Case Studies: Liefkenshoekspoorverbinding Liefkenshoek Rail Link

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Project Overview
Belgium1.png
Figure 1: Liefkenshoek Rail Link, Belgium
Liefkenshoekspoorverbinding-Liefkenshoek Rail Link, Belgium
Project Type: Both
Type of Project Financing: PPP
Contract duration: 43 Years
Budget: 690 million EURO (This budget includes only Construction Costs.)
Project Time Line
Call for Tender: 18/04/2006
Permit delivered 10/09/2008
Contract Approved (signed): 05/11/2008
Financial Close: 05/11/2008
Start of construction: 12/11/2008
Initiation of tunneling works: 01/2010
Initiation of rail works part 1 & 2: 19/12/2011
Rail works on part 3 & 4 (see figure 1): 21/01/2013-26/02/2014
Official opening of the Liefkenshoekspoorverbinding 14/12/2014

Introduction

The port of Antwerp is the most important port in Belgium with a total turnover in freight of 190 mio annual tonnage and positive container traffic projections. The expected growth rate in freight transport is between 8%-15% by 2020. The port was served by a common railroad connection to the hinterland, causing congestion and delays. The Liefkenshoek tunnel project was designed to address this problem as the new railroad would accommodate and allow for growth (Petit, 2008). The Liefkenshoek Rail Link project is the largest Public-Private-Partnership (PPP) project in Belgium. LOCORAIL NV was chosen to design, build, finance and maintain (a DBFM contract) the Liefkenshoekspoorverbinding with a total value of approximately 690 Mio euros. The project includes two single-track tunnels of roughly 5,970m length each and with an internal diameter of 7.3m, constructed by shield driving, as well as several kilometres of tunnels by cut-and-cover with deep diaphragm and cement-bentonite walls. The total project is divided into 13 construction sections (KW) including an aqueduct, the renovation of the existing 30-year-old Beveren Tunnel (which has never been used), the starting shaft, two Tunnel Boring Machine (TBM) tunnels with cross-passages (CP) and evacuation shafts (ES), as well as the end ramp. Works began in November 2008. The critical part was the construction of the starting shaft, as both TBMs depended on this to remain in their time frame. The excavation for TBM No. 1 started in January 2010, while for the second, 2 months later in March 2010 (Boxheimer & Mignon, 2009). Construction works were completed in February 2014 and the railroad is operational since 14 Decemeber 2014.

The Contracting Authority (Public Party)

Infrabel and the Flemish government compose the contracting authority. Infrabel is a Belgian government-owned public limited company. It builds, owns, maintains and upgrades the Belgian railway network. Infrabel is the Liefkenshoekspoorverbinding operator.

The Concessionaire (Private Party)

Project Sponsors are the following three: 1) Aannemerscombinatie of CFE NV, 2) Vinci concessions SA and 3) BAM PPP Investments België.

The Contracting Authorities decided to carry out the constructional part of the project in the form of a DBFM contract whereby a private partner takes responsibility for Designing, Building, Financing and Maintenance. After an extensive negotiation procedure (many tendering phases), LOCORAIL NV was ultimately selected as the private partner for this project. Locorail NV, with shareholders CFE NV (Belgium company), Vinci concessions SA (French company), BAM PPP (Dutch company), is the special purpose vehicle created for this project. The DBFM contract between Infrabel and Locorail NV was signed on the 5th of November 2008 (Boxheimer &Mignon, 2009).

The Design and Build part of the contract was entrusted to the joint venture LocoBouw, consisting of MBG, CEIDe Meyer, Vinci Construction Grands Projets and Wayss & Freytag Ingenieurbau (BAM PPP bv, 2014).

The construction consortium, THV LocoBouw (key subcontractor), was commissioned to build the project by LocoRail NV. Within the consortium, MBG and CEI-de Meyer were responsible for the construction work. Vinci and Wayss & Freytag, French and German tunneling specialists, were in charge of the shield drives to produce the tunnels and cross-passages with Vinci responsible for the technical management (Boxheimer & Mignon, 2009).

