THE EGNATIA MOTORWAY

EX POST EVALUATION OF INVESTMENT PROJECTS CO-FINANCED BY THE

EUROPEAN REGIONAL DEVELOPMENT FUND (ERDF) OR COHESION FUND

(CF) IN THE PERIOD 1994-1999

THE EGNATIA MOTORWAY

PREPARED BY: CSIL, CENTRE FOR INDUSTRIAL STUDIES, MILAN

PREPARED FOR: EUROPEAN COMMISSION

DIRECTORATE-GENERAL REGIONAL POLICY POLICY DEVELOPMENT

EVALUATION

MILAN, SEPTEMBER 5, 2012

This study is carried out by a team selected by the Evaluation Unit, DG Regional Policy, European

Commission, through a call for tenders by open procedure no 2010.CE.16.B.AT.036.

The consortium selected comprises CSIL – Centre for Industrial Studies (lead partner – Milan) and DKM

Economic Consultants (Dublin).

The Core Team comprises:

- Scientific Director: Massimo Florio, CSIL and University of Milan;

- Project Coordinators: Silvia Vignetti and Julie Pellegrin, CSIL;

- External experts: Ginés de Rus (University of Las Palmas, Spain), Per-Olov Johansson (Stockholm School

of Economics, Sweden) and Eduardo Ley (World Bank, Washington, D.C.);

- Senior experts: Ugo Finzi, Mario Genco, Annette Hughes and Marcello Martinez;

- Task managers: John Lawlor, Julie Pellegrin and Davide Sartori;

- Project analysts: Emanuela Sirtori, Gelsomina Catalano and Rory Mc Monagle.

A network of country experts provides the geographical coverage for the field analysis: Roland Blomeyer,

Fernando Santos (Blomeyer and Sanz – Guadalajara), Andrea Moroni (CSIL – Milano), Antonis Moussios,

Panos Liveris (Eurotec - Thessaloniki), Marta Sánchez-Borràs, Mateu Turró (CENIT – Barcelona), Ernestine

Woelger (DKM – Dublin).

The authors of this report are Gelsomina Catalano and Davide Sartori of CSIL who were also responsible

for the field research. Useful research assistance has been provided by Chiara Pancotti and Stathis

Karapanos.

The authors are grateful for the very helpful comments from the EC staff and particularly to Veronica

Gaffey, José-Luís Calvo de Celis and Kai Stryczynski. They also express their gratitude to all stakeholders

who agreed to respond to the team’s questions and contributed to the realisation of the case study. The

authors are responsible for any remaining errors or omissions.

Quotation is authorised as long as the source is acknowledged.

Cover: The Egnatia motorway. Source: Egnatis Odos S.A.

TABLE OF CONTENTS

EXECUTIVE SUMMARY ....................................................................................................................... 1

1 PROJECT DESCRIPTION ............................................................................................................... 7

1.1 CONTEXT ........................................................................................................................................ 7 1.2 GREECE’S TRANSPORT CONNECTIONS ................................................................................................... 9 1.3 STRUCTURAL FEATURES AND SERVICE DELIVERED .................................................................................. 13 1.4 CURRENT PERFORMANCE ................................................................................................................. 18

2 ORIGIN AND HISTORY ............................................................................................................... 23

2.1 BACKGROUND ............................................................................................................................... 23 2.2 FINANCING DECISION ...................................................................................................................... 25 2.3 PROJECT IMPLEMENTATION .............................................................................................................. 27 2.4 FUTURE DEVELOPMENTS .................................................................................................................. 30

3 LONG-TERM DEVELOPMENT EFFECTS ........................................................................................ 33

3.1 KEY FINDINGS ................................................................................................................................ 33 3.2 DIRECT ECONOMIC GROWTH ............................................................................................................ 37 3.3 ENDOGENOUS DYNAMICS ................................................................................................................ 45 3.4 INSTITUTIONAL QUALITY .................................................................................................................. 48 3.5 ENVIRONMENTAL EFFECTS ............................................................................................................... 48 3.6 TERRITORIAL COHESION ................................................................................................................... 50 3.7 SOCIAL HAPPINESS .......................................................................................................................... 53

4 DETERMINANTS OF PROJECT OUTCOMES .................................................................................. 55

4.1 KEY FINDINGS ................................................................................................................................ 55 4.2 APPROPRIATENESS TO THE CONTEXT .................................................................................................. 56 4.3 PROJECT DESIGN AND FORECASTING CAPACITY ..................................................................................... 56 4.4 MANAGERIAL RESPONSE .................................................................................................................. 58 4.5 PROJECT GOVERNANCE .................................................................................................................... 58

5 CONCLUSIONS ........................................................................................................................... 63

ANNEX I. METHODOLOGY OF EVALUATION .................................................................................. 67

ANNEX II. COST-BENEFIT ANALYSIS ............................................................................................... 73

ANNEX III. MAP OF STAKEHOLDERS ............................................................................................. 105

ANNEX IV. GLOSSARY .................................................................................................................. 107

ANNEX V. LIST OF INTERVIEWEES ................................................................................................ 109

ANNEX VI. REFERENCES ............................................................................................................... 111

LIST OF ABBREVIATIONS

AADT Annual average daily traffic

BSEC Black Sea Economic Cooperation

CBA Cost-Benefit Analysis

CF

CSF

Cohesion Fund

Community Support Framework

DG Move Directorate-General for Mobility and Transport

DG Regio Directorate General for Regional Policy

EC

EIA

European Commission

Environmental Impact Assessment

EIB European Investment Bank

ENPV Economic Net Present Value

ERDF European Regional Development Fund

ERR Economic Rate of Return

ESF

ESPON

European Social Fund

European Spatial Planning Observation Network

EU European Union

FNPV Financial Net Present Value

FYROM The former Yugoslav Republic of Macedonia

GDP

GHG

Grd

GVA

Gross Domestic Product

Greenhouse Gas

Greek drachma

Gross Value Added

HR Hour

ICT Information and Communication Technology

IMF

IRR

MEPPW

International Monetary Fund

Internal Rate of Return

Ministry of Environment, Planning and Public Works

NGO

NPV

SA

Non-governmental Organization

Net Present Value

Public limited Company (French abbreviation for Société Anonyme)

SCF

TEN-T

Standard Conversion Factor

Trans-European Transport Networks

TEUs Twenty-foot Equivalent Units

ToRs

PATHE

PATHE/P

PPS

S.A.

Terms of references

Patras-Athens-Thessaloniki-Evzonoi motorway

Patras-Athens-Thessaloniki-Idomeni/Promachnonas railway

Purchasing Power Standard

Public Limited Company (The French abbreviation for Société Anonyme is used in Greece)

1

EXECUTIVE SUMMARY

This case study analyses the implementation of the Egnatia motorway, a road crossing

horizontally Northern Greece with a length of 670 km and a width of 24.5 m (or 22 m along

mountainous adverse sections). The motorway runs from Igoumenitsa to Kipoi and crosses five

regions: East Macedonia & Thrace, Central Macedonia, West Macedonia, Epirus and Thessaly.

The purpose of the evaluation is to assess the socio-economic long-term effects generated by

the project and to disentangle the possible determinant factors that may have contributed to

producing these effects. More details on the overall evaluation approach are recalled in the

Box below and, more extensively, in Annex I.

OVERALL APPROACH AND METHODOLOGY

The Conceptual Framework developed in the First Intermediate Report has been developed starting from the evaluation questions included in the ToRs1, and further specified and organised as per the team’s understanding. In particular, the Team identified three relevant dimensions of analysis: a. The object of the evaluation (the ‘WHAT’): this relates to the typologies of long-term contributions

which can be observed. Starting with the typologies identified in the ToR (socio-economic development and quality of life) the Team developed the following classification of long-term effects: ‘Economic development’ (including effects on GDP growth and endogenous dynamics) and ‘Quality of life’, synonymous with additional social wellbeing, i.e. including effects that are not captured by the economic variables. ‘Quality of life’, in turn, has been divided into: social cohesion, territorial cohesion, institutional learning, environmental effects and social happiness.

b. The timing of the long-term effects (the ‘WHEN’): this dimension relates to the points in the project’s lifetime at which the effects materialise for the first time (short-term dimension) and stabilise (long-term dimension). The proper timing of an evaluation and the role it can have in relation to the project’s implementation is also discussed here.

c. The determinants of the project’s performance (the ‘HOW’): the assumption here is that five aspects of the project’s implementation and their interplay are crucial for the project’s final performance. These aspects are: project design, forecasting capacity, governance, context and managerial response. Five Working Hypotheses are related to these dimensions and explain how each of them can influence the generation of the project’s short or long-term effects.

On the basis of this conceptualisation, a set of evaluation questions was developed and aims to guide the entire study and to support the provision of conclusions and recommendations. The methodology developed to address the evaluation questions consists of a combination of quantitative (Cost Benefit Analysis) and qualitative (interviews, surveys, searching in governments and newspapers’ archives, etc.) techniques, integrated in such a way as to produce ten project histories. CBA is an appropriate analytical approach for the ex-post evaluation because it can provide quantification or indications about some of the long-term effects produced by the project. However, the most important contribution of the CBA exercise is to provide a framework of analysis to disentangle the most crucial aspects of the projects’ ex-post performance and final outcome. Qualitative analysis is on the other hand addressed more to understanding the underlining causes and courses of action of the delivery process. On the basis of the findings provided by the ten case studies, the Final Report will draw lessons along the key dimensions identified of ‘what’, ‘when’ and ‘how’.

Source: Authors

1 They are the following: What kind of long-term contributions can be identified for different types of investment in the field of

environment and transport infrastructure? How are these long-term contributions generated for different types of investment in the field of environment and transport infrastructure, i.e., what is the causal chain between certain short-term socio-economic returns and long-term returns from investment? What is the minimum and average time needed for a given long-term contribution to materialise and stabilise? What are these time spans for different types of investment in the field of environment and transport infrastructure? What are the existing evaluation methods to capture a given long-term contribution for different types of investment in the field of environment and transport infrastructure?

2

The project responded to the need of providing faster and safer connections between the

Western and Eastern borders of Greece. The overall condition of the existing roads was poor.

They followed the conventional routes through the mountains and lacked access control,

allowing animals and people to cross. As a result, travel time from East to West was very long

(about 12 hours) and driving conditions were very dangerous. In light of this need, the idea of

building a motorway axis dates back to the 1970s. However, the lack of financial resources and

of expertise to overcome the technical difficulties posed by the Greek mountainous territory

prevented construction until 1997. In the meantime, the Greek State financed the realisation

of some dispersed sections, which remained unconnected for years. The push for the

realisation of the project came with the launch of the first European Community Support

Framework (CSF, 1989-1993), which triggered a positive response of the Greek government, by

allowing it to plan the construction of necessary infrastructures thanks to the funds made

available from the European Union.

In order to understand the features of project, two historical facts should be taken into

account. First, originally Egnatia was conceived as a road running only from Igoumenitsa to

Thessaloniki, thus leaving out the remotest areas of East Macedonia & Thrace, and it was

designed as a motorway only in some sections. The project eventually implemented is

different from this original design and it is the result of stringent negotiations between the

various stakeholders, among which the European Commission played a key role. In fact, on the

request of the European Commission, the Egnatia motorway was re-designed as a Trans-

European Road Network running from Igoumenitsa to Kipoi with the aim to make it a collector

road for the Pan European Corridors and Trans-European Networks converging in the Balkans

area.

Second, following again a request of the Commission, the regulatory framework for the

management of public infrastructure in Greece was substantially revised. Breaking with the

traditional management system, an ad-hoc executing agency was established for the

construction, supervision and management of the motorway. The Egnatia Odos was set up in

1995 and, although fully owned by the Greek State, it operates according to the rules of the

private sector. An international consulting company (Brown & Root) was appointed and

merged into the organisational chart of Egnatia Odos with the role of Project manager. The

aim was to provide the emerging company with the managerial and technical expertise needed

to implement and run the project.

Once set the institutional conditions to operate, construction works started, taking place

between 1997 and 20112, with the first section opened to traffic in 2000. The total investment

costs amounted to EUR 7,052.6 million (2011 prices), of which 44% was financed by the

European Union (ERDF, CF, TEN-budget) and the remaining 56% by the Greek State, of which

41% provided by loans from the European Investment Bank.

2 Investment concerning some sections were undertaken by the Greek State since 1994.

3

OVERVIEW OF INVESTMENT COSTS AND SOURCES OF FINANCING

Financing period 1994-2011

First year of operation 2000

Total investment costs (2011 prices) EUR 7,052.6 million 100%

Sources of financing and co-funding rates over the total investment costs

Cohesion Fund EUR 1,033.5 million 14.7%

European Regional Development Fund EUR 2,025.9 million 28.7%

TEN-T Budget EUR 31.2 million 0.4%

European Investment Bank EUR 2,885.4 million 40.9%

National contribution EUR 1,076.5 million 15.3%

To date, driving is allowed along the entire length of the motorway, with the exception of a 1

km section in the Region of Epirus, which is closed because of landslides occurring in that area.

As a consequence, traffic is diverted to the old road network, which is just beside the Egnatia

motorway. Since 2004, the performance of the motorway in terms of traffic volume,

environmental and spatial impacts has been monitored and supervised by the Egnatia

Observatory. Although designed as a tolled motorway, users have been asked to pay tolls only

since 2010. The delayed introduction of the tolls was not related to technical issues but to the

purpose of achieving political consensus. This has hampered the financial sustainability of the

project, which is currently not self-sustaining so that operation and maintenance have been

ensured through external financing from the central government. The introduction of the

Gantry system for toll collection and the privatisation of operations are expected to make the

project financially sustainable.

The project succeeded in achieving the expected objectives and contributed to the economic

development of the context in which it took place. Journey time from West to East Greece was

significantly cut (by 5 hours and 10 minutes) and the number of accidents was reduced (e.g. 97

fatalities in 1998 against 48 in 2010). These effects materialised in the short run, according to

the progressive opening of the motorway’s sections. Relevant wider economic effects have

been triggered by the project in the long run. In particular, the project has succeeded in

improving the performance of ports and airports physically and functionally connected to the

motorway and providing the conditions for the development of new business activities, as well

as boosting the tourism industry.

A strong impact has been generated in terms of territorial cohesion. As a consequence of the

reduction in travel time and costs, relationships between the remotest urban centres and the

most dynamic and developed ones have been increased. A number of socio-economic

indicators show that this has led to an increase in cohesion among the five regions crossed by

the motorway. However, effects on territorial cohesion are expected to be wider in the future.

Being a Trans-European Network connected through vertical axes to the neighbouring

countries to the North, the Egnatia motorway creates the conditions for improving territorial

cohesion at European level. From the national point of view, territorial cohesion is expected to

be reinforced once other investments on the connected axes roads (PATHE and Ionian

motorway) are completed.

4

From the endogenous dynamic perspective, the project was innovative. With the creation of

the Egnatia Odos and its Observatory, it brought about a new organisational scheme for the

management of public infrastructure projects in Greece and, moreover, developed new

knowledge and expertise for the construction of road infrastructures, while minimising their

impacts on the landscape. The impacts on institutional quality could have been much higher if

the innovations introduced by the project had been applied in a consistent manner. In

particular, an ad hoc private law company, such as the Egnatia Odos, could have been

established also for the upgrading of PATHE motorway, which was started in the same period

and is still underway.

Finally, the Egnatia motorway turned out to be an environmental friendly infrastructure.

Although negative externalities were generated, in terms of increases in noise and emissions

related to the generated traffic, its negative impacts on the landscape were minimised by

implementing appropriate mitigation measures.

The analysis of the determinants of such performance shows that the relevance of the project

to the context was very high and that the project was able to influence the context in which it

took place, by changing the surrounding socio-economic and legislative environment (it was a

“trait making” project in Hirschman’ s words). The project, however, had limited forecasting

capacity on some environmental issues. Although these issues could have been foreseen

upfront, nevertheless they were not properly taken into account during the project design. As

a result, the original alignment of the motorway was subjected to continuous revisions in the

course of implementation. The construction of additional structures was therefore needed,

leading to additional construction costs and delays during implementation. Fortunately, the

project’s design was flexible enough to allow it to “slip” in one direction or another according

to the needs of the context. In the face of the design weaknesses, the project manager

(demonstrated good managerial response to unforeseen events, by revising promptly the

project, adopting collaborative cooperation with the stakeholders concerned (environmental

and archaeological organisations).

Overall, the project’s governance was the dimension which most affected the performance of

the project, providing a mixed contribution. On the one hand, it made possible to overcome

the weaknesses in project design and forecasting capacity. In this regard, a key role was played

by the European Commission which improved the project design by bringing it into line with

EU priorities for Trans-European Networks. A significant contribution was also made by the

environmental and archaeological organisations, which contributed to improving the

alignment of the motorway in order to minimise its impact on the landscape. On the other

hand, the governance was less effective in implementing all the measures needed to ensure

the project’s sustainability. The main responsibility in this regard lies with the Greek State,

which delayed the introduction of tolls, despite the (soft) pressure carried out by the European

Commission.

As for future developments, operation and management of Egnatia is expected to be given in

concession to a private operator. However, there is still uncertainty about the concrete

specifications and the timing of the concession. The impacts of a private management (likely to

5

increase the toll prices) and the introduction of an electronic toll collection system should

improve the revenues and the sustainability of the project and, in turn, help the Greek

Government in repaying the loans contracted with the banks and the EIB.

Four interesting lessons can be learnt from the analysis of the project performance.

First, the Egnatia motorway is an example of a mega-project involving a large number of

stakeholders. The common tendency in these projects is to avoid negative reactions from them

so that the final decision is taken only after the completion of long consultation. This tendency

can, however, lengthen the process, producing delays in the implementation with negative

effects on investment costs. In general, the shorter the decision-making process is, the easier it

is to avoid cost overruns, although the interests of some concerned stakeholders might not be

protected adequately.

Second, the establishment of an independent agency for the purposes of project construction,

operation and maintenance and monitoring is an efficient solution for the realisation of the

project and the management of national and European funds.

Third, the political dimension is never aside when dealing with large infrastructure projects,

which depend upon strong political commitment. However, projects should not become a

means for political visibility and consensus building. As demonstrated by the Egnatia

motorway, the policy to delay the introduction of the toll system so as to protect the

consensus jeopardised the financial sustainability of the project.

Fourth, the European Commission can play a strategic role in the project it co-finances. Far

from being a mere funding provider, it can attach to the provision of funds conditionalities

which will improve the quality of the project design and preparation, especially by putting the

project into a wider European perspective.

6

7

1 PROJECT DESCRIPTION

The project under assessment concerns the construction of the Egnatia motorway which links

the Western and Eastern borders of Northern Greece by crossing five regions: East Macedonia

& Thrace, Central Macedonia, West Macedonia, Epirus and Thessaly. Before describing in

details the key features of the motorway, the service delivered and its current performance

(Sections 1.3 and 1.4), some information on the socio-economic context and on Greece’s

transport infrastructure endowment, which is important for understanding the project and will

be recalled throughout the case study, is provided in what follows.

1.1 CONTEXT

Located at the crossroads of three continents (Africa, Europe and Asia), Greece is one of the

most peripheral countries of the Union with no common borders with other European Union

(EU) countries, other than with Bulgaria. However, as a result of the new geopolitical centre of

gravity of EU-27 moving towards the East3, it holds a strategic position to act as a transport

node connecting the Balkans, the Black Sea basin and the South Mediterranean to the rest of

Europe.

Figure 1.1 THE GEOGRAPHICAL POSITION OF GREECE

Source: Authors’ elaboration based on http://www.banknoteworld.it/greece.htm

Greece is characterised by a fragmented physical and economic geography, due to the

existence of hundreds of inhabited islands and the limitations imposed by its mountainous

3 The process of EU enlargement is moving towards the Balkans peninsula. Croatia completed accession negotiations on 30 June

2011 and on 9 December 2011 signed the Treaty of Accession to become the 28th member of the Union. The ratification process, by the Parliaments of all 27 EU member states, is expected to be concluded by the end of June 2013. Therefore, the accession of Croatia to the EU is expected to take place on 1 July 2013. FYROM, Montenegro, and Turkey are recognized by the EU as official candidates for membership while the remaining western Balkan States of Albania, Bosnia-Herzegovina and Kosovo are recognized as potential EU candidates.

FYROM

8

territory4. In the centre of the country lies the Pindus, a chain of mountains with a maximum

elevation of 2,637m, populated by fauna and flora of particular environmental relevance, the

most important being the brown bear (whose habitat is particularly located in the area of

Panagia, West Macedonia). The Pindus is also one of the most seismic areas of Greece5,

including geological formations responsible for frequent landslides6.

From 1st January 2011, in compliance with the Kallikratis plan (Law 3852/2010)7, the

administration of the Greek territory was drastically overhauled. The former system of 13

regions, 54 prefectures and 1,033 municipalities and communities was replaced by 7

decentralized administrations, 13 regions and 325 municipalities in order to reduce costs and

streamline the bureaucratic structure of the country. The new decentralized administrations

are shown in the Figure below.

Figure 1.2 PHYSICAL AND POLITICAL MAP OF GREECE

Source: Authors’ elaboration based on http://danielgobert.free.fr/serbia/greece1.htm

Population and economic activities are largely concentrated in metropolitan areas8, including

Athens and Thessaloniki, which account for approximately 4 million and 1 million inhabitants

respectively9.

4 It extends over a surface of 131,957 km² and consists of three main areas: the mainland; the Peloponnese, a peninsula connected

to the Southern tip of the mainland through the Isthmus of Corinth; and around 2,000 islands in the Aegean and Ionian seas, of which only approximately 165 are inhabited. 5 Greece records the highest level of seismic activity in Europe, and is an area where the geology is young and dynamic.

Earthquakes in this country are typically shallow with focal depths of less than 18 km and magnitudes up to 7.5 on the Richter scale. The Greek seismicity is due to the fact that most of the territory is contained in a "box" of fault lines running in different directions and to the presence of active volcanoes, especially the Nysiros Volcano (located in the Aegean Sea). 6 According to a study carried out specifically for the purpose of the Egnatia motorway’s implementation, most important

landslides are related to “tectonic formations” which have developed over the years. These latter consist of shales and pelites, containing detached blocks of limestone and deep sea sediments. Mechanically these materials behave differently in dry and in wet conditions. In dry conditions they behave like a rock, while in wet conditions they rapidly lose their cohesion and their original structure, behaving like a sutured soil and causing landslides. See Christaras B. et al. (1997). 7 http://www.delino.gr/N38522010_KALLIKRATIS_FEKA87_07062010.pdf, available only in Greek.

8 Greece's total population in 2001 amounted to 11,309,885 inhabitants, which represents approximately 2.3% of the EU-27 total

population8. According to the World Bank database, annual population growth is slow but constant (an average of +0.35% per year

http://www.delino.gr/N38522010_KALLIKRATIS_FEKA87_07062010.pdf

9

From the economic point of view, the tertiary sector is the leading sector in the Greek

economy, employing 70.1% of workforce (while 18.2% is employed in the secondary sector

and 11.7% in the primary10) and contributing 78% of Gross Value Added (GVA)11. According to

EUROSTA, the Greek economy grew at an average annual rate of 4% from 2004–2007 and 2%

during 2008. Then, as a result of the word financial crisis, the national budget deficit and

government debt12, it started to contract, by 2% in 2009, 4% in 2010, and 5% in 2011. In order

to recover from recession, the Greek government, under intense pressure from the European

Commission and other International stakeholders (International Monetary Fund and

Eurogroup), has adopted an economic adjustment programme that includes cutting

government spending, reducing the size of the public sector, reducing tax evasion, reforming

the healthcare and pension systems, and improving competitiveness through structural

reforms to the labour and product markets13.

Regional disparities in terms of economic development and income distribution are significant.

The two metropolitan centres of Athens and Thessaloniki are the richest and most developed

areas, while all the other regions, especially the mountainous areas and the peripheral islands,

lack the critical mass in terms of size, population, production, technological capital, and

administrative structures to develop and converge with the richest parts of the country. As a

result, the contribution of these regions to the overall development of the country is very low.

According to Eurostat data, the lowest per head Gross Domestic Product (GDP) is recorded in

Eastern Macedonia & Thrace and in Western Greece (PPS per inhabitant EUR 16,600 and EUR

18,200, and about 5.8% and 6.4% of the country’s total GDP, respectively), while the highest is

in Attica (PPS per inhabitants EUR 28,200)14.

1.2 GREECE’S TRANSPORT CONNECTIONS

The morphology of the territory and the large number of islands have led to the development

of a wide network of ports and airports. In particular, with a coastline of 15,021 km Greece has

1,33415 ports, of which 140 are counted by the Hellenic Ministry of Mercantile Marine as major

ports16. Among these, the ports of Piraeus and Thessaloniki handle the largest volume of traffic

in Greece. According to Eurostat data, Piraeus is the top container port in Eastern

Mediterranean and is one of the top twenty ports for container traffic in Europe.17 As far as air

between 2000 and 2010) and the population density in 2010 was 87.81 inhabitants per km². However, almost two-thirds of Greek people live in urban areas. 9 Other important urban centres are Patras, Heraklion, Larissa, Volos, Rhodes, Ioannina, Chania and Chalcis, with urban

populations above 100,000 inhabitants. 10

Eurostat data, 2010. 11

Hellenic Statistical Authority, 2010, http://www.statistics.gr 12

According to Eurostat data, in 2009 the government gross debt was equal to 129.3% of GDP, the highest in Europe. It increased to 144.9% and 163.7% in 2010 and 2011 respectively. 13

The programme has been subjected to five reviews. The latest dates back to October 2011. To support the Greek government's efforts to get its economy back on track, euro-area Member States agreed on 2 May 2010 on a three-year programme, providing a total of EUR 80 billion in bilateral loans. The financial assistance agreed by euro-area Member States is part of a joint package, with the IMF financing an additional EUR 30 billion under a stand-by arrangement. On 21 February 2012, Eurogroup agreed on second bail-out programme for Greece to the value of EUR 130 billion, in exchange for a drastic economic reform programme. 14


ECORYS Netherland BV (2006). 16

ABI/INFORM Trade & Industry, 2010. 17

Eurostat, 2010. Piraues accounts for a volume of 1.4 million Twenty-foot Equivalent Units (TEUs).

http://www.statistics.gr/

10

transport is concerned, Greece counts 39 airports18 but 85% of total air traffic is served by five

major airports, namely Athens, Thessaloniki, Heraklion (Crete), Rhodes and Corfu. The largest

airport in term of traffic volume is Athens International Airport which acts as a connecting

node between the airport network of Greece and South-Eastern Europe. In 2010, the total

number of passengers at this airport rose to 15.4 million19. The airports of Heraklion (Crete)

and Thessaloniki are the second and third largest, recording 5.0 and 3.9 million passengers in

2010, respectively20.

In contrast to the airport and maritime services, the railway infrastructure in Greece is modest

because of the limitations imposed by the mountain chains. In 2008 the total length of tracks

was 3,062 km21 and the rail network density was 23.4 km/1,000 km2, significantly lower than

the EU15 average (77.8 km/1,000 Km2)22. The main railway axis is Patras-Athens-Thessaloniki-

Idomeni/Promachnonas (PATHE/P), which is part of the Trans-European rail network and

connects the most economically dynamic regions of Greece, namely the wider Athens Area

(Athens – Piraeus) with Thessaloniki and Patras, the latter being one of the country’s Western

gateways to Italy and Western Europe. Another relevant rail network is the Thessaloniki-

Alexandroupoli-Ormenio line, running along the Northern part of Greece and providing

connections with Bulgaria and Turkey.

As far as road transport connections are concerned, they are more developed than the

railways but still below the endowment level of other European countries. Although a

substantial increase has been detected between 1990 and 2008 (489%), in 2008 the motorway

density in Greece was still well below the EU average, 8.57 km/1,000km² against 19.10

km/1,000km² in the EU15. The density of other roads23 also significantly increased from 1990

to 2008 (187% against 28% for the EU15) but it is still far below the EU average, 892

km/1,000km² against 1,075 km/1,000km² in the EU1524.

18

ECORYS Netherland BV (2006). 19

http://www.aia.gr/pages.asp?pageid=526&langid=2 20

Hellenic Civil Aviation Authority, (2011). www.hcaa.gr. 21


Authors’ calculation based on Eurostat data. 23

Other roads include main or national roads, secondary or regional roads and roads without a hard surface. 24

Authors' calculation on the basis of Eurostat and DG Move data.

http://www.aia.gr/pages.asp?pageid=526&langid=2

http://www.hcaa.gr/

11

Figure 1.3 DENSITY OF MOTORWAYS FROM 1990 TO 2008

Source: Authors’ elaboration based on Eurostat and DG Move data. Note: data are expressed in km motorway per 1,000 km2 land area

Besides gaps in terms of infrastructure endowment, the safety of the roads in Greece is far

below that of other European countries. Although a decrease (19.7%)25 in the number of

accident victims has been detected between 1990 and 2008, this was not enough to achieve

the road safety level in other European countries26. In 2008, Greece still accounted for a high

number of road fatalities, 138 victims per million inhabitants against 71 in the EU 15.

Figure 1.4 ROAD FATALITIES COUNTRY RANKINGS - 2008

Source: Authors based on European Union Road Federation, 2010

One of the main road connections is the Patras-Athens-Thessaloniki-Evzonoi motorway

(PATHE), a North-South axis (730 km) crossing the Regions of Central Macedonia, Thessaly,

West Greece, Central Greece, the Peloponnese and Attica (see Figure 1.5). Since the end of the

25

Authors’ calculation based on Eurostat data on deaths in road accidents per million inhabitants. 26

In 2008, Netherlands (41), UK (43) and Sweden (43) had the lowest number of deaths per million inhabitants.

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12

Eighties27, PATHE has been included as priority in the Trans-European Transport Network.

Substantial investments have been undertaken and are still ongoing28 in order to upgrade it to

a modern motorway of international standard. A second relevant road connection is the Ionian

Motorway which is currently under construction. It is planned to stretch along the Western

borders of the Balkan Peninsula, starting from Ioannina (Epirus Region) and ending at Rio, in

Patras (West Greece, Northern Peleponnese), after crossing the Corinthian Gulf over the Rio-

Antirio bridge. Started in 2006, works are expected to be completed by the end of 2013.

Finally, there is the Egnatia motorway, which is the object of the present evaluation and of

which a detailed description is provided in Section 1.3.

