The major issues confronting the sponsors and concessionaire for this large bridge project and the strategies used to address them included the following:
• Financing the Various Components of the Estuary and River Crossing. The total cost of the project amounted to $1.08 billion (£581 million), including building the second bridge, paying off the outstanding debt on the original bridge, and operating and maintaining both bridges over the term of the concession agreement. In 1988, the Government concluded it lacked sufficient funding to pay for both the estuary and river crossing bridge and the estuary approach roads. Therefore it decided in 1988 turn to a private concession team to finance the estuary and river crossing bridge, with the Government paying for the estuary approach roads.
With the project divided between a publicly-funded approach roads portion and a privately-funded main estuary and river crossing and toll plaza, the Government had flexibility regarding how to deliver each portion of the project. The approach roads portion funded by the Government was contracted as a design-build project. The estuary and river crossing and toll plaza project (the Second Severn Crossing Bridge) was contracted as a DBFO project to a private sector concession team.
The resulting financial arrangement for the DBFO contract included the following components:
- Bank loan - $353 million (£190 million)
- BEI loan - $ 279 million (£150 million)
- Indexed bond loan - $243 million (£131 million)
- Government bond loan - $111 million (£60 million)
- Concession equity - $93 million (£50 million)
The bank debt was refinanced in 1997 and again in 2002 to lower the debt service costs for the project.
• Environmental Risks. With the proposed Second Severn Crossing Bridge proposed to cross both a wide estuary and the Severn River, significant environmental concerns needed to be addressed early in the planning stages of the project to prevent long delays in the project due to environmental protests and lawsuits. The Government had detailed environmental and preliminary design studies preformed in 1987 to identify environmental issues and develop a proactive strategy to avoid or mitigate them. This included the provision of Ltd. construction access routes, separate drainage networks and outfalls, extensive landscape planting, and noise fencing along portions of the approach roads to the new bridge.
• Public Opposition. Public opposition to the project posed another challenge to the ability of the Government to attract private-sector interest in committing to a PPP whereby its only source of reimbursement would be the tolls from the new bridge, as well as the existing bridge. Other projects like the M6 Tollway had experienced ling delays due to public opposition.
To address this potential threat, extensive public outreach and stakeholder communication efforts were undertaken by the Government between 1987 and 1990, whose results impacted the location of the estuary crossing and the approach roads to the new bridge. In addition, a high embankment and wetland area was provided beyond the embankment to screen the new toll plaza on the Welsh side of the bridge from residents of a nearby community, while complementary landscaping provided visual screening of the toll plaza and approach roads on both sides of the Severn River and estuary.
• Local Community Impacts. The construction of the Second Severn Crossing Bridge posed significant traffic, noise, and air quality impacts on the neighboring communities along the approach road corridors to the site of the new bridge. To alleviate these potential local impacts during the construction period, by-pass construction roads were created to enable trucks to deliver materials to the site without passing through the local communities on both sides of the Severn River and estuary. In addition, the partners to the PPP held regular liaison meetings with local officials and representatives of local community groups to keep them informed of construction progress and address any issues raised by these local representatives.
• Structural Obsolescence of Older Bridge. A potential traffic, revenue, and cost risk to the private team responsible for operating and maintaining both Severn Crossing bridges under the current concession contract has recently been discovered as a result of the inspection of the 40-year old cables on the original suspension bridge. This more in- depth inspection was prompted by a finding of severe deterioration of suspension cables on another bridge built at approximately the same time, the Forth Road Bridge. Pending further technical review, this may require weight restrictions on the original bridge until the cables are restored. This poses a traffic and revenue risk to the PPP concession team, which may delay retirement of the debt service on the two bridges and add to the costs to be borne by the concession team now responsible for the two bridges.
This situation highlights a major risk for PPP concession teams in taking over existing and mature transportation infrastructure facilities, which need to be addressed in the concession contract. These contracts need to define the limits or conditions under which the new concessionaire would be legally and financially responsibility for the reconstruction or replacement of major infrastructure features which may wear out prematurely due to any one of the following situations
- Poor design or construction when the facility was first built;
- Higher-than-expected traffic volumes, especially by heavy trucks; or
- Adverse weather conditions.
It would appear unlikely that the concession team of Laing-GTM would be responsible for the rehabilitation of the subject suspension cables since it was not involved with the design or construction of the original bridge or its operation and maintenance for the first thirty years after the bridge opened in 1966. Severn River Crossing PLC has only been responsible for operations and maintenance of the original bridge since 1996, which would not appear to include reconstruction or replacement of major bridge components due to fatigue.