Sources of Financing

The total investment of the project was 873 Mio euro (2010 price), with the PPP contractor funding its 690 Mio euro share and the rest (183 Mio euro) provided by the state (state funding). The 183 Mio euro is state debt. Total project debt is 550.2 Mio euro. Approximately, half the project debt is provided by the EIB (250.1 Mio euro) and the rest by six commercial banks (ING, Fortis, Banco Santander, Société Générale, BNG, Bayerische Landesbank). Total equity equals to 189.8 Mio euro. One of the two sources of equity is the Flemish government, which provided a financing of 107 Mio euro in order to limit the interest charges of the (pre)financing of the works. The remaining equity (82.8 Mio euro) was provided by the private party corresponding to 12% of the total contribution (690 Mio euro) (Van Olmen, 2015).

Infrabel will pay Locorail an availability fee of approximately 51Mio euro (+ indexation) /year for 38 years (Railway Gazette, 2014). Locorail is responsible for:

  • Financing and construction of the infrastructure (mainly civil engineering), as well as the maintenance of the infrastructure during 38 years;
  • Making the infrastructure available to Infrabel for 38 years;
  • After this period, Infrabel will have the ownership of the infrastructure without further obligations between parties (2051) (Bamelis Frederik, 2015).

The availability fee of the 51 Mio euro/year is only partly indexed and covers the reimbursement of capital, interest of senior debt, equity return as well as the maintenance and renewal of the infrastructure for 38 years. The cost of maintenance and renewal is not part of the PPP-CAPEX cost of 690 Mio euro (Van Olmen, 2015).

Users

The direct users are the train operating companies. Other stakeholders/indirect users are container shipping lines, shipping companies and goods handlers who want to transport goods from the right side of the Scheldt to the left side. Employees, inhabitants, Antwerp Municipal Port Authority, Flemish government and Infrabel are also indirect users. It is important to point out that the Liefkenshoek rail link is a strategic rail connection dedicated only to freight traffic and not passengers.

Key Purpose for PPP Model Selection

State budgetary constrains are considered as the basic reason the Belgian Federal State chose the PPP model (Raemdonck, 2015). Another reason was the desire to have more detailed specifications concerning the design and construction of the entire project. From the above, it can be concluded that the approach used by the contracting authority is a “rather finance-based approach”(Raemdonck, 2015). This means that PPP is chosen not only for receiving additional financing from the private partners, but also for achieving higher quality of the project.

Other key reasons and objectives are 1) the achievement of transparency and optimization of the costs, 2) the increase of chances to reach the target of construction deadlines and the cost of construction and 3) transferring the risk from the public sector to the private sector.

The project was not included in the TEN-T programme.

Project Timing

The initial tender call took place on the 18th of March 2006 and the contract was awarded/signed approximately 2.5 years later, on the 5th of November 2008. The construction works started one week after the contract award, on the 12th of November 2008 (Lallemand, 2008). The official opening of the Liefkenshoekspoorverbinding was on the 14th of December 2014.

The GDP per capita, income per capita and the unemployment rate of the region during the time of data collection (2011 & 2013) were in line with the expectations with respect to the GDP, income and unemployment rate respectively at project award (Eurostat, 2015b).

Project Locality and Market Geography

The rail line connects Antwerpen Noord, Antwerpen Schijnpoort and Antwerpen Berchem (Lallemand, 2008). The Liefkenshoek Rail Link is a direct rail link between the port area on the left bank and that on the right bank, whereby the South sidings and the Deurganckdock on the left bank are connected to line 11, and the Antwerp North marshalling yard on the right bank. This way, traffic generated in the future on the left bank, and particularly at the Deurganckdock, can be handled more efficiently by rail (TUC RAIL, 2015).

The line is coupled over almost its entire length to the R2 ring road. Besides the Waasland canal on the left bank, the line also runs under the Scheldt and Kanaal dock B1-B2 on the right bank. The Waasland canal is crossed through the already existing Beveren rail tunnel (outer-urban locality)(TUC RAIL, 2015).

In the region where the railroad is located, the population density at the time of data collection (2012) was unchanged in comparison to the density at project award time (2008)(Eurostat, 2015a). Also, the level of industrialization and economic activities during the time of data collection was higher than the level of industrialization at the time of project award. No specific production activities, which were not foreseen when the project was planned, started in the region (Raemdonck, 2015).