Figure 1.5 THE MAIN ROAD AXES IN GREECE

Source: Authors based on Egnatia Odos Observatory, 2006

From a European perspective, Greece is among the countries with the lowest accessibility by

rail and road, although some improvements were made between 2001 and 2006. According to

the ESPON study29, the highest relative accessibility gains by rail were achieved in the central

Regions (25% to 30% compared to 2001 values) while the lowest can be found in the sparsely

populated areas of the Northern Regions and Aegean Islands30. This is mainly explained by the

implementation of the railway axis PATHE/P, started during the 2000-2006 programming

27

First European Community Support Frameworks (1989-1993). 28

The sections along the Malian Gulf and Tempe Valley are expected to be completed around 2012. 29

ESPON, 2009. 30

The relative improvement ranges from 0.1% to 10%.

13

period and still ongoing. As far as road accessibility is concerned, major improvements have

occurred in the Northern Regions as a consequence of the new motorway investments during

this period, including the Egnatia motorway with its complementary vertical axes (see

following sub-section).

1.3 STRUCTURAL FEATURES AND SERVICE DELIVERED

The Egnatia motorway is a high-speed four-lane motorway with a length of 670 km and a width

of 24.5 m (or 22 m along mountainous adverse sections). It has two traffic lanes and a hard

shoulder per direction31, a central reserve separating the two directions and an emergency

lane. From its starting-point at Igoumenitsa (Epirus Region), the Egnatia motorway runs

through the Prefectures of Thesprotia, Ioannina, Grevena, Kozani, Imathia, Thessaloniki,

Serres, Kavala, Xanthi, Rodopi and Evros, to the village of Kipoi on the Turkish border. In total,

it crosses five Greek regions: East Macedonia & Thrace, Central Macedonia, West Macedonia,

Epirus and Thessaly. These are the most mountainous regions in the country and account for

50% of the national territory, 36% of the national population and 33% of the national Gross

Domestic Product32.

Figure 1.6 PREFECTURES AND CITIES CROSSED BY THE EGNATIA MOTORWAY

Source: Egnatia Observatory

Along the path of the Egnatia motorway, there are 73 twin‐bore tunnels (totalling about 50

km), of which 15 are classified as long tunnels, with lengths ranging from 800 m to 4.6 km. The

longest tunnels are located in the Regions of Epirus, Central and Western Macedonia where

the motorway crosses the Pindus Mountains (see Table below).

31

The only exception is represented by a 45 km section (Kidli – Thessaloniki – Derven) that has three traffic lanes and a hard shoulder per carriageway . 32

Egnatia Odos Observatory, 2012.

14

Table 1.1 LONG TUNNELS ON THE EGNATIA MOTORWAY

Region Tunnel name Length (m)

Epirus Dodoni 3,350

Epirus Driskos 4,590

Epirus T8 2,635

Epirus Krimnos 1,080

Epirus Neo Anilio 2,135

Epirus Metsovo 3,550

Thessaly Panagia 2,700

West Macedonia Syrto 1,500

West Macedonia Koiloma 1,080

Central Macedonia S10 (Kastania) 2,240

Central Macedonia Paggaio 1,100

Source: Egnatia Odos

About 40 km of the motorway consists of large structures, such as bridges or over/

underpasses. There are 1,856 highway structures (including 646 bridges) with lengths varying

from tens of metres to over 1 km. Of these, 259 are bridges, 170 overpasses, 280 underpasses,

and 1,210 small culverts (with a span up to 6 metres). Of particular interest are the structures

in the regions of Epirus and West Macedonia. Compared to the rest of the axis, the bridges in

the Region of Epirus have notable features, such as lengths of 1,000 metres, individual spans of

up to 235 metres and pier heights of 110 metres33. All bridges have been constructed using

reinforced or pre-stressed concrete and various construction methods34. Moreover, they have

been designed on the basis of German DIN Standards, except for seismic loading where the

European Standards (i.e. Eurocodes) have been adopted35. Five wildlife underpasses and one

green bridge have been constructed in Western Macedonia. These allow crossings by large

mammals, such as the brown bear but also foxes, wolves, hares, deer and wild boar. A detailed

description of the motorway’s features in each region crossed is provided in Table 1.2.

The Egnatia motorway is connected to the rest of Greece via the PATHE motorway and the

Western axis of the Ionian motorway (at the A2- Ioannina interchange), and with the islands of

the Aegean and Ionian seas through sea corridors starting from the ports of Alexandroupoli,

Kavala, Thessaloniki, and Igoumenitsa. Moreover, it links six airports36 and serves several

industrial zones37 and tourist areas38. In the North-South direction, it is complemented by 9

vertical axes, with a total length of about 658km, connecting Greece with the Balkan and

European countries. Most of the vertical axes are part of the Pan-European Corridors, namely

33

For instance, Arachthos Bridge with a length of 1,000 m is the longest bridge on the Egnatia axis, whilst Metsovitikos and Votonosi bridges with a span of 235 m are among the bridges with the longest spans in Europe. All these infrastructures are located in the Epirus Region. 34

These include voided slabs, box girders, precast beams, balanced cantilever, incremental launching and travelling formwork. See Konstantinidis, D. and Antonique, F., (2010). 35

The Eurocodes are a series of 10 European Standards, EN 1990 - EN 1999, providing a common approach for the design of buildings and other civil engineering works and construction products. 36

Ioannina, Kastoria, Kozani, Thessaloniki, Kavala and Alexandroupoli. 37

Ioannina, Florina, Edessa, Thessaloniki, Kilkis, Serres, Drama, Xanthi, Komotini, Alexandroupolis. 38

In total, it passes near 332 towns and villages, of which 30 are tourist or otherwise special locations.

15

Corridors IV (Vienna-Thessaloniki)39, VIII (Durrës-Varna)40, IX (Helsinki-Alexandroupoli)41 and X

(Berlin-Thessaloniki)42. They are national motorway roads, partly still under construction.

Finally, the Egnatia motorway is linked to the surrounding Black Sea Area though the Black Sea

Ring highway, which is a four lane ring motorway, approximately 7,000 km long, extending in

the Black Sea Economic Cooperation (BSEC) Member States43, with vertical axes to Azerbaijan,

Serbia and Albania. The Black Sea Ring Highway is currently under construction and is expected

to intersect Egnatia motorway at Alexandropoli, Komotini44.

39

Corridor IV is a multi-modal Northwest - Southeast transport link running from Dresden/Nürnberg (Germany), via Praha (Czech Republic), Wien (Austria)/Bratislava (Slovakia), Budapest (Hungary) to Romania. In Romania Corridor IV divides into two branches. The Northern branch runs from Arad via Bucuresti to Constanta at the Black Sea, the Southern branch runs from Arad via Craiova to Sofija (Bulgaria) and divides again. One of these branches runs further to Thessaloniki (Greece) and the other to Istanbul (Turkey). 40

Corridor VIII main alignment starts in the ports of Bari and Brindisi, continues to Durres and Vlore, goes through Tirana, Skopje and Sofia, then Plovdiv in Bulgaria, and ends in the Bulgarian ports of Burgas and Varna (Black Sea), thus creating a connection

between the “Adriatic Motorway Corridor”, the Adriatic branch of the “Motorways of the Sea”, and the Mediterranean Basin, on the West, with the Black Sea Pan European Transport Area and TRACECA on the East (Transport Corridor Europe-Caucasus-Asia). 41

Corridor IX main alignment starts in Helsinki, continues to St. Petersburg, Pskov/Moscow, Kiev, Chisinau/Odessa, Bucharest, Dimitrovgrad and ends at Alexandropoulis. It also include tree sub-alignment (meaning not clear). 42

Corridor X runs between Salzburg in Austria and Thessaloniki in Greece. The corridor passes through Austria, Slovenia, Croatia, Serbia, Macedonia and Greece. It is divided into four branches and the fourth runs from Veles in Macedonia to Igoumenitsa in Greece via Prilep - Bitola - Florina where the corridor meets the Egnatia motorway. 43

Republic of Albania, Republic of Armenia, Republic of Azerbaijan, Republic of Bulgaria, Georgia Hellenic Republic, Republic of Moldova, Romania, Russian Federation, Republic of Serbia, Republic of Turkey, Ukraine. 44

The Memorandum of Understanding for the construction of the “Black Sea Ring Highway” was signed on 19 April 2007 in Belgrade by the the Ministers of Foreign Affairs of the BSEC Member States and on 1 November 2008 it entered into force. A Steering Committee and Joint Permanent Technical Secretariat of the Black Sea Ring Highway were established in order to implement the project. The Secretariat is managed by the public Greek company “Egnatia Odos”. According to the Memorandum of Understanding, it has been initially decided that the Ring Highway will pass through the following cities: Tirana (Albania), Yerevan (Armenia), Baku (Azerbaijan), Haskovo, Sofia (Bulgaria), Batumi, Poti (Georgia), Alexandroupolis, Komotini (Greece), Chisinau (Moldova), Bucharest, Constantza (Romania), Novorossiysk, Rostov-on-Don, Taganrog (Russia), Nish, Belgrade (Serbia), Edirne, Samsun, Trabzon, Istanbul (Turkey), Mariupol, Melitopol, Odessa (Ukraine). However, this suggestion is currently under elaboration.

16

Box 1.2 THE VERTICAL AXES OF THE EGNATIA MOTORWAY

Looking at the figure below from a West-East direction, the nine vertical axes complementing the Egnatia motorway are: Ioanna – Kakavia (Albania-Trans-European Axis, 62km), Siatista – Ieropigi – Kristalopigi (Albania – Pan-European Corridor VIII, 72km), Kozani – Florina – Niki (The former Yugoslav Republic of Macedonia, FYROM - Pan-European Corridor X, 98km), Thessaloniki – Evzoni (FYROM-Pan-European Corridor X, 78km), Thessaloniki – Serres - Promachonas (Bulgaria – Pan-European Corridor IV, 96km), Drama – Nevrokopi – Exochi (Bulgaria-Trans-European Axis, 54km), Xanthi – Echinos (Bulgaria -Trans-European Axis, 50km), Komotini – Nymphea (Bulgaria-Pan-European Corridor IX, 25km), Ardanio – Ormenio (Bulgaria – Pan-European Corridor IX, 124km).

Started in 1997, the construction works for the vertical axes have not been completed yet. Five45 of them are under the supervision and management of Egnatia Odos S.A, the same company responsible for the management of Egnatia motorway. Of these, three are almost complete while the other two have only recently been designed, in 2006 (Komotini –Nimfea and Xanthi–Echinos). As for the remaining four axes, they are being built and managed under the supervision of regional administrations, with the exception of Kozani–Florina–Niki, for which the involvement of Egnatia Odos. is envisaged on the section Florina-Niki. With regard to the remaining three axes managed by regional administrations, it is worth noting that two - Ioannina–Kakavia in the West and Drama-Exhochi in the East, overlooking the port of Kavala - were old roads which have recently been improved, while the section Klidi–Evzoni (vertical axis Thessaloniki–Evzoni) is part of the PATHE motorway and is still under construction.

Five of the nine vertical axes of the Egnatia Motorway are on the list of the Greek Priority Projects co-funded by the Structural Funds and Cohesion Fund in National Strategic Reference Framework (NSRF) 2007-2013. In particular, four of the five are under the Operational Programme (OP) Accessability, namely: Komotini – Nymfea, Thessaloniki - Serres – Promachones (parts Lachanas - Α/Κ Christou & Κ. Ampela –Α/Κ Petritsiou), Siatista – Ieropigi – Kristalopigi (part Koromlla – Ieropigi – Kristalopigi), Kozani – Florina – Niki (part Florina – Niki); while Ardanio – Ormenio (section Ardanio - Mandra & Mandra –Psathades) is under the OP East Macedonia &Thrace. All the projects are in the implementation phase unless Koromlla – Ieropigi – Kristalopigi and Florina – Niki which are still in the contracting phase. Even if some delays and cost overrun have occurred, the estimated completion date is, for all the projects, the end of 2014 except for Komotini – Nymfea, which is estimated to be finalized by the end of 2013, and Ardanio - Mandra & Mandra –Psathades, which will be completed by the end of 2015.

Source: Authors based on different sources46

45

Siatista-Ieropigi-Kristalopigi, Thessaloniki-Serres-Promachonas, Xanthi-Echinos, Komotini-Nimfea, Ardanio-Ormenio. 46

Egnatia Odos Observatory, 2005 , interview and http://www.espa.gr/en/Documents/PriorityProjects/ypaan_120116_espa_projects_EN.pdf

17

Table 1.2 KEY FEATURES OF THE EGNATIA MOTORWAY BY REGIONS CROSSED

Region Section Description Main structures

Epirus 123 km from Igoumenitsa Port to Panagia

Four-lane motorway, with a cross section width of 22 m, two traffic lanes and a hard shoulder per direction and a central reserve separating the two directions.

Twin bore Dodoni tunnel, 3.3 km long (per carriageway);

Twin bore Driskos tunnel, 4.5 km (per carriageway) which is also the Egnatia Motorway’s longest tunnel;

Twin bore Metsovo tunnel, 3.5 km long;

Metsovitikos and Arachthos river bridges.

Western Macedonia

110 km long from Panagia to Polymylos

Four-lane motorway, with a cross section width of 24.5 m (or 22 m along mountainous adverse sections), with two traffic lanes and a hard shoulder per direction and a central reserve separating the two directions.

Dual-carriageway bridges of a total length of 10 km (5 km per carriageway) and twin-bore tunnels of a total length of 22 km. Five wildlife underpasses and one green bridge.

Central Macedonia

191 km long from Polimylos to Strimonas

Four-lane motorway, with a cross section width of 24.5 m (or 22m along adverse mountainous sections), with two traffic lanes and a hard shoulder per direction and a central reserve separating the two directions. At section Klidi-Thessaloniki-Derveni, which has a length of 45 km, it becomes a six-lane motorway with three lanes and a hard shoulder per direction. Here, there is a common section of 25 km with the PATHE motorway.

Bridges of a total (approximate) length of 7 km and tunnels of an approximate length of 18 km, as well as a great number of junctions and major structures. This section includes the Kastania bypass which extends from Polymylos to Veria, with a total length of 26 km.

East Macedonia & Thrace

246 km long from Strymonas to Κipi (Evros)

Four-lane motorway, with a cross section width of 24,5 m (or 22 m along adverse mountainous sections), with two traffic lanes and a hard shoulder per direction, and a central reserve separating the two directions.

This section includes a great number of bridges, of a total length of approximately 18 km (measured as a single carriageway) and a great number of tunnels, of a total length of approximately 12 km (measured as a single bore). Moreover in the section from Hrysoupoli IC to Vaniano IC (a length of approximately 17km) the alignment crosses Nestos biotope, an area protected by the Ramsar Convention47.

Source: Authors’ elaboration based on Egnatia Odos website

47

The Nestos biotope is the area along the Nestos River which represents the boundary of East Macedonia and Thrace. It presents uniform environmental conditions and provides habitat for a specific assemblage of plants and animals. The area is protected by the Ramsar Convention, an international treaty which came into force in 1975 for the conservation and sustainable utilization of wetlands. The inclusion of Nestos biotope in this convention is due to the fact that 4 out of the 11 Greek wetlands of international importance are in this area.

18

1.4 CURRENT PERFORMANCE

The Egnatia motorway was constructed between 1997 and 2009 under the supervision of

Egnatia Odos.48. In 2000, the first 125 km were opened to traffic and by the end of 2004, 407

km out of 670 km became operational. To date, driving is allowed along the entire length of

the motorway, with the exception of a 1 km section in the Region of Epirus which is still closed

because of landslides occurring in that area. As a consequence, traffic is diverted to the old

road network, which is just beside the Egnatia motorway.

Since 2004, the performance of the motorway in terms of traffic volume, environmental and

spatial impacts has been monitored and supervised by the Egnatia Observatory, a permanent

department of Egnatia Odos (see Box 1.2 and Section 3.3).

Box 1.3 EGNATIA ODOS AND ITS OBSERVATORY

Egnatia Odos S.A. is a legal entity governed by private law in the form of a Public Limited Company (the French acronym for Société Anonyme is used in Greece), with the Greek State (Ministry of Infrastructures, Transport and Network49) as the only stakeholder. It was created in 1995. In February 1997, it took responsibility for the design and construction, maintenance and usage of the Egnatia motorway and some of its vertical axes50. It is managed by a seven-member Board of Directors and its organisational structure consists of five administrative divisions, including i) Project construction and design, ii) Project Planning and Monitoring & Financing, iii) Operation & Maintenance Division, iv) Service Support (e.g. project Monitoring), and v) Road Safety Works Directorate. Under the Service Support division, there is a permanent department – the Egnatia Observatory – in charge of studying the spatial and environmental impacts of the motorway and its vertical axes system in Northern Greece. It was created in 2003 by Egnatia Odos thanks to a co-funding contract signed with DG Energy and Transport in the amount of EUR 295,000 (negotiations started in 1999). It is the only example of a transport observatory in Greece with a permanent organisation and operation. The Observatory activity mainly consists in the monitoring of three groups of indicators: Socio-Economic, Environmental, and Transport. In total, there are approximately 50 indicators that are updated and appropriately adapted according to scientific and operational requirements. Depending on the subject of the monitoring and on the geographical span involved, the Observatory produces research studies focused on four Zone of impacts: i) Zone I – Axis Zone: 500-1,000 metres on either side of the axis; ii) Zone II - transit of the axis: Prefectures crossed by the axis (11 prefectures); iii) Zone III - transit of the vertical axes: Prefectures crossed by the vertical axes (13 Prefectures); iv) Zone IV – the Regions crossed by the motorway.

Source: Authors

According to data provided by the Egnatia Observatory, the traffic volume in 2011 amounted

to 2,783 million vehicle-kilometres (Figure 1.7). Overall traffic has increased by 64% since the

opening of the first section in 2000, with an average annual growth rate between 2000 and

2009 of +5.4%. After a systematic increase in traffic volumes up to 2009, the trend has been

reversed in recent years, with a decrease of 2% in 2010 and of 10% in 2011. This negative

48

The Greek acronym used to identify a anonymous society is A.E., which stands for Anonymi Etairia. However, the Greek law admits also to use foreign acronyms, for instance the French S.A. (for Société Anonyme) and the English P.L.C. (for Public Limited Company). Usually, the French S.A. is more used than the English P.L.C. since the latter one creates more confusion on which law is applicable. 49

Egnatia Odos was under the superintendence of the Ministry for the Environment, Physical Planning and Public Works until 2009. Following the election victory of the Panhellenic Socialist Movement on 4 October 2009, the ministry was split into Ministry for the Environment, Energy and Climate Change, while its Public Works sector was merged with the Ministry for Transport and Communications to form the Ministry of Infrastructure, Transport and Networks. 50

Egnatia Odos is responsible for the operation, maintenance and usage of the motorway for 50 years.

19

trend is explained not only by the economic crisis but also by the frequent landslides which led

to the temporary closure of some sections of the motorway, as well as by the introduction of

the tolls in 2010.

Figure 1.7 VEHICLE-KILOMETRES TRAVELLED ALONG EGNATIA

Source: Egnatia Observatory, INDEX TRA07

Considering the various sections, the highest traffic volumes in the last 7 years have been

recorded on the central sections of the motorway (Veria–Thessaloniki–Asprovalta) and

especially along the interchanges of Kalochori and Serres, in the outer area of Thessaloniki51.

These sections serve both West-East long distance traffic and urban and inter-Prefectural trips

having Thessaloniki as their main nodal point. Most trips are daily movements, including a high

proportion of commuters52.

Composition of traffic on the Egnatia motorway is relatively stable. Most vehicles (about 85%)

are private cars, while the remaining 15% are heavy goods vehicles. As far as passengers traffic

is concerned, data shows that in 2011 users per day on the motorway ranged from 9,000

(Eastern and Western sections) to over 110,000 (in the outer-Thessaloniki sections)53. High

mobility is recorded also from and to the Northern border through the vertical axes. Findings

from an origin-destination survey in ten cross-border stations54, undertaken in 2009, indicate

that the average daily traffic per typical weekday crossing the Greek borders amounts to

22,467 vehicles and 50,514 passengers. This figure represents a significant increase

(approximately 90%) of the average trips per day if compared to 2005. The highest traffic

volumes (60%) are recorded at the border stations of Evzoni and Promachonas (Central

51

Egnatia Odos Observatory, 2012. 52

Egnatia Odos Observatory, April 2009. 53


The origin-destination (O-D) survey was conducted by Egnatia Odos in the 10 border stations of Northern Greece under the supervision of the Egnatia Motorway Observatory, in cooperation with the Department of Traffic of Egnatia Odos. These ten stations serve all road-based cross-border movements in Greece. The survey took place in spring-summer 2009, on the completion of the Egnatia Motorway, when large parts of the vertical axes were also open to traffic. Source: Fourkas, V., at all, 2010.

0

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Miio

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20

Macedonia) and are largely represented by passenger vehicles (74.2%), while 20.1% are trucks

and 5.7% buses and taxis55.

Travelling from one side of the Egnatia motorway to the other takes six hours and ten minutes

(from Igoumenitsa to Kipoi) at the allowed speed of 120 km/h. Six toll stations, a twin service

area and eight twin and two single rest areas are provided along the motorway. Opened

between 2010 and 2011, the toll stations are not located at all motorway’s interchanges

(about 63), meaning that vehicles can enter/exit the motorway by intermediate junctions

without being charged (see Figure 1.8). As far as the toll is concerned, vehicles pay a fixed

amount regardless of the number of km travelled. The toll is equal for all the stations, except

for Nea Malgara56station, which is shared with PATHE motorway and has a higher toll than at

the other stations.

Table 1.3 TOLL FARE BY CATEGORY AND TOLL STATION

Egnatia toll stations57 (EUR)

Nea Malgara toll station (EUR)

light vehicles 2.0 2.80

motorcycles and tricycles 1.40 2.00

carriers and vehicles with 2 or 3-axles and busses 5.00 7.00

trucks and other vehicles with 4 or more axles 7.00 10.00

Source: Egnatia Odos website and from the newspaper Agelioforos, Dec. 9, 2011

From April 2012, tolls are expected to increase by 20% as a result of a joint decision of the

Ministry of Infrastructures and the Ministry of Economy58 and an additional station in Paggeo

(Kavala, East Macedonia & Thrace) will be the last one to be opened59. These toll stations are,

however, only a temporary solution which will be replaced within the next two years by an

electronic system, according to which drivers pay for the kilometres they travel without

stopping at any station. The competition for its assignment is under way60.

The only opened service station is located in Platanio, (Imathia, Central Macedonia). However,

five more double stations (one on each side of the road) and 4 single service stations are

expected to open during the coming months.

«Egnatia Odos vice-president and consultant, Mr. Tsaklidis, stated that the company is ready to award the service stations’ projects, while awaiting the “green light” from the Stabilisation Fund, as the competition phase has already been completed».

Source: Aggelioforos, Jan. 8, 2012

55

Data refer to weekday traffic. During the weekends, the share of passenger vehicles rises to 77.5%, while the percentage of the other two categories is lower. 56

Nea Malgara toll station is located in Axios-Klidi (Central Macedonia). 57

They are located at Tyria (Paramythia area of Thesprotia in the Region of Epirus), Malakasi (Metsovo area in the Region of Epirus), Polymylos (Kozani in West Macedonia Region), Analipsi (Langadas area, Central Macedonia Region) and Iasmos (Komotini, East Macedonia and Thrace). 58

Source: To Vima, Nov. 23, 2011 59

Source: Agelioforos, Dec. 9, 2011 60

Source: Ibidem.

21

Figure 1.8 EXISTING TOLL AND SERVICE STATIONS ALONG THE EGNATIA MOTORWAY

Source: Authors’ elaboration based on a map provided by the Egnatia Observatory. Note: Toll stations are represented by blue circles and service stations by red ones. Toll stations: 1=Tyria; 2=Malakasi; 3=Polymylos; 4=Nea Malgara; 5= Analipsi; 6: Iasmos

6

5

2

1

4

3

1

22

23

2 ORIGIN AND HISTORY

2.1 BACKGROUND

The need for a horizontal axis connecting the Eastern and Western parts of Greece dates back

to Romans times. The Egnatia motorway is actually a revival of the Roman road - Via Egnatia -

which connected the Adriatic coast of the Roman empire with Thrace and the Black Sea.

Starting from Durres and Avlona (Albania), Via Egnatia went through Macedonia and Thrace

and ended at Kypsela (now part of Turkey).

Box 2.1 VIA EGNATIA IN ROMAN TIMES

The Via Egnatia was built between 146 and 120 BC, initially following the traces of an older, pre-Roman road, Via Appia (ending at Brindisi) running from the Adriatic to the Aegean. Later, it was extended from the Evros to Byzantium, and eventually the name "Egnatia" was given to the entire road, i.e. from Rome to Constantinople, in honour of the Roman proconsul Gnaeus Egnatius who built it. About 800 km in length, the road had a minimum width of 10 roman feet (approx. 3m) which increased to over 5m when passing through big towns. Moreover, there was uniformity in pavement, signage, construction of army camps, stations and horse changing posts, bridges, entrances to towns and internal routes with other international roads, in Britain, Italy and Spain. Like other major Roman roads, it was paved with large polygonal stone slabs or covered with a hard layer of sand. The Romans initially used the road for military purposes, but as it became more widely used, it rapidly developed into the main road from the Adriatic to the Black Sea, competing with the traditional sea route from Italy across the Isthmus to the North Aegean and into the Black Sea. After the Roman times, the road was used as a trans-regional connection during the Byzantine and Ottoman periods as well as during the Turkish hegemony in the 18th and 19th centuries. In the late 19th and 20th centuries, as a consequence of the introduction of the motorised transportation system, the Egnatia road faded in importance since the crushed stone with which it had been built was unable to support ordinary traffic and heavy trucks.

Source: Authors61

Over the centuries, the Roman road was abandoned and a number of local and gravel roads,

providing a potential West to East access, took its place. The overall condition of these roads

was extremely poor and they were not able to support the traffic and flows of the 20th century.

Major shortcomings related to the lack of access control, so that animals and people were

allowed to cross or walk on it, together with some “structural deficiencies” including sharp

corners, steep road gradients, mountainous terrain and narrow cross sections. As a result,

traffic was fragmented, speeds were very low and travel time from East to West very long.

61

Based on Egnatia website and Guttormsen T.S., 2007.

24

Box 2.2 ALTERNATIVE CONNECTIONS BEFORE THE EGNATIA MOTORWAY

Vehicles wishing to travel from the Eastern to Western Greece had to cross two main geographical sections, driving along local and uneven roads for a total length of 850 km and a travel time of approximately 15hr. The two sections included: 1. Igoumenitsa – Thessaloniki: this is the longest section - about 465 km - for which two

alternative roads are available: i) Igoumentitsa–Ioannina–Kalampaka–Larissa–Thessaloniki: the total travel duration is approximately 8hr and 30 minutes, equating to an average speed of 55km/hr. This road crosses through the sub-section Igoumenitsa–Kalampaka (230 km), a very mountainous area with sharp corners, high gradients, a narrow cross-section of 7 m and no hard shoulder. Vehicle speeds on this section do not exceed 49 km/hr and the average travel time is approximately 5hr 30 minutes. Thereafter, it goes through Kalampaka-Larissa (85 km), a section with poor pavement conditions, no access control and passing through a number of villages. Along this section, vehicle average speed cannot exceed 70 km/hr and the average travel time is 1 hours and 30 minutes. Finally, the road carries on to the section Larissa–Thessaloniki (150 km), which is shared with the PATHE axis, and has an average travel time of 1hr and 30 minutes. ii) Igoumentitsa–Ioannina–Konitsa–Kozani–Veria, Klidi, Thessaloniki: the total travel duration is approximately 9hr, equating to an average speed of 50 km/hr. Except for the Klidi- Thessaloniki sub-section which is shared with the PATHE axis and is three plus three lanes, the section from Igoumenitsa to Klidi is mountainous with no access control, sharp corners and high gradients. 2. Thessaloniki – Kipoi: about 385 km long, the majority of this section is characterised by level or

undulating terrain. Vehicle average speed does not exceed 70km/hr and the proportion of accidents on this route is high. Only a 50km section (Strimon-Kavala coastal road) is a single carriageway expressway allowing for vehicle speeds up to 90 km/hr. The road passes through a number of cities, including Kavala and Alexandropoli.

Note: Red: Egnatia motorway; Blue: Alternative Route

Source: Authors62

The need for a modern road able to connect in speed and safety the Northern Regions of

Greece was obvious to everybody.

62

Based on Ministry of National Economy, 1995. The map was provided by Egnatia Odos Observatory.

25

“Crossing the Northern part of the country from the Aegean to the Ionian sea was quite an adventure: uphill and downhill for seven or eight hours, with sharp bends and steep slopes on a strip of asphalt clogged with lorries and toiling buses, at times funnelling through picturesque villages and crossing vertiginous mountain passes”.

Source: Polacco, F. 2011

2.2 FINANCING DECISION

The idea of a major motorway in Northern Greece dates back to the 1970s but the lack of

financial resources and technical difficulties related to the mountainous terrain prevented its

construction until 1997, and led only to the realisation of some isolated sections. A first

attempt was made in the late Seventies, when an American consulting firm financed by the

Greek Government, designed some sections of the Egnatia motorway and constructed 3.4 km

of road which comprised a tunnel in the Prefectures of Epirus. Unfortunately, this section

remained, for many years, unconnected to the existing road network because of geological

problems. Another section of 25 km in Central Macedonia, shared with the PATHE axis, was

built in the early Nineties. Both sections were entirely financed by government funds and were

designed and constructed under the supervision of the Ministry of Environment, Planning and

Public Works (MEPPW).

The push towards the realisation of the project came only in 1989-1993 with the launch of the

first European Community Support Framework (CSF)63. This generated a positive effect on the

infrastructure planning philosophy in Greece because, for the first time in its history, “the

Greek government was allowed the agility to make long term plans for the construction of

necessary infrastructure projects as funding could be secured”64. During the first CSF period,

the Egnatia motorway started to be designed by an international consortium – Barclay de

Zoete Wedd Ltd and Trademco – thanks to European support.

