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Old January 14th, 2011, 09:16 AM   #3981
ChrisZwolle
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PPP's are more expensive because their running time is not simply construction time, but often includes maintenance / operate contracts which can run for 30 years. Hence, you cannot compare PPP with regular road construction directly. However, PPP is very risky in economic uncertain times, as has been proved in Montenegro, Romania and Slovakia recently.
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Old January 14th, 2011, 09:30 AM   #3982
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Correct, but this does not make it more expensive. The operation and maintenance costs must be covered both in PPP and non-PPP cases.
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Old January 14th, 2011, 09:42 AM   #3983
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Yes, but in PPP you have to sign the contract for all the money needed for 30 years of mantainance and the public sees it as a huge amount of money. For non-PPP projects the government pays every year a little bit for mantainance (added up during 30 years is about equal as at PPP), but the public is not always aware of this and says that non-PPP are cheaper.
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Old January 14th, 2011, 10:27 AM   #3984
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Agree. The biggest impact is public scandal which the PPP numbers sometimes create, but the economic calculations show a different impact, sometimes better for PPPs. However, you're right that populist message sometimes hinders PPPs (as we've seen with the media message in Romania when the 4 billon PPP was agreed with Vinci for Comarnic-Brasov).

PS: For non-PPP, the cost of maintenance and operation may be higher for 30 years.
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Old January 14th, 2011, 12:29 PM   #3985
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Maintenance costs (2005, now+20%):

2x2 motorway: 15 million HUF/km
2x1 main road: 5 million HUF/km

Reconstrucion/renovation costs :

2x2 motorway: 160 million HUF/km
2x1 main road: 100 million HUF/km

M44 PPP parameters:
length: 63km
PPP duration: 2012-2040
total expense: 380,8 billion HUF
installment: 13,6 billion HUF/year
total costs/km: 6,26 billion HUF/km

Without PPP:
building expense (1,5 billion HUF/km): 94,5 billion HUF
maintenance costs (28 year): 945 million/year, 26,5 billion HUF/28 years
1x full renovation costs: 10 billion HUF
total expense: 122 billion HUF
total costs/km: 1,93 billion HUF/km

difference: 3x

We call the difference: Private Public Pillage
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Old January 14th, 2011, 01:59 PM   #3986
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You are comparing present costs with future (30 year-span) costs. What will be the value of HUF 30 years from now on (EUR denominated included)? It may be the case that HUF/EUR will devalue making the 30-year cost lower than the present cost. Think about the value of the USD 30 years before and now. Also, the PPP gives a certainty of operation and maintenance costs. The non-PPP system doesn't have that, and such costs may vary widely over the large span of 30 years.

And this is only one thing. The fact that there is money now to invest into a motorway, then a PPP makes no sense indeed. But if the money isn't there? The PPP becomes the only solution.
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Old January 14th, 2011, 02:37 PM   #3987
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Quote:
Originally Posted by Le Clerk View Post
You are comparing present costs with future (30 year-span) costs. What will be the value of HUF 30 years from now on (EUR denominated included)? It may be the case that HUF/EUR will devalue making the 30-year cost lower than the present cost. Think about the value of the USD 30 years before and now. Also, the PPP gives a certainty of operation and maintenance costs. The non-PPP system doesn't have that, and such costs may vary widely over the large span of 30 years.

And this is only one thing. The fact that there is money now to invest into a motorway, then a PPP makes no sense indeed. But if the money isn't there? The PPP becomes the only solution.
Will be 2x without hyperinflation. This is the situation:

normal expenses:
- appropriation costs
- building costs
- corruption costs on construction and design -->go money to political parties' fund and local authorities from the investor

PPP expenses:
- appropriation costs
- building costs
- corruption costs on construction and design -->go money to political parties' fund and local authorities from the investor
- maintenance costs
- corruption costs on maintenance -->go money to the investor from the sub-contractors
- the investor's profit on maintenance
- corruption costs on inventors extraprofit -->go money to political parties' fund from the investor
- the investor's profit on total project
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Old January 14th, 2011, 09:44 PM   #3988
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Quote:
Originally Posted by blogen_ View Post
Will be 2x without hyperinflation. This is the situation:

normal expenses:
- appropriation costs
- building costs
- corruption costs on construction and design -->go money to political parties' fund and local authorities from the investor

PPP expenses:
- appropriation costs
- building costs
- corruption costs on construction and design -->go money to political parties' fund and local authorities from the investor
- maintenance costs
- corruption costs on maintenance -->go money to the investor from the sub-contractors
- the investor's profit on maintenance
- corruption costs on inventors extraprofit -->go money to political parties' fund from the investor
- the investor's profit on total project
ignorance is a bliss

This comment of yours make understandable many of your former posts (obviously made on belief and not on well founded knowledge).

