Non-discounted Level 1 All-in ( /km) 14,281,581 Track ( /km) 7,455,877 Level 2 Stations ( /station) 79,940,000 Bridges ( /bridge) 24,321,063 Tunnels ( /tunnel) 24,262,745 Source: ADIF Ongoing costs Both ADIF and RENFE incur ongoing costs. ADIF s ongoing costs include infrastructure maintenance and other general costs. The 2009 ADIF analysis provides the level of cost differences between the scenario with the new infrastructure and the counterfactual for the period 2004 to We have assumed that after 2012, these cost differences remain constant in real terms. This is because ADIF s ongoing costs are based on the number of stations and the number of kilometres of high speed rail line, and these are remain constant in the LAV Madrid Barcelona after RENFE s ongoing costs can be separated into two groups. The first include those that depend on the number of passengers on the line. We have assumed that these costs will grow over time in the same proportion as the number of passengers. The second group includes those costs that are unrelated to the number of passengers on the line, but are proportional to the infrastructure size. We have assumed that after 2012 later costs remain constant in real terms Direct benefits To calculate the project s benefits, we have used the same approach as in the analysis carried out by ADIF in 2009 as well as the ex ante analysis of the line carried out by ADIF in We understand that this approach follows the methodological approach recommended by Ministerio de Fomento for the appraisal of rail projects in Spain. The 2009 analysis by ADIF provides updated parameter values, in 2008 Euros, used to estimate the monetary value of time savings, environmental externalities, accidents and vehicle operating cost savings. We have used this updated value in our analysis.

16 16 Frontier Economics, Atkins, ITS March 2011 Traffic volumes RENFE provided us with passenger data related to all rail services using the LAV Madrid Barcelona and corresponding to years 2008 and These services use the LAV Madrid Barcelona either exclusively or partially. Rail services that use the LAV exclusively are those between two destinations located along the LAV. Services in this category include the AVE Madrid Zaragoza/Barcelona and the regional service AVMD Lleida Barcelona. Rail services that use the LAV partially are those that combine segments of the LAV and other rail segments. Services in this category include, among others, the AVE Barcelona Málaga or the ALVIA Madrid Pamplona. We obtained passenger data for 19 different rail services using the new high speed line, with the AVE Madrid Zaragoza/Barcelona service accounting for around two thirds of the total number of passengers. For the rail services that use the LAV Madrid Barcelona partially, we have obtained passenger data corresponding to the high speed segment of the service. For these rail services, we use distance and time parameters corresponding to the LAV segment. For example the rail service between Barcelona and Bilbao, we only consider the distance and travel times corresponding to the Zaragoza Barcelona segment. We assume that travel times outside the LAV are unchanged. The 2009 ADIF analysis provides information regarding the origins and destinations of passengers using the new or improved services on the LAV. For example, it reports that just over 50% of the passengers going from Madrid to Barcelona, and vice versa, on the new AVE service used the plane before the AVE service became operational; 18% used the train, 18% used the car and 4% used the bus. The remaining 10% of current AVE passengers in this segment are new passengers that were not travelling before. ADIF provides this information for all geographical segments covering the services that use the new rail line. Taking this modal shift information for all services using the new rail line, we have calculated the average modal shift of each transport mode and the percentage of induced passengers on the line. Table 9 shows this average modal shift for all the services operating on the LAV Madrid - Barcelona

17 March 2011 Frontier Economics, Atkins, ITS 17 Table 9. Origin of passengers using the LAV Madrid - Barcelona Modal shift Trad. rail Car Bus Air Induced traffic 23% 44% 8% 16% 10% Source: Frontier Economics with data from ADIF Combining historical passenger data from RENFE and modal shift information from ADIF, we have estimated, for the years 2008 and 2009, the number of passengers in each segment of the new line, the distance travelled by each group, the transport mode used before the opening of the new line and the duration of the journey before and after the opening of the line. We have considered the LAV as a new mode of transport. We have then treated all passengers as new, except those who were already using the old rail service. Accordingly, the rule of half (discussed in Annexe 2) has been applied to all passengers except those already using the old rail previous to the LAV. We have not received estimated future passenger numbers from either RENFE or ADIF. Therefore, we have used the estimated future passenger-related benefits and costs induced by the LAV Madrid Barcelona for the years 2008 and 2009 and applied them to the 2009 ADIF analysis to estimate future passengers of rail services on the line. The annual growth rates of these benefits and costs are shown in Table 10, for the period 2016 to Information included in the 2009 ADIF analysis for the years until 2015 are less relevant for our analysis as growth rates in these years are strongly influenced by the opening of the line from Barcelona-Sants station to the French border, a section we do not analyse in this exercise. Table 10. Annual growth rates in 2009 ADIF analysis. Medium run ( ) Long run ( ) Variable costs related to passengers / tickets sold Benefits from time savings, vehicle operating costs, accidents and environmental externalities 1.25% 0.5% 1.5% 1% Source: Frontier Economics with data from ADIF Using these estimated growth rates we have build our High and Low case scenarios. Both scenarios assume three different growth rates of passengers for