Originally, it was conceived as a road from Thessaloniki to Igoumenitsa following the alignment

of the old Roman road and designed as motorway only in some sections. When the project was

submitted to the European Commission at the beginning of the second CSF (1994-1999), the

Commission explicitly required Egnatia to be differently designed, following the specifications

of the Trans-European road network in order to function as collector road for transport in the

whole of the Balkans and South-Eastern Europe. The request officially came from DG XVI –

Regional Policies and Cohesion (now DG Regio) but it was discussed and agreed with DG VII –

Transport (now DG Move). The new infrastructure lent itself to being a receptive axis towards

which Pan-European Corridors could converge65. The Egnatia motorway thus acquired the

63

The CSF is the document approved by the Commission, in agreement with the Member State concerned, containing the strategy and priorities for action of the Funds and the Member State, their specific objectives, the contribution of the Funds and the financial resources. This document is divided into priorities and implemented by means of one or more Operational Programmes. (Definition derived from Council Regulation (EC) No 1260/1999 laying down general provisions on the Structural Funds). 64

Konstantinidis and Antoniou, 2010. 65

Ten Pan-European transport corridors were defined at the second Pan-European transport Conference in Crete, March 1994, as routes in Central and Eastern Europe that required major investment over the following ten to fifteen years. Additions were made at the third conference in Helsinki in 1997. Therefore, these corridors are sometimes referred to as the "Crete corridors" or "Helsinki corridors", regardless of their geographical locations.

26

status of a project of major importance in terms of development of South-Eastern Europe, and

it was included among the 14 priority projects of the Trans-European Transport Networks66.

The preparation of the country for entering the Economic and Monetary Union, the exploitation of its geographical position in the South-Eastern Mediterranean and Balkans, as well as the overcoming of barriers emerging from the national geophysical structure of the country justified the selection of specific large projects during the 1994-1999 planning period, such as the upgrading of PATHE and the construction of the Egnatia motorway.

Source: Papadaskalopoulos A. and Christofakis M., 2008

Finally, the Egnatia was designed as a motorway of international standard to be linked to the

Pan-European Corridors by means of nine vertical axes67.

Further conditionalities were imposed by the European Commission in the framework of this

project. During the negotiations preceding the adoption of the second CSF (1994-1999), the

European Commission pushed for the creation of new autonomous authorities responsible for

the construction, operation, maintenance and monitoring of infrastructure projects in Greece.

This requirement was based on the results of the ex-post evaluation of the first CSF in Greece,

indicating that “in order to implement better quality projects, there was a need to establish

specific agencies”68. Previously, planning, design and construction of transport infrastructure

were traditionally the responsibility of the Greek State in the case of major projects and the

national road network, and of the prefectural and local authorities in the case of provincial and

municipal infrastructure, respectively. As a result, project risk and the financing of transport

infrastructure were fully undertaken by the public sector. This system was leading to delays in

all phases, compared to the initial time schedules, and to cost overruns. Incomplete or

inadequate studies were resulting in changes in the budget and in rescheduling of the

implementation plan. In addition, adequate quality was not always secured69. Following the

request of the European Commission, the Greek government revised the regulatory

framework for public projects (which was confined to Law 1418/84) by issuing Law 2229/9470,

according to which legal entities governed by private law should be set for any infrastructural

project that had a budgeted cost above Grd 25 billion71. Such legal entities would be wholly

owned by the Greek State and would take responsibility for the preparation of the technical

study, the construction, maintenance and overall operation of the infrastructure project in

question.

66

The Trans-European Transport Networks are a planned set of road, rail, air and water transport networks designed to serve the entire continent of Europe. The TEN-T networks are part of a wider system of Trans-European Networks (TENs), including a telecommunications network (e-TEN) and a proposed energy network (TEN-E or Ten-Energy). The European Commission adopted the first action plans on Trans-European Networks (transport, energy and telecommunications) in 1990. 67

European Communities (1996), Decision N°1692/96/CE of the European Parliament and of the Council of 23 July 1996 on the Community guidelines for the development of the Trans-European Transport networks. Official Journal of the European Communities 39, L228, 9 September 1996, 1-104. 68

Source: Interviews. 69

Papaioannou P., Peleka M. (2006), Recent Experience on Success and Failure Stories from Funding Large Transportation Projects in Greece, paper presented at the 1st International Conference on Funding Transportation Infrastructure, Banff, Alberta, Canada, 2-3 August 2006. 70

Art 5, http://www.elinyae.gr/el/lib_file_upload/138A-94.pdf. 71

About EUR 73 million.

http://www.elinyae.gr/el/lib_file_upload/138A-94.pdf

27

Following the application of the above mentioned law, Egnatia Odos was created in 1995, as

result of negotiations between the European Commission and the Greek Government.

However, the above law was not applied systematically to all new road projects in Greece. In

fact, it was decided that the creation of an ad hoc private law body (Pulic Limited

Company/Société Anonyme – S.A.72) was not needed in the case of the PATHE motorway, since

a specific management department already existed within the MEPPW73.

For the creation of Egnatia Odos, a further requirement was added by the European

Commission. Considering that the project demanded high levels of expertise to overcome the

technical difficulties of the Greek territory, the Commission encouraged the Greek

Government to provide Egnatia Odos with international highly skilled assistance to be

incorporated into the company and to provide the necessary managerial and technical

expertise to run the project. This requirement translated into the selection of the Brown &

Root company (today KBR), which was included into the Corporate Organisation Chart with the

role of Project Manager74. Brown & Root provided its expertise not only on construction but

also on the organisation of the company and was involved in the selection of its personnel.

After the selection process, Egnatia Odos was endowed with few persons from the Greek

Ministries and a large number of highly skilled engineers recruited from the market75.

Brown & Root company provided consulting in order to organise the management system of the emerging Egnatia Odos and revise all the project’s studies, properly addressing the geological and wildlife prevention issues. It brought the needed know-how to build the motorway (new technology, new construction methods) and a very work-focussed environment to the company.

Source: Interview

Having acquired the necessary technical expertise, Egnatia Odos started to revise all the

studies carried out in the previous years and, finally, a homogeneous design of the motorway

and a new business plan were drafted and presented to the Commission in 1997 for final

approval. According to the latter, the project forecast total costs were 843 billion Grd76.

However, the project design submitted to the European Commission in 1997 was not the one

actually implemented. As will be more fully discussed in the following sub-section, many

revisions were needed in order to protect wildlife and archaeological sites, as well as to face

the geological challenges of the territory being crossed by the motorway.

2.3 PROJECT IMPLEMENTATION

Problems of a geological and wildlife nature have been faced during the implementation of the

project. These required specific studies and the use of sophisticated design methods and, in

many cases, they justified a change to the motorway alignment. One of the most controversial

phase was the construction of the Panagia-Greneva section located in West Macedonia.

72

As already mentioned, the abbreviation S.A. for Société Anonyme can be used in Greece. 73

EYDE/PATHE was the special service established by the General Secretariat of Public Works for the management of the PATHE project. 74

After six years, a second call for tenders was launched and Brown & Root won a second contract which lasted until 2002. 75

The staff totalled 283 employees, of which 65% were engineers and 35% administrative staff. 76

About EUR 247 million.

28

Discussion for the revision of the road alignment on this section started in 1994 and was

strongly supported by ARCTUROS, a Non-Governmental Organisation (NGO) established in

1992 for the protection of large carnivores both in Greece and around the Balkans. The initial

proposal envisaged cutting the brown bear habitat in the Pindus Mountains. The only

mitigation measure planned was the construction of few tunnels with 7 km total length for the

safe crossing of the bear. However, only two tunnels with total length of 1.1 km were judged

by the environmental organisations to be in an appropriate habitat location, while the rest

were unsuitably designed77. After a series of judicial actions initiated by ARCTUROS and

repeated discussions with the MEPPW (see Box below) and foreign experts78, the change of

the initial route plan of a 34 km segment in the Prefecture of Greneva was agreed. As a result,

there was an increase of the total length of tunnels and bridges (17 km against 7 km originally

planned), whilst additional structures, such as a green bridge and underpasses, were designed

in order to reduce habitat fragmentation.

Box 2.3 THE CASE OF THE PANAGIA–GRENEVA SECTION

1993: The section Panagia–Greneva was designed within the framework of a study carried out by the MEPPW.

1994: ARCTUROS formulated an official objection to the MEPPW with regard to the proposed design and asked that a solution be studied for this section.

1995: The Environmental Terms for the section Panagia-Greneva was jointly signed by the MEPPW and the Ministries of Culture and Agriculture. ARCTUROS, WWF-Hellas and the Hellenic Society for the protection of Nature appealed to the Council of State by asking that the Ministerial Decision be annulled.

1996: A special meeting took place with representatives of ARCTUROS, MEPPW and the European Commission (DG XVI) to discuss the problems concerning the area.

1997: The Council of State (Regulation n. 2731/1997) cancelled the Ministerial Decision and proposed to investigate a new solution.

1998-1999: As a consequence of the Council’s decision, Egnatia Odos implemented a new Environmental Impact Assessment (EIA) for the section Panagia-Greneva. The Study proposed variations of the design with some more corrective measure and investigated two alternative solutions. Egnatia Odos started a series of working meeting with ARCTUROS in order to agree a feasible solution. The issue was discussed at the Council of Europe in Strasburg.

2000: A warning letter was sent to the Greek Government by the European Commission (DG Environment). On the 6th of April, the MEPPW and the Ministries of Culture and Agriculture approved a new Environmental Term including (just before the National Election) the request for the implementation of a monitoring and evaluation programme regarding the impacts of the project on large mammals79.

Source: Authors80

77

In particular, they were judged to be unsuitable to secure the long term survival of the indigenous bear population, as the species uses an extensive territory ranging from 150-250 km

2 annually and is characterised by daily movements of up to 15-20 km.

The main risk put forward concerned the isolation of the bear population in Hasia mountain, thus inhibiting the expansion of the species to the East and limiting their gene exchange. See Georgiadis at al., (2007). 78

Experts in the monitoring of fauna during motorway construction were invited from Canada and Slovenia. 79

Environmental term (Art. 37): “A monitoring and evaluation programme shall be determined, regarding the impacts of the project on large mammals (mainly the brown bear) and their habitats, both during the phase of construction and operation. The programme shall be determined and promptly approved, (specifications, checking process, participation of specialized experts and services etc.)”. 80

Based on Georgiadis at al. (2007).

29

Major technical difficulties due to the geological features of the terrain were faced in the

section connecting Thessaloniki and Kavala cities (about of 100 km) and in Epirus Region. The

main problems related to the discontinuities in and quality of the rock mass which together

with rainfall were responsible for the instability of the terrain and the incidence of landslides.

In order to deal with this problem, technical solutions were studied to avoid the collapse of the

already built Kavala bypass and Ravine Bridge81.

As far as the section crossing Epirus Region is concerned, this was the most difficult to

construct from a technical viewpoint, because the area is characterized by difficult geo-

morphological conditions, with the road intersecting perpendicularly the mountains of Pindus.

This resulted in serious geological problems that to a great extent determined the alignment of

the road82. Because of frequent landslides, one km section is still temporarily83 closed to traffic,

which being diverted to the old road network.

Figure 2.1 KAVALA BYPASS AND DODONI TUNNEL

EAST MACEDONIA : KAVALA BYPASS - RAVINE BRIDGE EPIRUS: DODONI TUNNEL Source: Egnatia Odos

In several cases, the alignment of the motorway was either changed or improved because of

the important archaeological sites encountered along its route (see Box below). For instance,

the ancient theatre of Dodoni - located on the route of the Igoumenitsa-Pedini section - has

been completely bypassed by a tunnel (Dodoni tunnel). The initial alignment of the Egnatia

motorway was to pass very close to the theatre. However, the company decided to change the

road’s alignment by increasing the length of the twin bore tunnel of Dodoni by 2,700 km, so

that the road and the related traffic was not visible from the archaeological site. The

construction works of the Egnatia motorway encountered and brought to light ancient remains

(such as the town of Evoia, close to Polymylos, in the Prefecture of Kozani). More than 45

archaeological excavations were undertaken along the motorway axis at a cost amounting to

81

They concerned the reduction of the inclination of slopes, the construction of embankments and a drainage system and, the enforcement with wire mesh and rock bolts. Source: Chatziangelou and Christaras (2010). 82

Approximately 30% of the Egnatia Motorway in Epirus consists of tunnels and bridges. 83

It is expected that this section will be opened to traffic by the beginning of 2013.

30

EUR 13.5 million84. Most of these excavations were, in agreement with the Greek Ministry of

Culture, buried again to allow the construction of the motorway.

Technical adjustments to project design made during the implementation phase led to an

investment cost higher than forecast. Other external factors influenced the total project cost.

For instance, international technical specifications for tunnel safety where less strict in 1997

and significantly changed after the Mont Blanc tunnel accident in 199985.

The Egnatia motorway, eventually, cost EUR 5,475 million (in current terms), of which 43.8%

was financed by the European Commission86 and 55.3% by the Greek State partially with

European Investment Bank (EIB) loans87. More than 70% of the project’s financing occurred

during 2000-2006 programming period88, while almost 30% occurred in the previous one

(1994-1999)89. Among the cost items, the construction of bridges and tunnels (83.3%)90 and

the expropriation of the land (7.4%) were the most expensive, while project design and

management accounted for 3.8% and 5.0% of project total cost respectively. Finally, a minor

share (0.6%) was addressed to public utilities and archaeological excavations.

2.4 FUTURE DEVELOPMENTS

One of the most controversial aspects of the Egnatia motorway, as well as of its future

operation, concerns the introduction of the toll system. From the beginning, Egnatia was

conceived as a tolled motorway and ad hoc studies were carried out in order to estimate the

number and the size of the toll booth stations. Discussions about which toll system should be

adopted started in 1999 and a Master Plan was approved by the MEPPW. Given the high

number of intersections (63), many of them serving very limited traffic flow, it was decided to

reject the “closed” toll system and to adopt an “open” system (see Box below), which was

already in operation on the PATHE motorway. However, this was considered only a temporary

solution, since the aim was to implement an electronic system once the motorway was

completed. According to the original design, it was envisaged that toll stations would be

located at thirteen selected locations along the motorway and users would pay a fixed charge

regardless the length of motorway travelled91. Actually, as described in Section 1.4, six stations

are in operation while the seventh and last one is currently under construction and is expected

to be operational by the end of 2012. However, as already mentioned in section 1.4, the

84

Many architectonical ruins were found during the excavation (I-IV century A.D.), while an extended cemetery was discovered. The most important finding was the remains of a horse sled, dated back to the second half of the 1

st century A.D. Total surface of

the excavation project was more than 1,600 m2 Source: Evdomi, June 13, 2008.

85 In many cases with asphalt works prices change according to the international price of oil. Source: Interview.

86 The EU contribution amounts to EUR 2,399,271,096, of which EUR 1,572,797,552 was from the ERDF, 802,273,544 from the

Cohesion Fund and EUR 24,200,000 from the Trans-European Network. Source: Egnatia Odos. 87

Out a total of EUR 3,075,728,904 provided by the Greek State, 73% (EUR 2,240 million) was financed by the EIB. Source: Egnatia Odos. 88

During the period 2000-2006, the project’s financing amounted to EUR 4,041 million, of which EUR 2,472 million was by the Greek State, EUR 1047 million by the ERDF, EUR 25 million by the TEN and EUR 497 million by the Cohesion Fund. Source: Egnatia Odos. 89

Project’s financing during the 1994-1999 was equal to EUR 1,400 million, of which EUR 570 million was provided by the Greek State, EUR 525 million by the ERDF and EUR 305 million by the Cohesion Fund. Source: Egnatia Odos. 90

Costs for the tunnel and bridge construction depended on geological conditions. They ranged from EUR 14 to 20 million/km for twin deck bridges, and EUR 20-30 million/km for twin bore tunnels. Source: Papasiopi, Z. (2004). 91

“They had in mind 13 toll stations with a charge higher than the average observed on the existing roads”. Source: Interviews.

31

current system is expected to be replaced by an electronic toll collection system, for which a

competition was started in February 2011 using the "competitive dialogue" procedure92.

Box 2.4 THE TOLL SYSTEMS

Two basic toll systems exist at the operational level: the “closed” and the “open” system. The closed system requires full access control, with side toll stations in order to control every vehicle entering/exiting the motorway at all intersections. The system permits vehicles to be charged according to the distance travelled on the motorway. The open system is simpler. Users pay a flat charge at selected locations, regardless of the length of motorway travelled. Intermediate access could be free of charge. The major differences between the two systems are the equipment and the labour needed for their implementation, as well as the revenues. The open system requires less equipment and labour but at the same time produces less revenues.

An alternative system to the closed and open ones is the so called “automatic debiting system” (ADS). This latter is already being used in some European countries (e.g. Italy, France, Sweden, Norway) at a limited number of tool booth stations. This system is based on the use of barcodes affixed to each vehicle, to be read optically at the toll booth stations. A more advanced electronic system is the Electronic Road Pricing (ERP), which has been adopted for instance in Singapore (1998). It relies on the use of gantry systems able to capture the vehicles number plate. In EU, the system currently in place in Stockholm uses the same technology.

Source: Authors

The collection of tolls started at the end of 2010, although toll stations had been ready to

operate since 2004. There was no technical rationale for this delay, it was rather a political

decision to postpone tolling because of elections. Indeed, the decision to open the toll stations

was taken by the Ministry of Finance and the MEPPW only after severe pressure from the

European Commission and because of the necessity to repay the loans contracted with local

banks and the EIB.

«Egnatia motorway is by its nature a high cost project which demanded substantial investments during the construction phase and now requires resources for its operation. […] Greek State has a commitment with the European Union to impose tolls on the Egnatia motorway. Today we find ourselves in the unpleasant situation of receiving a letter from the European Commission claiming: “We have recommended you three times by now, you have replied three times and you have done nothing”. This is the reality. This story began in 2004.» Mr. Labropoulos statement during a press conference in 2010.

Source: Ministry of Infrastructure Transport and Networks, Press Releases, May 19, 2010

As far as the future is concerned, the Egnatia motorway is expected to be operated and

maintained by the private sector. Since Autumn 2011, Egnatia Odos has been included in the

privatisation programme of the Ministry of Finance. As a result, it is envisaged, as a concrete

possibility, that by the end of 2012 the Greek state will transfer the operation of the highway,

its maintenance and toll stations to private companies through concession contracts, while the

construction department will remain public. In this way, the functions of Egnatia Odos will

change substantially. It is expected that Egnatia Odos will retain only the construction

responsibilities, while the Operational and Maintenance Department could be closed93.

92

Competitive dialogue is a procedure introduced into the EU procurement system in 2004 to provide an improved method for awarding complex contracts, such as those for public infrastructure and major Information Technology systems. 93

This privatization is being organised by the Hellenic Republic Asset Development Fund in cooperation with Barclays Capital and Rothschild. http://www.hradf.com/en/infrastructure/egnatia-motorway

http://www.hradf.com/en/infrastructure/egnatia-motorway

32

The privatisation process started in Greece will mark a change in the construction and

management strategy for the motorways, thus aligning it with the schemes already applied in

other EU countries, especially in Southern Europe (see Box below).

Box 2.5 MAIN TRENDS IN FUNDING AND MANAGEMENT MOTORWAYS IN

EUROPE

Evidence from the literature shows that in the last decade the private sector has increased its participation in the funding and management of the motorway network in Europe. General financial restrictions on government, and particularly the need to reduce deficits, have been the main rationale for the privatization trend observed in several European countries. The private sector plays a particular role in the Southern European countries. In France, Italy and Portugal, private firms control more than three-fourths of the motorway network, while in Spain they manage one fourth. Spain has the longest history of private motorways. The first motorway in Spain was awarded to the private sector in 1967 and private firms have been seen as the natural base for toll motorways management. In France the three biggest public motorway companies, jointly holding 80% of the French network under concession (Sanef-SAPN, APPR-Area and ASF) were privatised at the end of 2005. Between 2005 and 2006, three new concessions were awarded (ARCOUR, ADELAC, and A’liénor). In Italy, the government launched a broadly-based privatisation programme in 1997 in response to the financial restrictions imposed by the Maastricht Treaty. As a result, Autostrade public company, which holds 60% of the Italian network under concession, was privatised in 1999. By contrast, one can find in Europe a group of North and Central countries (Benelux, Germany, Denmark, and Sweden) that remain reluctant to use concession contracts and tolls. Another group of countries (Austria, Slovenia, Hungary, and Norway) make use of concessions, but they have created public firms that manage such concessions and the charges to road users. Finally, there are the particular cases of the United Kingdom and Ireland. The few concessions in the United Kingdom are all privately managed. However, of those, the M6 is the only one on which users are charged direct tolls, while the rest operate a shadow toll mechanism94. In Ireland, where motorways were traditionally funded out of the budget, the government decided to increase the motorway network by introducing private participation in Build-Operate-and-Transfer schemes. Albalate et al. (2009) points out that “the recent European privatisation shows how a new mode of governance is emerging as deregulation and privatisation gain ground in public economic policy. Paradoxically, privatisation is used to solve budget constraints while retaining a large degree of capacity control and intervention”. Spain, Italy and France are presented as the best examples of how governments attempt to control markets by using strict toll regulation to accommodate the new ownership patterns. As for Spain and Italy, they have adopted the most sophisticated mechanism of price management as private management has increased. In France, each concessionaire is governed by a specific regulation for the first five years and then there is an active presence of the government on the council board of each concessionaire.

Source: Authors based on Albalate, D., Bel, G. and Fageda, X., 2009.

94

This is a way to provide subsides in which the government contributes to a specific payment per vehicles to the concessionaires.

33

3 LONG-TERM DEVELOPMENT

EFFECTS

This section presents the assessment of the long-term effects produced by the Egnatia project

under the seven categories95 identified in the First Interim Report. A summary of these effects

is provided in the following paragraph while the most significant categories are discussed in

detail, especially in terms of effects on different stakeholders and the levels at which the

effects are produced.

3.1 KEY FINDINGS

The evidence shows that Egnatia’s most significant effects are on economic growth, territorial

cohesion and endogenous dynamics.

The impact on direct economic growth is particularly strong on road users, who benefitted

from a considerable reduction in transport costs, as well as safer and more comfortable trips.

Road users are not only citizens living in the five regions crossed by the motorway (or, in other

words, the project “impact zone”), but also those from the rest of the country, mainly

connected with Egnatia by the PATHE and Ionian motorways, and from neighbouring

countries, thanks to the construction and progressive opening of the vertical axes. Thus, the

project has a relevance which is regional, national and European at the same time, as part of

the Trans-European Transport Network. The results of the Cost-Benefit Analysis (CBA) support

the findings on road users, by showing positive values for benefits such as travel time saving,

reduction in vehicle operating costs and reduced number of accidents. Results from the CBA

analysis show that EUR 292.6 million per year is the average annual benefit generated with

regard to the passengers using the motorway. For freight traffic, the average annual benefit is

EUR 133.6 million per year.

By contrast, for the producer of the service (Egnatia Odos), a missed financial profit has been

observed, as a consequence of the delayed application of the toll system. This has also

hampered the sustainability of the road so that operation and maintenance had to be provided

through external funding from the Ministry. In addition, the current prices applied, together

with the system of toll collection (the traditional system - see previous section), are just

sufficient to match to operating costs. This means that in 2012 the road will be no more than

slightly self-sustaining. In other words, the application of the toll system, as it is now, will have

a limited impact on the financial viability of the project96. With the introduction of the Gantry

system and the privatisation of the operations (which is likely to increase the level of the tolls),

95

Direct economic growth, endogenous dynamics, social cohesion, environmental effects, territorial cohesion, institutional quality, social happiness. 96

For instance a simulation has been carried out to see what would have been the effect of an earlier application of the toll from 2004 onwards, considering the road sections that were open at that time and the traffic levels recorded. The simulation shows that, given the non-completion of some key sections in Epirus region, the sustainability would have been unlikely, at least if a limited number of toll stations and low tariffs were still applied.

34

on the contrary, the expected inflows will be such to fully guarantee the project’s long term

sustainability.

Direct economic effects on road users have triggered a set of indirect and induced effects on

the Greek socio-economic substrate. Economic activities, in particular, have been affected

both negatively and positively. At local level, the construction of the motorway has led to a

loss of profits for the small economic activities (bars, restaurants, cafeterias, etc.) located

along the alternative routes from which traffic has been diverted. However, this negative

effect has been more than outweighed by the increase in trade and tourism generated at

regional (and to some extent national) level, thanks to the reduction in transport costs and

improved accessibility to areas of tourist interest. In turn, other transport modes were also

positively affected by the project, especially ports and airports physically and functionally

interconnected with the motorway. Finally, although the identification of a clear causal link is

less straightforward, wider economic effects in terms of the generation of new businesses and

changes in land-use have been facilitated by the project.

A strong positive impact has been generated in terms of territorial cohesion. The Egnatia

motorway created the necessary conditions to strengthen cohesion between the Northern

Greek regions, by mitigating the territorial isolation of borderland areas such as Thrace,

Western Macedonia and Epirus. Moreover, it considerably affected trans-border connectivity,

by shortening the journey time between border countries and Greece. At local level, significant

impacts were produced by the project, since it improved accessibility and mobility among

urban centres, directly contributing to increasing their inter-relationships. The positive impact

on inter-regional territorial cohesion has been confirmed by the interviews but also measured

by a number of socio-economic indicators.

In terms of endogenous dynamics of economic growth, the project introduced innovative

management systems to the public sector and developed know-how and expertise in road

infrastructure construction, and, in particular, in the minimisation of landscape impact.

Specifically related to this effect, there is the impact of the project in terms of institutional

quality. The organisational changes introduced thanks to the project positively affected the

overall management quality of public infrastructure projects in Greece by replicating the

experience of Egnatia Odos in other contexts. However, evidence indicates that this effect

could have been greater if the innovations introduced had been applied in a consistent

manner.

Both negative and positive effects have been generated by the project on the environment.

Negative impacts concerned the increase in air pollutant emissions and noise related to the

generation of new traffic, as well as the negative externalities usually associated with

construction of large infrastructures. However, despite the generation of these negative

effects, the overall environmental impact of the motorway is assessed as positive. This

judgment relies on the fact that the results of the measurements on air pollution and noise

emissions carried out by Egnatia are positive, and that a significant diversion of traffic from

roads going through villages and towns has been produced, meaning less congestion,

improved air quality and lower noise for the citizens of those towns. Also, mitigation measures

35

during construction have been undertaken to deal with sites of archaeological and natural

interest.

Finally, evidence on the level of satisfaction of people living in the regions crossed by the

motorway is mixed. On the one hand, a general satisfaction usually arises from significant

reductions in travel time for both business and leisure trips. Additionally, citizens have been

provided with new leisure opportunities thanks to improved accessibility to natural, historical

and tourist attractions in Northern Greece. On the other hand, a certain level of dissatisfaction

has been expressed with the introduction of tolls and the lack of an adequate number of

service stations along the motorway.

36

Table 3.1 SUMMARY OF NATURE AND STRENGTH OF IMPACTS

Strength* Level Quantitative analysis (CBA) Qualitative analysis

1. Direct economic growth +4 Local, regional, national,

cross-border

√ √

2. Endogenous dynamics +5 National √

3. Social cohesion 0

4. Environmental effects +1 Local, regional √ √

5. Territorial cohesion +5 Local, regional, cross-border √ √

6. Institutional quality +2 National √

7. Social happiness +1 Local, regional √

*-5 = very strong negative effect; 0 = no effect; 5 = very strong positive effect (the criteria considered to assign these scores are presented in Annex I).

Table 3.2 IMPACTS* ON DIFFERENT STAKEHOLDERS

EFFECTS STAKEHOLDERS

Road Users

Egnatia

Odos

Land owners

Greek State

Road Designers and Builders

Government and citizens Other modes

Local Regional National EU Neighbouring countries

Rail Air, Sea

1. Direct economic growth

+5 -3 +3 -1 +3 +1 +4 0 +2 +4

2. Endogenous dynamics +5 +5 +5

3. Social cohesion

4. Environmental effects -1 +2 +2

5. Territorial cohesion +5 +5 +3 +4

6. Institutional quality +3

7. Social happiness +1 +3 +3

*-5 = very strong negative effect; 0 = no effect; 5 = very strong positive effect, •= expected effects which did not materialise (the criteria considered to assign these scores are presented in Annex I).

37

From a time dimension perspective, most long-term effects have already stabilised and, apart

from a further strengthening, no significant changes are expected. For instance, impacts on

direct economic growth and territorial cohesion are expected to slightly increase in the future

as a consequence of the improved connectivity of the motorway with the European Corridors

via the vertical axes. While all other impacts have been already materialised and stabilised,

there is uncertainty about the impact on social happiness, which could be reduced if the tolls

are increased after privatisation of the motorway, which is a likely scenario.

Table 3.3 PATTERN OF RELATIONS BETWEEN SHORT AND LONG-RUN EFFECTS

Effect Short run

(years 1-5)

Long run

(years 6- 10)

Future years

Comments

1. Direct economic growth

+ ++ +++ Positive benefits on road users and local and regional economy have materialised gradually and has stabilised since the motorway has become fully operational. They are expected to be further strengthened in the future, as consequence of the completion of the vertical axes connecting the motorway with the neighbouring countries.

2. Endogenous dynamics

+ + + Positive effects have materialised in the short run and are mostly stabilised. No changes are expected in the future.

3. Social cohesion

No effect.

4. Environmental effects

+ + - All effects have already materialised. Negative effects associated with air quality will increase if traffic increases substantially.

5. Territorial cohesion

+ ++ +++ Improvement in terms of territorial cohesion has materialised gradually as distances between urban centres and regions have been shortened. In the future, a major impact is expected on cross-border territorial cohesion as a result of the improved connection of Northern Greece with neighbouring countries.

6. Institutional quality

+ + + Effects materialised in the short run. However, they could have been greater if the opportunities provided by the project had been applied consistently. No changes are expected in the future.

7. Social happiness

+/- +/- +/- Impacts have been mixed and may not have stabilised yet.

Note: +/- uncertain; +slightly positive; ++ positive; +++ very positive (the criteria considered to assign these scores are presented in Annex I) Source: Authors

3.2 DIRECT ECONOMIC GROWTH

Egnatia motorway contributed to Greek economic growth, most directly through cutting

journey times for passengers and freight traffic and thus reducing transport costs. Other direct

impacts on motorway users contributing to economic growth include reduced vehicle

operating costs and accidents, thanks to safer and higher quality road infrastructure. All these

effects along with the capital and operating costs of the road, and the environmental

38

externalities capable of valuation (see Section 3.3), have been used to undertake a Cost

Benefit Analysis (CBA) of the project, as set out in detail in Annex II.

