Jonathan O'Brien (Cork North Central, Sinn Fein)
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Question 10: To ask the Minister for Transport; Tourism and Sport his plans to renegotiate deals in place following public private partnership initiatives which means that the State must pay a penalty for reduced traffic on some roads. [33431/11]

Leo Varadkar (Dublin West, Fine Gael)
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The question relates to the renegotiation of public private partnership, PPP, contracts. I have responsibility for overall policy and funding in regard to the national roads programme. The implementation of individual national road schemes, including PPPs, is a matter for the National Roads Authority In particular, the statutory power to levy tolls on national roads, make toll by-laws and enter into toll agreements with private investors in respect of national roads is vested in the NRA under Part V of the Roads Act 1993, as amended by the Planning and Development Act 2000 and the Roads Act 2007. Contracts for privately operated toll schemes are commercial agreements between the NRA and the PPP concessionaires concerned. Two PPP contracts, the M3 Clonee-Kells and Limerick tunnel PPPs, incorporate a traffic guarantee mechanism.

With regard to the remaining PPP schemes, all traffic risks remain with the operator, while the State stands to benefit from the revenue share arrangement where average daily traffic volumes exceed scheme specific predefined thresholds. At current traffic levels, a revenue share only arises on two of these schemes, the M1 Dundalk-Drogheda bypass PPP and the M4 Kilcock-Enfield-Kinnegad PPP.

With regard to the traffic guarantee mechanism, such difficulties will not arise because it is envisaged that future PPP projects will be funded by way of unitary-availability payments rather than through tolling. Under this arrangement, it is envisaged that availability payments would be made on a regular basis by the NRA for the duration of the contract, with penalties applying in the event that the road or particular road lanes were not available.

Dessie Ellis (Dublin North West, Sinn Fein)
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PPPs have been a disaster in this regard, as the NRA put in place a mechanism, whereby if traffic levels dropped, the State would have to compensate companies. This does not make sense. The companies involved have been well paid, with many receiving significant sums from the State to undertake the projects. The Minister referred to the Limerick tunnel PPP. The NRA paid €1.8 million over a four-month period last year to the private operators of the N18, the Limerick tunnel and the M3 motorway. I am glad the Minister said private companies should not be compensated because of reducing traffic volumes. That should not have happened in the first place and I hope he is discussing how this issue can be addressed with the NRA. Is there any way of avoiding the payment of these penalties?

Leo Varadkar (Dublin West, Fine Gael)
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These arrangements will not be made again under my watch and it would have been better if they had not been made. I will not gratuitously condemn the previous Government for agreeing to them because, at the time, nobody could have predicted the economy would crash by more than 20%. Perhaps their projections at the time were reasonable.

One must have two parties to renegotiate a contract. Many of the toll companies which do not have traffic guarantee clauses are losing money. For example, the toll company and PPP contractor for the Waterford bypass project have lost money and this will make it more difficult to agree new PPPs. One would have to offer something to renegotiate the current contracts. People will only agree to a change in a contract if they get something in return. The only thing these companies would want is a toll increase above the rate of inflation instead of a traffic guarantee mechanism. The Deputy would not support that either, which is why I am not pursuing a renegotiation of the contracts.

Billy Timmins (Wicklow, Fine Gael)
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The Minister has stated it is more difficult to secure agreement on PPPs owing to the uncertainty about traffic flows. Has there been movement on the proposed Newlands Cross-N11 works, which may be subject to a PPP? Will he give an update on this proposal?

Timmy Dooley (Clare, Fianna Fail)
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Deputy O'Brien was well intentioned in tabling the question, but the Minister has outlined the difficulties involved and recognises that the previous Government had to make agreements to get projects up and running, which was the right thing to do. What else can the Minister do to advance projects such as that mentioned by Deputy Timmins and one close to my own heart, the N18 Gort-Tuam upgrade which would have a significant impact not only on County Clare but also on County Galway? I do not have the answer, but is the Government considering other financial mechanisms for PPP projects? Are we just looking at the standard way this was done in the past or has any other initiative been considered?

Leo Varadkar (Dublin West, Fine Gael)
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At this stage there is major uncertainty with PPPs which does not relate to traffic levels. As neither road would be tolled, traffic levels are not relevant. The major issue with PPPs is that banks are not willing to lend money to Ireland on a 30 year basis at an interest rate we can afford. That could get even harder because next year. European banks must hoard capital to raise their tier 1 capital ratios and if there are defaults in Greece or elsewhere, banks will be badly hit. Money to invest in these projects is thin on the ground and investors do not want to invest in the eurozone and where they do, they do not want to invest in Ireland because it is included in an IMF programme and there are Members in this House suggesting we should default on our debts. There is no way anyone would lend money to a country for 30 years when people are talking about that sort of thing. We must hope the country will return to the markets in the next few years and if we are in that position, money might become available. That is why the Newlands Cross-M11 project, the cheapest of the all the PPPs, is being continued and why we continue to engage with the banks and others who might fund it. We will be ready to start if we can secure funding and agree the appropriate guarantees. This project is still being pursued, but I cannot make any promises and it would be wrong for me to do so, given that I do not control the banks we want to lend us money.