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FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X4.2 ALTERNATIVES OF INFRASTRUCTURE DEVELOPMENT (ROAD PHYSICALAND OPERATIONAL CHARACTERISTICS INCLUDING TOLL STATIONS) 404.2.1 ALTERNATIVE A: DO MINIMUM 414.2.2 MOTORWAY CONSTRUCTION (ALTERNATIVES B, C, D) 414.2.2.1 General description – Design speeds and typical cross-sections 414.2.2.2 Length of section 454.2.2.3 Horizontal alignment 454.2.2.4 Vertical alignment 464.2.2.5 Pavement 474.2.2.6 Structures 474.2.2.7 Traffic interchanges 484.2.2.8 Environmental protection equipment 495. TRAFFIC FORECASTS 505.1 PRESENTATION OF THE TOOL FOR TRAFFIC FORECASTS 505.1.1 METHODOLOGY OF THE DEVELOPMENT OF THE FORECASTING TOOL 505.1.1.1 Data collection – Construction of the base year database 505.1.1.2 Methodological issues and constraints 505.1.1.3 Adopted methodology and assumptions for the scenarios’ development 505.1.2 THE SCENARIOS 515.1.3 ESTIMATION OF THE PASSENGER AND FREIGHT FLOWS 525.1.3.1 Estimation of the international passenger and freight flows on Corridor X 525.1.3.2 The model 555.1.3.3 Estimation of local traffic and assignment of road Corridor X 575.2 FORMULATION OF SCENARIOS (TIME HORIZONS) 575.3 TRAFFIC FORECASTS 585.3.1 EVALUATION OF TRAFFIC PROJECTIONS 585.3.1.1 General conclusions of the traffic flows forecasting of the Technical Secretariat ofCorridor X 585.3.1.2 Results and evaluation of results of the various available traffic flows forecastingexercises 595.3.1.3 Traffic projection to various target years 605.4 EVALUATION OF ALTERNATIVES LEVEL OF SERVICE IN FUNCTION WITHTHE FORECASTED TRAFFIC FLOWS 666. ECONOMIC ANALYSIS 676.1 PARAMETERS OF THE ANALYSIS 676.1.1 DETERMINATION OF EXPECTED COST ELEMENTS 686.1.1.1 Construction cost 686.1.1.2 Operational expenses (annual and periodical maintenance) 696.1.2 DETERMINATION OF EXPECTED BENEFIT ELEMENTS 706.1.2.1 Time savings 716.1.2.2 Benefits form the vehicle operational costs reduction 726.1.2.3 Benefits from time savings as far as the vehicle users are concerned 736.1.2.4 Benefits from the reduction in the number of road accidents 746.1.2.5 Residual value of the project 766.1.2.6 Installation and operation of toll stations 776.1.3 CONSIDERATION OF ELEMENTS WHICH CANNOT BE QUANTIFIED 77EGNATIA ODOS S.A. 3APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X6.1.3.1 Consumer surplus 776.1.3.2 Spatial and regional development aspects 786.1.3.3 Employment impacts 786.2 ENVIRONMENTAL CONSIDERATIONS 806.3 FINANCING ASPECTS 826.3.1 TOLL REVENUES 836.3.2 CASH FLOW 856.4 RESULTS OF THE ECONOMIC ANALYSIS 876.5 SENSITIVITY ANALYSIS – COMPARATIVE EVALUATION OF ALTERNATIVESAND RANKING 906.6 CONCLUSIONS CONCERNING THE ECONOMIC ANALYSIS 947. RECOMMENDATIONS 95BACKGROUND DOCUMENTS – REFERENCES 97ANNEXES 99A. ISSUES DISCUSSED AT THE TECHNICAL MEETING IN SKOPJE (01.03.2007) 99B. RESULTS OF THE ECONOMIC ANALYSIS 99EGNATIA ODOS S.A. 4APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XEXECUTIVE SUMMARYThe feasibility study for the improvement of the road section between Demir Kapija– Udovo – Smokvica, part of the Main Axis of Pan-European Transport Corridor X inthe Former Yugoslav Republic of Macedonia, has been carried out by Egnatia OdosS.A. (E.O.A.E.) at the request of the Greek Ministry of Foreign Affairs.The methodology followed for the current study is fully aligned with the standardsset by the Greek Ministry of Environment, Physical Planning and Public Works andthe European Commission.The project appraisal has been carried out in socio-economic level with the CostBenefit Analysis.The road section of the existing E-75 (M-1) road between Demir Kapija and Smokvicahas a total length of 35.834km. The examined alignments for motorway constructionare two:• Alignment 1 is the one proposed and designed in detail by ScetaurouteInternational in 2000, also approved by the local government, and foreseesthe transformation of the existing M-1 road to motorway profile. The totallength of Alignment 1 is 32.15km, which can be divided into two subsections:Subsection Demir Kapija – Udovo, 19.9km through the “gorge” and thesubsection Udovo – Smokvica, 12.25km through the valley southwards of the“gorge”.• Alignment 2 foresees the construction of a totally new motorway on the westbank of the Vardar River. The total length of Alignment 2 is 28.05kmThe construction period is six (6) years for Alignment 1 and three (3) years forAlignment 2. Therefore, with start of construction works in 2008, the foreseencompletion of the project is the end of 2013 and 2010, respectively.The motorway will be completely open to traffic in 2014 in the case of Alignment 1and in 2011 in the case of Alignment 2.Four options are examined in the cost benefit analysis. The “Do minimum”alternative (Alternative A) concerns the upgrading of the existing road. Threealternatives of motorway construction are examined for both alignments:Alternative B examines the construction of a motorway with cross-section width of22.6m; Alternative C examines the construction of a motorway with cross-sectionwidth of 24.6m; and Alternative D examines the construction of a motorway with thecross-section widths proposed by the designs of the two alignments: For Alignment 1the cross section on the easy parts (Udovo – Smokvica) is 27.6m wide and in thegorge is 26.4m. For Alignment 2 the cross section is 28.2m along the entire motorway.The traffic analysis has exploited traffic statistics from the period 1989 – 2002, whichincludes the period of crisis in the region, and some recent data of the years 2005-EGNATIA ODOS S.A. 5APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X2006. The last year’s increase of traffic was more than 25%; however, such growth isnot expected to occur continuously over the entire analysis period.The average annual traffic growth rate used in the study during the entire period ofanalysis is 4%, with the realistic assumption of higher growth factor of 5% in theinitial years of analysis to represent the anticipated increase of traffic to reach thelevels of 1990 by the years between 2015 and 2020 (depending on the upgradingalternative) and taking into consideration the dynamic of a developing country in theregion of the Western Balkans in their E.U. direction. Annual traffic growth rates of4% and 3% (for the next two decades, respectively) are considered realistic to beretained even after a prospective EU enlargement within the following years, due tothe simplification (or even elimination) of border crossing procedures and thediversion of traffic from other competitive European routes (e.g. bypass ofinternational traffic through Romania and Bulgaria).Addition of traffic applied for the motorway solutions is 15%. It is assumed that thispercentage represents the generated traffic, as well as the traffic diverted from otherPan-European Corridors in the area and from other national and regional roads (M-5and M-6 to/from Strumica and Dojran).Traffic forecasts have been reduced after the introduction of tolls, with diversion of7.7% of traffic, mainly local, to the alternative road network (diversion of 9% ofprivate cars, 3% of buses and 5% of heavy trucks). Especially for Alignment 2 anadditional 14.8% of the traffic (almost triple in total compared to traffic diversion inthe case of Alignment 1) was considered intermediate local traffic around Udovo andwas subtracted, due to the fact that an interchange is not foreseen at Udovo.In summary the weighed average AADT along the proposed motorway ofAlignment 1 from Demir Kapija to Smokvica is estimated at 5,881 veh/day (8,230PCUs/day) in 2015, 8,789 veh/day (12,300 PCUs/day) in 2025, and 11,926 veh/day(16,691 PCUs/day) in 2035.For Alignment 2 the forecast is 4,901 veh/day (7,108 PCUs/day) in 2015, 7,324veh/day (10,623 PCUs/day) in 2025, and 9,939 veh/day (14,414 PCUs/day) in 2035.Total costs for the various alternatives of motorway construction are summarised forthe two alignments in the following table:Alignment Economic construction cost (€)Alternative B Alternative C Alternative D1 144,501,616 152,613,331 156,621,5462 107,989,433 114,829,350 125,149,748The costs of the alternatives of narrower sections, compared to the costs ofAlternatives D are lower at 2.6% and at 7.7% for the cases (respectively) ofAlternatives C and B of Alignment 1, while for Alignment 2 the respective reductionis of 8.25% and 13.7%.EGNATIA ODOS S.A. 6APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XConstruction costs, operational and maintenance costs have been compared withquantified impacts used in the socioeconomic analysis of the project, which include:• Benefits from vehicle operating costs reduction• Benefits from time savings• Benefits from accidents reduction• Residual value of projectThese benefits were examined for the expected traffic with or without the project.Consumer surplus benefits expected from the additional traffic were not included inthe economic analysis that would cause higher values of the economic indices.The results of the socioeconomic analysis for the motorway Alternative D for theperiod 2008 – 2032 (25 years after the commencement of construction works) are asfollows:Alignment 1Economic Internal Rate of Return (EIRR) 1.91%Net Present Value (NPV) – Discount rate 8% -68,486,440 €Net Present Value (NPV) – Discount rate 6% -56,714,117 €Net Present Value (NPV) – Discount rate 4% -36,349,902 €Benefits over Costs ratio (B/C) 0.36Alignment 2Economic Internal Rate of Return (EIRR) 5.87%Net Present Value (NPV) – Discount rate 8% -21,681,005 €Net Present Value (NPV) – Discount rate 6% -1,573,624 €Net Present Value (NPV) – Discount rate 4% 28,638,824 €Benefits over Costs ratio (B/C) 0.77Respectively for alternatives B and C the results of socioeconomic analysis are:Alignment 1Alternative B Alternative CEconomic Internal Rate of Return (EIRR) 2.33% 2.05%Net Present Value (NPV) – Discount rate 8% -59,456,895 € -65,523,614 €Net Present Value (NPV) – Discount rate 6% -47,430,231 € -53,644,360 €Net Present Value (NPV) – Discount rate 4% -27,013,094 € -33,220,670 €Benefits over Costs ratio (B/C) 0.40 0.37Alignment 2Alternative B Alternative CEconomic Internal Rate of Return (EIRR) 7.06% 6.49%Net Present Value (NPV) – Discount rate 8% -8,442,372 € -14,290,808 €Net Present Value (NPV) – Discount rate 6% 11,501,944 € 5,584,182 €Net Present Value (NPV) – Discount rate 4% 41,109,817 € 35,252,837 €Benefits over Costs ratio (B/C) 0.90 0.84EGNATIA ODOS S.A. 7APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XFinally, for the “Do minimum” alternative (Alternative A) the economic analysisresults NPV of -19,589,010 € and B/C ratio of 0.10. The IRR is not defined. Theanalysis included the costs for an upgrade in 2008 and rehabilitation in 2023, as wellas the annual operational and maintenance costs of the existing E-75 road.Sensitivity analysis for alteration of critical parameters (construction costs,operational costs and traffic), carried out for the three motorway alternatives of eachalignment, resulted the following:Alignment 1Economic Internal Rate of Return (EIRR)Alternative B Alternative C Alternative DInitial EIRR value 2.33% 2.05% 1.91%Increase of construction costs by 1.70% 1.42% 1.29%10%Reduction of construction costs 3.05% 2.75% 2.60%by 10%Increase of operational costs by 2.25% 1.96% 1.81%10%Reduction of operational costs by 2.42% 2.13% 2.00%10%Increase of traffic by 10% 2.83% 2.52% 2.38%Reduction of traffic by 10% 1.83% 1.56% 1.42%Increase of traffic by 20% 3.32% 2.99% 2.85%Reduction of traffic by 20% 1.30% 1.06% 0.92%Alignment 2Economic Internal Rate of Return (EIRR)Alternative B Alternative C Alternative DInitial EIRR value 7.06% 6.49% 5.87%Increase of construction costs by 6.17% 5.63% 5.05%10%Reduction of construction costs 8.09% 7.48% 6.83%by 10%Increase of operational costs by 6.98% 6.40% 5.78%10%Reduction of operational costs by 7.13% 6.57% 5.96%10%Increase of traffic by 10% 7.96% 7.35% 6.70%Reduction of traffic by 10% 6.13% 5.60% 5.03%Increase of traffic by 20% 8.85% 8.20% 7.51%Reduction of traffic by 20% 5.17% 4.69% 4.16%Other unquantifiable impacts, such as the environmental, spatial – regional andemployment impacts have been considered.EGNATIA ODOS S.A. 8APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XConcerning the environmental impacts of the project, it must be stressed that theDemir Kapija canyon is a very sensitive region; special attention should be paid forany of the qualified motorway alignment/ alternative. The environmental impacts ofeach of the two alignments examined are currently being studied and it is verycrucial to be taken fully into consideration before the final decision for the projectrealisation.According to the assurance of the designers of the new alignment (Alignment 2) onthe west side of Vardar River, this solution is more environmentally friendlycompared to Alignment 1. The design of the new alignment avoids extensive cutsand embankments, sites of archaeological interest and the offence of Bela Voda Cave,while it has no conflict with a future dam to be constructed in Vardar River.Concerning direct employment impacts, it is expected that the realisation ofAlignment 1 would result around to 2,190 jobs (13,150 man-years) during theconstruction period and around to 55 jobs for the annual maintenance and operationof the motorway. Further labour needs of 1,100 man-years are also expected for theperiodical maintenance of the motorway during the analysis period. The respectivefigures for Alignment 2 are 3,700 jobs (11,150 man-years) during the constructionperiod, around to 45 jobs for annual maintenance and operation and around to 900man-years for periodical maintenance.Indirect employment is expected due to the increase of labour force employment atenterprises providing material and equipment during the construction andoperation/ maintenance of the project. Additional jobs are also expected with thedevelopment of motorway service areas along the entire Corridor X in the F.Y.R. ofMacedonia.In conclusion the project realisation should be considered, apart from the technoeconomicpoint of view, in combination with its expected social, regional and spatialbenefits, taking also into account the following EU transport policy relatedconsiderations:• The project is a part of the backbone of the South East Transport CoreNetwork, the Pan-European Corridor X and on the South Eastern Europeanpriority axis defined by the HLG of EC/ DG TREN chaired by exCommissioner de Palacio.• The project is a significant missing link of the Main part of Corridor Xmotorway and with its construction the completion of a 1,450km motorwaywill be achieved by 2012 (according to the existing national plans andcommitments, a motorway which serves international transit flows of goodsand passengers from Central Europe to Turkey and Asia and vice-versa.• The project contributes to the arsis of the isolation of the Western Balkans,regional development and cohesion of a future region of the European Union.• The project contributes to the strengthening of the bilateral relations ofGreece and the Former Yugoslav Republic of Macedonia through thefacilitation of trade and tourism by improving the access between Skopje andThessaloniki and the Central Macedonia region.EGNATIA ODOS S.A. 9APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X• Finally, it gives improved access to the Former Yugoslav Republic ofMacedonia to the sea and specifically to the port of Thessaloniki, which alsocontributes to the increase of the regional and international role of the port.Therefore, the realisation of the project is subjected to a political and not only technoeconomicdecision.EGNATIA ODOS S.A. 10APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X1. PREFACEThe feasibility study for the improvement of the road section between Demir Kapija,Udovo and Smokvica, part of the Main Axis of Pan-European Transport Corridor Xin Former Yugoslav Republic of Macedonia, has been carried out by Egnatia OdosS.A. (E.O.A.E.) at the request of the Greek Ministry of Foreign Affairs.The road section under study, 35.834km of existing infrastructure, is of majorimportance for both the Former Yugoslav Republic of Macedonia and the Republic ofGreece. For this reason the Government Former Yugoslav Republic of Macedonia hasshown interest in applying for financial support for the improvement of this roadsection, under the special financial aid program of the Greek Ministry of ForeignAffairs called “Hellenic Plan for the Economic Reconstruction of the Balkans”(Hi.P.E.R.B.).In 2002, the Former Yugoslav Republic of Macedonia submitted to the GreekMinistry of Foreign Affairs two unofficial applications for financial support for themotorway construction of Tabanovce – Kumanovo and Demir Kapija – Gevgelija.In 2004, a new unofficial application was submitted for motorway