Financial assessment of high-speed rail investments: The example of Spain

Over the last 20 years, the high-speed rail system in Europe has undergone a major development due to reduced travel times, increased train frequencies and improved quality of service. However, the construction of a new railway infrastructure requires a huge mobilization of resources, has a very long useful life and there are few alternatives of use for the investment made. Consequently, it is not a surprise that any investment of this size is always preceded by a detailed study in order to ensure the best possible result and analyze the profitability of such investment. Nevertheless, the alarm rings when one realizes that the appraisal of large-scale transport projects is less than reliable: the EU Cohesion Fund program revealed that one project in four costs more than 20% above budget, while only one in five stands underneath + 10% (Chevroulet, Reynaud, 2010). Deviations in cost, length and environmental impact are particularly tricky because such investments usually last several years, yield significant impacts and their costs achieve billions of Euros. This thesis’ objective is to build a methodology to determine as accurate as possible how infrastructure managers can forecast new high-speed lines financial results. This paper begins with a brief introduction to global high-speed projects in general, reviewing their singularities and main characteristics, to delve into the concrete case of infrastructure managers in Europe. The report is intended to be the first step towards a comprehensive harmonized methodology for financial appraisal of rail investments in the EU. The proposed methodology is applied in a practical scenario corresponding to the Madrid – Barcelona high-speed line. The objective is to estimate the financial profitability of the route as a whole, focusing on the most used practice: the Cost-Benefit Analysis (CBA), detailing all its stages and the correct parameters to choose. Existing publications and ex post reports are used to analyze how organisms implement the different phases of the method and where do they find difficulties, to get to the calculation of the two final indicators: NPV and IRR, which are the parameters that currently guide the financial profitability of a new line. Once the process of financially evaluating the new high-speed line has been developed, it goes on to identify and develop its limitations