18 18 Frontier Economics, Atkins, ITS March 2011 the short, medium and long-run. Assumed growth rates of passengers for the HIGH and LOW case are shown in previous Table 5. We have not received data from RENFE corresponding to the years 2004 to 2007, when the LAV Madrid - Barcelona was only partially open, between Madrid and Lleida until the end of 2006 and further extension to Tarragona in The 2009 ADIF analysis reports the benefits, related to time savings, vehicle operating costs savings, accidents and externalities, corresponding to these earlier years. Using the previous approach to estimate future passenger on the line, we have used the growth rates of benefits and costs in these earlier years to approximate the number of passengers on the line between 2004 and 2007, and calculate the associated benefits. Should RENFE provide actual data on outturn passenger numbers for the years within the timeframe of this study, we will update the analysis accordingly in later drafts of this report. Time savings Time saving benefits are given by the total number of minutes saved with the new infrastructure. Door to door journey times, including travel time plus access and waiting time at stations/airports, for different modes of transport and different segments have been obtained from the 2009 analysis by ADIF and from RENFE s web page. Access and waiting time is nil for car, while for bus and train ranges from 30 to 50 minutes, and for plane from 130 to 140 minutes. Using information on modal shifters from the 2009 ADIF analysis, we have estimated total minutes saved. Table 11 provides examples of door-to-door journey times for different transport modes for different segments on the line. Table 11. Door-to-door journey time (Minutes) Route Car Bus Air Trad. rail High-speed rail Madrid Barcelona Lleida Barcelona Madrid Zaragoza Zaragoza Lleida Source: ADIF and RENFE Note: Air transport service is only available for certain routes. According to the 2009 ADIF analysis, the monetary value of time depends on the purpose of the journey. In that sense, business journey time would have a value of EUR/hour and leisure journey time a value of 7.41 EUR/hour. The ADIF analysis also provides information on the percentage of business vs. leisure

19 March 2011 Frontier Economics, Atkins, ITS 19 journey by transport mode and segment on the rail services using the LAV. With this information, we have calculated a weighted average monetary value of time of EUR/hour for passengers travelling from Madrid to Barcelona, and vice versa, and a value of EUR/hour for all other segments on the line. Vehicle operating costs Total vehicle operating costs are lower in rail (traditional and high-speed) than in other modes of transport. Because of modal shift away from other modes of transport, there is a decrease in operating costs. Compared with other categories of benefits, vehicle operating cost savings are the largest. The 2009 ADIF analysis provided us with unit savings on vehicle operating costs for the different transport modes other than rail. These are summarised in Table 12. Table 12. Vehicle operating cost savings of rail with respect to other transport modes (EUR/passenger-km, 2008 prices) Car Bus Air Vehicle operating costs savings Source: ADIF We have calculated total vehicle operating cost savings using information on modal shifters provided by ADIF and total passengers provided by RENFE for 2008 and As mentioned before, for years between 2010 and 2033 and between 2004 and 2007, we have calculated VOC savings using an estimated number of passengers. Revenues RENFE provided tariff revenues for the years 2008 and As before, we have calculated future revenues, and revenues corresponding to years 2004 to 207, using an estimated number of passengers and assuming that real tariffs remain constant. These figures are calculated as net revenues, as we have also taken into account the (transport and infrastructure) operators lost revenue from passengers moving form car, bus and airplane to the rail services offered on the LAV Externalities Safety The 2009 ADIF analysis calculated the benefits from the reduced number of accidents on rail transport if compared with either car or bus. The analysis provided us with the parameter values related to the cost of accidents. Unit costs