construction ofDemir Kapija – Smokvica, since the financing of the southern section betweenSmokvica and Gevgelija was secured by the European Bank for Reconstruction andDevelopment.Most recently, in November and December 2006, intensive negotiations took placebetween the Secretariat for European Affairs, responsible authority for theimplementation of the Hi.P.E.R.B. in the Former Yugoslav Republic of Macedonia,and the Greek Ministry of Foreign Affairs. Those negotiations concluded to theimmediate speed up of the procedures for the technical documentation of the projectand the submission of a respective official application for Hi.P.E.R.B.During the above-mentioned negotiations, the immediate elaboration of a feasibilitystudy was agreed, which would be the update of the feasibility study elaborated byScetauroute in 1999 (for the section Demir Kapija – Gevgelija), and would alsocomprise the examination of an alternative alignment designed at preliminary level,simultaneously with the feasibility study, by E.O.A.E. and the Fund for National andRegional Roads (F.N.R.R.) of the Former Yugoslav Republic of Macedonia.In this aspect, the Secretariat for European Affairs has submitted part of the technicaldocumentation already prepared by Scetauroute International, namely the feasibilitystudy and the detailed design studies for the basic alignment.Finally it is noted that, the bilateral agreement includes also the examination ofalternative types of technical interventions on the entire section, in order to securethe economic feasibility of the project and give the potential for co-financing of theproject. Hence, this feasibility study attempts to make a comparative examination ofalternative motorway solutions, as well as the new alignment put on table by theF.N.R.R. on the west side of the Vardar River.EGNATIA ODOS S.A. 11APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XACKNOWLEDGEMENTSThe authors would like to acknowledge the support of the following Institutions,Authorities and individuals:• The Secretariat for European Affairs of the Former Yugoslav Republic ofMacedonia, primarily the Head of the Sector for Foreign Aid Coordination, Mr.Jovan Despotovski.• The Director and the staff of the Fund for National and Region Roads of theFormer Yugoslav Republic of Macedonia.• The Technical Secretariat of the Steering Committee for the Pan-EuropeanTransport Corridor X.Their consultation, provision of data and information contributed the most in theelaboration of the present study.EGNATIA ODOS S.A. 12APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X2. SCOPE, OBJECTIVES AND CONTENT OF THE WORKPan-European Road Corridor X is one of the ten priority Corridors in the widerEuropean area and the backbone of the Transport Core Network of SoutheastEurope. It coincides with the Southeast Priority Axis as defined in November 2005 bythe EC/ DG TREN High Level Group, chaired by the memorable ex CommissionerMrs. Loyola de Palacio.Corridor X is the north-south Corridor running through the territory of the FormerYugoslav Republic of Macedonia with a total length of 332.28km of existinginfrastructure, while Corridor VIII is the west-east Corridor. Both Corridors are ofmajor importance for the country, since their development will ensure better serviceof its domestic and international traffic and will enhance trade, economicdevelopment and regional cohesion in Europe. Corridor X, and mainly the Main Axisof the Corridor, is the first priority for the government, proved by the fact thatsubstantial progress has been made during the last years, while its completion isanticipated in the forthcoming years.Source: Fund for National and Regional RoadsMap 2.1: Pan-European Corridors of interest in the Former Yugoslav Republic of MacedoniaEGNATIA ODOS S.A. 13APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XSource: Fund for National and Regional RoadsMap 2.2: Constructed motorways along the Pan-European Corridors VIII and X in the FormerYugoslav Republic of Macedonia (in green colour)Furthermore, Corridor X is of significant importance to Greece, being the traditionalroute connecting Greece with Central Europe. Due to the war crisis in the region inthe 1990’s, infrastructures have been damaged and neglected. The service of thefreight and passenger (incl. tourist) traffic flows to and from Greece became morecomplicated with the creation of four new states along the route; six additionalborder stations were introduced on the main Corridor.Both countries, in the framework of their intensive cooperation, target therevitalisation of Corridor X. Their common will is also confirmed by theircooperation through their agreement for the implementation of the Hellenic Plan forthe Economic Reconstruction of the Balkans (Hi.P.E.R.B.), the Memorandum ofUnderstanding for Cooperation on Corridor X and the signed Protocol for theimprovement of border-crossings along Corridor X.The general objective of the present study is to contribute to the upgrading of themost critical part of the national road network and Corridor X in the FormerYugoslav Republic of Macedonia, enhancing domestic and international trade andpassenger flows, leading to lower economic transport costs and economic efficiencygains.The scope of the current study is to examine the feasibility of various technicalalternatives for the improvement of the road section of Pan-European Corridor X inEGNATIA ODOS S.A. 14APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR Xthe Former Yugoslav Republic of Macedonia, namely the section from Demir Kapijato Smokvica, close to the borders with Greece.Within the scope of the study is the determination of the maturity degree of a projectto be financed by the Greek Government through the Hi.P.E.R.B.The content of works includes the following actions:• exploitation of existing traffic data and formulation of traffic forecast scenarios forthe sections under consideration, for the identification of existing or potentialfuture bottlenecks, including details on the share of heavy vehicles, seasonality,etc.• identification of a set of technical project alternatives in terms of design standardsand technical variants, which will ensure a homogeneous level of service betweenDemir Kapija and Smokvica, taking into account the particular terraincharacteristics and their influence on cost, environmental aspects, and trafficdemand on the respective sections. The considered alternatives encompass thetransformation of the existing carriageway to a motorway, as well as theconstruction of a completely new motorway on the opposite (west) side of theRiver Vardar.• evaluation of the economic feasibility of each considered alternative and provisionof a ranking of possible schemes.Of course, the proper elaboration of the study presupposed and depended onspecific coordination requirements, and namely on the full co-ordination with all theconcerned institutional parties and stakeholders in the Former Yugoslav Republic ofMacedonia and ascertainment that their requirements are duly taken into account.The parties and stakeholders to consult include the following:• the Greek Ministry of Foreign Affairs, to examine the requirements of the GreekGovernment;• the Secretariat for European Affairs of the Former Yugoslav Republic ofMacedonia (National Coordinator for the Hi.P.E.R.B); and• the Fund for National and Region Roads of the Former Yugoslav Republic ofMacedonia to obtain all necessary data and information, get advice and assistancefor the preparation of the feasibility study and the fulfilment of the legal, technicaland administrative requirements.The activities of E.O.A.E. can be grouped as follows:• Fact finding and data collection: Review of all relevant documentation (feasibilitystudies, designs, etc.), meetings with all the parties and stakeholders (in order togather information) and analysis of existing data.EGNATIA ODOS S.A. 15APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X• Technical project definition: Establishment of alternative engineering proposalsfor the road sections and assessment of various cross-sections for the twoalignments considered for a future motorway.• Economic feasibility determination: Based on cost estimates for the alternativesconsidered and including land acquisition, construction and maintenance costs,and assessment of the benefits of vehicle operating cost, time savings andaccidents reduction, the economic feasibility, as indicated by the InternalEconomic Rate of Return determination for each alternative. Construction inphases is not examined as bilaterally agreed.