Procurement & Contractual Structure

Tendering

Prior to issuing the tender, the contracting authority took numerous alternatives into account (Boxheimer & Mignon, 2009a). In 2006, the tendering documents for Belgium’s largest ever infrastructural project were offered to a restricted number of pre-qualified consortia by Infrabel N.V, the contracting authority. The tendering documents included a fundamental reference design provided by the contracting authority’s technical consultant (Tuc Rail Engineering), a strict catalogue of requirements with a number of special demands, and project-specific descriptions. A complete set of soil appraisals and a so-called evaluation matrix with questions to be responded to by the bidder were issued. The replies to these questions were assessed by the contracting authority based on a point rating system (Boxheimer &Mignon, 2009).

Infrabel started the tendering process in April, 18 2006. A pre-selection took place based on an “Open Call”, and at the end of the pre-selection, there were three candidates/bidders in the negotiations (Raemdonck, 2015) required to submit the technical specifications. On the 5th of November 2008, Infrabel announced the successful bidder, Locorail NV. The duration of the procurement process (initial Open Call to contract signing) was approximately 2.5 years (Raemdonck, 2015).

Contract Structure

Following several tendering phases, the DBFM contract was awarded to the successful bidding consortium LocoRail NV in November 2008 (Boxheimer &Mignon, 2009).

The Public Authority (Infrabel) operates/manages the infrastructure. Infrabel also owns the infrastructure or, more precisely, will own the infrastructure after paying for 38 years an availability fee of 51 Mio euro/year to Locorail (Raemdonck, 2015).


Risk Allocation

Risks linked to the construction, maintenance and exploitation of the rail connection and also revenue, financial, regulatory and force majeure risks are allocated as depicted in the Figure 2. Accordingly, the design, construction, maintenance and financial risk are totally or mostly private. The exploitation and revenue risks are totally public and the regulatory and force majeure risks are rather public (Raemdonck, 2015).

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Figure 2: Risk allocation

Performance

Many performance indicators were explicitly stated in the contract but the main one was “availability”. In order to measure the performance of the project, the following indicators are examined: reliability, availability, maintainability, safety, security and user satisfaction. Reliability is improved only partially in line with expectations, availability is fully in line with expectations or even more, maintenance costs are fully in line with expectations and regarding user satisfaction, more than 50% of end users are very satisfied. The rail link is only in operation for 6 months, which is the reason why it is too early to calculate the security and safety indicators (Raemdonck, 2015).

Regarding the performance with respect to project costs, costs due to changes of design standards generated an increase of investment costs. The latter was also created because of the changes to the project layout and because of the introduction of a fire system imposed by the fire authorities capable of extinguishing fire. The introduction of this system generated an increase not only on the investment costs, but also on the operation/maintenance costs. Last but not least, there was a small delay in the opening of operation, which had an impact on the project revenues (Raemdonck, 2015).

Project Outcomes

Even if the Rail Link is in operation only for 6 months, it can be stated that the general level of project’s perceived success is high. The “Critical Success Factors” of the project, which contribute to making the Liefkenshoek Rail Link project a successful case, are the following. First, there is the integrated collaboration. It was the collaboration on all fronts that led to the true success of this project. Another key success factor was the partners’ great expertise and years of experience in tunnel drilling. Previously, the drillers had conducted together various high-speed train works for Infrabel and the major Diabolo Brussels Airport project. Naturally, this is an advantage in terms of communication and collective expertise. Within LocoBouw and LocoRail, the partners have a proportionate share, which supports the integrated approach. The third key success factor was the staff. From over ten countries, 600 people worked day and night as one integrated team to ensure that these complicated works were brought to a good completion. The fourth success factor was the clients. The involvement of Infrabel, TUC RAIL and the constructive cooperation of all stakeholders, together with all the site personnel, resulted in the successful achievement of this unique Public Private Partnership (BAM PPP bv, 2014).

Other important success factors were the adherence to deadlines and the financial stability. The fact that there were not any social acceptability issues was also a factor that led to the success of the project (Raemdonck, 2015). This is really important in order to avoid political risk in the long-term.

Nevertheless, in order for the project to actually succeed, it is necessary that the port of Antwerp keeps growing in the container shipping line industry and the new railroad is used to its full potential.