Direct economic effects led to the development of some indirect and induced effects, including

increased business productivity, improved opportunities for trade and tourism, increased

accessibility and mobility, improved performance of ports and airports interconnected with

the motorway, changes in land use, and more attractive locations for business and residential

development (real estate valorisation).

In the following, a detailed discussion of these effects is provided.

DIRECT EFFECTS Completion of the Egnatia motorway resulted in a substantial saving in the time required to

travel in Northern Greece. The time-distances between cities, terminal stations and transit

centres have been decreased, on average, by 50%. Before project implementation, the trip

from one end point (Igoumenitsa) to the other (Kipoi) was about 11 hours and 30 minutes.

Now trip time is slightly more than 6 hours (Table 3.4).

In addition, significant impacts on the reduction of travel time are being generated with the

construction and progressive opening of the vertical axes connecting the motorway with

neighbouring countries.

Table 3.4 TRAVEL TIME SAVINGS

Origin Destination Before the project After the project Saving

Igoumenitsa Kipoi 11 hours, 30' 6 hours, 10' 5 hours, 20’

Igoumenitsa Ioannina 1 hour, 45' 45' 1 hour

Ioannina Thessaloniki 5 hours 2 hours, 15' 2 hours, 85'

Thessaloniki Kavala 2 hours, 15' 1 hour, 15' 1 hour

Kavala Alexandroupoli 2 hours, 20' 1 hour, 15' 1 hour, 5’

Alexandroupoli Kipoi 25' 15' 5’

Source: Authors on Egnatia Odos’ Website

In addition to travel time savings, motorway users benefit from reductions in vehicle operating

costs (fuel) and accidents which result from travelling along a shorter and safer road. Before

the opening of Egnatia, road users were obliged to travel in extremely complex and dangerous

conditions, due to the presence of an old and inadequate network characterised by narrow

roads following the conventional routes through the mountains. The best "alternative" to

Egnatia consisted of 312 km of National Road N. 6 to Larissa, 121 km of PATHE highway from

Larissa to Thessaloniki, and 379km of National Road N.2 to Kipoi, for a total of 812 km, as

compared to the 670 km of Egnatia motorway (See Box 2.2).

Under the previous conditions, vehicle operating costs were higher because of the longer trip

and the typology of the roads themselves, which required road users to travel on a less

homogenous and modern infrastructure. For example, considering a unit cost for fuel of EUR

0.09 per km for cars, a saving of about EUR 15 per vehicle has been estimated (see Annex II for

details). With the introduction of tolls from September 2010, however, the trip cost for users

39

of the motorway has increased. These tolls become, in turn, revenues of the supplier of the

service, although for the society as a whole this is a transfer payment and the benefit and cost

of the tariff cancel each other. As far as the toll is concerned, it is worth noting that the delay

in the introduction of tolls represented a lost financial profit for the Egnatia Odos.

Comparing the years before and after the project’s operation, on average, accidents have been

decreased by about 50% on the routes served by the Egnatia motorway. More specifically,

fatalities per year fell from 97 in the years 1998-99 to 49 in the years 2010-11 on the specific

route between Igoumenitsa port and Kipoi’s Greek-Turkish border station. Of these 49

fatalities, only 19 occurred on Egnatia motorway, while the remaining part in the alternative

network. In this regard, an important contribution towards the reduction of accidents along

Egnatia came from the realisation of protection from animals crossing, mistakenly not

envisaged in the project design, but later imposed after the intervention of ARCTUROS NGO,

which pressed for the revision of the Environmental Impact Assessment of the project.

At the beginning, throughout all of its length, the Egnatia motorway wasn’t surrounded by any kind of barriers to prevent animals from crossing the road. As a result, some accidents occurred, especially in the Panagia- Grevena section, and bears were killed by cars. After protests from environmental organisation and drivers, the Egnatia Odos decided to build protection barriers. The initial fencing had a height of 1.5 metres and a mesh size of 17 by 10 centimetres. However, its design was improper and as a result the initial barriers were destroyed or beaten down by brown bears. Thus, an additional fence was added later on with a single barbed wire above it and with a height of 2 metres and a mesh size of 5 by 5 centimetres.

Source: interview

While recognizing a more general trend in fatality reduction, attributable to overall safer

conditions, increased police controls and more responsible behaviours by drivers, which is not

related to the Egnatia motorway itself, it is clear that this reduction has been reinforced by the

project through diverting traffic onto a safer network. As shown in Figure 3.1, while exposure

to danger increased over the years because of the additional length of roads made available by

the Egnatia motorway, the number of fatal accidents decreased significantly, shifting from 23.4

to 5.3 fatalities per billion vehicle-km between 2000 and 2010. Thus, taking into consideration

the exposure to danger (vehicle-kilometres), Egnatia motorway is, on the average, 5 times

safer than the alternative road network. The gradual opening of sections of Egnatia motorway

to traffic and the shifting of most movements to Egnatia reduced the absolute number of

accidents and injuries on the alternative network. However, the alternative network remains

hazardous despite the reduction in traffic loads and of the absolute number of accidents. In

particular, the annual fatality indicator per vehicle-kilometre has been almost constant from

1998 to 2004, which shows how high the risk of accidents is in those roads. On the other hand,

the average gravity of accidents (number of deaths and serious injuries per accident) is higher

on the Egnatia motorway in comparison to the alternative network, as a result of the

significantly higher speeds developed on Egnatia.

For the evaluation of the reduction of accidents in monetary terms see Annex II.

40

Figure 3.1 FATALITIES (PER YEAR) AND EXPOSURE TO RISK. 2000 - 2010

Source: Egnatia Odos’ Observatory

INDIRECT AND INDUCED EFFECTS Stemming from the materialisation of the direct effects related to the improved road

infrastructure endowment, business and employment developments have been stimulated,

mainly in the project’s impact zone.

First of all, reduced transport costs have translated into improved opportunities for trade,

especially at regional and national levels. Business volumes have increased, coupled with

increased business certainty, also thanks to the new road which permits more freight trips in

less time at a lower cost.

As for the destinations of trade, origin-destination data of commercial movements (heavy

vehicles) travelling on the Egnatia motorway in 2009 shows that 71% of freight traffic was

regional or inter-regional traffic within Greece, 21% was cross-border trade (with Italy as the

leading destination), and the remaining 8% was transit.

In terms of volumes of trade, latest available data from the Observatory shows that, in 2007,

total imports in the five regions crossed by Egnatia amounted to EUR 8,667 million,

representing 18.2% of the national total. In the same year, exports reached EUR 4,552 million,

representing 33.2% of the total national. Compared to the year 2000, this represented an

increase in imports and a reduction in exports with an average percentage change of +5.5%

and -0.6%, respectively97.

97

In 2007, 71.2% of imports and 69.0% of exports in the five regions had as their origin or destination the region of Central Macedonia. In Western Macedonia, Thessaly and Epirus, an increase in exports was recorded in the period 2000-2007, with Thessaly being the leading region with an average annual growth rate of 2.42%, followed by Epirus with 2.14%. With regard to imports, a significant average annual increase was recorded in Epirus (5.91%) followed by Central Macedonia (5.24%) and Thessaly (1.36%).

23.4

13.1

16.7

10.2

8.9

6.3

10.3

7.5

8.7 8.9

5.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

5

10

15

20

25

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Exp

osu

re to

dan

ger: B

illion

veh

icle

*km

(10^

9)

Fata

l accid

en

ts p

er

10^

9 (

1 B

illi

on

) veh

icle

*km

Exposure to danger: Billion vehicle*kms (10^9)

Fatal accidents per 10^9 (1 Billion) vehicle*kms

41

Reduced transport costs have also generated improved opportunities for tourism. In particular,

the road has provided better accessibility to areas of tourist interest within the impact zone of

the motorway, as well as new holiday options for the Greek residents of the North-Eastern

regions.

Improved accessibility to areas of tourist interest has contributed to boosting the regional

tourism industry at both regional and national levels. According to data elaborated by the

Observatory, during the period 1996-2006, the supply of tourist accommodation in the

Egnatia’s impact zone has increased substantially, surpassing the average increase in the

country (+45.5%, as opposed to +14.4%). The region of West Macedonia, in particular, has

doubled the amount of tourist accommodation capacity offered, while a big increase has also

been observed in the number of hotel units in the regions of Epirus (65.3%) and Central

Macedonia (57.9%).

On the demand side, between 2002 and 2006, considering the five regions together, arrivals in

tourist accommodation establishments increased by 21.5%, as compared to 12.8% for the

country as a whole (Table 3.5). These regions also recorded an increase in the percentage of

visitors staying overnight (1.9%), as opposed to the rest of the country, where the percentage

reduced (-7.1%).

Table 3.5 ARRIVALS IN TOURIST ESTABLISHMENTS. 2000-2006

2002 2003 2004 2005 2006 Average

2002-2006

Change

2002-2006

Greece 12,392,044 12,499,809 12,131,583 13,412,596 13,982,021 12,883,611 12.83%

Egnatia Impact

Zone

2,964,820 3,093,982 2,977,012 3,476,492 3,601,014 3,222,664 21.5%

East Macedonia &

Thrace

536,610 519,946 553,246 589,664 567,407 553,375 5.74%

Central Macedonia 1,075,262 1,224,055 1,302,659 1,560,266 1,681,539 1,368,756 56.38%

West Macedonia 202,196 205,420 189,915 196,012 200,679 198,844 -0.75%

Thessaly 729,616 737,899 632,750 788,201 781,834 734,060 7.16%

Epirus 421,136 406,662 298,442 342,349 369,555 367,629 -12.25%

Source: National Statistics Service Agency, 07/2006

Besides increased accessibility to tourist areas within the impact zone of Egnatia, the reduction

in travel costs from Thessaloniki and the Greek North-Eastern regions to the port of

Igoumenitsa has also improved accessibility to the Ionian Islands for the inhabitants of these

areas, making it more convenient to take holidays there. As evidenced from the interviews,

tourism service providers on the Ionian Islands have largely benefited from the increase of

tourists coming from Thessaloniki and nearby areas.

42

Egnatia motorway “has given life” to cities like Igoumenitsa and Ioannina, increasing transit and tourism. Suddenly, all the Ionian Islands were full of tourists from Thessaloniki.

Source: Interviews

These considerations regarding about regional trade and tourism are confirmed by the

performance of the transport facilities that are functionally interlinked with the Egnatia

motorway, ports and airports, and those that are alternatives to Egnatia, such as rail.

Regarding port infrastructures endowment, there are two ports in the region of East

Macedonia & Thrace (Kavalla and Alexandroupoli), one in Central Macedonia (Thessaloniki)

and one in Epirus (Igoumenitsa). During the period 2000-2006 the number of passengers

moving via these ports has more than doubled. The port of Igoumenitsa, in particular, had the

highest number of transported passengers during the period 2000-200698 and the highest

average growth rate. As far as freight is concerned, the total volume of commercial traffic also

increased, by 13.5% in the period 2000-2006. The port of Thessaloniki had an overwhelming

lead in the volume of transported goods compared to the other ports and in the period 2002-

2005 this was reinforced. No data has been recorded for the port of Igoumenitsa by the

corresponding Port Authority (see Table 3.6).

Table 3.6 PASSENGERS AND FREIGHT PER PORT, 2000-2006

Passengers

2000 2001 2002 2003 2004 2005 2006 Total

Igoumenitsa* 1,241,916 3,857,874 3,878,558 3,736,339 2,022,981 4,839,606 5,008,740 24,586,014

Kavala-O.L.K.* 1,380,409 1,390,512 1,445,901 1,454,229 1,386,653 1,448,099 1,636,328 10,142,131

Volos (Thessaly)

368,643 366,722 356,669 382,417 364,916 377,358 406,283 2,623,008

Thessaloniki 248,429 231,580 218,032 201,282 209,066 217,538 129,684 1,455,611

Alexandroupoli 157,422 158,146 159,452 168,800 168,604 178,203 155,756 1,146,383

Total 3,396,819 6,004,834 6,058,612 5,943,067 4,152,220 7,060,804 7,336,791 39,953,147

(*) There are no available data for 2000 domestic routes and 2004 international trips.

(**) Peramoti and New Peramos ports are included, as they belong to the Organization of Kavala Port. Data for the port of N. Peranmos for the period 2002-2005 are incomplete.

Freight (tonnes)

2000 2001 2002 2003 2004 2005 2006 Total

Thessaloniki 6,476,466 5,497,793 5,349,416 5,480,272 6,354,788 6,892,413 6,743,697 42,794,845

Kavala-O.L.K.* 1,050,505 1,175,245 1,115,240 1,081,675 1,721,496 1,054,195 1,947,199 9,145,554

Volos 1,061,311 1,070,464 1,161,332 1,264,297 1,097,235 1,091,057 1,042,506 7,788,202

Alexandroupoli 298,493 281,329 289,327 500,281 652,331 346,870 355,650 2,724,280

Total 8,886,775 8,024,831 7,915,315 8,326,525 9,825,850 9,384,534 10,089,052 62,452,882

(*) Peramoti and New Peramos ports are included, as they belong to the Organization of Kavala Port. Data for the port of N. Peranmos for the period 2002-2005 are incomplete.

Source: Data from Port Organizations, December, 2007.

98

It should be noted that for this port there are no data on domestic itineraries for 2000 or for international itineraries for 2004. This explains the fall in the table depicting the traffic volumes.

43

Good performance has also been experienced by the airport of Thessaloniki, whose passengers

increased in the period 2000-2011 by 12%, in line with most airports in Europe, with a peak of

4,169,559 passengers in 200899.

By contrast, the rail network, which is an alternative to Egnatia, rather than a complementary

link, has been negatively affected, as consequence of a diversion of freight from rail to road.

Commercial traffic on rail in the period 2004-2006 was decreased in the majority of the

prefectures examined.

Finally, the new road infrastructure has further contributed to establishing the conditions to

boost entrepreneurship and productive and commercial activities (beyond trade and tourism)

in the regions crossed by the motorway. In fact, reduced transport costs have translated into

gains in business productivity, which were reflected in changes in the capacity of business (i.e.

new lands devoted to business and new enterprises created), as well as changes in land-use

and in land-value.

However, this macro effect - mainly observed at regional level - has been counterbalanced by a

decrease in profitability at local level. This consisted of lowered business volumes for the small

economic activities, such as bars, restaurants and cafeterias, located on the alternative

network, due to the reduction of traffic.

Also, the identification of a link between the new motorway and new businesses and

entrepreneurship is less tangible and clear-cut than for the other effects discussed, so that it is

not possible to infer a clear causal relationship. What seems more reasonable is to say that the

road has put on the ground some basic conditions for economic development, playing a

“favourable” role. This is supported by the quantitative evidence, discussed below, which

suggests a positive relationship between the implementation of the motorway and the

development of new businesses in the impact zone of Egnatia, although some of these might

simply have been relocated from other regions.

As shown in Tables 3.7 and 3.8 below, between the years 1998 and 2009, in the areas around

the 17 nodes (interchanges) of Egnatia motorway, nearby urban centres, there has been,

overall, a significant increase in the land devoted to business activities. The tertiary sector has

experienced the highest increase with +74% of land area.

Table 3.7 LAND AREA CHANGES BY SECTOR. 1998-2009

Sector land area 1998

(1,000 m2)

land area 2009

(1,000 m2)

land area 1998 - 2009

(% change)

PRIMARY (agriculture) 336.98 365.83 8.56%

SECONDARY (industry) 6,601.10 8,009.42 21.33%

TERTIARY (services) 3,331.54 5,808.65 74.35%

Source: Egnatia Odos Observatory

99

Source: Air Traffic Safety Electronic Engineers Association of Hellenic Civil Aviation Authority

44

Table 3.8 LAND AREA CHANGES BY ECONOMIC ACTIVITY. 1998-2009

Land-use category land area 1998

(1,000 m2)

land area 2009

(1,000 m2)

land area 1998 - 2009

(% change)

Commerce 1,598.48 3,182.37 99.09%

Industry 6,437.38 7,381.13 14.66%

Transport and logistics 439.24 772.96 75.98%

Offices (public organisations, firms’ administrations etc. )

545.12 710.86 30.40%

Tourism and leisure 122.24 211.84 73.30%

Social services 434.19 751.22 73.02%

Agriculture 336.98 365.83 8.56%

Storing 288.47 328.37 13.83%

Technical infrastructure 67.52 479.32 609.89%

Special uses (military and religious assets) 812.51 826.20 1.68%

Source: Egnatia Odos Observatory

Concerning the creation of new enterprises, a survey carried out on the 17 nodes of the

Egnatia motorway showed that businesses have increased by 41% from 1998 and 2008, in

particular new enterprises, and 5,430 new jobs were created, mostly in the tertiary sector. The

area of Ioannina experienced the highest increase (26%) in the number of new businesses,

meaning businesses established in the study areas since 1998, which have been located mainly

along the national road which intersects Egnatia motorway. The area of Komotini recorded an

increase of 14% followed by the area of Thessaloniki with 11%. This relates mostly to

commercial businesses (retail and bulky goods), which also employ the majority of persons

occupied in new businesses.

As far as the change in land use is concerned, according to a pilot study carried out by the

Aristotle University of Thessaloniki100, in the zone of Thessaloniki significant amounts of rural

and natural land have been transformed into urban land. Urban land in this zone has been

increased by 22%, while rural land has been reduced by 30%. In the areas of Ioannina and

Komotini, urban land has been increased by 12% and 8%, respectively. The most important

increase in land occupied for industrial and commercial activities, transport and other services,

has on the other hand been observed in the area of Ioannina.

Finally, impacts of Egnatia have been also reflected in the increase in the market value of land,

as recorded in the 17 interchanges between 1999 and 2009. On average, the value of land

increased by +247%, the highest changes being observed on the interchanges near regional

medium-size cities like Igoumenitsa, Veria and Kavala (see Table 3.9). In the area of

Thessaloniki the impact has been lower, although a remarkable change in market values has

been observed along the Egnatia motorway, in relation to other nearby axes. For example, the

buildings located close to the interchanges facing the motorway, have increase their value by

up to approximately 600%.

100 Aristotle University of Thessaloniki, 2008.

45

Table 3.9 REAL ESTATE CHANGES. 1998-2009

Interchange (I/C) Name

Minimum land-value 1998 (EUR/1,000 m2)

Maximum land-value 1998 (EUR/1,000 m2)

Minimum land-value 2009 (EUR/1,000 m2)

Maximum land-value 2009 (EUR/1,000 m2)

Minimum land-value change (%) 1998-2009

Maximum land-value change (%) 1998-2009

Average land-value change (%) 1998-2009

Igoumenitsa - Ladochori

4,000 10,000 12,025 72,150 201% 1,704% 618%

Ioannina 7,500 30,000 30,000 125,000 -42% 261% 152%

East Grevena 1,000 2,400 2,405 7,215 60% 381% 179%

Kalamia 400 600 962 1,443 141% 141% 141%

Kozani 2,000 12,000 1,924 16,835 -36% 141% 66%

Veria 1,500 32,000 1,924 144,300 28% 434% 326%

Kalochori K1 15,000 60,000 14,430 72,150 -40% 157% 16%

Ionia-Diavata K2

12,000 20,000 14,430 57,720 15% 221% 116%

Titan (Efkarpia) K4

15,000 60,000 24,050 96,200 -20% 381% 67%

Lagadas-Serres 1,500 15,000 14,430 33,670 11% 862% 98%

Ag. Syllas 4,000 4,000 8,658 16,835 116% 321% 231%

Lefki Ammos (Kavala)

2,000 8,000 4,810 48,100 141% 1,103% 327%

Vaniano (West Xanthi)

600 750 1,443 9,620 189% 1,824% 798%

Vafeika (East Xanthi)

800 5,000 962 12,025 -44% 702% 93%

West Komotini 900 15,000 962 60,125 -36% 1,183% 240%

East Komotini 750 16,000 900 100,000 -31% 285% 208%

Alexandroupoli 2,000 8,000 2,405 48,100 20% 742% 392%

Source: Egnatia Odos’ Observatory

3.3 ENDOGENOUS DYNAMICS

The project under assessment has introduced new management systems in the public sector

and brought new knowledge, know-how and expertise in the construction of road

infrastructure, as well as in the minimisation of landscape impacts.

The establishment of Egnatia Odos represented an innovation in the management of public

investments in Greece, since it was the first time that a State-owned company, operating

according to the rules and the “thinking” of the private sector, took on the entire responsibility

for design, planning, construction and operation of a public infrastructure.

This change translated into a new managerial asset based on the involvement of highly skilled

personnel, recruited both from the European and International labour markets, on the

adoption of new management information systems, well as on the adoption of advanced

technologies (Information and Communication Technologies - ICT). An international firm

(Brown & Root) was appointed and incorporated in the company with the role of Project

46

Manager, with a central role in decision-making and planning. For construction, the company

relied on three Construction Managers (joint ventures of foreign and Greek firms) located in

West, Central and East Macedonia. Specific units were then established within the company to

supervise the construction.

Innovative organisational schemes were also introduced, such has the hiring of national and

international design firms, to carry out jointly with the Design Department of Egnatia Odos

detailed bridge and tunnel designs. Moreover, European and International experts were asked

to provide their know-how and technical expertise to solving the engineering difficulties

encountered during the design and construction of the project because of the geological–

geotechnical features of the Greek terrain. Finally, Egnatia Odos cooperated with

environmental organisations and scientists to minimise the motorway’s impact on ecosystems.

Apart from international expertise, Egnatia Odos adopted and implemented advanced

systems, both in the design phase (e.g. electronic management system for documents and

designs) and during the project’s implementation. The biggest innovation introduced

concerned the creation of the Observatory of Spatial Impact, which is the only Greek transport

observatory that has a permanent organisation and operation. As anticipated, the Observatory

produces research studies on the impacts generated by the motorway (e.g. on traffic

development, environmental impact and social and territorial changes) and contributes to

disseminating the results achieved by taking part in national and European conferences. The

activity of the Observatory is aimed at supporting not only the management of the Egnatia

motorway but also at collecting evidence for the development of policies and programmes in

Northern Greece.

The innovative systems, technologies adopted and international expertise brought to the

project has positively influenced domestic engineers, by increasing, in turn, their knowledge

and capacities in design, construction and management of large road infrastructure. As a

result, the company has drafted, on the basis of the studies carried out in the framework of

the Egnatia project, a set of guidelines for conducting road works designs (OSMEO)101. Also, it

has undertaken management and supervision responsibility for design and construction of

other large infrastructures both in Greece and abroad102. Furthermore, the Egnatia Odos has

introduced and applied in cooperation with Greek and foreign experts the “Landscape

Guidelines”103 to lay down the obligations for designers and constructors to minimise the

impact of motorway construction on the environment. The relevance of these documents has

101

The OSMEO is a two volume document containing information on criteria, specifications, design stages for all types of construction relevant to the project. It is under constant review. Compliance of design with this document is obligatory and any deviation must be justified and approved. 102

For instance, Egnatia Odos is currently involved in the following projects: Management and Supervision Services for the road Ag. Saranta – Konispoli (Sagiada) on behalf of the Greek government and Albania; Consulting services for the design, tender documents and supervision for the roads Baia Mare – Iacobeni and Iasi – Crasna on behalf of Romanian Motorway State Company. Management of construction works of "Raches-Klidi" section which is part of the PATHE motorway. 103

Egnatia Odos has drafted a standardised document - the OSAT - which contains the design and construction requirements for environmental protection and restoration. This document is the first of its kind nationwide and was developed in order to set guidelines for all environmental issues.

47

been acknowledged by the Greek government and they have been adopted as national design

guidelines104.

During the design, construction and operation of the Egnatia project, companies involved have the opportunity to accumulate knowledge that is usually obtained at great human and financial cost. In our country, there were no companies or organisations able to capture, acquire and integrate that knowledge or with an interest in doing so. Egnatia Odos succeeded in this regard.

Source: Interviews

Finally, project research studies have been carried out by Egnatia Odos in cooperation with the

University of Thessaloniki and environmental NGOs in order to investigate the origin of the

landslides occurring in Northern Greece and the status of the brown bear population of the

Pindus mountains.

In conclusion, the positive effects generated within Egnatia Odos are many. Thanks to

improved skills and competences in design and construction of road infrastructures, the

company was able to absorb financial resources more quickly than others (e.g. department

services within the MEPPW), and represented best-practice, to be copied in other contexts105.

Box 3.1 ENHANCED RESEARCH CAPACITY IN THE FIELD OF NATURAL

HABITAT PROTECTION

One of most important achievements of the juridical discussions between the Egnatia Odos and ARCTUROS was the implementation of a monitoring and assessment programme aimed at the evaluation of the impacts of the Egnatia motorway on large mammals and their habitats with a particular emphasis on the brown bears in the segment Panagia – Greneva (in North-Western Greece). Funded by Egnatia Odos, the MEPPW and the European Commission (DG Regio), the programme started in 2003 and included three phases: a) Recording the existing situation (2003 – 2005); b) Monitoring during construction of the motorway (2005-2007); c) Monitoring during operation (2007-2009). It was coordinated by ARCTUROS in cooperation with the Environmental Department of Egnatia Odos, the University of Thessaloniki and the Hellenic Ornithological Society. The first phase of the project included surveys with different methods including bear monitoring with GPS collars, focusing on the precise movements and habitat use of the bear, wolf and bird species in an area 10-20 km zone on both sides of the road. Based on the evidence collected, proposals for the improvements of the original design of the motorway were formulated, of which those implemented were the planning of one green bridge for the crossing of large mammals as ordered by the environmental term decision and the construction of a strong fence for averting traffic accidents106. During the second phase, the monitoring of the motorway’s construction impacts on fauna and the ecosystem was performed. Finally, the third phase concerned the monitoring of the impacts of the motorway on the maximum possible spatial-time scale and the checking of the mitigation measures’ effectiveness. The research programme included the use of a series of advanced techniques and methods, such as GPS radio collars, thermo-sensitive or infrared cameras, laboratory DNA analysis of traces of biological material and the development of a Geographic Information System.

Source: Authors

104

Source: Konstantinidis and Antonique, 2010. 105

“The company was ready to submit completed and high quality designs which were ready to be implemented. National and European resources were diverted to Egnatia Odos, since it has been established that they produced results”. Source: Interview. 106

Source: Georgiadis, L. et al., 2007.

48

3.4 INSTITUTIONAL QUALITY

The organisational changes introduced by the project generated positive spill-over effects on

the Greek public administration, in terms of improved management of large infrastructure

projects. As already pointed out in Section 2.2, the establishment of Egnatia Odos represented

a break with traditional planning, design and construction of schemes which were frequently

associated with delays in project implementation, provision of poor quality infrastructure and

poor managerial assets. Other companies of public interest were set up under the same

legislative context as Egnatia Odos, following and replicating its experience, and shaped on the

same model. These companies were charged with the responsibility of construction,

management and operation of transport infrastructure projects. Specifically, the Attiko Metro

S.A. (city of Athens metro), ERGOSE S.A. (national rail network), Ktimatologio S.A. (cadastral

infrastructure) and Ypodomes Kritis S.A. (infrastructure of Crete S.A.) were set up.

However, this positive learning effect on the institutional quality of the Greek public

administration was not applied in a consistent manner, and in some cases it even represented

a missed opportunity. As stressed in Section 2.2, the upgrading of PATHE motorway, started at

the same time of Egnatia, has been directly managed by the Greek national administration,

through an already existing department within the MEPPW, without creating a Société

Anonyme. The result is that the project has not been finalised yet107.

3.5 ENVIRONMENTAL EFFECTS

The Egnatia motorway has had both positive and negative impacts on the environment. On the

one hand, the diversion of traffic from national roads passing through villages and towns to a

motorway which by-passes towns, has improved the environment for people. People now

benefit from lower congestion in towns, improved air quality and lower noise, especially

caused by heavy vehicles. On the other hand, the generation of new traffic has increased the

overall amount of emissions and noise, as compared to the situation before the intervention.

This negative impact should be added to the negative externalities usually associated with

construction (noise, dust, waste, etc.), which, in the case of Egnatia, lasted for over than 10

years, and thus cannot be considered negligible. Also, the new motorway passes through a

number of sensitive environmental and historic areas, generating a landscape impact.

However, as explained in Section 2.3, significant costs were expended to re-align the road

during construction, in order to minimise the impact on sensitive environmental areas and to

deal with archaeological sites.

The main negative impact of the road is therefore represented by the increase in Greenhouse

Gas (GHG) emissions. Measurements of air pollutants108 are carried out by the Environment

Department of the Operation & Maintenance Division of Egnatia Odos S.A, with particular

attention paid to the road sections with intense traffic flows, as well as to those running along

environmentally sensitive areas.

107

About 500 km are still under implementation. 108

The following air pollutants are measured regularly in 26 different settlements along the whole axis of Egnatia: carbon Monoxide (CO); Nitrogen dioxide (NO2); Sulphur dioxide (SO2); Ozone (O3); Benzene & ΒΤΧ; Airborne particles - PM10; Lead (Pb).

49

Results for year 2009 show that, given the existing traffic volumes, emissions of air pollutants

in the sampling day were within the limits set for all locations, with the exception of

Girokomeio, Magnisia, and Taxiarchis locations, where PM10 values exceeded the daily limit

value of 50 mg/m3. However, these negative results should be interpreted with caution,

considering that, in accordance with legislation, the limit value is a mean daily value, which

should not be exceeded more than 35 times per year. Also, as reported by Egnatia Odos, in the

period of measurement, results were affected by the transportation of dust due to an

exceptional wind coming from the Public Power Corporation plants in Ptolemaida and Kozani

areas. Consequently, measurements have been affected by exogenous factors not related to

the operation of the Egnatia motorway. Updated data on PM10109

confirms the indication of a

limited negative impact generated by Egnatia on air quality (Figure 3.2). In 2010, for example,

emissions of air pollutants on the sampling day were all within the limits set, with only one

exception for K1 measurement station, in the Prefecture of Thessaloniki, where the value is

slightly above the limit (51 μg/m3). These results are in line with the contraction of traffic

volumes which has occurred in recent years (from 2010 onwards).