20 20 Frontier Economics, Atkins, ITS March 2011 associated to the four modes of transport considered are shown in Table 13. As rail transportation is slightly less safe than air transport, there is a cost associated with modal shift away from air travel. We have calculated the social benefits generated by modal shift switching to safer modes of transport using the information on passengers in 2008 and 2009 provided by RENFE and modal shifting patterns provided by ADIF. As mentioned before, for years between 2010 and 2033 and between 2004 and 2007, we have calculated accident savings using an estimated number of passengers. Table 13. Social costs of accidents associated to different transport modes (EUR/1000 passenger-km, 2008 prices) Car Bus Rail (trad. and high-speed) Air Value of accident costs Source: ADIF Environmental We consider the environmental impact of the new infrastructure by calculating the social benefits generated by people switching to high-speed rail services, considered to be a more environmentally friendly mode of transport than car, bus or air. In order to calculate the environmental benefits generated by the new infrastructure we have followed a similar approach to the 2009 ADIF analysis. Environmental social benefits induced by rail transportation can be subdivided in four different components, pollution, climate change effects, nature and visual effects, and urban effects. The 2009 ADIF analysis provides parameter values for unit benefits related to environmental externalities. Table 14 present these parameters.

21 March 2011 Frontier Economics, Atkins, ITS 21 Table 14. Environmental cost savings of rail with respect to other transport modes (EUR/1000 passenger-km, 2008 prices) Car Bus Air Pollution Climate change Nature and Visual Urban effects Total Source: ADIF We have calculated the social benefits generated by modal shifters switching to high-speed rail services using the information on passengers in 2008 and 2009 provided by RENFE and modal shifting patterns provided by ADIF. As mentioned before, for years between 2010 and 2033 and between 2004 and 2007, we have calculated the total environmental externality using an estimated number of passengers Wider socio-economic impacts The high speed train (HST) can have a set of wider socio-economic and land use qualitative impacts which go beyond the more immediate quantitative costs and benefits. The two main characteristics that need attention to understand the wider socio-economic effects of HST are (i) the channels through which HST can have wider impacts and (ii) the time it takes those impacts to take effect Impact channels The build up of HST infrastructure and start of rail service operations can influence the local socio-economic structures through different channels. Table 15 summarises what is known in the literature about the main wider socioeconomic effects of the HST. The HST can influence mobility and accessibility, socio-economic structures (especially tourism and market expansion), the image of urban centres and spatial changes, both urban transformation and urban planning.

22 22 Frontier Economics, Atkins, ITS March 2011 Table 15. Socioeconomic and land-use impacts influenced by the High Speed Train Impact area 1. Mobility Specific impacts 1.1 Amount of travel What we know HST tends to have a large impact on external accessibility and travel times generating an increased amount of travel. The increase in the number of trips appears to be more significant when the HST infrastructure implies substantial changes in external accessibility experienced by the cities with HST stations 1.2 Modal shift HST services tend to be competitive vis-à-vis air travel for middle distance corridors of km, and possibly longer distance corridors of 1,000-1,500 km with speeds of 350km/h. in Europe, the HST has been able to capture up to 70% market share in some corridors (e.g. Paris- Lyon, London-Brussels, Madrid-Sevilla) 2. Socioeconomic structures 1.3 Population mobility patterns 2.1 Support ongoing transformations 2.2 Tourism dynamics Following the introduction of the HST, the user profile and trip motive tends to be those of middle age, educated individuals who travel for business reasons. Over time, as the HST services consolidate their services, other traveller profiles develop. A common development has been the HST commuter who travels middle and long distances, thereby expanding the functional scope of some labour markets. HST infrastructure interact with other ongoing economic factors such as the labour market, scale economies and market size, thereby influencing labour productivity and corporate productive efficiency in central, well-developed cities and in peripheral, less developed cities to a varying degree depending on initial conditions and strength of ongoing economic transformation in these localities. The availability of HST services tends to have a direct influence on the tourism industry. Evidence suggests that cities connected via a HST network experience an increased volume of tourists from precisely the cities connected via the HST network, which tends to be accompanied by changes in the supply of tourism services and products on offer. 2.3 New economic activities The introduction of the HST facilitates market expansion in service-related activities. People and enterprises located in the area of influence of the HST stations gain access to an increased and diversified number of services.