A failure factor could be the fire safety system, which in the next 20 years could become outdated (Raemdonck, 2015). This is very critical because the Liefkenshoek rail link is largely constructed in a tunnel, and is used for the transport of “hazardous” goods.

Project outcomes and success are also going to be measured through the main project purpose for the Contracting Authority. This means that if the main project purpose is to reduce travel time and this goal is achieved, then positive project outcomes could be considered. The main reason for implementing the project is to avoid congestion in the Kennedyspoortunnel and railway line through the city of Antwerp (with growing cargo and passenger traffic). But this is not the only reason. There are also other reasons for constructing the Liefkenshoek Rail Connection. Reducing travel time is one of them (Raemdonck, 2015). The Rail Link will offer speed and direct connection between the Waasland port area on the left bank and Antwerp North marshalling yard, in addition to an enhanced rail connection with the European hinterland (railway-technology.com, 2014). The Liefkenshoek rail link will also improve the flow of traffic between the Waaslandhaven on the left bank (including the rail installations at Deurganck Dock, the largest tidal dock in the world) and the Antwerp North marshalling yard (the second largest marshalling yard in Europe) on the right bank. This will allow trains to run more quickly and efficiently, travelling directly between the two banks of the port. As of 14 December 2014, many freight trains no longer need to make a detour via bottlenecks (using the Kennedy rail tunnel and Antwerpen-Berchem – Antwerpen-Schijnpoort rail axis). This also frees up capacity for passenger trains, improving, for example the flow of traffic on the Antwerp – Ghent rail line.

Moreover, rail and maritime traffic (the ports) are natural partners and the Liefkenshoek rail link helps ensure optimal intermodality. The Ghent curve (10 million euros) came into service in 2008: a direct rail link in Melsele between Antwerp's Left Bank and the ports of Ghent, Zeebrugge and north-west France.

The electrified rail link including a 6 km twin-bore tunnel under the river is designed to increase freight capacity by reducing transfer times by 40 min, eliminating the need for trains to negotiate bottlenecks including the Kennedy tunnel to the south and the Berchem – Schijnpoort line (Railway Gazette, 2014). The goal “reducing the travel time” is achieved because travel time was improved fully in line with expectations or even more. The safety goal was also achieved because it was also improved fully in line with expectations and even more (Raemdonck, 2015).

Economic Impact

Antwerp is one of the largest rail ports in Europe, with some 250 freight trains passing through every day. This volume is expected to rise sharply in the future due to, amongst others, the development of distributed transport within the port itself. The objective is to raise the proportion of rail transport in the port of Antwerp from the current level of 10% to 15% by 2030 (the goal is further growth, which is expected to be achieved also through the rapid and efficient exchange of containers by rail) (Infrabel, 2014). Mr. Petit, (spokesman, Infrabel) estimates that 100 freight trains will use the route daily by 2030 (EURAILmag-The Magazine for European Rail Decision Makers, 2014).

The Liefkenshoek Rail Link is set to deliver benefits beyond the realms of rail freight and intermodality. By taking goods trains elsewhere, the line has now freed up existing rail tracks and capacity for overstretched passenger services, e.g. between Antwerp and Ghent. The Rail Link was expected to support the economic activities of the ports and also to be an economic and competitive stimulus for the Port of Antwerp (EURAILmag-The Magazine for European Rail Decision Makers, 2014).

Social Impact

Employing several hundreds of people daily for the construction of the new link since 12 November 2008 is also an important economic and social impact (Port of Antwerp, 2012).

Environmental Impact

Reducing the distance of travel by 22km is expected to affect the levels of pollution in the area where the Rail Link is constructed and, as a result, the well-being of individuals. This could also be an environmental impact (green mobility)(Railway-technology.com, 2015).

Last but not least, the boring drilling of the tunnels resulted in a significant amount of surplus soil. This was put to good use to construct a buffer belt that shields off the residential area of Kallo from the Liefkenshoek railway link, as well as from the R2 and E34 motorways. Consequently, the noise nuisance in residential areas caused by the traffic on both motorways was significantly reduced(TUCRAIL, 2015). This was actually the goal: reducing the noise nuisance for nearby residents to a minimum.