• Financial assessment: Financial implications for each alternative, includingconstruction and maintenance costs, the options of toll levying and the effects ontraffic.• Ranking of Schemes: Overall comparison of proposed alternatives, according toeconomic, environmental and financial criteria, and ranking establishmentenabling decision by the competent authorities.Finally, the expected results and deliverables of E.O.A.E. are:• By the 8 th week after the project assignment: Delivery of the Draft Final Report• By the 10 th week after the project assignment: Delivery of the Final Report(feasibility study), with traffic data analysis and projections for the relevant roadsections and with the assessment of the feasibility of the alternatives forimprovement, based on technical, environmental and financial criteria and withrecommendation of a preferred alternative.EGNATIA ODOS S.A. 16APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X3. METHODOLOGY AND BACKGROUND INFORMATIONThe methodology of the study includes the inventory and evaluation of availabledata and the collection of the necessary supplementary data, in cooperation withstakeholders in the Former Yugoslav Republic of Macedonia and the TechnicalSecretariat of Corridor X.3.1 Review of existing studies and other available informationThe methodology included the review of all the relevant technical documentationand information, which evidently was the cornerstone of the study. The technicaldocuments made available were the feasibility study and the detail design, preparedby Scetauroute in 2000, as well as traffic statistics for the national road network.Those documents were submitted to the Greek Ministry of Foreign Affairs inDecember 2006.Furthermore, E.O.A.E. had access to the Road Database and the archive of theTechnical Secretariat of the Steering Committee for Pan-European Corridor X. TheDatabase of Corridor X contains useful data regarding the physical and operationalaspects of the entire Corridor, such as road category, dimensions of cross section,design and operational speeds, dimensions concerning horizontal and verticalalignment, annual traffic per section and at borders crossings, traffic composition,delays at borders etc. It should be noted that information contained in the Databaseis based on information and data submitted by the participating countries of theSteering Committee of the Corridor.Relevant studies provide useful traffic flow forecasts for the current study: TheTransport Infrastructure Regional Study (TIRS by Luis Berger S.A.), the RegionalBalkans Infrastructure Study (REBIS by COWI) and the traffic flows forecastingalong Corridor X exercise of the Technical Secretariat of the Steering Committee forPan-European Corridor X. Additionally, the feasibility study delivered recently forthe Tabanovce – Kumanovo motorway (by Balkan Konsalting DOOEL) was takeninto consideration, in terms of exploiting data and expertise of a local firm.3.2 Evaluation of available information and data updates requirements anddesign of data collection processThe feasibility study and detail design, contained valuable and useful informationand were fully exploited in the current study.After detailed examination of the available references and the definition of thefollowed methodology of the study, the specification of the supplementary datarequirements have been made possible.After the first examination, a first contact with the responsible authority in theFormer Yugoslav Republic of Macedonia (Secretariat for European Affairs – NationalEGNATIA ODOS S.A. 17APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XCoordinator for Hi.P.E.R.B.) was made, in order to obtain additional data andinformation, as there have been various issues for clarification.Then a technical meeting was scheduled in order to obtain the necessary information,with interviews and the use of an appropriately formulated questionnaire. Thethematic sessions discussed during the meetings are attached in Annex A of thepresent study.3.3 Data collection surveys and cooperation with stakeholders in the F.Y.R. ofMacedoniaAs previously mentioned the data collection process included the formulation of aquestionnaire for structured interviews for use during the organised technicalmeeting in Skopje on March 1 st 2007 with the co-responsible authorities and thespecialists of the Funds for National and Regional Roads.Various issues were discussed and clarified during the meeting. Other issues wereconfronted a posteriori via e-mail, while others, and mainly those concerning theresults of the environmental impact studies and the accidents statistics at sectionlevel, remained pending up to the day of completion of this study.3.4 Tools3.4.1 Tools for the traffic forecastsTraffic forecasts for future years have been derived exploiting the traffic modeldeveloped by the Technical Secretariat of Corridor X in 2003. These forecasts (untilthe year 2015 – long term horizon of the traffic model as developed) have beenassessed using the most recent data available. For the rest of the period of analysisforecasts have been derived using appropriate growth factors.3.4.2 Tools for the evaluation of various alternatives of the projectThe exercise of the evaluation of the level of service of the examined alternatives ofdevelopment of the road section according to projected traffic was performed on thebasis of the Highway Capacity Manual 2000 for two-lane highways (for the existinginfrastructure) and multilane highways (for the motorway construction alternatives).3.4.3 Tools for the economic analysis (NPV, IRR, B/C ratio)Various alternatives of infrastructure development are examined, comprising the“Do minimum alternative” of lower cost interventions for the upgrade of the existinginfrastructure and the toll-motorway alternatives of two alignments (the one asproposed by the detail design and the other recently examined at preliminary level)with various cross sections’ widths and hence different design speeds.The economic analysis of each alternative under consideration (calculation of NetPresent Value, Internal Rate of Return and Benefit over Cost Ratio) was performedEGNATIA ODOS S.A. 18APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR Xbased on the estimates of cost (construction cost, maintenance cost, operational costetc.) and benefits (time savings, reduction of vehicle operational cost, accidentsreduction) at each year of operation of the project.A comparative analysis of the economic evaluations of the alternatives followed andthe alternatives were ranked, so that the most appropriate alternative is defined.Various sensitivity tests were performed for each alignment/ alternative examined.EGNATIA ODOS S.A. 19APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X4. PRESENTATION OF THE PROJECT4.1 Existing situation4.1.1 Pan-European Road Corridor XPan-European Corridor X is a traditional route linking South-Eastern Europe withCentral Europe, which had served transportation in the area for many decades.Before the 1990’s this Corridor was fully operational and more or less developed interms of road and rail infrastructure. The unfortunate events in former Yugoslaviahave caused a significant drop in traffic along the Corridor and have also influencedthe status of infrastructures and facilities, adding at the same time new internationalborders along the Corridor, between the four former Yugoslavian countries.The multimodal Pan-European Transport Corridor X (Main Axis and four branches),as defined by the Helsinki declaration, connects:• Salzburg, Ljubljana, Zagreb, Belgrade, Nis, Skopje, Veles and Thessaloniki;• Graz with Maribor and Zagreb (Branch A);• Budapest with Novi Sad and Belgrade (Branch B);• Nis with Sofia [to Istanbul via Corridor IV (Branch C)]; and• Veles with Bitola and Florina [and via Egnatia with Igoumenitsa port (Branch D)].The alignment of the road infrastructure of Corridor X is represented in Map 4.1.More specifically, Corridor X refers not only to the road and rail infrastructure, butalso to interconnection points for inland waterways, air, maritime, intermodal and inparticular combined transport infrastructure, including ancillary installations such assignalling, the installations necessary for traffic management, access