Figure 3.2 RESULTS OF PM10 MEASUREMENTS 2010

Note: red line: EU limit (=50 μg/m3).

Source: Egnatia Odos, Environment Department

It is worth noting that these measurements take into account the total traffic which travels on

Egnatia. To depict a more realistic picture, and infer a more accurate judgment on the

incremental effect generated by the project, one should also consider the decrease in

emissions generated by the diversion of vehicles from the alternative network and estimate a

“net” effect. Accordingly, in the CBA analysis, unit values for negative externalities associated

with air quality are applied only to the additional vehicles that have been added on the road

network and not to former vehicles diverted from one infrastructure to another. For the

109

It identifies the material present in the atmosphere in the form of microscopic particles whose aerodynamic diameter is equal or less than 10 micrometre (uM).

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50

quantification and evaluation of the incremental negative externalities on air pollution see

Annex II, which shows, on average, that the annual social cost from increased emissions is

valued at about EUR 6.4 million.

In contrast to GHG emissions, whose impact may be even at global level as they contribute to

increasing the Earth’s temperature, to ozone layer depletion and to acidification of

precipitations, the negative impact of noise emissions depends on the population’s exposure

to noise110. Thus, given that the motorway has led to the bypass of many settlements, the

situation is now more favourable in terms of overall number of people exposed to noise. The

main negative effects have been those occurring in the inhabited areas in close proximity to

the motorway. In these areas, similarly to what was done for air pollutants, Egnatias Odos S.A

carries out systematic measurements, in order to detect the areas where an excess of

statutory limits is observed and to calculate the population exposed to noise, due to the

operation of the motorway. The results of noise counts, available for 2009 and 2010, proved

that for most of the settlements located on either side of the Egnatia motorway, noise levels

are below the statutory limits111. Consequently, the population exposed to a noise level

exceeding the statutory limits is fairly restricted. For the quantification and evaluation of the

impact of noise see the CBA Annex.

In conclusion, considering the results of the monitoring carried out on air pollutant and noise

emissions, and considering the significant diversion of traffic from urban settlements to

sparsely populated areas, as well as the mitigation measures undertaken to deal with

archaeological sites, although some additional negative effects have been generated, the

overall environmental impact of the motorway is assessed as positive.

3.6 TERRITORIAL COHESION

Developing a motorway crossing horizontally Northern Greece had a significant and positive

impact on territorial cohesion, mainly at regional and cross-border levels.

First, evidence collected confirms that the Egnatia motorway has led to improved connections

between urban centres and created new forms of spatial organisation. The reduction in

journey times directly affected the relationship between the most remote cities in the regions

of Epirus and Eastern Macedonia & Thrace with the more developed ones, such as

Thessaloniki. A study carried out by the Egnatia Observatory proves that accessibility of

remote areas has improved thanks to the project and flows of people, goods, services and

technologies between urban centres have increased. Thus, what has been positively affected is

the so-called “functional policentricity” of the area, which is measured by the frequency of

trips occurring between urban centres. As a matter of fact, while Thessaloniki has remained

the largest centre in Northern Greece and further strengthened its position, the relationships

110

However, noise can also have a potential impact on wildlife , e.g. drowning out birdsong and reducing birds’ ability to attract a mate. 111

Namely, 70 dBA for L10 indicator and of 67 dBA for Leq indicator.

51

between it and the urban centres of Igoumenitsa, Ioannina, Grevena, Kozani, Xanthi and

Alexandroupoli have more than doubled112.

«Egnatia motorway connects East to West. It changes the scenery of North Greece. It changes the map of our country. Reduces distances between 5 regions of our nation. It gets the once ‘forgotten’ Greece out from isolation. It creates new and much higher prospects of development. Brings Thessaloniki at the centre of Balkans once again» Prime Minister Kostas Karamanlis stated during the closure ceremony of Egnatia’s works, in 2009.

Source: To Vima, May 30, 2009.

As already stressed in Section 3.2, improved connections provided by the project have directly

influenced the spatial organisation of business activities and households, contributing to

changes in the value and use of land.

Evidence of functional policentricity can be detached quantitatively by observing different

indicators, such as population change, GDP per capita, Gross Value Added, number of vehicle

per inhabitant, road network density, time-distance changes and spatial interaction between

cities. Studies113 conducted by the Egnatia Odos Observatory compared the situation before

and after the Egnatia implementation on the basis of these indicators. Results show that the

prevalence of the Prefecture of Thessaloniki compared to the rest of the Prefectures in the

Egnatia motorway’s impact zone114, as far as population growth, GDP per capita and the Gross

Value Added (GVA) are concerned, continued throughout the period 1995-2006. However,

with regard to the smaller and once isolated Prefectures such as Ioannina, Thesprotia, Florina,

Rodopi, Preveza and Evros, the positive changes recorded for GDP per capita and GVA are

larger. As a result, in relation to the pre-Egnatia situation there is a trend of economic

convergence. More details are provided in the following table.

Table 3.10 SOCIO-ECONOMIC INDICATORS (BEFORE AND AFTER, % CHANGE)

Prefecture Region Population percentage change 1995-2005

GDP per capita percentage change 1995-2005

GVA percentage change 1995-2005

Thessaloniki Central Macedonia 8.2 18 -

Ioannina Epirus 8.6 56.2 108.2

Thesprotia Epirus -0.9 47 89.5

Florina West Macedonia 0.9 34.3 85.2

Rodopi East Macedonia & Thrace 1.6 33.3 86.1

Preveza Epirus -0.9 32.1 -

Evros East Macedonia & Thrace 0.7 31.6 -

Source: Egnatia Odos, 2008

Another interesting indicator of territorial cohesion, often used for the regions of Greece, is

the number of vehicles per inhabitants. In particular, positive changes in vehicle ownership are

112

Egnatia Odos, 2009, An assessment of Egnatia Motorway’s impacts on policentric development. 113

Egnatia Odos, 2008, Transport policy and territorial cohesion: the case of the Egnatia motorway in Northern Greece. 114

The regions of the impact zone considered in this sub-section are four: Epirus, West Macedonia, Central Macedonia and East Macedonia & Thrace. Thessaly is not taken into account.

52

associated with an increase in territorial cohesion115. In the Egnatia case, the Prefectures that

presented the greatest percentage increase in this indicator in the period 1995-2004 are the

Prefectures that had low ownership percentages in 1995 and are located far from the

dominant Prefecture of Thessaloniki, namely Thesprotia (+91.7%), Arta (+89.4%), Trikala

(+76.3%) and Evros (+72.2%).

Similar results are observed for the accessibility indicator, such as road density. When Egnatia

was completed the highest percentage of road density increase was recorded in the

Prefectures of Grevena, Rodopi and Kastoria which presented, in turn, the lowest density in

the pre-Egnatia period. The greatest improvement in city gravity was recorded in the cities

located far away from Thessaloniki (Ioannina, Igoumenitsa, Grevena, Arta and Preveza).

Finally, an important proof of the Egnatia’s achievements in terms of territorial cohesion can

be drawn by observing the mobility data collected by the Observatory. According to the

Egnatia Odos Observatory (April 2009), between 1993 and 2006 the annual average daily

movements have increased both at intra-regional and inter-regional level. Considering

Egnatia’s impact zone, the movements between regions has increased by 160.5%, while the

movements within regions have been increased by 108.7%. In particular, the highest increase

in interregional and infra-regional movements were recorded in West Macedonia (172%) and

East Macedonia & Thrace (155%), respectively. Conversely, the regional movements in Central

Macedonia have witnessed the lower increase (78%). The aforementioned study has also

assessed that the primary purpose of movements is related to work.

However, the construction of the Egnatia motorway and its nine vertical axes has not only

raised the traditional remoteness and poor accessibility of the impact zone, but has also

affected trans-border connectivity. Indeed, through nine vertical axes the Egnatia motorway

operates as a collector axis of the Trans-European Network and the Pan European Transport

Corridors that cross South–eastern Europe from North to South116. In particular, these vertical

axes connect Greece with the border of Albania, Western Bulgaria, Eastern Bulgaria, FYROM

and Turkey. The latest territorial cohesion agenda of the EU (EC, 2008) and the European

Spatial Development Perspective acknowledge that trans-border transport networks are of

crucial importance to transcending spatial distances across Europe, to improve cooperation

and to connect less developed and more peripheral regions with the more central ones. The

study “Trans-border movements in Northern Greece: seeking for spatial interactions” (2010)

confirmed that the improvement of the road infrastructure on the Greek side of border areas

has brought about a significant increase in trans-border movements. The study relied on data

supplied by customs stations of the respective border stations of Northern Greece under the

supervision of Egnatia Odos. In particular, in the years 2005-2009, the average trips per day

have undergone a significant increase (approx. 90%), especially from and to the Northern

border (Bulgaria and FYROM). The main purposes of the trips were tourism and leisure (45%)

and work - both business trips and commuters - (43%). As a result, an important increase in the

spatial interaction between Greece and its border regions has occurred. However, the

115

Egnatia Odos, 2008. 116

Fourkas, V. et al. 2010.

53

reduction in socio-economic disparities in the trans-border area due to the Egnatia and its

vertical axes is still to be investigated.

Finally, territorial cohesion effects will be further reinforced at the national level once other

motorway projects, namely the PATHE and Ionian motorways, are completed.

3.7 SOCIAL HAPPINESS

The economic and territorial impacts generated by the project have positively affected the

satisfaction levels of people living in Northern Greece. Reductions in journey time, and more

comfortable and safer trips are perceived by everyone. The satisfaction of people mainly

relates to the positive changes generated by the project on their lifestyles. By halving travel

times, many people were no longer forced to move from their original locations for work

purposes, but they can travel daily to work.

Interviewees also confirm that the project has improved people’s capacity to enjoy leisure

activities. Natural and historical sites located in Northern Greece, as well as the tourist

attractions of the Ionian Islands, have become more accessible.

Despite the overall satisfaction of road users, general opposition is expressed to the

introduction of tolls. Several protests have been occurring since the first toll station

(Polymylos) was opened in 2010 during which drivers get out of their cars, raise the barriers of

the toll station and continue their trips without paying.

“Polymylos’ toll station was symbolically occupied for two hours by local citizens and organisations. The mobilisation was organized by Kozani’s Labour Centre, asking for the banning of the toll fees. During the mobilisation, drivers were allowed to pass through without paying any fee, since protesters kept the barriers lifted up. «We say “no to haratsi117 ” of toll fees. We ask tolls to be banned right now»

Source: the president of Kozani’s Labour Centre, Aris Kourkoutas, mentioned To Vima, Dec. 31, 2010

It is worth mentioning, however, that protests do not concern only the Egnatia motorway but

all the highways in the country. Movements demonstrating against the payment of tolls are

continuously growing in light of rights recognised at constitutional level to provide roads as

public goods118. The dissatisfaction of road users is expected to increase after the possible

privatisation of Egnatia Odos, which, according to many interviewees, will lead to an increase

in the toll price. Evidence from the literature119 confirms that countries like Greece, where the

public sector is economically important, tend to record more opposition to privatisations,

probably because of the perceived greater role of the State in the provision of services and

uncertainty about the role of the new private owners.

A further dissatisfaction of road users relates to the lack of a sufficient number of service

stations along the Egnatia motorway. As described in Section 1.2, one service station is

117

“haratsi” is a word first used during the Ottoman occupation of Greece, indicating a cruel and humiliating fee paid for avoiding execution. 118

Balezdrova A., Greek drivers refuse to pay toll fees, concessionaire companies are looking for a way to collect the lost revenues, GRReporter, 8 January 2011, 119

Checchi, D., Florio, M. and Carrera J., (2005).

54

currently opened, while others are expected to be built. This creates unease for drivers,

especially trucks, who are forced to exit the motorway and enter the surrounding cities for

refuelling.

Figure 3.3 ROAD USERS REFUSE TO PAY TOLL FEES

Source: To Vima, Dec. 31, 2010

The opposition expressed by the environmental organisations during the project design and

implementation also affected people perceptions. The main issue concerned the crossing of

the motorway by animals, allowed by the former lack of proper fencing measures, which

initially caused some accidents (see Section 3.2). Nowadays, the Egnatia motorway is

completed fenced-off and it is acknowledged that it is an environmental friendly infrastructure

in line with the “landscape guidelines” adopted by the Greek State. However, a certain level of

dissatisfaction remains with its vertical axes, which are not yet properly fenced.

West Macedonia Region, in cooperation with «Kallisto» and «Ankas» organizations, started a community LIFE-nature project in the area, putting particular emphasis on actions intended to reduce car accidents where bears and other wild animals are involved. This project’s framework schedules the installation of special signs and technical prevention measures, in order to guarantee a safer road network and wild animals’ fatality reduction.

«Kallisto» underlines that the problem will not be solved until the road is properly fenced, according to the requirements Kallisto presented in 2008, combined with the construction of adequate crossing paths for the animals.

Source: To Vima, May 26, 2011

55

4 DETERMINANTS OF PROJECT

OUTCOMES

In this section the key determinants of the project outcomes discussed in the previous sections

are illustrated and discussed. After a brief presentation of the key messages, each significant

determinant is presented and evidence and arguments supporting the findings are presented.

4.1 KEY FINDINGS

Evidence collected confirms that the performance of the Egnatia project is the result of the

interplay of five determinant factors. One of the most influential was the project governance,

which actually provided a mixed contribution. In the initial phase, it was the key factor

determining the way the project was designed and managed. In this regard, the European

Commission played the key role by conditioning the provision of funds to the implementation

of three requests concerning the design, management and the quality of the project. During

the implementation phase, project governance was less effective in implementing all the

measures necessary to ensure the project’s sustainability. In particular, the Greek State

delayed the introduction of tolls, thus causing serious loss of profits for the Exchequer. Again,

the European Commission played a role in putting pressure on the government to implement

this measure.

The project was a “trait maker”, using Hirschman’s words, since it succeeded in changing the

socio-economic and legislative features of the context in which it took place, thus favouring

the project’s performance. Project design and forecasting capacities are also interesting.

Notwithstanding it proved to be an impressive exercise and highly-qualified expertise was

involved, the project design failed to properly address some environmental issues, which, if

adequately foreseen, could have led to saving of costs and time. Again, project governance

played a role in this regard. Wide consultations with all concerned stakeholders should have

been anticipated at the project design stage to avoid opposition from environmental

organisations in the course of project construction. However, the degree of responsiveness

and the professionalism of the actors involved in this “conflict” led to the solution of the issue

in a pragmatic way and, in the end, Egnatia was built as a high quality environmentally friendly

infrastructure.

Table 4.1 IMPACT OF KEY DETERMINANTS ON PROJECT’S PERFORMANCE

Strength*

1. Appropriateness to the context +5

2. Project design +2

3. Forecasting capacity -1

4. Project governance ±3**

5. Managerial response +4

*-5 = very strong negative effect; 0 = no effect; 5 = very strong positive effect. ** +/-3 means project’s governance provided a “mixed” contribution. On the one hand, it acted positively, making it possible to

56

overcome some weaknesses in the project design and preparation process, on the other hand, system of actors proved to be paralysed when delicate political decisions should have been adopted (the criteria considered to assign these scores are presented in Section 1).

4.2 APPROPRIATENESS TO THE CONTEXT

The Egnatia motorway is an example of a “trait making” project. Using Hirschman’s words, it

influenced the context in which it took place, by changing its existing traits and creating new

ones120.

The appropriateness of the project to the context was very high, given the high relevance of

the intervention, which properly responded to the need for a fast connection between

Western and Eastern Greece. The construction of a high standard motorway cutting

horizontally through the Northern regions was an appropriate initiative since it achieved the

objective of reducing travel time between regions, improved accessibility and mobility of the

most remote urban centres, and increased intra-regional relationships, in order to meet a well-

defined need. As a consequence, the project was strongly supported by all institutional

stakeholders.

The project’s influence on the context was twofold. On the one hand, the project was required

to deal with the morphology and the natural habitat of the Greek terrain with efforts to

mitigate the landscape impact. On the other, the project demonstrated that it was able to

“change” the socio-economic characteristics of the context. It succeeded, in particular, in

changing the regulatory framework for public management of large infrastructures, allowing

for the creation of public companies operating according to the rules of the private sector.

Additionally, the project had the potential to change the spatial organisation of business

activities and set up the conditions for new productive and commercial activities.

In conclusion, the institutional context was appropriate and favourable to “receiving” the

project. At the same time, the project was of such a scale as to impose new traits on the

context, while minimising the impacts on the environment.

4.3 PROJECT DESIGN AND FORECASTING CAPACITY

The project under assessment required specific engineering capacities and advanced

technologies in its design. It relied on the expertise provided by an international engineering

company, incorporated within the Egnatia Odos, highly skilled professionals recruited from the

private market and a number of environmental and archaeological experts occasionally

consulted.

Notwithstanding it proved to be an impressive exercise, project design presented some

weaknesses due to inaccurate forecasting capacity, which have influenced the project’s

implementation schedule and cost. First of all, although well known, the environmental

features of the Greek terrain were not adequately taken into account in the first business plan

120

“The decision which traits to ‘take’, that is, to accept (because they are considered unchangeable) and which ones to ‘make’ (by changing existing or creating new traits) is crucial to project design and success”. Source: Hirschman, 1967, p. 131.

57

submitted to the European Commission in 1997. This deficiency translated into delays in

implementation and costs overrun, as further studies were needed to identify the optimal

solution to minimising the impacts of the motorway on the natural habitat of the Pindus

mountains. These studies led to a revision of the alignment of the motorway as initially

planned and implied more structures (bridges, underpasses, tunnels, etc.) than originally

forecast.

Secondly, the geological instability of the territory was underestimated. Some sections of the

motorway were planned and built in areas subject to continuous landslides, which not only

delayed the implementation of the project but also affected its operation, by causing

occasional closures of motorway sections to traffic.

Particularly unstable is the ground on which the Egnatia motorway has been planned and is being constructed. The whole Epirus area is formed by this kind of unstable ground, significantly delaying the project’s realisation. But certainly this cannot be the only cause for delays; the ground has been known for many years now. Probably the cause can be found in wrong studies made only on paper, not in loco, for this project of national interest.

Source: To Vima, Apr. 20, 1997

Finally, adequate fencing of the motorway to prevent the crossing of animals was not

envisaged in the design phase, thus leading to accidents on some sections of the motorway

and to the reaction of the environmental organisations.

Fortunately, the project design was characterised by a good degree of flexibility which made

possible the revision of the original design during the construction phase. Besides the

unforeseen events, revisions were also imposed by the European Commission, as the

feasibility study presented was not in line with the priorities of the context of constructing a

collector route for the Pan-European Corridors and Trans European Road Networks.

As far as the demand side is concerned, the resulting traffic flows was not far from those

forecast. In some case it was higher but it was never below the expectations. Risks for the

project derived from lower than expected revenues, which was not due to a change in demand

but, as will better explained in the Section 4.5, to the political context.

In conclusion, although well-qualified professionals were involved, the project design failed to

properly address at an early stage relevant issues which could have improved the project’s

implementation performance, in terms of adherence to schedule and costs. However, using

Hirschman’s words, the “latitude” of the project enabled Egnatia Odos to easily revise it and to

“slip” it in one direction or another according to the need of the context and the unforeseen

events that occurred. Given such a degree of flexibility, a determinant for project performance

has been the capacity of planners, construction and operating bodies to provide a timely

response to the challenges encountered. This aspect is better discussed in the following sub-

section.

58

4.4 MANAGERIAL RESPONSE

A certain level of uncertainty affected the construction phase in so far as the original design

had to be revised. However, deficiencies related to forecasting capacity were outweighed by

the prompt and adequate response of Egnatia Odos to revise the project and to cooperate

with the different sources of uncertainty, including environmental and archaeological

organisations. In particular, this revision process was planned and agreed in a contract (the

memorandum) signed by Egnatia Odos and the Ministry of Environment (see Section 2.3).

The good managerial response of Egnatia Odos turned out to be, therefore, a key success

factor of the project. It should be stressed that the capacity of Egnatia Odos to properly react

to uncertainties was mainly due to the combination of the international expertise of the

Project Manager and the knowledge brought by the professionals and experts involved in

design and construction. In other words, this good responsiveness was due to the specific

features of Egnatia Odos, as the first example of a Public Limited Company in Greece dealing

with mega-projects.

4.5 PROJECT GOVERNANCE

Evidence collected supports the assessment that project governance is a key determinant of

the project’s performance. In particular, the roles assumed by the actors involved, as well as

their relative contributions to the project, are crucial to understanding why certain positive

things happened while others were missed. In what follows, a discussion of the governance

structure is provided.

59

Figure 4.1 PROJECT GOVERNANCE STRUCTURE

Source: Authors

4.5.1 The European Commission There was a widely-shared opinion among the interviewees that the European Commission

played a key role in the project definition, and significantly influenced its performance. Far

from being a mere funds provider, the Commission conditioned the design and the

management of the project, by imposing specific requests.

The requirement in terms of project design determined the revision of the original plan to

build a road from Thessaloniki to Igoumenitsa, designed as a motorway only in some sections.

On the basis of the Commission’s request, the Egnatia motorway was, instead, designed as a

motorway running from Igoumenitsa to Kipoi (Turkish border), acting as a collector for the

Pan- European Corridor and the Trans European Road Network. As explained in Section 2.2,

conditionality in terms of project design was officially imposed by DG Regio but supported and

agreed with DG Move, which contributed also to financing the project under the TEN transport

budget line.

The requirement in terms of project management determined the revision of the legislative

framework under which the management of public infrastructures was traditionally carried

out. This translated into the establishment of Egnatia Odos and other similar companies

entrusted with the management of public infrastructure. The pressure for the selection of an

international engineering company to be incorporated into Egnatia Odos with the role of

European Commission

European Investment Bank

MEPPW/Ministry of Infrastructure, Transport and

Networks

Brown & Root

EGNATIA ODOS S.A.

Ministry of Finance

International Experts

ARCTUROS

Archeological Organisations

East Macedonia & Thrace, Central Macedonia, West Macedonia,

Epirus and Thessaly

Financial relationship

Interest relationship

Technical and managerial relationship

Provision of service

Institutional relationship

60

Project Manager is another key requirement which ensured the needed expertise for

designing, constructing and operating the project.

Although less incisive, the Commission also played a role during the operation of the project.

As mentioned in section 2.4, it recommended several times the introduction of tolls, by

exercising some pressure on the Ministry of Infrastructure but without imposing conditionality

to the provision of funds.

4.5.2 Egnatia Odos The role of Egnatia Odos was clear since the initial phase of the project. It was in charge of the

design, construction, maintenance and operation of the motorway.

As for design and construction, the requirement to recruit highly-skilled personnel and appoint

international experts clearly influenced the quality of the project, which resulted in an

advanced and unprecedented exercise in Greece. However, a more participatory, and less

technical-engineering, approach to the project’s design could have been adopted in order to

properly take into account the environmental opposition that is always, by its nature,

associated to this type of mega-infrastructure. In particular, wide consultations with all

concerned stakeholders should have been anticipated to avoid opposition in the course of

implementation and a substantial revision of the project.

However, in the end, this “game” between Egnatia Odos and the environmental organisations

ended in a “win-win” model. The institutionalization and professionalism of the negotiations

resulted in the construction of an environmental friendly infrastructure, meeting high quality

technical standards, including a “green bridge” enabling the crossing of wildlife. This, of

course, had a cost.

With regard the operation of the motorway, Egnatia Odos is responsible through its Operation

and Maintenance division for collecting tolls on behalf of the Ministry of Economy (since

November 2011)121. As far as the (delayed) introduction of tolls is concerned, Egnatia Odos had

limited or no responsibility. The decision was made by the MEPPW, who moved very slowly,

possibly for political reasons.

4.5.3 The Greek State The contribution of the Greek State to the project performance was mixed.

On the one hand, it strongly supported the project and was keen to introduce the reforms

suggested by the Commission, in terms of adoption of a new legislative framework for the

application of new public management systems. As discussed in Sections 3.2 and 3.3,

institutional learning is probably the main innovation brought about by the project. On the

basis of the good example provided by Egnatia Odos, other companies have been created

adopting the same principles. However, as explained, to counterbalance this positive effect,

this system was not applied systematically and consistently, since for example the PATHE

121

Before that, Egnatia Odos collected the tolls on behalf of the Ministry of Infrastructure, Transport and Networks.

61

motorway is still under the responsibility of the Ministry, and its current implementation

reflects the well-known problems related to the traditional public management system.

On the other hand, it is not clear why the decision to introduce the tolls was so delayed

(September 2010), while the relative infrastructure (toll stations) had been ready for many

years. This was possibly due to political reasons, and the reluctance of governments to

introduce new tariffs to citizens. However, this solution appears as an unjustified

postponement of something that was envisaged in the project’s design, and that is current

practice for these types of infrastructure across Europe.

4.5.4 Other stakeholders As explained above, other stakeholders such as ARCTUROS and the archaeological

organisations played an active role. They contributed to raising issues which were not

adequately taken into account during the design of the project.

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63

5 CONCLUSIONS

The Egnatia motorway is an example of successful project which achieved the expected

objectives and contributed to the economic development of the context in which it took place.

Spatial organisation of business activities, territorial cohesion and innovation in management

systems are the three dimensions on which the project has been most incisive. The first two

dimensions are indirect consequences of the huge reduction of travel time produced by the

project, while the last is a consequence of a dialogue at political level.

By cutting transport costs for both freight and passengers, Egnatia had the potential to change

the spatial organisation of business activities, primarily but not solely in the tourism sector,

located in the areas crossed by the road. It improved the performance of airports and ports

interlinked with the motorway and set up some favourable conditions for the creation of new

productive and commercial activities. Also, transport cost reductions were such as to make

social and leisure behaviours change, for example by giving people the opportunity for new

holiday destinations.

Positive territorial cohesion dynamics have also been generated by halving travel times on the

route. In fact, the project contributed to reducing the isolation of borderland areas such as

Thrace, Western Macedonia and Epirus, by improving mobility and increasing the relationships

with more developed and dynamic urban centres such as Thessaloniki. As a result, cohesion

between the Northern Regions in Greece has been significantly strengthened. Moreover,

thanks to the vertical axes connecting the Northern neighbouring countries, and to the

connection with other major roads in Greece (i.e. the PATHE and Ionian motorways), the

project also created the conditions to improve territorial cohesion at national and cross-border

levels.

Thus, a first peculiarity of the project lies in its spatial dimension, whose scale of

implementation was such as to allow for the generation of wider economic effects. In other

words, the short-term direct effects on the users of the motorway translated in the long run

into effects on a wider scale.

The second peculiarity is the organisational innovation the project has been able to activate,

thanks to the dialogue between the Greek government and the European Commission on how

the infrastructure should be managed. As a result, the project became innovative in nature.

With the creation of a specialised independent agency and of a dedicated observatory, it

brought about new organisational schemes that can be replicated for the management of any

large public projects in Greece, as well as new knowledge and expertise for the construction of

environmental friendly infrastructures. This aspect is fundamental to the history of the project

and is at the same time an effect and a cause of success.

Notwithstanding general satisfaction with these results, a grey area relates to the financial

management of the project. In order not to generate dissatisfaction among users, who claim

64

Greek motorways to be toll-free, the introduction of the toll system was delayed for political

reasons and this compromised the project’s financial sustainability. Financial indicators of

project performance could have been improved if the tolls had been adopted earlier, as it was

designed.

In explaining project performance, two factors become decisive.

In the first instance, the investment was highly relevant to the context and benefitted from

strong political commitment. It was a response to a clear, well-defined and long lasting need

for a faster and safer connection between Western and Eastern Greece. The relevance of the

objectives was never a matter of debate and acted as a very positive factor.

In the second instance, the project’s governance proved to be another determinant, providing

in this case a “mixed” contribution. On the one hand, it acted positively, making it possible to

overcome some weaknesses in the project design and preparation process, which stemmed

from a non-holistic, but rather partial, vision of the project. In particular, the conditionality

imposed by the European Commission, DG Transport (now DG Move), determined the revision

of the original, fragmented, design in favour of the construction of a single axis connecting the

two borders of Greece and acting as a road collector of Pan-European corridors (through the

vertical axes). In this way, Egnatia motorway assumed a relevance at European level. Also, the

establishment of an autonomous agency such as Egnatia Odos, required by the European

Commission DG REGIO, and properly implemented by the Greek State, made available to the

project higher levels of expertise than in traditional project management. This expertise has

been essential to reacting promptly and efficiently to unforeseen adverse events and to

opposition from some environmental stakeholders in the course of implementation. In this

way, Egnatia assumed a high international professional profile.

On the other hand, the project’s governance also acted negatively, as the system of actors

proved to be paralysed when delicate political decisions should have been adopted. Thus, the

high profile of Egnatia Odos acted at a technical level but was not able to influence the political

sphere.

On the basis of these conclusions, some interesting lessons can be learnt:

The Egnatia motorway is an example of a mega-project involving a large number of

stakeholders of various types and at different institutional levels. As such, it was more

subject to risks (of non-implementation, cost overruns, delays, etc.) than standard

projects. However, results demonstrated that adequate attention to trying to

compound all stakeholders’ interests can improve the quality of the project. Wide

consultations are advisable from an early stage in order to avoid unexpected problems

during implementation. The common tendency in these projects is to avoid negative

reactions: the final decision is taken only after the completion of long consultations

with the actors involved and the submission of the all information and analyses

required. This tendency can, however, lengthen the process, producing delays in the

implementation with negative effects on investment costs. In general, the shorter the

65

decision-making process is, the easier it is to avoid cost overruns, although the

interests of some concerned stakeholders might not be protected adequately.

The establishment of an independent agency for the purposes of project construction,

operation and maintenance and monitoring proved to be an efficient solution for the

realisation of the project and the management of national and European funds. In

particular, high levels of technical competence and managerial capacity concentrated

in one ad hoc body makes project management more efficient than having them

dispersed among different services and departments at ministerial level.

The political dimension is never to the side when designing and implementing large

infrastructure projects, which depend upon strong political commitment. The political

framework plays its role by supporting the project in all its stages and by aligning it to

the priorities of the territory in which it takes place. However, in turn, these projects

can become a means for political visibility and consensus building. As demonstrated by

the Egnatia motorway, the policy to delay the introduction of the toll system so as to

protect the consensus jeopardised the financial sustainability of the project.

