Mr. Fred Barry:

Those members of the committee who have been listening to me on this over the years will excuse me if I cover some old ground. The committee will recall that by the mid-2000s, PPP tenderers and their funders were beginning to become more risk averse with regard to traffic forecasts than they had been previously. When we in Ireland were developing the earlier PPP contracts, the companies were willing to assume the entire traffic risk on tolled roads. By the mid-2000s, that was no longer the case. When it came to contracting the M3 Clonee to Kells and the Limerick tunnel schemes - both large and complex schemes - tenderers and their funders were unwilling to bid on the basis of them carrying the full traffic risk. Both PPPs were tendered on the basis that the NRA would take some of the traffic risk by guaranteeing minimum traffic volumes.

The PPP tenderers did their own traffic forecasts and, in both competitions, all the bidders forecast traffic volumes and revenue well above the NRA guarantee levels. The circumstances and the fact that we were entering this arrangement was reviewed by the committee in the mid-2000s. The PPP companies carry risk and cost of traffic being below their forecasts subject to a floor guarantee from the NRA. The mechanism has worked quite well from a public interest point of view. While I cannot reveal the individual consortia's precise commercially sensitive information, I can advise the committee that for 2012 the shortfall in revenue based on the PPP consortia forecasts at the time of the tenders was carried roughly two thirds by them and one third by the State. As a way of sharing the risk, it is working reasonably well. Of course, we would much prefer that we did not have to pay that money but given the choice was to carry the entire risk or put a risk sharing mechanism in place, as we succeeded in doing, we were better off with the risk sharing mechanism.

We are, like so many other businesses and enterprises in the country, dependent on the economic situation to improve our own finances as well as everybody else's. When the economy starts growing, the burden of the traffic guarantees will begin to ease and the payments from the revenue sharing schemes will begin to grow a little, but for as long as the current economic circumstances continue, we will, as the Comptroller and Auditor General has highlighted, continue to make traffic guarantee payments.