links, bordercrossing stations, service stations, freight and passenger terminals and warehousesalong the route of the Corridor.Concerning the road Corridor X, its total length is 2,299.6km and at present consistsof 61.5% multilane motorways and 38.5% highways and other main roads.The main part of Road Corridor X linking Salzburg and Thessaloniki throughLjubljana, Zagreb, Belgrade and Skopje is 1,451.4km long and consists of multilanemotorways at a percentage of 80% of its length. The maximum permitted speedalong the Main Axis is 120km/h at most of its sections, and generally theinfrastructure is in good condition.The percentage of the multilane motorways is foreseen to reach 90% of the Axis by2008, with construction of all the Slovenian and Croatian sections to full motorwayprofile. The remaining sections of the main part of Corridor X in Serbia andF.Y.R.O.M. that need reconstruction are the Leskovac (Grabovnica) – F.Y.R.O.M.border (102.13km) and Tabanovce – Kumanovo (7.4km) and Demir Kapija –Smokvica section (33km) in F.Y.R.O.M.EGNATIA ODOS S.A. 20APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XRecently, the negotiations of the Former Yugoslav Republic of Macedonia with theWorld Bank ended up with an agreement for the financing of the Tabanovce –Kumanovo motorway.Furthermore, the construction of the Leskovac – Presevo motorway is foreseen by2012, with Greek financial assistance (21% of total construction cost) through theHi.P.E.R.B., as well as the construction of the Belgrade bypass.Hence, according to the above-mentioned scheduled projects, after five years theonly remaining non-motorway section would be the section under study.Branch A, from Graz to Zagreb via Maribor, is 163.4km long and consists ofmultilane motorways at 55% of its length. This Branch is foreseen to be fullyconstructed in motorway profile by 2012.#YSALZBURGAUSTRIAΞ%[BUDAPESTLJUBLJANA#Y#######%[###SLOVENIAΞGRAZHUNGARYZAGREBCROATIAMARIBOR%[## #ΞBOSNIA-HERZEGOVINA#YΞ###Y#YSZEGEDSUBOTICANOVI SAD### #%[##Ξ##BELGRADEROMANIA#ΞSARAJEVO%[SERBIA-MONTENEGRO#NISY######BULGARIA# ###SOFIA%[ ###ITALYΞSKOPJE %[###VELESF.Y.R.O.M.#####Source: Corridor X Technical Secretariat%[TIRANEALBANIA##YFLORINA##GREECE##YTHESSALONIKIΞMap 4.1: Road Corridor X alignmentOn Branch B, the 41% of the 352.9km are parts of the M5 motorway in Hungary. Theconstruction of motorways on the rest of the Branch is foreseen by 2011, through arecently signed concession for the Horgos – Pozega motorway.Branch C (191.8km) is consisted by highways at 71% and two-lane main roads at therest of its length.EGNATIA ODOS S.A. 21APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XFinally, Branch D is 140.1km long and consists of highways and other two-lane mainroads. Rehabilitation plans exists for the Greek part of the Branch by 2007 and alsofor the section Veles – Prilep in mid-term time horizon.Concerning all the Corridor, Main Axis and Branches, since 2001 246.96km ofmotorways have been constructed, out of sections of total length of 382.59km. Thelength of constructed sections corresponds to 64.5% and by the end of the year 2007will reach 67.7% of planned transformation of highways to motorways (Table 4.1).Part ofCorridorXMainAxisBranch ABranch BTable 4.1: Progress of motorways’ construction along Corridor X since 2001CountrySectionTotallength(km)Constructedlength (km)Length ofsectionsplanned to beconstructed in2007 (km)Slovenia Bic – Obrezje 75.5 54.4 7.9Slovenia Vrba – Naklo 20.9 4.3 3.7CroatiaVelika Kopanica – 53.56 53.56 -Zupanja – LipovacCroatia Zagreb – Bregana 13.0 13.0 -Serbia Belgrade bypass 45.33 16.8 -Gradsko – Demir 75.5 42.5 -F.Y.R.Kapija – Udovo –MacedoniaGevgelijaSloveniaMaribor –38.8 2,4 0.6GruskovjeHungaryKiskunfelegyhaza – 60.0 60.0 -Szeged – RoszkeA=Total 382.59 246.9612.264.5%Grand Total A + B = 259.16km (67.7%)Source: Corridor X Technical SecretariatB=3.2%4.1.2 General description of projects on road Corridor X in the Former YugoslavRepublic of MacedoniaThe road section under study is a part of the main Axis of the Pan-EuropeanCorridor X, linking Skopje with Belgrade in the north and Thessaloniki in the south.Also, Veles in the northwest is the nodal connection point of the Main Axis andBranch D to Bitola and Florina (and the vertical axis of Egnatia Odos to Kozani).At present the Main Axis of Corridor X in the Former Yugoslav Republic ofMacedonia is constructed in motorway standards from Kumanovo to Demir Kapijaand from Smokvica to Gevgelija and the Greek borders (Bogorodica cross borderstation). The total length of Main Corridor X in F.Y.R. of Macedonia is 174.34km andthe percentage of motorways reaches 75.4%, after the recent transformation ofNegotino – Demir Kapija road to a motorway.It should be noted that the above figures are affected by the fact that at the motorwaysection between Katlanovo and Veles the two carriageways follow a totally differentEGNATIA ODOS S.A. 22APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR Xalignment and hence the motorway length is also different by 5.07km. The followingtable and map give a very clear view of the current situation of the Main Corridor X,as well as the profile of each motorway section (where emergency lane has beenconstructed).Table 4.2: State of play of Corridor X Main Axis in F.Y.R. of MacedoniaSection Length (km) Length of motorway (km)Section close to Serbian border 1.084 1.084Tabanovce – Kumanovo 7.052 -Kumanovo – Miladinovci 21.782 21.782Miladinovci – Petrovec 5.846 5.846Petrovec – Katlanovo 6.979 6.979Katlanovo – Veles (right carriageway) 27.157 27.157Katlanovo – Veles (left carriageway) 22.087 22.087Veles – Gradsko 25.139 25.139Gradsko – Negotino 16.044 16.044Negotino – Demir Kapija 16.525 16.525Demir Kapija – Udovo 22.270 -Udovo – Smokvica 13.564 -Smokvica – Gevgelija 11.228 11.228Gevgelija – Greek border 4.582 4.582Source: Fund for National and Regional RoadsSource: Fund for National and Regional RoadsMap 4.2: Representation of Corridor X Main Axis in the F.Y.R. of MacedoniaEGNATIA ODOS S.A. 23APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThe existing road on the section Demir Kapija – Udovo – Smokvica has beenconstructed during the period 1960-1964 and has been periodically renewed at somesections. Rehabilitation, including total repavement of the entire section, wasperformed in 1990-1991 through financing of $9million by the World Bank within therehabilitation of Gradsko – Gevgelija project.The following paragraphs provide details of the current status of the road betweenDemir Kapija and Smokvica [2].i. Demir Kapija – Udovo (22.27km)The road section between Demir Kapija and Udovo was built in 1964. The lastrehabilitation took place in 1990, which included total repavement. The roadcondition is good, with one, 3.5m wide, lane per direction and 1m wide stableshoulders. The condition of the pavement is reported as medium, while the level ofvertical and horizontal signing is not satisfactory, since it is described as damagedand insufficient.According to the approved detail design of Scetauroute (2000) it is envisaged thatthis section will be transformed to a motorway, with two lanes per direction, 3.5mwide each, and design speeds of minimum 80km/h and maximum 100km/h. Also, asecond alignment bypassing Udovo has been examined at preliminary level byE.O.A.E. and F.N.R.R. for the construction of a new motorway on the west bank ofRiver Vardar, with design speed of 120km/h.Photo 4.1: Road section Demir Kapija – UdovoPhoto 4.2: Road section Demir Kapija – UdovoEGNATIA ODOS S.A. 24APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XPhoto 4.3: Road section Demir Kapija – UdovoSource: Fund for National and Regional RoadsPhotos 4.4 and 4.5: Tunnels on Demir Kapija – Udovo roadii. Udovo – Smokvica (13.564km)The road section between Udovo and Smokvica was built in 1960. The lastrehabilitation took place in 1991, which included total repavement. The roadcondition is good, with one, 3.5m wide, lane per direction and 1m wide stableshoulders. The condition of the pavement is reported as medium, while the level ofvertical and horizontal signing is not satisfactory, since it is described as damagedand insufficient.According to the approved detail design of Scetauroute (2000) it is envisaged thatthis section will be transformed to a motorway according, with design speed of120km/h. The same design speed is also foreseen by the second alignment examinedby E.O.A.E. and F.N.R.R. that