Finally, the Egnatia project provides evidence on how the European Commission can

play a strategic role in the project it co-finances. Far from being a mere funding

provider, the Commission, after consultations and negotiations, can attach

conditionalities to the provision of funds which can improve the quality of the project

design and preparation, especially by putting the project into a wider European

perspective.

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67

ANNEX I. METHODOLOGY OF

EVALUATION

The present Annex summarises the methodological approach undertaken for carrying out the

project case studies and presented in the First Intermediate Report of this evaluation study.

Moreover, the Annex further elaborates on and specifies the definition of long-term effects

considered throughout the case study and the typology of determinant mechanisms analysed

in interpreting the project outcomes. The main objective is to provide the reader with a set of

information describing how the project evaluation was conducted and to enable him/her to

replicate this methodology.122

The Annex is divided into three parts: in the first one, the overall conceptual framework of the

evaluation study is recalled and the definition of long-terms effects and project determinants

are laid out; in the second one, the methodology of analysis followed to implement the ex-post

evaluation is discussed; finally, the structure of the case study reports and the tools used to

standardise them is described in the third part.

CONCEPTUAL BASIS

The Conceptual Framework of this evaluation study is based on three dimensions of analysis:

the object of the evaluation (the ‘What’), the timing of the long-term effects (the ‘When) and

the determinants of the project’s outcomes (the ‘How’).

The ‘What’ dimension

The Team developed a classification of long-term effects, with the aim of identifying all the

possible impacts of public investments on social welfare. A broad distinction of project effects

is among effects on ‘Economic development’ or ‘Quality of life’. Investment projects can foster

economic development, which is generally quantifiable by aggregate indicators, such as the

Gross Domestic Product; although economic development is not disconnected from the

wellbeing of society, it is acknowledged that there are a number of other factors that may

affect public welfare, that are not captured by the traditional economic indicators123. For the

purpose of this study, the notion of quality of life124 refer to the factors that affect social

development, the level of social satisfaction, the perception of social reality and other

dimensions which are outside the conventional economic dimension. Under these two broad

categories, a taxonomy of more specific long-term development effects of investment projects

has been developed. The definition of each type of effect is provided in Table I.1.

122

Specific recommendations which may enable application of the same evaluation methodology to future projects are discussed in the Final Report of this evaluation study. 123

Dasgupta, 2011 and Stiglitz et al., 2009. 124

Used also as synonymous with wellbeing, as mentioned in the ToR.

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TAXONOMY OF LONG-TERM DEVELOPMENT EFFECTS Table I.1Effects Definition Checklist

Economic development

Direct economic growth Following the traditional growth theory125, both public and private investment contribute to increasing the stock of capital and thus economic growth. The direct contribution of a project to economic growth, in terms not only of real growth of GDP, but also, more generally, on economic welfare is discussed within this category of effect.

Did the project have effects on the endowment of labour or capital production factors? Did it contribute to employment creation? Did it attract new investments? Did it create new business opportunities? Did it produce time savings for business trips? Did it produce decreases in travel costs?

Endogenous dynamics Endogenous dynamics comprise all the factors that have an indirect effect on economic growth, by improving the productivity of inputs: the increase of the stock of competences and knowledge of human capital126, the introduction of a more advanced technology127 and changes in the organisational model of economic actors, making them more efficient128, are analysed insofar they contribute to increasing the production function.

Did the project contribute to the improvement of the productivity of the economic system? Have social behaviours changed as a result of the project? Did the project provide new/improved skills, R&D investment, organisational changes that translated into an increase in labour productivity?

Quality of life

Social cohesion Public investment can affect social cohesion, by minimising disparities, avoiding social marginalisation and reducing income inequalities across different socio-economic, gender or ethnic groups.

Did the project promote social inclusion? Did it improve the conditions of specific segments of the population (e.g. elderly, migrants)? Did it improve the affordability of services?

Environmental effects Polluting emissions, biodiversity loss and depletion of natural resources caused by large infrastructural projects can affect social wellbeing of both the present and future generations.

Did the project improve the quality of the natural environment? Did it alter wildlife habitats? Did it affect the ecosystem? Were there any environmental issues related to project implementation?

Territorial cohesion The project can contribute to reducing welfare disparities caused by unequal distribution of resources and opportunities among regions and their population. The focus, in particular, is on core-periphery and urban/rural differences.

Did the project improve the territorial cohesion of the region/country? Did it play any role in urban-rural or core/periphery or cross-border dynamics? Did it expand the territorial coverage of the delivery of a basic service?

Institutional learning Investment projects can bring wide spill-over effects to the quality of Public Administration and other institutions at national, regional or local level. Institutional quality is strongly related to economic growth129, but it can also affect the quality of life of people, because of the intrinsic value that individuals can attribute to a well-ordered society130.

Did the project induce any institutional learning at regional administrative level? Did it raise political awareness regarding a specific theme? Did it have effects on the level of corruption?

Social happiness This category encompasses all those variables which may affect the subjective perception of people’s wellbeing, and have to do with their psychology, family context, religion and cultural traits.

Are the project beneficiaries overall satisfied with the project’s implementation and outcomes? Did the project have any effect on the perception of quality of life? Did it affect the sense of security of the target population?

In researching all the possible long-term effects of project investments, it is acknowledged that

there is a risk of duplication and double-counting: for example, a project for water treatment

clearly has effects on environment, which may contribute to the development of new

economic activities that foster economic growth.

125

Solow, 1956. 126

Becker, 1962. 127

Griliches, 1992 and Griffith, 2000. 128

Tomer, 1982 and Martinez, 2009. 129

See, for instance, Easterly et al., 2006. 130

Sen, 1987.

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The ‘When’ dimension

The temporal dimension of analysis relates to the point in the project’s lifetime at which the

effects materialise for the first time, how they develop over time and whether they have

already stabilised or are still evolving. A clear distinction emerges between short-term and

long-term effects, with the former being the first contributions made by the project and

enjoyed by society after a relatively short time following project completion (about 1-5 years);

the latter, on the other hand, become visible after a longer period of time and tend to stabilise

over many years. It is acknowledged that, given the varying timeframe for different effects to

appear and stabilise, the choice of the time horizon and the timeframe at which the ex-post

evaluation is carried out can significantly affect the results of the evaluation.

The ‘How’ dimension

Project outcomes, i.e. the way projects affect the generation of certain effects and the varying

timeframe for effects to appear and stabilise, are not certain, but result from a non-

deterministic combination of different and interrelated factors. Five stylised determinants of

project outcomes have been identified: appropriateness to the context, project design,

forecasting capacity, project governance and managerial response. Five Working Hypotheses

are related to these dimensions and explain how each of them can influence the generation of

the project’s short or long-term effects (see Table I.2). The three dimension of analysis are

logically interconnected and by combining the ‘What’, ‘When’ and ‘How’ dimensions the

evaluator can disentangle the causal chain between the project’s inputs and the outputs.

METHODOLOGY OF ANALYSIS

The methodology developed to answer the evaluation questions consists of a combination of

quantitative (Cost Benefit Analysis) and qualitative (personal interviews, surveys, searches of

government and newspaper archives, etc.) techniques. Qualitative techniques are probably

better at determining why certain effects are generated, along what dimensions, and

underlying causes and courses of action of the delivery process. The media (including websites

or blogs), in particular, have proved to be an excellent source of evidence identifying or

revealing both objective information and perceptions about the project, thus concurring to

assess the project’s impact on social happiness. At the same time, quantitative data can

provide an important support to test and validate certain findings derived from interviews and

other sources. The most important contribution of the CBA exercise is to provide a framework

of analysis to identify the most crucial aspects of the projects’ ex-post performance and final

outcome131.

131

More details on the approach adopted to carry out the ex-post CBA exercise and, in particular, indications on project identification, time horizon, conversion factors and other features are extensively described in the First Intermediate Report of this evaluation study.

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KEY DETERMINANTS OF PROJECT OUTCOMES CONSIDERED Table I.2Determinant Definition Working Hypothesis Questions to be answered Appropriateness to the context

Includes the consideration of institutional, cultural, social and economic environment into which the project is inserted.

Context traits can be more or less favourable for project performance and deserve early and careful consideration about which to take or to make. The terminology of context traits that can be either ‘taken’ (that is, accepted, as they are considered unchangeable) or ‘made’ (by changing existing or creating new traits) is drawn from Hirschman (1967).

Has the (political, cultural, socio-economic, institutional, regulatory) context played a role in influencing the attainment of long-term effects? Were there any political, social, cultural, economic, regulatory, or institutional constraints to project implementation and performance? Was the project ‘trait taking’ or ‘trait making’ in its nature? If it was intended to be trait making, did it succeed?

Project design Refers to the technical capacity to design the infrastructure project and to select the best project option.

The technical and engineering capacity to design an infrastructure and to provide the appropriate mechanism for its financial sustainability should be sufficiently disciplined to reduce future risks; at the same time it should leave some degrees of ‘latitude’ to enable adjustments for unforeseen circumstances. Following Hirschman, latitude is the characteristic of a project that permits the project planner and operator to mould it, or to let it ‘slip’, in one direction or another. Some projects are so structured that latitude is severely restricted or completely absent: in these cases, the project is considered highly ‘disciplined’.

To what extent and in what way did the technical, structural and financial features of the project influence its performance? Did the option selection process lead to the implementation of the most promising project idea? Was project design capacity a relevant factor in determining the observed ex-post performance of the project? Was the project design flexible enough to be adjusted, if needed, to external and unexpected constraints?

Forecasting capacity

Relates to the feasibility and capacity to predict future variables, such as the demand level.

A good initial investment in building the forecasting capacity does not eliminate risks, but it increases the knowledge of the context, improves the project design and optimises the distribution of responsibilities without lowering the commitment to performance.

Were the ex-ante forecasts based on a sound methodology and a comprehensive set of information? Were some important factors not sufficiently considered ex-ante? Was the forecasting capacity a relevant factor in determining the observed ex-post performance of the project?

Project governance

Concerns the number and type of stakeholders involved throughout the project cycle and how responsibilities are attributed and shared.

High stakeholder involvement, well-defined roles and responsibilities and incentive mechanisms require commitment of resources and increase the complexity of the decision-making process, which may be subject to particular pressures, but they can favour the project performance and its sustainability over time.

What are the interests and motives of different actors and incentives for decision-making? How did they change over the time-span considered? Was the ownership of the project clearly identified? Did contractual arrangements improve the co-ordination of different stakeholders towards achievement-oriented results? Was project visibility a relevant political incentive to foster proper project implementation? Was the project subject to political or other forms of pressure?

Managerial response

Defined as the managerial and professional ability to react to unforeseen events.

Unpredicted events that occur and undermine the sustainability of the project and its capacity to lead to expected benefits can be overcome by prompt and adequate response from the decision-makers and project managers, driven either by professionalism and experience or by creativity and imagination.

How did the project react to exogenous, unpredictable, events? What remedial actions were put in place? What mechanisms were used to incentivise proactive responses? Why were these events unexpected? Was it due to their purely exogenous and ex-ante unpredictable nature? Or, was it due to poor planning capacity?

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STRUCTURE OF CASE STUDIES AND STANDARD TABLES OF RESULTS

Qualitative and quantitative findings are integrated in a narrative way, in order to develop ten

project ‘histories’ and to isolate and depict the main aspects behind their long-term

performance. All case study reports share the same outline, presented in the following Table:

OUTLINE OF THE CASE STUDY REPORT Table I.3

SECTION CONTENT

Projects description The first section provides a brief sketch of the unit of analysis. It describes the key structural features of the infrastructure and the service delivered, the context in which it takes place, the target population and the current performance of the project.

Origin and history This section describes the background in which the decision to initiate the project was taken, the need and objectives expected be met and the key stakeholders involved and their role. The section should present a brief chronicle of the main developments after the construction phase and the most recent facts.

Description of long-term development effects

This section should describe the main long-term development effects provided by the project. The seven categories of effects should be considered and for each of them an assessment of the contribution of the project to that specific effect, and the timing of their materialisation and evolution, should be given.

Determinants of project outcomes

The main drivers influencing the performance observed are described and elaborated here. The evaluators should provide their own assessment for each of the five key determinants of project outcomes identified in the conceptual framework.

Conclusions The key messages in terms of lessons learnt are developed here.

Annexes Ex-post cost-benefit analysis report, list of interviewees, other ad hoc analysis if relevant (such as stakeholder mapping).

In order to maintain the structure of all the case study reports as similar as possible, and

facilitate the cross-project analysis of findings, a set of standard tables is used to summarise

the main evaluation results related to three dimensions of analysis (‘What’, ‘When’ and ‘How’).

Section 3 and 4 of each case study include standardised tables in which scores are assigned to

each type of long-term effect and each determinant. Scores ranging from -5 to +5 are given in

order to intuitively highlight which are the most important effects generated for each case

study and which are the most relevant determinants explaining the project outcomes. In other

words, scores are used to rank the effects and determinants, showing which ones are the most

relevant. Moreover, the plus or minus signs indicate the nature of the effects produced by the

project (was the impact positive or negative?) and of the determinant of project performance

(did the determinant positively or negatively contribute to the project outcome?).

The same scores are used to disentangle the project’s impacts on different stakeholders. This

table allows one to better interpret the aggregated score given to each effect, by

understanding on which actor the project impacted the most: for example, a +3 score to

“Direct economic growth” may be reflected by a very high positive effect on the infrastructure

operator (valued, for instance, +5) and a slightly negative effect on other actors (valued -2). As

shown by this example, the aggregate score of each effect and the scores related to different

stakeholders should be consistent with each other and should results from a sort of weighted

average of the impacts on individual stakeholders: an aggregate positive score is inconsistent

with negative impact scores on all the different stakeholders involved.

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SCORES ON PROJECT’S IMPACT AND DETERMINANTS OF PROJECT OUTCOMES Table I.4

Score Meaning

+5 Given the existing constraints, the highest positive effects have been generated.

+4 Given the existing constraints, high positive effects have been generated, but more could have been achieved under certain conditions.

+3 Moderate positive effects have been generated, with large scope for further improvement.

+2 Some positive effects have been produced.

+1 Very little, almost negligible, positive effects have been generated.

0 No effects have been generated.

-1 Very little, almost negligible, negative effects have been generated.

-2 Minor negative effects have been produced.

-3 Moderate negative effects have been generated, but they could have been worse.

-4 Highly negative effects have been generated.

-5 The highest negative effects have been generated.

Note: The same scores have been used for assessing both the project’s impacts and determinants. In the first case, they have to be interpreted as the nature and strength of effect generated by the project; in the latter, they indicate the strength of each determinant factor in influencing the project outcomes.

The ‘When’ dimensions results are synthetically presented by means of another table: for each

kind of effect, a score is given to explain how the nature and strength of the impact evolved

over the years, by focusing in particular, on the short-run (approximately 1-5 years after the

project’s completion), the long-run (6-10 years after the project’s completion) and the future

period. The Table contains information that allows the reader to immediately understand

whether the project impacts have already stabilised or not. The meaning of the symbols used

and an example of their application is presented in the following two Tables.

SYMBOLS USED TO DESCRIBE THE TEMPORAL DYNAMICS OF THE EFFECTS Table I.5

Symbol Meaning

+ or - Positive or negative effect.

++ or -- Positive or negative effects reinforced (in positive or negative direction) with respect to the previous stage.

+++ or --- Positive or negative effects further reinforced (in positive or negative direction) with respect to the previous stage.

+/- Mixed effect, it is not possible to assess whether the impact was positive or negative.

EXAMPLES OF TEMPORAL DYNAMICS OF THE EFFECTS Table I.6

Short run (years 1-5)

Long run (years 6- 10)

Future years

Comments

+ + + The positive effect stabilised in the short-run.

+ ++ ++ The positive effect stabilised in the long-run.

+ ++ +++ The effect has grown over the years and will increase also in the future.

- + ++ The effect was at first negative; after some years it turned positive and it is still not stabilised yet.

+/- + ++ Effects have been mixed in the initial stage, became positive in the long-run and are expected to further increase in the future.

73

ANNEX II. COST-BENEFIT ANALYSIS

This Annex presents the results of the ex-post CBA of the Egnatia motorway. The aim of the

analysis is twofold. On one hand, it is aimed at assessing the performance of the project in the

past. On the other, it seeks to provide forecasts for the future. To this end, historical data have

been used and assumptions about the future have been made. The methodology applied is in

line with the guidelines set in the First Interim Report and, more generally, according to the

methodology defined in the EC Guide (European Commission, 2008).

METHODOLOGY, ASSUMPTION AND DATA GATHERING

Before dealing with the results of the analysis, some relevant information on the assumptions

made and the procedure of data gathering are described in what follows.

Project identification

The unit of analysis of the present CBA is the Egnatia motorway running from Igoumenitsa

(Epirus Region) to Kipoi (on Turkish border) and crossing five Regions in Northern Greece (East

Macedonia & Thrace, Central Macedonia, West Macedonia, Epirus and Thessaly). As already

described in Section 1.3, it is a four-lane high-speed motorway with a length of 670 km and a

width of 24.5 m (or 22 m along mountainous adverse sections). Constructed between 1997132

and 2009, the motorway has been gradually opened to traffic. The major construction works

occurred between 1997 and 2004 and by the end of 2004 more than 60% of the total length of

the motorway was operational. Currently, the motorway has been completely built but one

kilometre in Epirus Region is still closed to traffic because of the frequent landslides occurring

in the area. As a consequence, traffic is diverted along this section. The latter is expected to be

opened by the beginning of 2013. The table below shows the cumulative kilometres built and

opened to traffic from 2000 to 2011.

MOTORWAY LENGTH (KM) Table II.1

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

125 191 294 362 407 444 469 509 555 669 669 669


Without the project scenario

The Egnatia motorway is an example of green-field investment. It was built as a faster and

safer alternative to many uneven roads which were connecting Western and Eastern Greece

for a total length of 812 km and a travel time of approximately 11hr 30’. Considering the

nature of the investment, project cash flows have been compared with a without-the-project

reference scenario, where no investments are undertaken and, accordingly, no operating costs

and revenues are envisaged for Egnatia Odos S.A, the project operator. By contrast, the

scenario with-the-project includes the construction of the motorway. A “do-minimum”

132

Investments concerning some sections were undertaken by the Greek State before 1997.

74

alternative included instead the road as originally proposed by the Greek Government but was

abandoned after the intervention of DG Transport, as not a suitable to fully address the

objective of the project. (see Section 2.2).

Time horizon

Time horizon for the CBA of Egnatia motorway has been set at 30 years, in compliance with the

First Interim Report. Accordingly, the timeframe of the project’s evaluation spans from 1994,

the first year of expenditure, to 2023. A mix of historical data from 1994 to 2011 (covering 18

years) and forecasts from 2012 to 2023 (covering 12 years) is used.

Constant prices and discount rates

Constant prices have been used to carry out the CBA. To this end, historical data have been

reflated and converted into 2011 prices by using the yearly average percentage variation of

consumer prices provided by the International Monetary Fund (IMF). As for data from 2012

onwards, they have been estimated in real terms (no inflation is considered).

In line with this approach, real financial and social discount rates have been applied to the

cashflows. In particular, inflows and outflows for the financial analysis - for both the backward

and forward periods of analysis – have been discounted and capitalised using a 5% real rate, as

suggested in the EC CBA Guide. With regard to the economic analysis, a real backward social

discount rate of 6.1% and a real forward social discount rate of 3.2%, specifically calculated for

Greece (see the First Interim Report for the calculation), have been adopted.

Data sources

The analysis relied on data provided by Egnatia Odos and the Observatory, as well as on the

opinions of the experts interviewed. Additional information has been gathered from a

literature review of transport investments in Europe.

Demand analysis and forecasting

Historical data on traffic flows between the origin–destination Igoumenitsa-Kipoi has been

gathered from the Traffic Department of Egnatia Odos. For the sake of completeness133, data

concerning vehicle-kilometres was used for the purpose of the analysis and the number of

vehicles travelling on Egnatia motorway has been calculated on the basis of the motorway

length progressively opened to the traffic (information provided by the Egnatia Odos).

Data shows that the number of vehicles on the motorway has increased by 64% since the

opening of the first sections in 2000, with an annual growth rate between 2000 and 2009

equal to 5.4%. After a systematic increase up to 2009, traffic decreased by 2% in 2010 and by

10% in 2011. This trend is explained not only as a result of the economic crisis but also of the

frequent landslides which led to the temporary closure of some sections of the motorway, as

133

On suggestion of Traffic Department of Egnatia Odos, data concerning Annual Average Daily Traffic have not been considered for the purpose of the CBA because they concern only some sections of the Egnatia motorway.

75

well as the introduction of the tolls. As for the future, experts from the Traffic Deptartment of

Egnatia Odos confirm that traffic flows on the motorway should increase substantially, as a

consequence of the opening of the nine vertical axes which are connected to it (see Section 1.3

for details), as well as the PATHE and Ionian motorways. Forecasts provided by the agency

assume that the number of vehicles will increase according to the following trends: + 5%

between 2012 and 2014, due to progressive opening of the vertical axes; + 7% between 2015

and 2020, including positive traffic generation from Southern Greece and Northern

neighbouring countries; +2% between 2021 and 2023, with stabilization of the generated

traffic.

Figure II.1 EGNATIA MOTORWAY’S TRAFFIC FLOW – HISTORICAL DATA (2000-2011) AND

FORECASTS (2011-2023). NUMBER OF VEHICLES PER YEAR

Source: Authors elaborating Egnatia Odos data

FINANCIAL ANALYSIS

Investments costs and financial sources

The total investment costs amount to EUR 5,475 million (in current terms), of which 44% was

financed by the European Union (ERDF, CF, TEN-budget) and 56% by the Greek State. As far as

funding from the national government is concerned, 27% of that was equity from national

resources while the remaining (73%) was provided by EIB loans.

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

76

Figure II.2 INVESTMENT COSTS BY SOURCE OF FUNDING

Note: the first figure shows total investment costs by funding provider. The second figure focuses on the origin of resources allocated to the project by the Greek State.

Source: Authors.

The investment components considered in the financial and economic analyses include the

following items:

Project design

Land expropriation

Construction costs

Public utilities and archaeology

Management

Details on costs per year and investment components are provided in the following table.

ERDF1,572,797,552

28.73%

CF802,273,544

14.65%TEN-T

24,200,000 0.44%

National government

3,075,728,904

56.18%

EIB loan 2,240,000,000

73%

National resources

835,728,904

27%

77

INVESTMENT COSTS BY ITEMS (EUR THOUSAND, 2011 PRICES) Table II.2

Project Design

Land Expropriation Construction costs

Public Utilities and archaeology

Management Total

1994 1,720 12,157 3,755 0 0 17,633

1995 1,164 585 56,984 0 3,434 62,166

1996 1,094 2,945 78,014 0 4,701 86,754

1997 15,773 89,287 128,381 0 7,736 241,176

1998 34,461 125,932 230,484 0 13,888 404,765

1999 38,180 67,530 327,131 0 19,712 452,553

2000 34,111 42,069 531,244 15,287 32,011 654,722

2001 26,463 17,889 645,793 9,367 38,913 738,424

2002 24,896 37,756 548,529 6,222 33,052 650,455

2003 20,993 22,029 437,414 2,423 26,357 509,215

2004 25,378 20,267 382,540 1,855 23,051 453,090

2005 20,821 19,444 467,943 2,329 28,197 538,733

2006 12,229 27,088 469,038 1,665 28,263 538,283

2007 8,699 37,814 476,742 1,392 28,727 553,373

2008 5,781 31,418 686,486 1,764 41,365 766,815

2009 4,676 8,077 321,129 406 19,350 353,638

2010 1,679 0 11,117 400 670 13,866

2011 1,456 0 14,422 191 869 16,938


To date, Egnatia Odos has not carried out extraordinary maintenance on the motorway but it is

expected to introduce this expenditure from 2014 onwards. The Planning, Project Finance and

Project Control Division of Egnatia Odos estimates that extraordinary maintenance will amount

to EUR 15,000,000/year between 2014 and 2018, EUR 20,000,000/year between 2019 and

2020 and up to EUR 25,000,000/year from 2021 to the end of the time horizon.

Residual Value

According to the suggestion of the Planning, Project Finance and Project Control Division of the

Egnatia Odos, the residual value has been estimated at 44% of the investment cost, namely

EUR 3,122 Million (2011 prices). This assumption has been made by considering a weighted

technical life of the project of 55 years, made up of: structures 75 years, earthworks pavement

40 years, and electromechanical and traffic signs 25 years.

Operating Costs and Revenues

As already stressed throughout the report, some sections of the motorway have been open to

the traffic since 2000, but the whole infrastructure became completely operational in 2009

and subjected to first tolls only from late 2010. Expenditure related to the management of the

infrastructure during the construction phase has been considered as part of the investment

costs (see above). Historical data (2010 and 2011) and forecasts for the future have been

provided by the Planning, Project Finance and Project Control Division of Egnatia Odos.

78

As far as operating costs are concerned, they include the following items:

Administrative costs - Egnatia Odos

Ordinary Maintenance

Toll system operation (toll collectors, etc.)

Energy (lighting etc.)

Currently, average annual costs to operate and maintain the project is about EUR 35 million

(2011, prices). This value is expected to increase up to EUR 75 million in 2023, according to the

forecasts provided by Egnatia Odos.

Revenues of the Egnatia motorway include tolls paid by users and rents paid by the operators

of the service stations. As already discussed in Section 1.3 of the report, there are currently six

toll stations operating on the route of the motorway, of which five have been built specifically

for Egnatia, while one is in common with PATHE. Since the financial analysis is carried out from

the perspective of Egnatia Odos (the project investor/operator), only revenues from the five

toll stations located along Egnatia motorway have been take into account, as representing

actual revenue for the operator. With regard to the service stations, it has been already

stressed throughout the main text that only one station is currently operating although

additional ones have been planned (see Section 1.3 of the report). Forecasted revenues from

service stations include the progressive opening of all designed stations.

To forecast the future, data from the Planning, Project Finance and Project Control Division of

Egnatia Odos has been gathering, relying on the following assumptions:

Two more stations will become operational in 2012.

After 1st April 2014 it is assumed that the traditional toll system will be replaced by an

electronic one.

However, it is worth noting that income from tolls and service stations may vary (and more

specifically increase) from the estimates adopted in this analysis, as a consequence of the

privatisation process of the motorway, which is currently under discussion (see Section 2.4). If

project operations are privatised, it is likely to lead to a real increase in the per unit toll,

considering that the current tariffs are very low, compared to similar projects in EU.

That said, for sake of caution, the scenario adopted is that of non-privatisation, but with

adoption of the electronic toll system. Accordingly, expected revenues in 2012 are about 15

EUR million (2011 prices). This value is expected to increase to EUR 150 million in 2023, due to

an increase of both tariffs134 and traffic.

134

More specifically, the scenario is based on 29 toll gantries located across network. Toll charge is of 0.045euro/km (2010 prices) for light vehicles.

79

Project Financial Performance

As showed in Table A.III.4, the financial profitability of the project is negative. The Financial

Net Present Value (FNPV) on investment is estimated at EUR -8,521. 9 million at a discount

rate of 5%, real), with an internal rate of return of -3.5%. These negative results confirm that

the project was in need of EU funding since no private investor would have been motivated to

implement it without an appropriate financial incentive.

To date, the project has not been self-sustainable and the yearly financial losses have been

covered by the Greek State. In 2012 and 2013, with the full implementation of the traditional

toll system the motorway is expected to recover its operating costs. From 2014-15 onwards,

with the introduction of the electronic toll system, it is expected to achieve full sustainability,

with net revenue between EUR 45 and 50 million per year.

ECONOMIC ANALYSIS

From market to accounting prices

In order to take into account the social opportunity costs of the project’s inputs and outputs,

the market prices have been converted to accounting prices by using appropriate conversion

factors. To this end, reference has been made to the Standard Conversion Factor specifically

calculated for Greece135, to the shadow wage estimated by Del Bo et. al. (2011)136 and to expert

opinion. The Table below summarises the conversion factors applied for each cost item. It is

worth noting that for some cost items, a specific conversion factor has been calculated as a

combination of other primary items, on the basis of engineering judgement and experience on

similar works. As an example, construction works, as considered in the financial analysis, is

composed of labour costs (10%), and raw material costs (90%). Therefore, the conversion

factor has been calculated as the sum of each component multiplied by its conversion factor.

135

See the First Interim Report for details. 136

Del Bo C., Fiorio C. and Florio M., 2011, Shadow Wages for the EU Regions, Fiscal Studies, Vol. 32, No 1, pp. 109-143.

80

CONVERSION FACTORS USED IN THE ECONOMIC ANALYSIS Table II.3

Item Conversion factor Source Note

Investment costs

Project Design 0.997 SCF

Land expropriation 1.3 Expert Opinion

Construction costs 0.969 Own calculation 10% labour; 90% raw material

Public utilities and archaeology 0.997 SCF

Management 0.72 Del Bo et. al (2011)

Extraordinary maintenance 0.997

Residual value 0.969 Own calculation 10% labour; 90% raw material

Operating costs

Administrative costs - Egnatia Odos 0.997 SCF

Ordinary Maintenance 0.997 SCF

Toll operation cost (toll collectors etc.) 0.997 SCF

Utilities Energy 0.997 SCF

Source: Authors

Project effects

Effects generated by the construction of the Egnatia motorway can be divided into:

i. Change in consumer surplus, represented by savings in the generalized travel cost for

already existing users that shifted from the alternative roads to the motorway plus the

new generated traffic;

ii. Change in producer surplus, represented by the increased income, net of the

operational costs, thanks to higher demand and the introduction of tolls;

iii. Casualties avoided thanks to the construction of the motorway;

iv. Negative environmental externalities as a result of the additional traffic generated by

the motorway.

Evidence from interviews confirms that user benefits, as well as the negative externalities,

have been materialising progressively following the opening of the various motorway sections.

Thus, progressive reduction factors have been applied to social costs and benefits on the basis

of the length of motorway opened to traffic from 2000 onwards.

In what follows a detailed description of the effects generated by the project is provided.

Change in consumer surplus

User benefits for transport projects are generally expressed through the concept of consumer

surplus, defined as the excess of consumers’ willingness-to-pay137 over the prevailing

137

The maximum amount of money that a consumer would be willing to pay to make a particular trip (European Commission, 2008, Guide to Cost Benefit Analysis of Investment Projects).