Opportunity cost of capital?
Discount rate?

Do these ring a bell?

PPP just makes obvious and apparent the costs that otherwise could be covered up and hidden from the public eye.
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Old January 15th, 2011, 09:39 AM   #3989
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Yes, he keeps taking out costs that are actually hidden for the normal non-PPP projects. The cost of capital over long term, which is fixed for PPP, makes the latter cheaper, at least in terms of financial risk. While the cost of the capital is known for 30 years in case of the PP, the cost of the capital for maintenance or reparations is unknown for the same period, where the government does the maintenance and reparations for the motorway. Actually, fixed costs projects are always preferred because of the certainty of the future costs.

In any case, I believe where there's lack of capital, the PPP is the best and only solution actually. And it's better than wait for money coming from other sources much later probably because a motorway always attracts development and other investments.
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Old January 15th, 2011, 10:28 AM   #3990
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Quote:
Originally Posted by Le Clerk View Post
Yes, he keeps taking out costs that are actually hidden for the normal non-PPP projects.
Again:

Quote:
Maintenance costs (2005, now+20%):

2x2 motorway: 15 million HUF/km
2x1 main road: 5 million HUF/km

Reconstrucion/renovation costs :

2x2 motorway: 160 million HUF/km
2x1 main road: 100 million HUF/km

M44 PPP parameters:
length: 63km
PPP duration: 2012-2040
total expense: 380,8 billion HUF
installment: 13,6 billion HUF/year
total costs/km: 6,26 billion HUF/km

Without PPP:
building expense (1,5 billion HUF/km): 94,5 billion HUF
maintenance costs (28 year): 945 million/year, 26,5 billion HUF/28 years
1x full renovation costs: 10 billion HUF
total expense: 122 billion HUF
total costs/km: 1,93 billion HUF/km
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Old January 15th, 2011, 10:34 AM   #3991
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Can you please tell me how much will labour, concrete, gasoline etc will cost in 20 years from now?
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Old January 15th, 2011, 10:41 AM   #3992
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min +25%, max+50% If dont come the world war...

But the difference threefold between the normal and the PPP! So the price advance does not make changes in the situation: the PPP is terribly expensive.
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Old January 15th, 2011, 10:57 AM   #3993
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Quote:
Originally Posted by blogen_ View Post
min +25%, max+50% If dont come the world war...
Not true! Look how the price of gold vs USD fluctuates in times of peace!

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Old January 15th, 2011, 12:01 PM   #3994
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Gold: +200% nominal, +50% CPI-U with a War on Terror (1990-2010) and -100% nominal, -600% CPI-U without WoT (1980-2000) and 0% nominal and -50% CPI-U without Irak Iran war (1982-2002).

I talk about this!
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Old January 15th, 2011, 12:07 PM   #3995
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You talked about world war, and the operation and maintenance prices for non-PPP projects over 30 years cannot include such wild variations of commodity and capital costs which cannot be anticipated., unlike in the case of PPP which they are fixed at a certain rate, giving the beneficiary 9i.e. state) a very comforting financial security.
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Last edited by Le Clerk; January 15th, 2011 at 12:43 PM.
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Old January 15th, 2011, 12:40 PM   #3996
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^ C'mon guys, this is taking too long and I don't see its point. Please, let's get back to Hungarian Motorways.
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Old January 15th, 2011, 01:01 PM   #3997
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Quote:
Originally Posted by Le Clerk View Post
You talked about world war,
The WoT is ww!

Quote:
and the operation and maintenance prices for non-PPP projects over 30 years cannot include such wild variations of commodity and capital costs which cannot be anticipated., unlike in the case of PPP which they are fixed at a certain rate, giving the beneficiary 9i.e. state) a very comforting financial security.
For the investors and not for taxpayers. But ok, back to HM!
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Old January 16th, 2011, 09:54 PM   #3998
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I like this pic, road nr 27:



Source: http://www.panoramio.com/photo/36201199
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Old January 18th, 2011, 06:06 PM   #3999
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Quote:
Originally Posted by blogen_ View Post
planned M44 (2009): 6,26 billion HUF/km
Where've you found this data?
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Old January 18th, 2011, 06:10 PM   #4000
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Quote:
Originally Posted by (HUN)RoGeR View Post
Where've you found this data?
source
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