bypasses Udovo by following the west bank of RiverVardar.EGNATIA ODOS S.A. 25APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XPhoto 4.6: Road section Udovo – SmokvicaPhoto 4.7: Road section Udovo – SmokvicaThe entire section under study is 35.834km long. Data described in the followingparagraphs were derived from the available documents (the feasibility study byScetauroute), the Road Database of the Technical Secretariat of Corridor X andinformation submitted by the Funds for National and Regional Roads of the FormerYugoslav Republic of Macedonia.4.1.3 Existing road geometrical characteristics4.1.3.1 Length of sectionThe total length of the section is 35.834km. The alignment is presented in Map 4.3with the respective toponyms.4.1.3.2 Cross sectionSub-section Length (km)Demir Kapija – Udovo 22.27Udovo – Smokvica 13.564Total 35.834The cross section as described in the Database of Road Corridor X, is 9.70m wide anddescribed and represented as follows:• Two traffic lanes, 3.50m wide each• Two shoulders, 1.00m wide each• Two verges, 0.35m wide eachEGNATIA ODOS S.A. 26APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XFigure 4.1: Typical cross section of existing M-1 roadAxiosMap 4.3: Alignment of existing E-75 road4.1.3.3 Horizontal alignmentBendiness along the entire section under study is considered high, mainly along the“gorge” section between Demir Kapija and Udovo.EGNATIA ODOS S.A. 27APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XSource: Google Earth (2007 TerraMetrics)Map 4.4: Landscape of surrounding area (direction from D. Kapija to Udovo)Cross fallsMinimum super-elevation is 2.5% and maximum super-elevation in curve is 7%.CurvatureMinimum horizontal curve radius is 350m.4.1.3.4 Design speedThe design speed of the existing alignment is 80km/h from Demir Kapija to Udovoand varies between 80 and 100km/h between Udovo and Smokvica.4.1.3.5 Vertical alignmentAltitudeThe level of the M-1 road from Gevgelija to Udovo before the construction of themotorway sub-section Gevgelija – Smokvica varied between 52 and 80m above thesea level, while the land type is flat and mountainous while moving to the northernparts.From Udovo to Demir Kapija, through a mountainous terrain, level varies between80 and 122m above the sea level.EGNATIA ODOS S.A. 28APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XGradientsGradients along the existing road do not exceed 2.2%.4.1.3.6 PavementPavement condition along the entire section from Smokvica to Demir Kapija isconsidered medium. The last maintenance was performed in 1990-91 and includedtotal repavement of the road.4.1.3.7 StructuresBridgesThe following table lists the existing bridges along the section Gevgelija – DemirKapija.F.N.R.R.BridgenumberNameNumberof spansLengthDescription117 Vardar River 3 163.32 Bridge118 Iberliska River 1 7.60 Bridge119 Gorge 1 8.40 Bridge120 Kosaracha River 2 16.60 Bridge121 Lutkova River 5 101.40 Bridge122 Vodisir gorge 9 187.60 Bridge123 Gradeshka River 10 209.20 Bridge124 Mushtenica gorge 7 153.50 Bridge125 Gorge 5 101.20 Bridge126 Gorge 3 36.00 Bridge127 Arazliska River 12 252.40 Bridge128 Loop Udovo 1 15.78 Underpass129 Anska River 3 33.98 Bridge130 - 3 24.40 Overpass131 Marvinci River 1 8.38 Underpass132 Vardar River at Miletkovo village 5 220.10 Bridge133 Railway Skopje - Gevgelija 3 31.40 Underpass134 Road P-103 3 33.05 Overpass135 Local road 1 29.60 OverpassTotal 19 1,633.91There are nineteen existing bridges and have total length of 1633.91m. Eleven ofthem (F.N.R.R. numbers 117-127) are on the Demir Kapija – Udovo section, whichcorrespond to a length of 1,237m.EGNATIA ODOS S.A. 29APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X4.1.3.8 IntersectionsNo at-grade intersections exist along the Demir Kapija – Udovo road. There is onlyone multilevel intersection along this section, where the road crosses with railwayCorridor X.Concerning the Udovo – Gevgelija section, before the motorway construction fromSmokvica to Gevgelija, there were three multilevel and one at-level intersections. Thetwo multilevel crossings were at the crossings of the M-1 road with the Skopje –Thessaloniki railway line.4.1.3.9 Traffic signsAs previously mentioned, the level of horizontal and vertical signing was reported tothe Technical Secretariat as not satisfactory (in 2001), due to the fact that it wasdamaged and incomplete.4.1.3.10 LightingLighting along the Demir Kapija – Udovo section is considered satisfactory. Lightingis not continuous but isolated at tunnels. Lighting along Udovo – Smokvica section isnot satisfactory.4.1.3.11 Road facilitiesOn the old road from Gevgelija to Udovo there were six parking areas and twoservice stations. No emergency telephones are installed.On the sub-section from Udovo to Demir Kapija there are two service stations, noemergency telephones, while seven parking areas exist.4.1.3.12 Traffic counters and toll stationsThree traffic counters are installed along the road section between Demir Kapija andthe Greek border: Automatic counter 11/C is installed at Demir Kapija, Manualcounter 8-1/P at Udovo and Automatic counter 19/C at Gevgelija.The closest toll booth is at Stobi (close to Gradsko at Demir Kapija northwards).4.1.4 Existing road operational characteristics4.1.4.1 Traffic flowsAvailable traffic data was derived from the Corridor X Database (only for the years1998, 1999 and 2003), from the traffic data officially submitted by the Fund forNational and Regional Roads of F.Y.R. Macedonia and also from the Scetauroutestudy (for the period 1989-2002 and the years 2005 and 2006).EGNATIA ODOS S.A. 30APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThe following table presents traffic data for various years since 1990 and until theyear 2006. The traffic volumes peaked in 1990 (weighted average AADT was over6,000 veh/day). However, the crisis in the former Yugoslavia saw a drastic reductionwith daily traffic falling to just 1,835 veh/day in 1994. As stability in the regionimproves traffic volumes have started rising. In 2006 weighted traffic volumes wasrecorded at 3,571 veh/day. It is worth noting that the 2006 traffic volume is only 59%of the traffic volume that was recorded in 1990.YearAnnual Average Daily Traffic (veh/day)D. Kapija–Udovo Udovo–Gevgelija Weighted traffic1989 4,644 5,036 4,8511990 6,300 5,856 6,0661991 5,357 5,128 5,2361992 2,858 2,400 2,6171993 2,779 2,846 2,8141994 1,496 2,139 1,8351995 1,647 2,280 1,9811996 2,142 2,825 2,5021997 2,315 3,021 2,6871998 1,922 3,387 2,6941999 1,869 4,121 3,0562000 2,754 3,334 3,0602001 2,300 3,265 2,8082002 2,119 3,412 2,8002005 2,671 2,916 2,8002006 3,596 3,548* 3,571Source: Corridor X Technical Secretariat – Fund for National and Regional Roads* EstimationTraffic flows along the sections were reduced by 56% during the period 1990 – 1998(70% on D. Kapija – Udovo and 42% on Udovo – Gevgelija). Increase of traffic wasobserved after the year 2000 but remained at low levels with fluctuations, at about50% less than the traffic in the year 1990.The Graph 4.1 presents the annual traffic along Corridor X Main Axis in the F.Y.R. ofMacedonia in various years since 1989. It shows that traffic flows gradually increasebut irregularly, so that the extraction of a safe conclusion and a mean annual growthfactor is impossible.EGNATIA ODOS S.A. 31APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAnnual Average Daily Traffic along Corridor X in F.Y.R.O.M. in the period1989 – 20061600014000AADT (veh/day)12000100008000600040002000019891990199819992001200220052006Tabanovce - KumanovoKumanovo - MiladinovciMiladinovci - PetrovecPetrovec - VelesVeles - GradskoGradsko - NegotinoNegotino - Demir KapijaSectionDemir Kapija - UdovoUdovo - GevgelijaGevgelija - BogorodicaGraph 4.1: Annual Average Daily Traffic along Corridor X in F.Y.R.O.M.in the period 1989 – 2006In any case, the trends of traffic along the sections of interest are anodic, as shown inGraph 4.2. Only in 2006 the traffic recorded an increase by 27.5% compared to trafficin 2005.Annual Average Daily Traffic changes per sub-section in the period 1989 – 200670006000AADT (veh/day)5000400030002000100001989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2005 2006YearDemir Kapija - Udovo Udovo - Gevgelija Weighted trafficGraph 4.2: Annual Average Daily Traffic changes per sub-section in the period 1989 – 2006EGNATIA ODOS S.A. 32APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAnnual Average