81

generalised cost138 of a specific trip between a particular origin and destination. The

implementation of the Egnatia motorway has reduced the generalised cost of travel between

Igoumentisa and Kipoi, generating a saving for already existing users (who have shifted from

the alternative road network to the motorway – green area in Figure AI.3) and making the trip

affordable to new users (who have been generated by the intervention - blue area in Figure

AI.3).

Figure II.3 PROJECT USER BENEFITS

Note: G0 : generalized cost before the intervention; G1: generalized cost after the intervention; D0: existing traffic; D1: total traffic on the motorway; D1 – D0: generated traffic.

Source: Authors

As shown in the Figure, benefits for already existing users (D0) have been calculated as the

difference between the generalised costs for a trip before and after the project. In particular,

owing to the lack of an origin-destination matrix with traffic data between the main cities, the

generalised cost of an average trip along the alternative route has been compared with the

generalised cost of an average trip along the Egnatia motorway. As far as the generated users

are concerned (D1 – D0), the benefit has been calculated by applying the rule of half139.

According to the information gathered from the Traffic Department of Egnatia Odos, existing

and generated traffics are estimated to be 80% and 20% of the total traffic, respectively.

Then, traffic have been distinguished between cars and heavy vehicles, in order to properly

take into account relative savings for these two categories. As already explained in the main

138

As per the CBA guide, the generalised cost of a trip can be expressed by the following formula: where: p is the amount paid for the trip by the user (tariff, toll); z is the perceived operating costs for road vehicles (for public transport it is equal to zero); τ is the total time for the trip; v is the unit value of travel time. 139

For the new generated traffic the so-called “rule of a half” has been applied. The rule of half measures change in consumer surplus as a half measure of user benefits. For further details, see European Commission, 2008, Guide to Cost Benefit Analysis of Investment Projects

Generalised cost

Generalised Cost savings for diverted traffic

Generalised Cost savings for generated traffic

G0

G1

Demand

82

text, traffic is, on average, represented 85% by passengers vehicles (mainly cars) and for 15%

by heavy good vehicles140. Then, light and heavy traffic has been converted, respectively, to

number of passengers and tonnes of freight by adopting relative (conservative) average load

factors (see below).

LOAD FACTORS Table II.4Cars Heavy vehicles

1.2 passengers 16 tonnes*

*this value has been calculated in a conservative way by crossing different sources, namely: Evaluating Public Transit Benefits and Costs Best Practices Guidebook, 2012; European Environmental Agency, TERM 2002 30 EU — Load factors for freight transport,2002¸Spanish Ministry of Public Works “Observatorio de costes del transporte de mercancías por carretera” October 2011.

Finally, specific assumptions have been made to estimate travel time savings and travel costs

both for passengers and freight. In what follows, a detailed explanation is provided.

Travel time savings According to data gathered from Egnatia Odos, travelling from Igoumenitsa to Kipoi on the

Egnatia motorway takes 6 hours and 10 minutes, which represents a time saving of 5 hours

and 20 minutes with regard to the alternative roads available before the construction of the

motorway. As mentioned above, owing to the lack of an origin-destination matrix with traffic

data between the main cities, an average trip-time has been estimated, on the basis of the

travel times recorded in the different sections of the motorway, weighted by relative traffic

volumes. According to the information provided by the Observatory, the highest traffic volume

is recorded on the central sections of the motorway (Veria-Thessaloniki-Asprovalta)141. On this

basis, average trip-times of about 7 hours and ½ and of less than 4 hours have been estimated,

respectively, before and after the intervention (Table AI.5).

TRAVEL TIME SAVINGS Table II.5

Before (h.)

After (h.)

Diff. (h.)

Average trip-time 7.6 3.9 3.7

Source: Authors

To estimate the value of time for light traffic, passenger trips have been distinguished between

business travellers, commuters and other passengers (e.g. leisure). On the basis of the expert

opinion, it has been assumed that 30% of the total light traffic on the Egnatia motorway are

business travellers, 20% are commuters and 50% are other passengers. For the monetisation

of the benefit, unit VTTS (Values of Travel Time Savings) from HEATCO142 have been adopted

for each category of passengers (see Table AI.6). As far as heavy traffic is concerned, the unit

140

This value also includes the share of light good vehicles, which is, however, negligible. 141


HEATCO, 2005, Developing Harmonised European Approaches for Transport Costing and Project Assessment - Deliverable 5

Proposal for Harmonised Guidelines.

83

VTTS per freight tonne provided by HEATCO has been applied to the tonnes of freight carried

on the Egnatia motorway.

UNIT VALUES OF TIME FOR PASSENGERS AND FREIGHT. GREECE (EUR PER Table II.6

HOUR)

Passengers

Freight

Business Commuters Leisure

EUR, 2002 19.42 7.92* 6.64* 2.55

EUR, 2011 26.17 10.66 8.95 3.44

Note: for commuting and leisure trips the average between short and long distance values has been adopted.

Source: HEATCO, 2006.

Trip Cost

An estimation of the trip cost has been carried out with respect to the best alternative route

available before the construction of the motorway. In particular, fuel cost and tariff paid for an

average trip in the two options have been compared in order to calculate the net gain or loss

for the motorway users. For sake of simplicity, other vehicle operating cost savings (such as

tyre consumption and asset’s depreciation) have not been considered.

Consistently with travel time’s estimations, we assumed average lengths for a trip of 535 km

and of 427 km before and after the intervention, respectively. Considering a unit cost for fuel

of 0.09 EUR/km and of 0.15 EUR/km for cars and for heavy vehicles, respectively, operating

costs before and after the intervention have been estimated for passenger and freight, as

shown in the table below. Also, unlike the alternative route, Egnatia is a tolled motorway. As

explained in Section 1.4 of the report, the first toll station was opened in 2010, while an

additional five stations became operational at the end of 2011. This has been duly taken into

account for the computation of costs for an average trip by envisaging a progressive increase

in costs for users. In particular, considering a fixed toll per station equal to EUR 2.00 for light

vehicles and EUR 7.00 for trucks and other vehicles with 4 or more axles143, average toll prices

have been estimated for the period 2011-2013 for passengers and freight. From 2014

onwards, an increase in the price has been assumed as consequence of the introduction of the

electronic system, for which one pays for the actual number of kilometres travelled. The table

below reviews the trip costs for the two scenarios, adopting year 2012 as reference.

143

Toll price has been gathered from Egnatia Odos website. See also Table 1.2 in the main report.

84

AVERAGE TRIP COSTS, YEAR 2012 Table II.7

Average Cost of fuel

Price

(EUR per Km)

Average length

for a trip (Km)

Average total cost

(EUR, 2011)

EUR/Passenger EUR/tonne

Before (alternative route) 0.09/0.15 a) 535 40.2 5.0

After (Egnatia) 0.09/0.15 427 32.1 4.0

Average Toll

Tariff

(EUR per station)

Average length

for a trip (Km)

Average total cost

(EUR, 2011)


Before (alternative route) 0 535 0 0

After (Egnatia) 2.00

7.00

427 6.5 0.3

Average trip cost

Average total cost

(EUR, 2011)


Average trip cost before (EUR, 2011) 40.2 5.0

Average trip cost after (EUR, 2011) 38.6 4.3

Source: Authors a) 0.09 for light vehicles; 0.15 for heavy vehicles

On the basis of these assumptions, in 2012, before the introduction of the electronic system,

the average trip cost per passenger after the intervention (EUR 38.6) is more or less equal the

trip cost before (EUR 40.2). Similar, or somewhat better, results are obtained for freight traffic.

On the other hand, from 2014 onwards, it is expected that the opposite will hold, with a trip

cost after the intervention slightly higher than before (e.g. up to EUR 39.7 per passenger).

However, this is more than counterbalanced by the savings in the travel times (e.g. up to EUR

95.6 per business passenger) so that, at the end, there is a net generalised cost saving for all

users alongside the whole period of consideration. In year 2012, the generalised cost saving for

passengers range from EUR 34.3 per passenger per trip for leisure traffic, to EUR 97.2 per

passenger per trip for business traffic (Table AI.7). For freight, generalised cost saving is

estimated at EUR 13.3 per tonne per trip (table AI.8).

85

GENERALISED COST SAVINGS FOR PASSENGERS, YEAR 2012 (EUR, 2011) Table II.8

Before After Diff.

Average trip cost 40.2 38.6 1.6

Cost of time

Commuters 80.9 41.9 39.0

Business 198.5 102.9 95.6

Leisure 67.9 35.2 32.7

TOTAL Generalised Cost

Commuters 121.1 80.5 40.6

Business 238.7 141.5 97.2

Leisure 108.1 73.8 34.3

Source: Authors

GENERALISED COST SAVINGS FOR FREIGHT, YEAR 2012 (EUR, 2011) Table II.9

Before After Diff.

Average trip cost 5.0 4.3 0.7

Cost of time 26.1 13.5 12.6

TOTAL Generalised Cost 31.1 17.8 13.3

Source: Authors

Producer surplus

Producer surplus is calculated as the change in the road service operator’s revenues thanks to

the progressive introduction of tolls to traffic, net of the additional operational costs borne.

On average, annual net incremental revenues account for some EUR 18.1 million in 2014, rising

to EUR 48.3 million in 2023 (2011 prices).

Reduction in Accidents

Historical data provided by the Road Safety Department of Egnatia Odos show that the

number of accidents on the alternative route from Igoumenitsa and Kipoi has fallen

significantly since the construction of the Egnatia motorway. For example, the number of

fatalities per year fell from 97 in 1998 to 49 in 2010, of which 30 occurred on the alternative

route and 19 on Egnatia (see table below). While recognizing a more general trend in fatality

reduction in Greece, attributable to overall safer conditions, increased police controls and

more responsible behaviours by drivers, which is not directly related to the Egnatia motorway

itself, it is clear that this reduction has been reinforced by the project through diverting traffic

onto a safer network. In order to value the fatalities and injuries avoided thanks to the Egnatia

motorway, the number of accidents occurring in the years between 2000 and 2010 have been

compared to the figure recorded in 1998, taken, for sake of simplicity, as reference value for

the scenario before the construction of the motorway, and by distinguishing between

fatalities, heavy injuries and light injuries.

86

NUMBER OF CASUALTIES AVOIDED Table II.10

1998 2010 Note Casualties avoided

in 2010

Fatalities* 97 49 of which 30 on the alternative road

and 19 on the Egnatia motorway

48

Heavy Injuries** 115 62 of which 32 on the alternative road


52

Light Injuries** 518 216 of which 128 on the alternative road


302

Note: * historical data was provided by Road Safety Department of the Egnatia Odos; Historical data from to 2004 was gathered from Egnatia Observatory, (2007) Indicator Factsheet TRB-10-Road safety. Data from 2005-2010 was estimated.

Source: Authors

In order to estimate the benefit related to the casualties avoided, the unit values suggested by

CBA guide for Greece have been applied (see Table below).

VALUES FOR CASUALTIES AVOIDED (EUR) Table II.11

Fatalities Heavy Injuries Light Injuries

EUR, 2002 1,069,000 139,700 10,700

EUR, 2011 1,440,343 188,228 14,417

Source: CBA guide CBA Guide, p. 81

Negative Externalities

As discussed above, the reduction in the generalised travel cost brought about by the project

has contributed to increased road traffic. As a consequence, vehicles’ emissions of air and

noise pollutants have increased, producing, amongst others, negative climate change effects.

In order to estimate the negative externalities generated by the project, the new generated

car and heavy vehicle trips have been considered and multiplied by the unit values provided

for each typology of externality in the Handbook on estimation of external costs in transport

sector. For the sake of caution, the central values have been considered within the ranges

proposed in the Handbook, as shown in the table below. Also, to avoid any double counting,

the typology “climate change effects” has been excluded due to the high cost of gasoline in

Greece, which already internalizes part of the social cost for GHG emissions.

VALUES FOR EXTERNALITIES Table II.12

Externalities Value Unit Reference

Air pollution road light 0.0037 EUR/(vehicle*km) Table 93, pag 206

heavy 0.0746 EUR/(vehicle*km) Table 93, pag 206

Noise road day 0.008 EUR/(vehicle*km) Table 22, pag. 69

Noise road night 0.0139 EUR/(vehicle*km) Table 22, pag. 69

Source: CE Delft, 2008, Handbook on estimation of external costs in the transport sector.

87

Economic performance

The Economic Net Present Value (ENPV) and Economic Rate of Return (ERR) of the project

amount to EUR 523,1 Million and 5.2%, respectively (see Table AI.15 for cash flows). Table

AI.13 below reviews the main categories of benefits and of costs and their relative incidence.

BENEFITS AND COSTS SUMMARY Table II.13

Benefits Total value

(EUR, discounted) % of total benefits

Consumer surplus - Passengers 5,349,052,653 40% Consumer surplus - Freight 2,854,698,186 21% Accidents reduction 1,949,359,662 15% Residual value 2,009,237,594 15% Producer surplus 1,157,451,975 9%

Costs Total value

(EUR, discounted) % of total costs

Initial investment cost 11,381,318,848 89%

Operating costs 672,705,979 5%

Replacement costs 163,904,758 1%

Environmental externalities 578,758,294 5%

The results of the economic analysis, which are slightly positive on the face of the large

resources spent, lend themselves to elaborate a bit about their meaning and about the

underlying determinants of the performance.

The first point to take into account is that, although the results are only moderately positive,

nevertheless, the project has generated a positive welfare change because the ENPV is

positive. This concept should be further reinforced by the consideration that the CBA analysis

does not take into account wider effects in terms of induced businesses, endogenous

dynamics, institutional learning and territorial cohesion, which have been widely described in

Section 3 of the main report and which confirm that the project was desirable for society.

The second point for discussion is that the economic performance is sensitive to

macroeconomic conditions. These are reflected in the choice of the social discount rates

(SDRs), which have been set at 6.1 % and 3.2% (in real terms) for, respectively, the backward

and the forward SDRs, on the basis of the pre-crisis data available for Greece. Comparing the

two SDRs we can infer that, as a paradox, the project is economically viable “thanks” to current

bad economic situation in Greece, which is reflected into a low forward SDR having the effect

of making the ENPV increase. If another rate aligned to the 6% used for the backward

discounting is used, the project will not be viable. For instance, by using the 6% for the two

SDRs, the ENPV would be about EUR -1.09 Billion. However, this consideration can be

misleading if a critical perspective about the suitability of the available data, as a reliable

indicator of the past economic growth of the country, is not adopted. In fact, the value used

for the backward discounting, calculated upon the average GDP growth rate reported for

Greece between 2003 and 2007 (equal to 4.01%, according to IMF), revealed to be unrealistic.

88

This apparent growth was, in reality, a “bubble” ending up into regression. If we carry out the

opposite exercise and we adopt a low backward SDR, equal to the 3.2% used for the forward

discounting, the ENPV will increase largely, reaching a value of EUR 2,428.4 Million (see below

the uncertainly analysis section for a full presentation of the results of the tests on SDRs).

Thus, if it is correct to say that the project’s economic viability actually benefitted from the

worsening of the economic situation in Greece, it would be not correct to say that the project

is viable only thanks to the crisis. This is because the pre-crisis statistical data on the real

economic growth in Greece (used to calculate the backward SDR) proved to be unrealistic to

reflect the situation of the country.

Third, while carrying out the economic analysis, it is sound to set a longer time horizon. This

procedure is motivated by the nature itself of the Egnatia Motorway, which can indeed be

classified as a “mega” project, given the amount of money involved and the length of

construction phase, which lasted for 18 years. Hence, it seems appropriate to deepen our

analysis by taking into account a longer time horizon, typical this kind of projects because, in

these situations, the adoption of a time horizon of 30 years cannot be sufficient to encompass

the long term effects of the project. For this reason, against the 30 years adopted in the base

case computations, which lasted from 1994 to 2024, a simulation of a CBA over a period of 50

years was carried out to better express the value of the project today and to calculate its

economic viability.

In this scenario, for the sake of prudence, the main assumption adopted is that demand traffic

flows will be constant over time and equal to the 2024 final forecast available. The same holds

for operational and maintenance costs. The result is that the ENVP is now much higher than

before and equal to EUR 4,821.9 Million. Also, the ERR is 6.7%, even higher than the pre-crisis

social discount rate (the backward SDR is equal to 6.1%). Hence, by setting a too short

forecasting period the overall risk is to under-estimate the project desirability, since there is

not enough time for its positive welfare effects to unfold in the long run.

In light of the above argumentations, it is justifiable to conclude that the project proved to be

good value for money. Some limitations remain and concern the cost and time overrun

experienced during implementation, as well as the delayed introduction of the toll, factors that

could have further increased the economic performance of the project. However, these factors

resulted not to be decisive and more than outweighed by the benefits already unfolded, even

considering a time horizon limited to 30 years.

In the following, the results of the base case are tested with a sensitivity and risk analysis.

89

FINANCIAL ANALYSIS (EUR THOUSAND, 2011 PRICES) Table II.14Years n. -17 -16 -15 -14 -13 -12 -11 -10 -9 -8 -7

Calendar Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 COSTS

Investment

Design 1,720 1,164 1,094 15,773 34,461 38,180 34,111 26,463 24,896 20,993 25,378

Land / Expropriations 12,157 585 2,945 89,287 125,932 67,530 42,069 17,889 37,756 22,029 20,267

Construction Cost 3,755 56,984 78,014 128,381 230,484 327,131 531,244 645,793 548,529 437,414 382,540

Public Utilities - Archaeology 0 0 0 0 0 0 15,287 9,367 6,222 2,423 1,855

Management 0 3,434 4,701 7,736 13,888 19,712 32,011 38,913 33,052 26,357 23,051

Replacement costs 0 0 0 0 0 0 0 0 0 0 0

Residual value 0 0 0 0 0 0 0 0 0 0 0

Total investment 17,633 62,166 86,754 241,176 404,765 452,553 654,722 738,424 650,455 509,215 453,090

Operating costs

Administrative costs - Egnatia Odos 0 0 0 0 0 0 0 0 0 0 0

Maintenance 0 0 0 0 0 0 0 0 0 0 0

Toll operation cost (toll collectors etc.) 0 0 0 0 0 0 0 0 0 0 0

Utilities Energy (lighting etc) 0 0 0 0 0 0 0 0 0 0 0

Total Operating Costs 0 0 0 0 0 0 0 0 0 0 0

TOTAL COSTS 17,633 62,166 86,754 241,176 404,765 452,553 654,722 738,424 650,455 509,215 453,090

REVENUES

Tolls 0 0 0 0 0 0 0 0 0 0 0

Service Stations 0 0 0 0 0 0 0 0 0 0 0

Total Revenues 0 0 0 0 0 0 0 0 0 0 0

Net Cash flow -17,633 -62,166 -86,754 -241,176 -404,765 -452,553 -654,722 -738,424 -650,455 -509,215 -453,090

Discounted Cash flow -40,414 -135,701 -180,355 -477,512 -763,245 -812,720 -1,119,796 -1,202,815 -1,009,069 -752,343 -637,543

90

Years n. -6 -5 -4 -3 -2 -1 0 1 2 3 4 Calendar Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

COSTS

Investment

Design 20,821 12,229 8,699 5,781 4,676 1,679 1,456 0 0 0 0

Land / Expropriations 19,444 27,088 37,814 31,418 8,077 0 0 0 0 0 0

Construction Cost 467,943 469,038 476,742 686,486 321,129 11,117 14,422 0 0 0 0

Public Utilities - Archaeology 2,329 1,665 1,392 1,764 406 400 191 0 0 0 0

Management 28,197 28,263 28,727 41,365 19,350 670 869 0 0 0 0

Replacement costs 0 0 0 0 0 0 0 0 0 15,000 15,000

Residual value 0 0 0 0 0 0 0 0 0 0 0

Total investment 538,733 538,283 553,373 766,815 353,638 13,866 16,938 0 0 15,000 15,000

Operating

Administrative costs - Egnatia

Odos 0 0 0 0 0 2,094 2,100 3,000 3,150 3,310 3,470

Maintenance 0 0 0 0 0 23,034 21,000 23,000 27,500 33,080 34,730

Toll operation cost (toll

collectors etc.) 0 0 0 0 0 335 2,000 3,000 3,150 3,310 3,470

Utilities Energy (lighting etc) 0 0 0 0 0 8,795 7,800 8,000 8,400 8,820 9,260

Total Operating Costs 0 0 0 0 0 34,258 32,900 37,000 42,200 48,520 50,930

TOTAL COSTS 538,733 538,283 553,373 766,815 353,638 48,123 49,838 37,000 42,200 63,520 65,930

REVENUES

Tolls 0 0 0 0 0 4,261 14,610 36,340 41,460 80,000 110,000

Service Stations 0 0 0 0 0 46 370 810 1,220 1,630 1,750

Total Revenues 0 0 0 0 0 4,307 14,980 37,150 42,680 81,630 111,750

Net Cash flow -538,733 -538,283 -553,373 -766,815 -353,638 -43,816 -34,858 150 480 18,110 45,820

Discounted Cash flow -721,954 -687,001 -672,628 -887,684 -389,886 -46,007 -34,858 143 435 15,644 37,696

91

Years n. 5 6 7 8 9 10 11 12 13

Calendar Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 COSTS

Investment

Design 0 0 0 0 0 0 0 0 0

Land / Expropriations 0 0 0 0 0 0 0 0 0

Construction Cost 0 0 0 0 0 0 0 0 0

Public Utilities - Archaeology 0 0 0 0 0 0 0 0 0

Management 0 0 0 0 0 0 0 0 0

Replacement costs 15,000 15,000 15,000 20,000 20,000 25,000 25,000 25,000 25,000

Residual value 0 0 0 0 0 0 0 0 -3,121,829

Total investment 15,000 15,000 15,000 20,000 20,000 25,000 25,000 25,000 -3,096,829

Operating

Administrative costs - Egnatia Odos 3,650 3,830 4,020 4,220 4,430 4,650 4,881 5,123 5,378

Maintenance 36,470 38,290 40,200 42,210 44,320 46,540 48,851 51,277 53,824

Toll operation cost (toll collectors etc.) 3,650 3,830 4,020 4,220 4,430 4,650 4,881 5,123 5,378

Utilities Energy (lighting etc) 9,720 10,210 10,720 11,260 11,820 12,410 13,026 13,673 14,352

Total Operating Costs 53,490 56,160 58,960 61,910 65,000 68,250 71,639 75,197 78,931

TOTAL COSTS 68,490 71,160 73,960 81,910 85,000 93,250 96,639 100,197 -3,017,898

REVENUES

Tolls 114,000 118,000 122,000 127,000 132,000 137,000 142,189 147,575 153,165

Service Stations 1,830 1,950 2,110 2,240 2,320 2,440 2,566 2,699 2,839

Total Revenues 115,830 119,950 124,110 129,240 134,320 139,440 144,756 150,274 156,004

Net Cash flow 47,340 48,790 50,150 47,330 49,320 46,190 48,116 50,077 3,173,902

Discounted Cash flow 37,092 36,408 35,641 32,035 31,792 28,357 28,133 27,885 1,683,188

Financial discount rate (backward) 5% FNPV -8,521,921,334

FRR -3.53%

92

ECONOMIC ANALYSIS (EUR THOUSAND, 2011 PRICES) Table II.15Years n. -17 -16 -15 -14 -13 -12 -11 -10 -9 -8 -7

Calendar Year CF 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 COSTS

Investment

Design 0.997 1,715 1,161 1,091 15,725 34,357 38,065 34,009 26,383 24,821 20,930 25,302

Land / Expropriations 1.3 15,804 760 3,828 116,073 163,712 87,790 54,689 23,255 49,083 28,638 26,347

Construction Cost 0.969 3,640 55,234 75,619 124,439 223,408 317,088 514,935 625,967 531,689 423,985 370,796

Public Utilities - Archaeology 0.997 0 0 0 0 0 0 15,241 9,339 6,203 2,415 1,850

Management 0.72 0 2,472 3,385 5,570 9,999 14,192 23,048 28,018 23,798 18,977 16,596

Replacement costs 0.997 0 0 0 0 0 0 0 0 0 0 0

Residual value 0.969 0 0 0 0 0 0 0 0 0 0 0

Total investment 21,159 59,627 83,923 261,807 431,477 457,135 641,922 712,962 635,594 494,945 440,890

Operating

Administrative costs - Egnatia Odos 0.997 0 0 0 0 0 0 0 0 0 0 0

Maintenance 0.997 0 0 0 0 0 0 0 0 0 0 0

Toll operation cost (toll collectors etc.)

0.997 0 0 0 0 0 0 0 0 0 0 0

Utilities Energy (lighting etc) 0.997 0 0 0 0 0 0 0 0 0 0 0

Total Operating Costs 0 0 0 0 0 0 0 0 0 0 0

TOTAL COSTS 21,159 59,627 83,923 261,807 431,477 457,135 641,922 712,962 635,594 494,945 440,890

BENEFITS

Producer's surplus

Tolls 0 0 0 0 0 0 0 0 0 0 0 Consumer's surplus

Passengers 0 0 0 0 0 0 30,217 48,580 62,980 80,609 107,616

Freight 0 0 0 0 0 0 15,830 25,450 32,994 42,229 56,377

Accident avoided 0 0 0 0 0 0 47,196 48,436 64,455 53,709 67,169

Externalities 0 0 0 0 0 0 -618 -1,518 -3,030 -4,774 -7,166

Net Cash flow -21,159 -59,627 -83,923 -261,807 -431,477 -457,135 -549,297 -592,013 -478,194 -323,173 -216,895

Discounted Cash flow -57,898 -153,777 -203,991 -599,787 -931,660 -930,313 -1,053,602 -1,070,250 -814,785 -518,989 -328,289

93

Years n. -6 -5 -4 -3 -2 -1 0 1 2 3 4

Calendar Year CF 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 COSTS

Investment

Design 0.997 20,759 12,192 8,673 5,764 4,662 1,674 1,452 0 0 0 0

Land Expropriations 1.3 25,277 35,214 49,158 40,843 10,500 0 0 0 0 0 0 Construction Cost 0.969 453,577 454,639 462,106 665,411 311,270 10,775 13,979 0 0 0 0

Public Utilities - Archaeology

0.997 2,322 1,660 1,387 1,759 405 399 191 0 0 0 0

Management 0.72 20,302 20,349 20,683 29,783 13,932 482 626 0 0 0 0

Replacement costs 0.997 0 0 0 0 0 0 0 0 0 14,955 14,955 Residual value 0.969 0 0 0 0 0 0 0 0 0 0 0

Total investment 522,236 524,055 542,007 743,560 340,769 13,331 16,247 0 0 14,955 14,955

Operating

Administrative costs - Egnatia Odos

0.997 0 0 0 0 0 2,088 2,094 2,991 3,141 3,300 3,460

Maintenance 0.997 0 0 0 0 0 22,965 20,937 22,931 27,418 32,981 34,626


0.997 0 0 0 0 0 334 1,994 2,991 3,141 3,300 3,460

Utilities Energy (lighting etc)

0.997 0 0 0 0 0 8,768 7,777 7,976 8,375 8,794 9,232

Total Operating Costs 0 0 0 0 0 34,155 32,801 36,889 42,073 48,374 50,777

TOTAL COSTS 522,236 524,055 542,007 743,560 340,769 47,486 49,049 36,889 42,073 63,329 65,732

BENEFITS

Producer's surplus

Tolls 0 0 0 0 0 4,261 14,610 36,340 41,460 80,000 110,000

Consumer's surplus

passengers 141,762 160,599 173,187 189,463 265,147 254,139 228,357 217,742 228,733 235,580 252,183

freight 74,265 84,133 90,728 99,255 138,903 132,714 119,250 124,823 131,124 126,212 135,107

Accident avoided 67,169 67,169 67,169 67,169 67,169 83,307 83,307 83,307 83,307 83,307 83,307

Externalities -10,298 -12,311 -14,409 -17,189 -29,023 -28,312 -25,440 -26,724 -28,115 -29,534 -31,615

Net Cash flow -249,339 -224,464 -225,332 -404,863 101,427 398,623 371,036 398,600 414,436 432,236 483,249

Discounted Cash flow -355,698 -301,803 -285,552 -483,564 114,178 422,939 371,036 386,240 389,133 393,262 426,042

94

Years n. 5 6 7 8 9 10 11 12 13

Calendar Year CF 2016 2017 2018 2019 2020 2021 2022 2023 2024 COSTS

Investment

Design 0.997 0 0 0 0 0 0 0 0 0

Land Expropriations 1.3 0 0 0 0 0 0 0 0 0

Construction Cost 0.969 0 0 0 0 0 0 0 0 0

Public Utilities - Archaeology

0.997 0 0 0 0 0 0 0 0 0

Management 0.72 0 0 0 0 0 0 0 0 0

Replacement costs 0.997 14,955 14,955 14,955 19,940 19,940 24,925 24,925 24,925 24,925

Residual value 0.969 0 0 0 0 0 0 0 0 -3,025,989

Total investment 14,955 14,955 14,955 19,940 19,940 24,925 24,925 24,925 -3,001,064

Operating Administrative costs - Egnatia ODOS

0.997 3,639 3,819 4,008 4,207 4,417 4,636 4,866 5,108 5,362

Maintenance 0.997 36,361 38,175 40,079 42,083 44,187 46,400 48,705 51,123 53,662


0.997 3,639 3,819 4,008 4,207 4,417 4,636 4,866 5,108 5,362

Utilities Energy (lighting etc)

0.997 9,691 10,179 10,688 11,226 11,785 12,373 12,987 13,632 14,309

Total Operating Costs

53,330 55,992 58,783 61,724 64,805 68,045 71,424 74,972 78,695

TOTAL COSTS 68,285 70,947 73,738 81,664 84,745 92,970 96,349 99,897 -2,922,369 BENEFITS Producer's surplus

Tolls 114,000 118,000 122,000 127,000 132,000 137,000 142,189 147,575 153,165

Consumer's surplus

passengers 269,956 288,981 309,347 331,149 354,487 361,745 369,152 376,711 384,425

freight 144,628 154,821 165,733 177,413 189,916 193,805 197,773 201,823 205,955

Accident avoided 83,307 83,307 83,307 83,307 83,307 83,307 83,307 83,307 83,307

Externalities -33,843 -36,228 -38,781 -41,515 -44,440 -45,350 -46,279 -47,227 -48,194

Net Cash flow 509,763 537,935 567,867 595,690 630,525 637,537 649,794 662,293 3,701,028

Discounted Cash flow

435,482 445,299 455,501 463,002 474,881 465,273 459,514 453,831 2,457,459

95

Economic discount rate (backward) 6.1% Economic discount rate (forward) 3.2%

ENPV 523,112,191

ERR 5.2%

96

SENSITIVITY AND SCENARIO ANALYSIS

A sensitivity analysis has been carried out on the key variables in order to determine whether

they are critical or not. The procedure requires to make them vary one at a time by a +/-1%,

and then to assess the corresponding change in the ENVP and ERR. A variable is referred to as

“critical” if the corresponding variation in the economic output is greater than 1% in absolute

value. In addition to the sensitivity analysis, a scenario analysis has been performed on the

same variables in order to identify pessimistic and optimistic future paths.

