Tunnel owners face €5m loss

The operator of the tolled €810 million Limerick tunnel recorded a €5m pre-tax loss in its first full year of operation last year.

Figures show DirectRoute (Limerick) Ltd recorded the loss despite receiving compensation payments last year totalling €4.45m from the National Roads Authority (NRA) for the lower than anticipated traffic volumes using the tunnel.

19,400 motorists per day were projected to use the tunnel. However, the NRA confirmed yesterday that only 14,400 motorists a day used the tunnel last year with the shortfall triggering the €4.45m Traffic Guarantee Payments from the authority in 2011.

In its directors’ report for 2011, DirectRoute (Limerick) Ltd states: “The traffic guarantee payments have increased in line with the contract and also provide a necessary contribution to the project funding”.

The traffic guarantee payment system was put in place in the Public Private Partnership (PPP) scheme due to the high cost of the route and due to it being a challenging project to deliver — a traffic guarantee payment system is also in place for the M3 in Co Meath.

The directors state that the traffic guarantee mechanism increases income to a level that covers third-party funding requirements. At the end of December last, DirectRoute (Limerick) owed €255.7m in loans to group companies.

The Limerick tunnel route — which acts as a bypass to Limerick city — was first opened to traffic in July 2010 and car drivers pay €1.80 to use the tunnel under the River Shannon.

The accounts show that DirectRoute (Limerick) generated revenues of €23.1m from tolls and operational payments from the NRA in the 12 months to the end of December last — a €14.8m increase on the €8.2m in revenues in 2010.

The figures show that the firm added €5.8m to its revenues in “other operating income” — an increase of 140% from the €2.43m generated in “other operating income” in 2010.

This allowed the firm to record an operating profit of €8.2m — a six fold increase on the €1.1m operating profit recorded in 2010.

However, interest payments totalling €13.8m resulted in the company’s pre-tax loss of €5m. This followed a pre-tax loss of €4.27m in 2010.

The firm’s operating costs of €20.7m include non-cash depreciation costs of €13.4m showing that the firm’s earnings before depreciation amounted to €8.38m.

According to the directors’ report: “Traffic increased in 2011 as motorists recognise the benefits of the tunnel in terms of safety and improved journey times.

DirectRoute Limerick is made up of Lagan, Roadbridge, Sisk Contractors, Strabag, AIB and Meridiam Infrastructure.

The firm had a shareholders’ deficit of €8.1m at the end of December last. The figures show that the toll road and tunnel had a book value of €400m.

A note attached to the accounts states: “The directors are aware that the company has reported a loss for the period and is in a net liability position.

“The directors have assessed the project’s cash requirements and prepared a forecast for the life of the concession. This forecast demonstrates, based on the underlying assumptions, that there will be sufficient cash for the project to meet its third party liabilities as they fall due.”