Daily Traffic considered for the scope of the study in the base year2006 per section is:• 3,596 veh/day on the section Demir Kapija – Udovo• 3,548 veh/day on the section Udovo – SmokvicaWeighted Annual Average Daily Traffic along the entire section under study in 2006is 3,571 veh/day.4.1.4.2 Traffic flows characteristicsTraffic compositionAnnual average daily traffic can be analysed in vehicle categories and reduced topassenger car units (PCUs). From the analysis of the year 2001, for which trafficseparation is made to light and heavy vehicles, it is concluded that heavy traffic wasaround 30%. In the Scetauroute feasibility study, which included traffic counts thatwere used in traffic projections, the following shares of vehicles were registered foryear 1998:RoadsectionDemirKapija –Udovo(Prdejci)Smokvica –GevgelijaPassengercarsBusesVans/pickupsLighttrucksMediumtrucksHeavytrucks58% 4% 7% 4% 4% 6% 17%67% 4% 7% 4% 5% 7% 5%ArticulatedtrucksTraffic composition has changed since 1998. If one studies the available F.N.R.R.traffic statistics for 2005 and 2006, presented in the following tables, the trafficcomposition along the Demir Kapija – Udovo road is more or less the same as thetraffic composition along the Udovo – Gevgelija road.SectionAMotorcyclesBCars and lightloaded vehiclesCHeavy loadedvehiclesDBusesTotalDemir Kapija 27 2,003 588 53 2,671– Udovo 1.01% 74.99% 22.01% 1.98% 100.00%Udovo – 18 2,332 467 99 2,916Gevgelija 0.62% 79.97% 16.02% 3.40% 100.00%EGNATIA ODOS S.A. 33APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XMore specifically, traffic composition along Demir Kapija – Udovo section in the year2006 was recorded as follows:A B C DSectionCars and light Heavy loadedTotalMotorcyclesBusesloaded vehicles vehiclesDemir Kapija 34 2,877 611 74 3,596– Udovo 0.95% 80.01% 16.99% 2.06% 100.00%Therefore, along Demir Kapija – Udovo section the share of light vehicles is 81%, thepercentage of buses is 2% and of heavy loaded vehicles 17%. For the section Udovo –Smokvica the shares are assumed to be the same with the northern road section,confirmed by the available statistics for 2005, considering also that higher volumes oflocal trips emerge after the village Prdejci, 3km south of Smokvica.Summarizing, and incorporating also the percentages registered in the year 1998, thefollowing shares per type of vehicle are extracted and used in the present study:• Motorcycles: 1%• Passenger cars: 69%• Vans and pickups: 7%• Buses: 2%• Light trucks: 4%• Medium trucks: 4%• Heavy trucks: 6%• Articulated trucks: 7%Traffic in private car units in the base year (2006) for traffic projection is estimated at4,928 PCUs/day.International trafficInternational traffic has been drastically reduced since 1990. Annual average dailytraffic of vehicles with foreign registration plates in 1990 at Nis toll booth onCorridor X in Serbia was 4,065 veh/day, while in 2001 it was 916 veh/day (includingvehicles from ex Yugoslavian countries that are now considered as internationaltraffic). These figures highlight the significant drop of international traffic after thecrisis in former Yugoslavia. They also indicate the growth potential of internationaltrips as the political stability of the region steadily improves.In the previous feasibility study by Scetauroute, it is estimated that internationaltraffic in 1998 represented 20% of the AADT along the section Demir Kapija –Gevgelija.In order to approach the share of international traffic it was considered useful toexploit available statistics at the cross border of Bogorodica that were officiallysubmitted to the Technical Secretariat of Corridor X by the authorities of F.Y.R. ofMacedonia in 2003.EGNATIA ODOS S.A. 34APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XYearCars Buses Trucks SubtotalsForeign Domestic Foreign Domestic Foreign Domestic Foreign DomesticTotal1997 135,010 129,676 12,270 1,620 40,452 81,521 187,732 212,817 400,5491998 116,122 46,786 10,419 309 35,666 83,237 162,207 130,332 292,5391999 72,729 72,527 4,872 973 41,815 87,660 119,416 161,160 280,5762000 132,682 157,017 18,954 22,431 37,909 44,862 189,545 224,310 413,8552001 82,047 103,520 9,438 976 39,528 78,361 131,013 182,857 313,8702002140,849 101,091 9,160 952 42,919 87,914 192,928 189,957 382,88573.01% 53.22% 4.75% 0.50% 22.25% 46.28%Annual average 2002 529 520 1,049In 2002, 382,885 vehicles crossed the borders of F.Y.R. of Macedonia with Greece,which approximates 1,049 vehicles per day in both directions. About half of them(529 veh/day) are vehicles with foreign registration plates and the composition ofthis traffic flows is 73% passenger cars, 4.75% buses and 22.25%. These shares aresimilar to the composition of AADT on the section under study mentioned in theprevious paragraphs.The 529 veh/day represent the 18.9% of the AADT of the year 2002, whichapproximates the 20% estimated by Scetauroute for the year 1998.Therefore, for the scope of this study, it is assumed that 20% of the traffic isinternational, which for 2006 is estimated at 714 veh/day (1,100 PCUs/day) in bothdirections.Annual entrances per vehicle category at Bogorodica road crossborder station90,00080,00070,00060,00050,00040,00030,00020,00010,0000ForeignPrivateCarsDomesticPrivateCarsForeignBusesDomesticBusesForeignTrucksDomesticTrucks199719981999200020012002Graph 4.3: Annual entrances per vehicle category at Bogorodica road cross border station inthe period 1997 – 2002EGNATIA ODOS S.A. 35APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAnnual exits per vehicle category at Bogorodica road cross borderstation90,00080,00070,00060,00050,00040,00030,00020,00010,0000199719981999200020012002ForeignPrivateCarsDomesticPrivateCarsForeignBusesDomesticBusesForeignTrucksDomesticTrucksGraph 4.4: Annual exits per vehicle category at Bogorodica road cross border station in theperiod 1997 – 2002Traffic irregularitiesSeasonalityFrom data collected in 2001 at the (old) counter points 12/A at Demir Kapija and13/A at Gevgelija, as expected, the average monthly traffic flows are higher duringthe months of the vernal period. Peak month at Demir Kapija – Udovo was July(2,680 veh/ day) and at Udovo – Gevgelija (3,326 veh/day).MonthD. Kapija - Udovo Udovo - GevgelijaAverageAverageComparison tomonthly dailymonthly dailyAnnual AveragetraffictrafficDaily Traffic(veh/ day)(veh/ day)Comparison toAnnual AverageDaily TrafficJanuary 1,920 83.48% 2,562 78.44%February 2,095 91.09% 2,948 90.26%March 2,011 87.43% 2,855 87.41%April 2,093 91.00% 3,023 92.55%May 2,173 94.48% 3,795 116.19%June 2,378 103.39% 3,175 97.21%July 2,680 116.52% 3,336 102.14%August 2,633 114.48% 3,468 106.18%September 2,539 110.39% 3,684 112.79%October 2,488 108.17% 3,509 107.43%November 2,296 99.83% 3,396 103.97%December 2,282 99.22% 3,444 105.44%EGNATIA ODOS S.A. 36APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XSummer average daily traffic (SADT) in 2001 was 2,564 veh/day (11% higher thanAADT) on Demir Kapija – Udovo and 3,326 veh/day on Udovo – Gevgelija (2%higher than AADT), while winter average daily traffic (WADT) was 2,077 veh/dayand 2,952 veh/day, respectively, which correspond to 90% of the AADT.It should be mentioned at this point that at Udovo – Gevgelija section the SADT in1989 was 8,153 veh/day, 62% higher than AADT, while WADT was 3,573 veh/day(71% of AADT).Traffic seasonality in 2001 is also presented in the following graph.Monthly Average Daily Traffic in 2001400035003000Veh/day250020001500D. Kapija - Udovo MADTD. Kapija - Udovo AADTUdovo - Gevgelija MADTUdovo - Gevgelija AADT10005000JanuaryFebruaryMarchAprilMayJuneJulyMonthAugustSeptemberOctoberNovemberDecemberGraph 4.5: Monthly Average Daily Traffic in 2001Peak days and hoursInformation concerning the peak days and hours are available for the period 1999 –2002 (Source: F.N.R.R.).On the section from Demir Kapija to Udovo the maximum daily traffic load wasrecorded on the working day of 31/7/2000 with 6,023 vehicles (218% of AADT ofyear 2000). In the following years traffic on peak days was much closer to the annualaverage daily traffic.EGNATIA ODOS S.A. 37APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XYear1999200020012002Section:Day Morning AfternoonDateDemir Kapija – Udovotraffic Peak hour peak hourMaximum working day 6/7/1999 3,019 8h and 12h 15h and 18hMaximum non-working day 24/7/1999 2,917 12h 18h and 20hAverage day 22/10/1999 1,867 11h -Maximum working day 31/7/2000 6,023 - 16h and 21hMaximum non-working