23 March 2011 Frontier Economics, Atkins, ITS 23 Impact area 3. Urban image 4. Spatial changes Specific impacts 3.1 Urban image 3.2 Local marketing campaigns 4.1 Metropolitan dynamics 4.2 Urban transformation 4.3 Planning policies and measures 4.4 Urban promotion and marketing What we know Cities that become part of the HST network, and do not belong to the more well-known set of important national cities (e.g., Madrid, Barcelona etc) immediately improve their external image and achieve increased awareness (e.g. tourists, business conference organisers). Cities take the opportunity of becoming part of the HST network to initiate or adapt urban image campaigns intended to improve their attractiveness and promote the local economy. New metropolitan interactions are created between small and medium cities with other small and medium cities connected by the HST network and long distance interactions irrespective of city size. The physical transformation brought about by the HST is illustrated by a network remodelling promoting an improved integration and access of rail into town and the urban remodelling around HST stations, new ones and old but enhanced ones Local and regional authorities take advantage of the new HST infrastructure to review existing urban plans or policies or issue new ones: better integration of stations with their urban surroundings, mitigate potential negative effects, and improve accessibility Local and regional authorities take advantage of the new HST infrastructure to also reinforce or launch city image and tourist campaigns to enhance the attractiveness of the cities and their tourism appeal Source: Bellet (2010) and own analysis Timeframe Figure 7 summarises the dynamic sequence of the HST impacts. The immediate short-term impact relates to the construction of the HST infrastructure and the changes in the urban image in the cities linked by the new HST infrastructure. The rest of the socio-economic impacts via multiplier effects materialise in the medium and long terms. Increased mobility and accessibility to urban centres can change land use patterns and facilitate the expansion of labour markets, for example. These long term impacts are the result of multiple interrelationships with other socio-economic phenomena (e.g. urban growth, population dynamics, planning policies, etc.) which makes it difficult to attribute any of those impacts exclusively to the HST. The French experience with HST infrastructure suggests

24 24 Frontier Economics, Atkins, ITS March 2011 that it takes up to 20 years to be able to appreciate the wider socio-economic impacts of HST infrastructure and services. Figure 7. Socio-economic impact of High Speed Train over time Source: Bellet (2010) The LAV Madrid Zaragoza Barcelona has the potential to produce several wider effects related to passenger s mobility, general image of the cities, socioeconomics and spatial changes. We summarise these wider economic effects below. Mobility effects The number of passengers using the LAV Madrid Zaragoza Barcelona has experienced a significant increase since the start of operations. According to RENFE, in 2008 around 2.5 million passengers used the AVE service between Madrid Barcelona exclusively. In 2009 this number increased to around 3 million. This substantial increase in the number of passengers is also a consequence of changes in the modal distribution of transports. For example, for the route between Madrid and Barcelona, before the AVE service was opened, the train had a market share of 11.8%. Figures for the first semester of 2009 suggest that this market share has increased to 48.6%. A survey carried out by RENFE in October 2009 shows the following average traveler profile: middle age (from 30 to 44 years), with high levels of education (57% have university degrees or postgraduate or doctoral studies), 48% are