The Authors tested the sensitivity of six different variables: Traffic flow, Traffic composition,

Traffic diverted, Avoided accidents, Average travel time and Load factor. The assumptions

concerning the variables’ base values are based on experts’ opinions, and have been

formulated starting from the data provided by the Egnatia Odos observatory. In accordance to

what reported in the previous section, these variables have been considered particularly

relevant for the future forecasts because of their impact on the demand side (Traffic flow and

Traffic composition), on the benefits for private car users and for heavy good vehicles users

(Traffic diverted, Average travel time and Load factor) as well as on externalities (Avoided

accidents and Traffic diverted). The key variables considered in the sensitivity analysis are

described more in detail in what follows:

Traffic flow: in the CBA, the demand growth rate have been split according to three

time periods (2012-2014, 2015-2020 and 2021-2023). The base values assumed for

carrying out the demand forecasts are 5.05%, 7.05% and 3.05%, respectively. In

carrying out the sensitivity analysis, these three values has made vary by a +/-1%.

Traffic composition: Starting from the available data, the share of private cars has been

assumed equal to 85%, while the share of heavy vehicles is equal to 15%. Since the

aggregate benefits144 for the passengers using the motorway are higher relative to the

same benefits for freight traffic, an increase in the share of cars is positively associated

to the ENVP and ERR. Within the sensitivity analysis the two quantities are made

contemporaneously and oppositely vary by a +/-1%.

Traffic diverted: The entire traffic flow has been split into two shares, traffic diverted

and traffic generated. In the CBA, the two base values have been assumed equal to

80% and 20%, respectively. An increase in the share of traffic diverted is associated to

higher output values, as the traffic generated lowers the outcomes through the

generation of negative externalities (air pollution and noise). With respect to the

sensitivity analysis, it holds what said for the previous variable.

Avoided accidents: On the basis of experts’ opinion, the number of avoided accidents

has been assumed constant over time and equal to 48, the difference between the

2010 fatalities occurred on alternative roads (“without the project” situation) and the

same quantity relative to the Egnatia Motorway (“with the project”).

144

Determined by travel time savings, reduction in vehicles operating costs (fuel) and decrease in the number of accidents.

97

Average travel time: The average travel time has been obtained – separately for the

before-the-project scenario and for the after-the-project scenario – as the average of

the travel time on six different routes. The base values adopted in the CBA are 7.59

and 3.93 hours, respectively. By increasing these two quantities by 1%, their difference

– by definition, the travel time saving – becomes higher (3.70, against 3.66 in the base

case). This also holds for greater variations, so that in general an increase in Average

travel time is associated to an increase in the ENVP and ERR.

Load factor: It consists in the average tons carried by the heavy vehicles. Starting from

the available data, the base value has been assumed equal to 16. Since the load factor

is linked to the tolls computed in the CBA analyses, it is positively related to the

producer surplus and negatively related to the consumer surplus. In general, it turns

out that the lower is the Load factor value, the higher are the outputs, and vice versa.

Overall, the sensitivity analysis procedure shows that the economic outputs are extremely

sensible to variations in the independent variables. Specifically, all the variables but Load

factor are critical with respect to the ENVP, with Traffic composition and Average travel time

being characterized by the largest elasticities (20.70 and 15.68, respectively). As for the ERR,

these two last variables are the only ones to be critical (see the Table below for further

details).

RESULTS OF THE SENSITIVITY ANALYSIS Table II.16

Independent variable Variation (in percent) of the ENPV due to a ± 1% variation

Criticality

judgement *

Variation (in percentage value) of the ERR due to a ± 1% variation

Criticality

judgement *

Traffic flow 4.118 Critical 0.287 Not critical

Traffic composition 20.698 Critical 1.562 Critical

Traffic diverted 6.970 Critical 0.526 Not critical

Avoided accidents 1.734 Critical 0.129 Not critical

Average travel time 15.683 Critical 1.183 Critical

Load factor 0.081 Not critical 0.007 Not critical

* Critical: ΔENPV/ERR > +1%; Less Critical: ΔENPV/ERR > +0.7%; Not critical: ΔENPV/ERR < 0.7%.

With respect to the scenario analysis, the above variables vary at the same time according to

“pessimistic” or “optimistic” values. Specifically, for the sake of prudence the optimistic

scenario has been obtained by contemporaneously increasing the base values of Traffic flow,

Avoided accidents and Average travel time by 10%. Furthermore, the share of cars (Traffic

composition) and the share of traffic diverted have been increased by five percentage points.

In addition, Load factor has been set to 12 tons. Accordingly, the pessimistic scenario has been

constructed by reversing the signs of the increments of the first five above mentioned

98

variables. With respect to load factor, according to experts’ opinion in the pessimistic scenario

it takes the value of 24 tons.

The following Table gives a visual inspection both of the variables ranges, as defined in the

pessimistic and optimistic scenarios, and of the outputs obtained when the independent

variables are made vary one at once according to the scenario analysis hypotheses.

SYNTHESIS OF SOURCES AND HYPOTHESIS MADE FOR THE CBA AND Table II.17

RELATED OUTPUTS

Variable Base assumption in

CBA Hypothesis

ENPV (EUR 2011) *

ERR (%) *

Traffic flow (2012-2014, 2015-2020 and 2021-2023)

5.05%, 7.05%, 3.05% 5.75%, 7.75%, 2.75% 744,504,067 5.36%

4.34%, 6.34%, 1.34% 313,440,554 5.06%

Traffic composition ** 85% 84% 650,495,372 5.30%

86% 395,729,010 5.11%

Traffic diverted *** 80% 81% 568,688,585 5.24%

79% 477,535,798 5.17%

Avoided accidents 48 53 613,806,682 5.27%

43 432,417,701 5.14%

Average travel time (before and after, hours)

7.59, 3.93 8.35, 4.32 1,343,487,275 5.81%

6.83, 3.54 -297,262,893 4.58%

Load factor 16 12 537,019,904 5.22%

24 508,847,373 5.19%

* ENVP base case: EUR 523,112,191. ERR base case: 5.2%. ** The figure is referred to private cars, while the share that implicitly sum to 100% is referred to heavy vehicles. *** The share that implicitly sum to 100% are referred to the traffic generated.

The economic performance indicators obtained by making contemporaneously vary all the

independent variables according to the above pessimistic or optimistic hypotheses are the

following:

In the optimistic scenario, the ENPV would reach EUR 2,698,680,686, with an

economic rate of return of 6.75%.

In the pessimistic scenario, the ENVP would reach EUR -1,324,693,496, with an

economic rate of return of 3.76%.

Overall, as it is clear from the above values, the project is not robust to contemporaneous

variations in the base values assumed for its key variables. This is consistent with the results

99

that we had obtained in the sensitivity analysis, by carrying out “one at once” variations in the

hypothesized base values.

Uncertainty analysis

In addition to the sensitivity analysis on the assumptions made for the future trends of the key

variables, it also has been tested the elasticity of the outputs to the real Social Discount Rates

adopted in the analyses, as a test of the methodology used. In the CBA, the SDRs were

estimated at 6.1% and 3.2% for the backward and forward period, respectively. The difference

with the standard sensitivity analysis stems from the consideration that variations in the

parameters are not the result of the uncertainty about the future, but relates to

methodological choices and assumptions. Hence, the ultimate purpose of this section is to test

the robustness of the results to some key methodological hypotheses.

Since the project outcome is highly affected by the specific SDR values, it is worth deepening

our analysis by building some alternative scenarios based on different values hypothesized for

the two discount rates.

First, we assume that either the discount rates are equal to 5%. This because the social

opportunity cost of capital – i.e. the return that can be generated on the marginal project in

the private sector145 – could have be set to a 5% real rate, as recommended by the EC Guide.

The result, reported in the following table, is that the ENVP becomes equal to EUR Th. 247,202,

about one half the base case value.

Moreover, it seems sensible to set the real forward-SDR equal to 6.1%, equal to the backward

SDR. This corresponds to ask ourselves what would have happened in a scenario where the

current global crisis had not hit the economy. It turns out that the ENVP is now extremely

negative and equal to EUR Th. -1,091,453. The apparently paradoxical result is that the global

crisis has increased the social desirability of the project. This because it caused the real

forward-SDR to decrease, hence increasing the value of the future cash flows discounted.

Finally, for the sake of completeness, we can build a scenario where the real social discount

rate is equal to 3.2% within the entire time horizon considered. In this last case, the ENVP is

equal to EUR Th. 2,428,449. The positive result follows from the fact that during the period in

which the backward-SDR is applied (1994-2011) the largely negative net cash flows are now

capitalized at a lower rate.

145

In a closed economy with perfect information, no distortions and no externalities the social discount rate and the social opportunity cost of capital are equivalent. This because public investments crowd out private investments, so that the social discount rate can be defined as the real rate of return earned on a marginal project in the private sector.

100

VARIATION OF SELECTED INDICATORS SYNTHESIS OF SOURCES AND Table II.18

HYPOTHESIS MADE FOR THE CBA

CBA value Value tested

ENPV

(EUR thousand) *

Social discount rate Backward SDR 6.1%;

forward SDR 3.2%

both 5% 247,202

both 6.1% -1,091,453

both 3.2% 2,428,449

* ENVP base case: EUR 523,112,191.

RISK ASSESSMENT

The risk assessment has been conducted on the six variables on which the Sensitivity analysis

was previously performed: Traffic flow, Traffic composition, Traffic diverted, Avoided accidents,

Average travel time and Load factor. For the sake of simplicity, it was assumed that the

probability distribution of each of these variables is triangular, with the value with the highest

probability being the reference one – that is, the “base value” adopted for carrying out the

CBA – and the lower and upper bounds being the “pessimistic” and “optimistic” values defined

in the scenario analysis.

The analyses have been elaborated through an experimental Monte Carlo simulation146 with

1,000 random repetitions. In a nutshell, at each iteration it is randomly extracted a value from

the distribution of each of the independent variables. The six extracted values are adopted for

computing the ENVP and ERR, and the output results are then stored. Finally, the Monte Carlo

numerical algorithm approximates the probability distribution of the two outputs.

The risk assessment shows that the expected value of the ENPV is equal to EUR 520,352,867

(slightly lower than the reference case), and that the expected value of the ERR is 5.2% (i.e.

equal to the base case. It is worth noting three important facts that emerge from the Monte

Carlo procedure:

Firstly, the probability that the ENVP is lower than 0 is not negligible, as it is equal to

13%.

Second, the numerically estimated standard deviation of the ENVP distribution is quite

high (EUR 442,414,202).

Finally, the ENVP range is wide, as it takes values between EUR -561,387,882 and

1,964,707,308.

All these aspects suggest that the ENVP value of the base case will be attained with a degree of

uncertainty and, more generally, that future variations in the key variables can even make the

project performance negative. However, as discussed in the sections above, there are some

important limitations to the base case, in primis a short time horizon, but also the value

adopted for the backward SDR, which reduce the benefits of the project. Accordingly, the

project is assessed as only slightly risky.

146

A proprietary software has been used.

101

RESULTS OF THE RISK ANALYSIS ON THE ECONOMIC NET PRESENT VALUE Table II.19

(EUR) Reference value of the ENPV 523,112,191

Mean 520,352,867.396

Median 514,341,573.045

Standard deviation 442,414,201.577

Minimum value -561,387,881.943

Central value 701,659,712.931

Maximum value 1,964,707,307.804

Probability of the ENPV being not higher than the reference value 0.504

Probability of the ENPV being higher than the reference value 0.496

Probability of the ENPV being lower than zero 0.132

Source: Authors

Figure II.4 PROBABILISTIC DISTRIBUTION OF THE ECONOMIC NET PRESENT VALUE

(EUR)

Source: Authors

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

-570,000,000 -70,000,000 430,000,000 930,000,000 1,430,000,000 1,930,000,000

Punctual

probabilityCumulated

probabilityReference value

Minimum

Central

Maximum

Mean

SD low

SD upp

Median

102

Figure II.5 PROBABILISTIC DISTRIBUTION OF THE ECONOMIC NET PRESENT VALUE

(EUR)

Source: Authors

RESULTS OF THE RISK ANALYSIS ON THE ECONOMIC INTERNAL RATE OF Table II.20

RETURN Reference value of the ERR 5.20%

Mean 5.20%

Median 5.20%

Standard deviation 0.33%

Minimum value 4.37%

Central value 5.31%

Maximum value 6.24%

Probability of the ERR being not higher than the reference value 0.502

Probability of the ERR being higher than the reference value 0.498

Probability of the ERR being lower than the reference discount rate (3.2 %) < 0.001

Source: Authors

0.00

0.02

0.04

0.06

0.08

0.10

0.12

-498,2

35,5

02

-371,9

30,7

43

-245,6

25,9

83

-119,3

21,2

24

6,9

83,5

36

133,2

88,2

95

259,5

93,0

55

385,8

97,8

14

512,2

02,5

74

638,5

07,3

33

764,8

12,0

93

891,1

16,8

52

1,0

17,4

21,6

12

1,1

43,7

26,3

71

1,2

70,0

31,1

31

1,3

96,3

35,8

90

1,5

22,6

40,6

50

1,6

48,9

45,4

09

1,7

75,2

50,1

69

1,9

01,5

54,9

28

103

Figure II.6 PROBABILISTIC DISTRIBUTION OF THE ECONOMIC INTERNAL RATE OF

RETURN

Source: Authors

Figure II.7 PROBABILISTIC DISTRIBUTION OF THE ECONOMIC INTERNAL RATE OF

RETURN

Source: Authors

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

4.3% 4.8% 5.3% 5.8% 6.3%

Punctual

probabilityCumulated

probabilityReference value

Minimum

Central

Maximum

Mean

SD low

SD upp

Median

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

4.4%

4.6%

4.8%

5.0%

5.2%

5.4%

5.5%

5.7%

5.9%

6.1%

104

SYNTHESIS OF THE HYPOTHESES OF ANALYSIS AND SOURCES

The following Table lists the different sources consulted to derive the financial and economic

flows and the hypotheses and assumptions made by the Team in carrying out the CBA.

Item Source Hypothesis

Traffic volume

Traffic Unit Network Support Department of

the Egnatia Odos

Data on the number of vehicles per km were provided by the Traffic Department of the Egnatia Odos. On this basis, number of vehicle was calculated. Future flows was estimated according to the forecasts provided by the Traffic Department: +5% between 2012-2014; +7% between 2015 and 2020; +2% between 2021-2023. According to experts’ opinion, it was assumed that 80% of the total traffic volume was already existing in alternative roads while the remaining 20% was generated by the construction of the motorway.

Traffic composition

Different sources

Traffic Department suggested that traffic volume is represented on average for 85% by light vehicles and 15% by heavy vehicles. The number of vehicles travelling from Igoumenitsa to Kipoi was converted in number of passengers and freight tonnes, by applying the respective load factors (1.2 for passengers and 4.3 for freight tonnes). As for the light traffic, we distinguished between business, commuters and other passengers (leisure), which on the basis of expert’s suggestion, were assumed to be 30%, 20% and 50% of the total light traffic.

Investment costs and

Extraordinary maintenance

Planning, Project Finance and Project Control Division of

Egnatia Odos

Historical data on investment costs, as well as forecasts on extraordinary maintenance, have been provided by the Planning, Project Finance and Project Control Division of the Egnatia Odos

Operating costs and revenues


Egnatia Odos

Historical and forecast data on operating costs and revenues have been provided by the Planning, Project Finance and Project Control Division of the Egnatia Odos. Estimation on the future revenues relied on the following hypotheses: two more stations will become operational in 2012; in 2014 an electronic toll collection system will be put in place.

Source of Funding


Egnatia Odos

Details on the share of European and National resources allocated to the project were provided by the Planning, Project Finance and Project Control Division of the Egnatia Odos.

Travel Time Different sources

An average travel time for a trip between Igoumenitsa and Kipoi has been taken as reference and compared to the alternative roads. Time saved has been then monetized by applying difference unit values, according to business and non-business trips or freight trips as from the indication provided by HEATCO guidelines.

Travel Costs Different sources A fuel price equal to 0.09 and 0.15 for light and heavy vehicles respectively was considered. Toll fare per passenger and freight tonnes were gathered from Egnatia website.

Number of accident

Different sources

Historical data on fatalities were provided by the Road Safety and Traffic Signing of Egnatia Odos S.A while data on heavy and light injuries were gathered from Egnatia Observatory, (2007) Indicator Factsheet TRB-10-Road safety. Casualities avoided have been monetised by applying difference unit values as suggested by the CBA guide, pag 81

Residual Value


Egnatia Odos

Residual value was estimated to be 44% of the investment costs by considering a weighted technical life of the project equal to 55 years (structures 75 years, earthworks pavement 40 years, electromechanical and signage 25 years).

Externalities Different sources

Externalities have been monetised by applying the unit values provided by CE Delft, 2008 for air and noise pollution and climate change effects to the number of vehicles per km provided by Traffic Department of Egnatia Odos.

Source: Authors

105

ANNEX III. MAP OF STAKEHOLDERS

Stakeholder General description and responsibility

Egnatia Odos

• State-owned company set up in 1995 by the Greek Government specifically to design and construct the Egnatia motorway and five of its vertical axes. On its

establishment, it was charged also with the responsibility of management, maintenance and operations of the motorway for a period of 50 years.

• It was under the superintendence of the Ministry for the Environment, Physical Planning and Public Works until 2009. Then, it passed under the supervision of

the Ministry of Infrastructure, Transport and Networks.

• Until 2002, Brown & Root company (today KBR ) was included in its Corporate Organisation Chart, with the role of Project Manager

• Since 2011 the company has been included in the privatization programme of the Ministry of Finance and it is expected that by the end of 2012 the Greek

State will give the functioning of the highway, its maintenance and toll stations to private companies through concession contracts, while the construction

department will remain under the supervision of the State.

• Operational and Maintenance Division of the Egnatia Odos is in charge for the collection of tolls on behalf of the Ministry of Finance since 2011 (before it was

on behalf of the Ministry of Infrastructure, Transport and Networks)

Egnatia

Observatory

• Permanent unit of Egnatia Odos under the Support Services Division. It was created in 2003 by Egnatia Odos thanks to a co-funding contract signed with DG

Energy and Transport in the amount of EUR 295,000 (negotiations started in 1999).

• Its activities are structured on a 5-year Action Plan.

• It collects and process data, and calculates indicators to be used for monitoring the long-term impact of the Egnatia motorway and its vertical axes on the

social and financial cohesion, the physical planning arrangement, the system of transport, and the environment.

Arcturos

• NGO based in Thessaloniki, Greece, and founded in 1992.

• Its purpose is to promote the study, management and conservation of the natural environment and wildlife. The society’s activities are especially focused on

the brown bear.

• In 1994, it initiated a judicial action against Egnatia Odos calling for a revision of the motorway’s alignment in the section Panagia–Greneva. It appealed to the

State Council and succeeded in getting the cancellation of the Ministerial Decision concerning the initial design of the section and the approval of a new

Environmental Term.

• From 2003 it has cooperated with Egnatia Odos in order to implement a 6 year programme entitled, "Evaluation of the impact of the construction and function

of Egnatia Highway on the large mammal and avifaunal population at the Panagia Grevena section» and to adopt a series of mitigation measures along the

Egnatia motorway.

European

Commission

• It financed 47% of total investment costs incurred between 1997 and 2009 (amounting to EUR 2,480 million out of a total cost of EUR 5,550 million).

• At the beginning of the second CSF (1994-1999), it encouraged the Greek Government to revise its regulatory framework for the management of public

projects.

• It explicitly required the Greek Government to design Egnatia following the specifications of the Trans-European road network.

106

Stakeholder General description and responsibility

• It encouraged the Greek Government to provide Egnatia Odos with international highly skilled assistance to be incorporated in the company and in charge of

providing the necessary managerial and technical expertise for running the infrastructure project.

Greek State

(Ministry of

Environment and

Public Works)

• At the beginning of the second CSF (1994-1999), it was asked by the European Commission to revise its regulatory framework for public projects (which was

confined to the Law 1418/84). It issued the Law 2229/94 which enabled the creation of a number of Sociétés Anonymes entrusted with the responsibilities of

construction, maintenance and operation of transport infrastructure projects

• In 1995, it established Egnatia Odos. Then, following the request of the European Commission, it selected the Brown & Root company (today KBR) which was

incorporated into Egnatia Odos with the role of Project Manager

• Project financier in the amount of EUR 3,070 million out of a total cost of EUR 5,550 million; however, 73% of the former amount (EUR 2,240 million) came

from loans provided by the EIB.

• Ministry for the Environment, Physical Planning and Public Works supervised Egnatia Odos until 2009. Following the electoral victory of the Panhellenic

Socialist Movement on 4 October 2009, the ministry was split into Ministry for the Environment, Energy and Climate Change, while its Public Works section

was merged with the Ministry for Transport and Communications to form the Ministry of Infrastructure, Transport and Networks. The latter has taken the

supervision of the Egnatia Odos up to the present day.

• At the end of 2010, after several demands from the European Commission, it decided to start the collection of tolls on the motorway in order to repay the

loans contracted with local banks and the EIB.

European

Investment Bank

• It provided loans to the Greek State, by co-financing 40% of total investment costs incurred between 1997 and 2009 (amounting to EUR 2,240 million out of a

total cost of EUR 5,550 million).

Brown & Root

company (today

KBR)

• It was founded in Texas in 1919 by two brothers, George R. Brown and Herman Brown, with money provided by their brother-in-law, Daniel Root. The

company began its operations by building roads in Texas. It emerged from the Second World War as a major US construction company and continued to

increase the scope and magnitude of its construction and engineering projects, including overseas.

• Today its name is KBR, Inc. (formerly Kellogg Brown & Root) (founded in 1998), an American engineering, construction and private military contracting

company.

• Prior to the creation of Egnatia Odos, Brown & Root company provided consulting services to the Greek State in order to organise the management system of

the emerging Egnatia Odos and revise all the project’s studies, properly addressing the geological and wildlife mitigations issues.

• From 1997 to 2002, it was included into the Corporate Organisation Chart of Egnatia Odos with the role of Project Manager.

• It provided its expertise not only for the construction of the motorway but also for the organisation of the company itself, by being involved, for instance, in

the selection of its personnel.

107

ANNEX IV. GLOSSARY

TERM DEFINITION

Automatic debiting system

A toll system based on the use of barcodes or similar devices affixed to each vehicle, to be read optically at the toll booth station.

Balanced cantilever bridge

A cantilever bridge is a bridge built using cantilevers, structures that project horizontally into space, supported on only one end. A common way to construct trusses (composed of connected elements) and pre-stressed concrete cantilever spans is to counterbalance each cantilever arm with another cantilever arm projecting in the opposite direction, forming a balanced cantilever.

Beam A horizontal structural element that is capable of withstanding load primarily by resisting bending (or flexure).

Bypass A road or highway that avoids or "bypasses" a built-up area, town, or village, to let through traffic flow without interference from local traffic, to reduce congestion in the built-up area, and to improve road safety.

Carriageway A width of road on which a vehicle is not restricted by any physical barriers or separation to move laterally. A single carriageway is a road with 1, 2 or more lanes arranged within a single carriageway with no central reservation to separate opposing flows of traffic. A dual carriageway is a class of highway with two carriageways for traffic travelling in opposite directions separated by a central reservation.

Closed toll system A toll system that requires full access control, with side toll stations in order to control every vehicle entering/exiting the motorway at all interconnections. This system permits vehicles to be charged according to the distance travelled on the motorway.

Concrete A composite construction material composed primarily of aggregate, cement and water. There are many formulations that have varying properties.

Culverts A device used to channel water. It may be used to allow water to pass underneath a trail, road, railway, or embankment. Culverts can be made of many different materials; steel, polyvinyl chloride and concrete are the most common.

Electronic Road Pricing

A toll system which relies on the use of gantry system able to capture the vehicles number plate

Expressway A highway or arterial road for high-speed traffic

Fatalities Death arising from the accident.

Functional Polycentricity

A concept that concerns the relations between urban areas, i.e. the flow and cooperation networks.

Green Bridge A bridge that allow animals to cross human-made barriers (e.g. a highway) safely.

Greenhouse Gas A greenhouse gas (sometimes abbreviated GHG) is a gas in an atmosphere that absorbs and emits radiation within the thermal infrared range. This process is the fundamental cause of the greenhouse effect. The primary greenhouse gases in the Earth's atmosphere are water vapour, carbon dioxide, methane, nitrous oxide, and ozone.

Hard shoulder A reserved area by the verge of a road or motorway, typically used for emergency stops.

Interchanges A road junction that typically uses grade separation, and one or more ramps, to permit traffic on at least one highway to pass through the junction without directly crossing any other traffic stream. It differs from a standard intersection, at which roads cross at grade. Interchanges are almost always used when at least one of the roads is a limited-access divided highway (expressway or freeway).

Landslide A geological phenomenon which includes a wide range of ground movement, such as rock falls, deep failure of slopes and shallow debris flows, which can occur in offshore, coastal and onshore environments. Although the action of gravity is the primary driving force for a landslide to occur, there are other contributing factors affecting the original slope stability, such as: weakening of a slope through saturation by snowmelt, glacial melting, or heavy rains; groundwater pressure acting to destabilize the slope; deforestation, cultivation and construction, which destabilize already fragile slopes.

108

Lane A lane is a part of the roadway within a road marked out for use by a single line of vehicles. Most public roads (highways) have at least two lanes, one for traffic in each direction, separated by Lane markings. Major highways often have two roadways separated by a median, each with multiple lanes.

Large mammal A large size member of a class of air-breathing vertebrate animals characterised by the possession of endothermy, hair, three middle ear bones, and mammary glands functional in mothers with young. Most mammals also possess sweat glands and specialised teeth, and the largest group of mammals, the placentals, have a placenta which feeds the offspring during gestation. E.g. Bear, elephant, horse, etc.

Open toll system A toll system that imposes a flat charge at selected locations, regardless of the length of motorway travelled. It allows intermediate access free of charge.

Overpass A bridge, road, railway or similar structure that crosses over another road or railway.

Pier A vertical, rectangular or circular support for concentrated loads from an arch or bridge superstructure.

PM10 The abbreviation PM10 identifies material present in the atmosphere in the form of microscopic particles whose aerodynamic diameter is equal to or less than 10 uM, or 10 thousandths of a millimetre. It can consist of dust, smoke, or liquid aerosols.

Precast beams The concept of precast (also known as “prefabricated”) construction includes those buildings where the majority of structural components are standardized and produced in plants at a location away from the building, and then transported to the site for assembly. One type of precast structure is beams (or girders).

Pre-stressed concrete A method for overcoming concrete's natural weakness in tension. It can be used to produce beams, floors or bridges with a longer span than is practical with ordinary reinforced concrete. Pre-stressing can be accomplished in three ways: pre-tensioned concrete, and bonded or unbonded post-tensioned concrete.

Reinforced concrete Concrete in which reinforcement bars ("rebars"), reinforcement grids, plates or fibres have been incorporated to strengthen the concrete in tension.

Serious injury Casualties who require hospital treatment and have lasting injuries, but who do not die within the fatality recording period (30 day).

Slight injury Casualties whose injuries do not require hospital treatment or, if they do, the effect of the injury quickly subsides.

Span The distance between two supports of a structure.

Toll booth stations A toll station (toll booth, toll plaza, or toll gate) is a building or facility on a toll road at which a fee for using a road is collected.

Twin-bore tunnels A dual-bore, four-lane vehicular tunnel.

Underpass A section of a road that passes under another road or railway line.

Wildlife underpass An underpass that allows wildlife to cross human-made barriers (e.g. highways) safely.

109

ANNEX V. LIST OF INTERVIEWEES

Interviews and correspondence were undertaken with the following individuals. We would like

to thank them for their assistance in compiling our report.

Interviewees Position Date Place

Ms Thalia Valkouma Head of Environment Unit, Egnatia Odos S.A 13.02.2012 Thessaloniki

Mr Alexandros Maravas

Head of the Planning, Project Finance and Project Control Division of Egnatia Odos

13.02.2012 Thessaloniki

Ms Zoe Papasiopi Head of Planning, Project Finance and Project Control

Division of Egnatia Odos at the time of the Project financing; Her current position is head of Managing Authority, OP-Accessibility Improvement, Ministry of Infrastructure Transport and Networks -G.S.P.W.


Mr Vassilys Fourkas Egnatia Odos Observatory 14.02.2012 Thessaloniki

Mr Ioannis Tsaklidis Vice-president and Executive Director of Egnatia Odos S.A


Mr Evangelos Viskos Civil - Transportation Engineer, MSc, Head of Traffic Unit Network Support Department Operation & Maintenance Division Egnatia Odos S.A


Mr. Athanasios Tsantsanoglou

Traffic Engineer, Unit of Road Safety and Traffic Signing of Egnatia Odos S.A


Mr Simon Guy Deputy Head of Traffic Unit - Transport Planner at Egnatia Odos S.A


Mr Mathaiou Operation and Maintenance Division of Egnatia Odos S.A


Ms Desdina Papadopoulos

Transport and Communication unit of West Macedonia Region

20.02.2012 Phone interview

Mr Sergios Lambropoulos

General Secretary for Concessions, Ministry of Infrastructure, Transport and Networks


Mr. George Kolyvas E.C. Task Force for Greece 1.03.2012 Phone interview

Mr Papantoniou Ioannis

Municipality of Alexandroupoli 2.03.2012 Phone interview

Mr Apostolos Kenanidis

OFAE (transport association) 9.03.2012 Phone interview

Mr Antonios Sartzetakis

Legal Officer Greece and Cyprus – European Commission DG Regio


110

111

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