Mr. Peter Walsh:

I thank the committee Chairman and members of the committee for the invitation to attend today. I am joined by Ms. Audrey Keogh, director of business services, Mr. Cathal Masterson, director of commercial operations, Mr. Nigel O'Neill, director of the capital programme, and Mr. Pat Maher, director of network management. I understand that the committee wishes to examine TII's financial statements of 2020 and the area of public–private partnerships. Before I make some general comments about 2020 and the area of public–partnerships, I would like to describe briefly the duties and functions assigned to TII through legislation.

The NRA, operating as TII since 2015, was established under the Roads Act 1993. It is the general duty of the authority to secure the provision of a safe and efficient network of national roads, having regard to the needs of all users. TII is the approving authority for national road projects. In 2015, the NRA was merged with the Railway Procurement Agency, and the Roads Act of 2015 added the function of securing the provision of, or providing, such light railway and metro railway infrastructure as may be determined by the NTA. The NTA is the approving authority for metro and light rail projects. In September 2021, TII became the approving authority for greenways.

In relation to 2020, the onset of the global pandemic had a significant impact on TII. In March 2020, the Government classified the national road network and the Luas network as critical transport infrastructure. Luas and national roads continued to operate, without interruption, throughout all the restrictions that Government put in place to combat the spread of Covid-19. All staff who could moved to remote working.

The measures imposed to combat the spread of the virus reduced the volume of vehicles on national roads and passengers on Luas, with a consequent reduction in revenue to TII. Revenue from national road tolls for 2020 was €56 million less than originally forecast. The reduction in toll revenue was managed to ensure that all activities were kept going and fully funded. The Luas revenue shortfall was addressed by the provision of €30 million in PSO payments by the NTA. This was the first time TII received PSO payments since the commencement of Luas services. I am happy to report that the Comptroller and Auditor General expressed an unqualified opinion on the 2020 financial statements.

On PPP contracts, I would like to outline why TII entered into them, how TII's PPP contracts are structured and what the outcome was. Why did TII develop and enter into PPP contracts? In 1999, the Government decided to adopt a PPP approach on a pilot basis in order to fund public capital projects. In the national development plan, NDP, for the period 2000 to 2006, the Government set a minimum indicative target of €1.27 billion for private sector investment into national road projects. The use of PPP contracts was identified as an essential component in contributing to the financing and delivery of the national road improvements. The stipulated that funding structures, including road user tolls, where appropriate, were to be examined.

Section 4.109 of the NDP in question stated that the pilot projects announced by the Minister for Finance in June 1999 would all be developed as PPP projects within the period of the plan, namely, 2000 to 2006. These included, subject to statutory procedures and negotiations where appropriate: a new western river crossing in Limerick on the N7; the Waterford by-pass, including a new bridge over the Suir, on the N25; the second West-Link Bridge on the M50. In addition, the potential for a PPP to develop the Kilcock-Kinnegad section of the N4 was to be actively explored.

The Government established the central public private partnership unit in the Department of Finance at the beginning of 1999, to lead, drive and co-ordinate the process and in mid-1999 the Government established a Cabinet committee on infrastructural development, including public private partnership. The Cabinet committee focused initially on transport, notably the core interurban road network. In response to these policy decisions, TII established a PPP unit and developed a bundle of nine PPP contracts which, following competitive tendering, were entered into during the period 2003 to 2007. Details of the nine projects are in an information note I provided to the committee. In total, €1.75 billion of private finance was raised by the PPP companies and used in the delivery of these nine road projects. The NDP for the period 2007 to 2013 reiterated Government policy that PPPs would have an important role to play in the delivery of that plan. It stated that a PPP approach would be considered for appropriate projects.

On 31 January 2008, the Minister for Transport informed the chair of the NRA that:

... the Government recently reviewed the financing arrangements for Transport 21. Arising from that review it is now proposed that a number of national road projects, involving capital expenditure of the order of €1 billion euro, should be undertaken as unitary payments public private partnerships.

In compliance, TII developed a bundle of four PPP road contracts and two motorway service area contracts. In total, €1.22 billion of private finance was raised by the PPP companies and used in the delivery of these four road projects and six motorway service areas.

How are national roads PPP contracts structured? There are three types of PPP contract that TII has entered into. Eight are road toll concession contracts. Five are availability, design, build, operate, maintain and finance, DBOMF, road contracts and two are motorway service area concession contracts. There are two key features of PPP contracts that make them different from the traditional form of civil engineering contracts which are used to deliver road infrastructure for the State. The first is risk transfer and the second is the commitment to the long-term operation and maintenance of the asset.

In terms of risk transfer, there are two types of risk which are transferred from the state to the PPP company. The first is construction risk. I have been involved with civil engineering for more than 40 years and I know that construction risk does manifest and when ground conditions or weather conditions do not turn out to be what had been anticipated it costs money to rectify or mitigate the consequences. Construction risk is transferred to the PPP company in all 15 of TII's PPP contracts.

The second area of risk occurs where the funding structures include road user tolls. In these contracts, the risk relates to traffic forecasts. Of TII's eight toll concession PPP contracts, the traffic risk has been fully transferred to the PPP company in six and partially transferred in two. The traffic volumes that were forecast by the PPP companies in the years 2003 to 2007 did not materialise.

The second key feature of PPP contracts is the commitment to the long-term operation and maintenance of the asset. TII's eight toll concession contracts have contract durations of 30 years for six of them, 35 years for one and 45 years for the remaining one. TII's five availability contracts have contract durations of 25 years for four and 35 years for one. The two motorway service area concessions have 25-year contract durations. During those years the PPP company must operate and maintain the road or service area. At the end of the period, the road or service area must be handed back with a minimum residual life. The minimum residual life varies for different elements of the asset. For example, for pavements it is ten years. The payments relating to these services are strictly controlled by the contract conditions.

I will outline what was delivered by PPP contracts. The major interurban motorway network, connecting Ireland's five major cities to Dublin was completed by 2010. The PPP contracts delivered key elements of that network. In total, PPP contracts have delivered more than 400 km, approximately one third, of Ireland's motorway network and six motorway service areas. The contracts have proven to be robust, with the successful transfer of construction risk and traffic risk to the PPP companies.

The operation and maintenance requirements are appropriate for the safe operation of the motorways and the maintenance of the value of the assets which will handed back to the State at the end of the contract durations. Today, the PPP companies employ 540 full-time and 400 part-time staff in the operation and maintenance of the 400 km of motorway and the provision of services at the six motorway service areas.

The operating standards have been maintained. The motorway network remained open and safely operational throughout extreme weather events and Covid-19 necessitated public health restrictions. PPP contracts have delivered, and continue to deliver, very good value for money for the Irish taxpayer and have contributed in a very significant way in the creation of a safe and efficient motorway network for Ireland. That concludes my opening statement. My colleagues and I will endeavour to answer any questions that members of the committee may have.