25 March 2011 Frontier Economics, Atkins, ITS 25 private employees performing management or administration functions, entrepreneur or self-employed, and 48% travel for business or professional reasons. The survey results also suggest that leisure/tourism is the reason for travelling in 29.2% of the responses. Previous studies of the Spanish southern HST corridor Madrid-Sevilla show that leisure/tourism trips increases over time and that the passenger profile also becomes more diversified over the years. Finally, a new type of traveller has appeared as a consequence of the LAV Madrid Barcelona: the commuters. The frequency of trips between cities separated by less than 60 minutes (Zaragoza Madrid, Zaragoza Barcelona, and especially Lleida Barcelona and Lleida Camp de Tarragona) is very high. According to RENFE s survey, 21% of passengers in the Zaragoza Madrid service were commuters. This percentage is much higher for the Catalan services (53.4%) given that since the introduction in April 2008 of the AVANT services, high-speed train services for short distances at competitive prices between Barcelona Camps de Tarragona Lleida. Socio-economic effects The HST is seen as an instrument to improve the accessibility of cities and regions connected to the network. Several studies suggest that accessibility gains would be higher for medium and small cities (Zaragoza and Lleida) than for bigger cities (Madrid and Barcelona) because some activities would be reallocated to these smaller cities. These activities would include activities related to urban tourism, conference tourism, scientific meetings, and business meeting; and the relocation of specialized businesses and technical consultancy firms to take advantage of lower labour costs and availability of skilled labour while keeping good accessibility to Madrid and/or Barcelona. Change in tourism dynamics As discussed above, one of the sectors that is most influenced by the arrival of the LAV, is the tourism. Overall, the number of visitors grows, especially from large cities and towns near the corridor or high-speed network. These dynamics appear to have been particularly intense in the cities of Zaragoza and Lleida. The reasons are: The train incorporates or strengthens the position of these cities as tourist destinations; With the new train infrastructure, these cities become closer and reinforces the role of these cities and their territories in the national tourism market; It tends to increase the number of congressional and business meetings that take place in medium and large cities;

26 26 Frontier Economics, Atkins, ITS March 2011 Increased tourism causes a significant economic impact on local services, with or without overnight stays, such as catering, commerce, urban transport, travel agencies, etc. The HST can also work as a channel to publicize campaigns and local events, for example the 2008 International Exhibition in Zaragoza. New activities The TAV Madrid Zaragoza - Barcelona has been running since February Thus, it is too early to assess any lasting economic impact caused by the HST on the two major cities. However, in the case of Zaragoza and Lleida, which have had HST services since 2003, it is possible to establish a relationship between some local economic revitalization projects and the HST. 1. Zaragoza: logistics, international events and business land. The arrival of the LAV was exploited as a tool to develop local socio-economic plans (Plan estratégico de la ciudad y su entorno Ebropolis, 1998). The objective was to carry out a thorough urban and socio-economic transformation of the city of Zaragoza. The implementation of the infrastructure was accompanied by other important projects: the 2008 International Exhibition about Water and the consolidation of PLAZA, a logistics platform. 2. Lleida: the LAV and the technology park. The Agribusiness Science and Technology Park (Parque Científico y Tecnológico Agroalimentario de Lleida PCiTAL) was created in 2005 as a consortium between the University of Lleida and the Lleida City Council. It was established with the intention of becoming a major scientific and technological platform in the agribusiness industry in Spain. Image effects In terms of image transformation as a consequence of the LAV Madrid Barcelona, Zaragoza and Lleida are probably the two Spanish cities that have benefited the most, even more than Madrid and Barcelona. In the case of Zaragoza, the arrival of the LAV was used as an instrument (together with the Expo in 2008 and the logistic platform, PLAZA) to promote an ambitious urban and socio-economic transformation of the city. According to a survey by the Employer s Confederation of Zaragoza, 91.2% of respondents believe that the image of the city has improved with the LAV. In the case of Lleida, a year before the arrival of the LAV, the local Chamber of Commerce and Lleida City Council released a strategic plan, Plan de Dinamización del tren de alta velocidad, intended to promote the city as a touristic gateway. Some of the measures considered in the plan are currently being developed. Also a marketing campaign was released to reinforce the image of the city of Lleida.

