M8 Rathcormac - Fermoy Bypass

This is one of the projects announced by the NRA in June 2000 under Tranche II of the PPP Roads programme. This project lies on the N8 Cork to Dublin route and involved the construction of an 18 km stretch of road incorporating a Blackwater crossing viaduct with an approximate length of 450 metres.

The PPP contract was awarded in June 2004 to the DirectRoute (Fermoy) Limited consortium which comprises Kellogg Brown & Root Ltd, Strabag AG, John Sisk & Son (Holdings) Ltd, Lagan Holdings Ltd, Roadbridge Ltd. and the First Irish Infrastructure Fund (a joint AIB/European Investment Bank fund).

Contract Award DateContract Awarded toPPP TypeGovernment ProgrammeStatus
June 2004 Direct Route (Fermoy) Ltd. Concession National Development Plan 2000 - 2006 Opened 2006

Please click here for the M8 Rathcormac/Fermoy website 


Financial Aspects of the M8 Rathcormac/Fermoy Bypass PPP Contract

Concession Company

The Direct Route (Fermoy) Ltd. consortium comprises Kellogg Brown & Root Ltd, Strabag AG, John Sisk & Son (Holdings) Ltd, Lagan Holdings Ltd, Roadbridge Ltd. and the First Irish Infrastructure Fund (a joint AIB/European Investment Bank fund established for the purpose of investing in PPP projects and private sector infrastructure developments in Ireland and across Europe).

Duties and obligations of the Concession Company

The scheme comprises 17.5 km of motorway. The scheme involves the construction of 3 interchanges and includes a 450 m long viaduct spanning the Blackwater Valley. In addition there are a further 18 structures constructed (comprising 7 overbridges, 2 underbridges, 1 service tunnel at the toll plaza, 4 river bridges and 4 underpasses) along with local road realignments. Direct Route is required to carry to undertake the following tasks:

  • Design
    • Complete the full detailed design of all elements;
    • Carry out necessary structures assessments at various stages throughout the concession period.
  • Build
    • Construct all the works;
    • Assume responsibility for ground conditions, archaeological monitoring and resolution, utility relocations and, landscaping.
  • Maintain
    • Maintain the road pavement, structures, landscaping, signs, lining, lighting, safety barriers, fencing and all other aspects of the road;
    • Carry out comprehensive winter maintenance including patrols, precautionary salting, and snow clearance.
  • Operate
    • Manage the road in terms of safety, traffic management, information to the road user, oil spillage, accidents;
    • Operate the tolling system to the required levels of service and upgrade it as necessary to match demand;
  • Re-invest
    • Prior to handback to the public sector at the end of the concession, upgrade all the facilities as necessary (e.g. road re-sufacing, re-lining) in order to provide the required residual life for the road.
    • In regard to the road structure, the concessionaire is to hand it back with a further 10 year life before any structural strengthening would be required.
  • Finance
    • Raise finances for the scheme and take the responsibility for all the repayments;
    • Carry the risk of cost over-runs.

Period of Concession

The contract was signed on the 11th June 2004 and will extend for 30 years from that date. The construction is anticipated to take approximately 3 years and Direct Route will be responsible for collection of tolls for a period of approximately 27 years.

Cost of the project

The Authority estimates that if it were to undertake itself all the design, construction, maintenance, operation and re-investment tasks that are being required of Direct Route the cost would be in the order of €320m (excluding land and preliminary design costs) in 2003 values.

In addition, the costs of operating and maintaining the built roads would be in the order of €130m (Net Present Value, January 2007 values) over the 30 year period.

The Authority estimates that the cost of land, preliminary studies/design necessary to identify the route, preparation of the statutory documents (Motorway scheme and Environmental Impact Statement), advance ground investigation, initial archaeological testing and resolution, and supervision of its construction will amount to approximately €40m. These costs apply irrespective of the contractual means that could be employed for the delivery of the scheme.

Direct Route's Financing

Direct Route is investing substantial funding into this project by means of equity from the companies included in the consortium. The majority of the funding is debt funding and Direct Route has arranged funding from three sources:

  • Three banks - KBC/IIB, AIB and ING1;
  • European Investment Bank - a bank owned by the member states of the European Union which invests in necessary EU infrastructure;
  • Funds from the consortium members1.

Direct Route is the party responsible for the repayment of these debts.

1Subsequent to financial close, debt finance along with equity was syndicated to Bank of Scotland.

Payments from the Authority to Direct Route

The Authority's payments to Direct Route are fixed and consist of payments of €80m (2003 prices) over the period of the construction, released on satisfactory completion of key construction elements, and €40m (2003 prices) during the period of operation. (Note: Operational payments are subject to indexation in line with the consumer price index.)

Payments from Direct Route to the Authority

Direct Route will pay a share to the Authority, dependent on the level of traffic on the road, of the toll revenues collected. This revenue share will be applicable once traffic volumes on the tolled road exceed 21,000 vehicles per day.

Payments from Direct Route to the State

In addition to the revenue share that it will pay to the Authority, Direct Route will be obliged to make the following payments:

  • Commercial rates: In accordance with the Valuation Act 2001, Direct Route will be the occupier of a rateable property due to its operation of the toll facilities. Direct Route will be required, dependent on the traffic volumes and calculated in accordance with a methodology set out by the Valuation Office, to pay rates to Cork County Council, the local authority through whose administrative area the road passes.
  • Corporation tax; and
  • VAT on non-recoverable receipts.

Summary Overview

For infrastructure with an estimated cost of €320m, excluding land/planning/preparatory design costs, the State will pay €80m (excluding land/preparatory costs) throughout the 3 year construction period along with a further €40m during the operational period. The State will recoup monies by means of revenue share, rates and taxes.