The final report of a study done by Dutch consultant LievenseCSO into the construction of a new bridge over the Demerara River has made some eyebrow-raising propositions for increasing tolls to achieve a sustainable financial model.
The report, which was released on Tuesday by the Public Infrastructure Ministry, recommends that toll rates be increased to 250 per cent of the present 2017 toll rates. It also recommends a 700 per cent increase in tolls for river vessels.
This, according to the report, is with the view of limiting Government’s contribution to the project to around US$39 million in the first five years after the bridge is commissioned.
An artist’s impression of the proposed new bridge (Public Infrastructure Ministry photo)
It notes that interest has been found on the national and regional financial markets to fund the project, which the report estimates will cost some US$170 million, inclusive of interest, in pre-financing costs during the construction.
The report’s findings are that a minimal toll hike of 100 per cent would require US$140.1 million over the first 12 years. On the other side of the spectrum, it states that US$27.3 million would be required from the Government with an increase of 300 per cent.
“From the financial projections, it was concluded that the business case of the project is financially not viable assuming similar toll rates and no contribution from Government. The main reason is the high debt service caused by the short loan periods and high interests in the market,” the report continues.
According to the report, this proposed financial structure is by project finance. It notes that the structure will be administered by a Government-owned Special Purpose Company (SPC) being the owner and arranging the funding.
BOOT
According to the report, an alternative structure is to seek private parties willing to engage themselves in a Built, Operate, Own and Transfer (BOOT) Project. The consultants noted that these financiers could handle this aspect of the project more effectively than the State.
“However, project costs are higher and the BOOT business case must result in sufficient risk coverage and profit for the private partner and as a result, may require higher toll rates or more Government contribution.”
It is expected, the report added, that similar guarantees from Government will be required as in the case of project finance, adding that a DBFM (Design, Build, Finance and Maintain) model is a mixed option combining the SPC structure with possibly better financing by the private parties.
The Government’s proposed financial models have come in for strong criticism by Opposition Leader Bharrat Jagdeo. On Tuesday, Jagdeo during a press conference lambasted Government for its tenuous approach to determining a financial model to use for the bridge.
The feasibility study and design for the new Demerara River bridge, which had reportedly cost some $146.3 million, was presented to Minister within the Public Infrastructure Ministry, Annette Ferguson late last month.
The 57-page final report was done by the Dutch company, with the project team including officials from the Demerara Harbour Bridge Corporation and Transport and Harbours Department.
The feasibility study determined the proposed location of Houston-Versailles as the most ideal. The report had also determined that the bridge should be a low-level one with a movable part and three lanes.