27 March 2011 Frontier Economics, Atkins, ITS 27 Spatial effects In Madrid and Barcelona, the implementation of the LAV will have the effect of converting high-speed train stations into intermodal hubs. For example, the future Sagrera project will mean an intense process of renewal of the Sant Andreu district in the north of the city of Barcelona. The Barcelona-Sagrera or Sagrera- TAV will probably become the most important railway station of Catalonia, the largest in Spain to international destinations, and the second largets in terms of national routes. In Madrid, the project called Operación Chamartin, can easily become one of the largest urban renewal operations in Europe. It was approved in late 2009 and will impact over 3 million square meters to be completed in The LAV Madrid Zaragoza Barcelona has produced the following spatial effects: Reinforcement of the two national metropolises, Madrid and Barcelona. Strengthening Madrid Barcelona metropolitan dynamics through a high-speed corridor: Utilisation rates Intensification of the metropolitan dynamics with nearby cities (30 minutes travel time) as Madrid Guadalajara and Barcelona Camps de Tarragona Inclusion to the metropolitan dynamics of close cities (60 minutes travel time) as Barcelona Lleida Repositioning of large and medium size cities: Zaragoza and Lleida. As requested by the TORs, we have considered the evolution of the utilisation rates of this project. We have calculated these rates for the last two years, using the passenger data related to the rail services using the LAV Madrid Barcelona provided by RENFE. Table 16 shows for the years 2008 and 2009 the maximum capacity available in passenger-kilometre on the services being provided, the total amount of passenger-kilometre and the resulting capacity utilisation, equal to 61% in 2008 and 57% in The contribution to this indicator by the high-speed rail services using exclusively the LAV Madrid-Barcelona, for example the AVE Madrid Barcelona, is equal to 79% in 2008 and 67% in As mentioned before, there are other rail services using the LAV Madrid-Barcelona. These correspond to (i) high-speed rail services using the LAV Madrid-Barcelona and other LAVs, for example the AVE services between Barcelona and Sevilla; and (ii) rail services using the LAV and other Iberian standard rail segments, for example the ALVIA service between Barcelona and Bilbao.

28 28 Frontier Economics, Atkins, ITS March 2011 Table 16. Utilisation rates on the LAV Madrid - Barcelona (2008 and 2009) Maximum number of passengerskilometer (Million) Total number of passengerskilometer (Million) 4,494 6,942 2,723 3,962 Utilisation rate 61% 57% Source: RENFE data 1.3 Review ex ante cost-benefit analysis The first assessment for the LAV Madrid Barcelona French border was elaborated by the Ministerio de Fomento in and it was used to prepare the applications for funding for subprojects 1999ES16CPT001, 2000ES16CPT003 and 2000ES16CPT005. This cost-benefit report was later updated in May 2001 by INECO. 5 This study covers the period. As it is the most complete, we focus our ex ante review on this analysis. The 2001 ex ante CBA follows the approach set out by Ministerio de Fomento (Dirección General de Ferrocarriles) and considers costs and revenues for both the network operator (ADIF) and the train operating company (RENFE). As in the previous assessment, the 2001 report is a single cost-benefit analysis of the whole LAV (that is, including the Barcelona French border section, which is not completed at the moment) Headline results from the analysis Economic analysis The ex ante CBA prepared by INECO in 2001, and used to prepare most of applications for funding, considers only the option implemented. It assesses it against a counterfactual where the existing rail line is maintained. INECO considers a 29-year period for the analysis and assumes that the Madrid Lleida section would open in 2003 and the Lleida Figueres section in Estudio de optimización functional de la Línea de alta velocidad Madrid Zaragoza Barcelona Frontera Francesa 5 INECO Report, Rentabilidad de la Línea Madrid Barcelona Figueres, May 2001

29 March 2011 Frontier Economics, Atkins, ITS 29 The CBA report presents the results of the calculations of benefits and costs for each year of the appraisal period. The CBA distinguishes between economic analysis (Evaluación económica) and social analysis (Evaluación social), the latter includes positive externalities environmental benefits and employment generation. For both analyses, the report shows the Net Present Value, the economic rate of return and the benefit-investment ratios. INECO calculates the NPV of the project using a 6% discount rate. Table 17 shows the results. Instead of producing the benefit-cost ratio of the project, the ex ante cost benefit analysis reports the benefit-investment ratio. This ratio is not directly comparable with the ex post BCR, used in the other projcts under analysis. Table 17. Results of ex ante cost benefit analysis for the whole line Net Present Value ( million, 2005 prices) Economic IRR (%) BIR Economic Analysis % 0.04 Social Analysis 2, % 0.38 Source: INECO Report, Rentabilidad de la Línea Madrid Barcelona Figueres, May 2001 Financial analysis The ex ante CBA shows a separate financial analysis for the infrastructure operator (ADIF) and for the railway operators. For this matter, access charges to be paid to the infrastructure manager are calculated in such a way that the railway operators profitability is 9%. Table 18 presents the results of the financial analysis for the whole line. INECO calculated the financial NPV using a 6% discount rate.