References

The initial version of this wiki page has been produced within the framework of the BENEFIT project that has received funding from the European Union's Horizon 2020 research and innovation programme under grant agreement No 635973.

1. Bamelis F. (2015) Interview: Financing and Capital structure of the Liefkenshoek Rail Connection project, Infrabel.

2. BAM PPP bv. (2014) Liefkenshoek rail link ready for service from 14.12.2014, a showpiece in infrastructure realisations in Antwerp, Royal BAM Group, Retrieved June 25, 2015, from http://www.bam.eu/press/press-releases/liefkenshoek-rail-link-ready-for-service-from-14122014-a-showpiece-in?vnc=b354d2d3bd5a806be2507f7f52f04a81&vnp=8

3. Boxheimer S., & Mignon J. (2009) Liefkenshoek Railway Tunnel in Antwerp, Retrieved June 25, 2015, from http://www.tunnel-online.info/en/artikel/tunnel_tunnel_7_2009_Liefkenshoek_Railway_Tunnel_in_Antwerp_329559.html

4. EURAILmag-The Magazine for European Rail Decision Makers (2014)Liefkenshoek Rail Link Up & Running | EURAILmag, Retrieved June 25, 2015, from http://eurailmag.com/liefkenshoek-rail-link-up-running/

5. Eurostat (2015a) Home – Eurostat, Retrieved June 25, 2015, from http://ec.europa.eu/eurostat

6. Eurostat (2015b) Home - Eurostat_1. Retrieved June 25, 2015, from http://ec.europa.eu/eurostat

7. Forrester S. (2013)PPP, the European Commission's TEN-T programme and funding Europe’s transport infrastructure projects, European Institute of Public Administration, from http://www.eipa.eu/files/File/PPP/PPP-TEN T_programme_Shelley%20Forrester%20.pdf

8. Infrabel (2014) ‘LIEFKENSHOEK Facts & Figures 2008 – 2014”from http://www.infrabel.be/sites/default/files/documents/brochureliefkenshoek.pdf

9. Lallemand L., (2008)Liefkenshoek- Spoorverbinding Financiële Closing Van De Publiek Private Samenwerking, Infrabel from http://ecms.infrabel.be/DMS/ds/nl/6442402

10. Petit F. (2008) Infrabel rondt de financiële en contractuele closing van de Liefkenshoekspoorverbinding af (PPS), Infrabel http://www2.vlaanderen.be/pps/documenten/Infrabel_persbericht_liefkenshoekspoorverbinding%27_051108.pdf

11. Port of Antwerp (2012) Track laying starts on Liefkenshoek rail connection | Port of Antwerp. Retrieved June 26, 2015, from http://www.portofantwerp.com/en/news/track-laying-starts-liefkenshoek-rail-connection

12. Raemdonck W. (2015) Liefkenshoek Rail Connection Project interview-TUCRAIL-Brussels.

13. Railway Gazette (2014) Antwerpen’s Liefkenshoek tunnel opens - Railway Gazette, Retrieved June 26, 2015, from http://www.railwaygazette.com/news/infrastructure/single-view/view/antwerpens-liefkenshoek-tunnel-opens.html

14. Railway-technology.com (2014) Belgium’s Liefkenshoek rail link to begin operations from 14 December - Railway Technology, Retrieved June 26, 2015, from http://www.railway-technology.com/news/newsbelgiums-liefkenshoek-rail-link-to-begin-operations-from-14-december-4458626

15. Railway-technology.com (2015) Liefkenshoek Rail Link - Railway Technology-1. Retrieved June 26, 2015, from http://www.railway-technology.com/projects/liefkenshoek-rail-link/

16. TUC RAIL (2015) Liefkenshoek railway link, Retrieved June 26, 2015, from http://www.tucrail.be/EN/projects/NationalProjects/Liefkenshoek/Pages/Liefkenshoek.aspx

17. TUC RAIL (2015) Port of Antwerp - Liefkenshoek rail connection, Retrieved June 25, 2015, from http://www.tucrail.be/EN/PROJECTS/NATIONALPROJECTS/Pages/Antwerp.aspx

18. Van Olmen G. (2015) Interview: Financing and Capital structure of the Liefkenshoek Rail Connection project, Infrabel.