day 29/7/2000 5,319 - 18-20hAverage day 23/5/2000 2,670 8h 16h and 22hMaximum working day 1/8/2001 3,638 9h 20hMaximum non-working day 28/7/2001 3,168 12h 17h and 20hAverage day 26/2/2001 2,302 - 20hMaximum working day 30/8/2002 3,408 9h 13h and 19hMaximum non-working day 16/11/2002 3,491 6h 12-14hAverage day 6/12/2002 2,127 12h -On the road from Udovo to Gevgelija the maximum daily traffic load was recordedon the working day of 13/4/1999 with 12,207 vehicles (three times higher thanAADT of year 1999). In the following years traffic on peak days was close to half ofthis value.Year1999200020012002Section:Day Morning AfternoonDateUdovo – Gevgelijatraffic Peak hour peak hourMaximum working day 13/4/1999 12,207 9h13h, 16h and20hMaximum non-working day 11/4/1999 9,588 11h -Average day 11/9/1999 4,093 9h 19hMaximum working day 2/2/2000 5,096 10-11h 16h and 21hMaximum non-working day 23/2/2000 3,912 -15-16h and 21-22hAverage day 15/5/2000 3,335 8h 16h and 22hMaximum working day 20/9/2001 6,801 - 14h and 19hMaximum non-working day 19/5/2001 6,103 12h 14h and 19hAverage day 17/9/2001 3,263 - 13hMaximum working day 27/2/2002 6,7794-6h and 11-15h19hMaximum non-working day 29/9/2002 7,451 9h 13hAverage day 12/2/2002 3,412 8h 17h and 22hEGNATIA ODOS S.A. 38APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X4.1.4.3 AccidentsData for accidents is not available on road section basis. From the Database of theTechnical Secretariat of Corridor X the only information available is on country basis,for the years 1995 – 1998.Year Accidents Deaths Injuries1995 2,436 179 3,4211996 2,505 154 3,3971997 2,293 170 3,1991998 2,184 187 3,019Source: Corridor X Technical SecretariatThe persons killed in road accidents in F.Y.R. of Macedonia were 216 in 1999 and 162in 2000 (Eurostat). Eight persons were killed in road accidents per 100,000 inhabitantsin 2000, while in 1999 the same index was eleven, in 1997 and 1998 nine, and finallyin 1997 eight.From the above statistics, the mean annual number of accidents is 2,355, of injuries3,259 and deaths in road accidents 178.Road accidents in F.Y.R. of Macedonia2000199919981997InjuriesDeathsRoad accidents199619950 500 1000 1500 2000 2500 3000 3500 4000YearGraph 4.6: Road accidents in F.Y.R. of Macedonia in the period 1995 – 2000Another statistic concerning accidents is the number of accidents per 1,000 vehiclesin 1999, reported by the Ministry of Transport and Communications of the F.Y.R. ofMacedonia: 6.9 accidents, 0.6 deaths and 9.3 injuries per 1,000 vehicles.EGNATIA ODOS S.A. 39APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAccidents along the existing road under study were expected from the responsibleMinistry of Interior of the F.Y.R. of Macedonia. Up to the date of completion of thecurrent study, the submission of the required data is still pending.4.2 Alternatives of infrastructure development (road physical and operationalcharacteristics including toll stations)The alternatives of infrastructure development are formulated in such a way that thequalification of the most suitable, in economic and technical terms, solution is madepossible.The first alternative (Alternative A) is the lowest cost solution, where the entiresection is upgraded in order to increase the road safety and facilitate the traffic ofboth private cars and commercial vehicles. Rehabilitation according to the authoritiesis required every 15 years, and thus the upgrade should be performed immediately.Therefore, for the scope of the study upgrade is considered to take place in theperiod 2008 -2009 and rehabilitation in 2023.The second and the third alternatives (Alternatives B and C) examine the motorwayconstruction with narrower cross-section widths compared to those proposed by theexisting detail and preliminary designs of the two alignments under study, in orderto examine more economic solutions, while still serving the existing and forecastedtraffic with an acceptable level of service.Finally, the motorway construction alternatives as proposed by the existing designsare examined (Alternative D).The alternatives of infrastructure development are summarised in the followingtable:Alternative Description Year ofrealisationA (“Dominimum”)Upgrade of the existing road 2008 – 2009BMotorway construction with cross section width of22.60m (traffic lanes 3.25m wide) along the entiresectionCDMotorway construction with cross section width of24.60m (traffic lanes 3.50m wide) along the entiresectionAlignment 1Motorway construction with cross section width of- 27.60m (traffic lanes 3.75m wide) at the “easy” sections- 26.40m (traffic lanes 3.50m wide) at the “gorge” sectionAlignment 2Motorway construction with cross section width of28.20m (traffic lanes 3.75m wide) along the entiresection2008 – 2013(Alignment 1)Or2008 – 2010(Alignment 2)EGNATIA ODOS S.A. 40APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X4.2.1 Alternative A: Do minimumThe “Do minimum” alternative is the lower cost alternative of upgrading of theexisting M-1 road that could include various minor interventions for the betterutilisation of the existing infrastructure and the facilitation of traffic. Minorinterventions could be the formulation of climbing lanes and parking lots at givenspots along the hilly and difficult parts of the road (along the “gorge” section), inorder to give more passing opportunities to passenger cars, as the percentage ofheavier vehicles is considered high (19%).Climbing lanes increase the level of service of the road, and also contributes toaccidents reduction, travel time and vehicle costs savings. Also, for the increase ofroad safety, the provision of emergency escape ramps and arrester beds could beexamined at long downhill sections or other cases of increased possibility of a vehicledriver losing control.4.2.2 Motorway construction (Alternatives B, C, D)Alternatives B, C and D are variants of motorway construction which differ in theformulated typical cross-section and in the design speed of a future motorway, inorder to examine the best techno-economic alternative.The following elements of the analysis are considered to remain constant for allmotorway cross-section widths within each alignment (Alternatives B, C, D):• Traffic projections (vary only in different alignments).• The median type, which is formulated with metal barriers. The case ofestablishment of New Jersey median is not examined.• The omission of the emergency lanes at bridges longer than 50m and tunnels.• The considered percentage of accidents reduction after the motorwayconstruction.The construction costs are estimated on the basis of the estimation performed by theF.N.R.R. for the wider cross sections (27.6m and 26.4m in the case of Alignment 1 and28.2m in the case of Alignment 2).4.2.2.1 General description – Design speeds and typical cross-sectionsAlternative B: Motorway construction with a cross-section of 22.60m for designspeed of 90-110km/hAlternative B is the alternative of motorway construction with two lanes perdirection, separated by a median with guardrails, for design speed of 90-110km/h:Traffic lanes: 4 (2 per direction), each 3.25m wideCentral reserve: 2.00m wideEmergency lanes: 2 (1 per direction), each 2.00m wideMarginal strips towards central reserve: 2 (1 per direction), each 0.30m wideMarginal strips towards emergency lanes: 2 (1 per direction), each 0.50m wideShoulders: 2 (1 per direction), each 1.00m wideEGNATIA ODOS S.A. 41APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X9.307.301.00 0.50 2.00 0.501.00Figure 4.2: Alternative B typical motorway cross section (V d = 90-110km/h)More specifically, for Alignment 1 the design speed will be between 80 and 100km/hfor the subsection Demir Kapija – Udovo, while for the remaining section betweenUdovo and Smokvica will be 110km/h. For Alignment 2 the design speed will be110km/h along the entire section.Reduction of the cross section is also foreseen at tunnels and bridges longer than50m. The reduction of the cross section at tunnels and bridges is achieved throughthe removal of the emergency lane. The width of tunnel is 8.7m with two traffic lanesof 3.25m each, two verges of 0.35m each and two service footpaths of 0.75m each.Alternative C:Motorway construction with a cross-section of 24.60m for designspeed of 90-110km/hAlternative C foresees the motorway construction with two lanes per direction,separated by a median with guardrails, for design speed of 90-110km/h, with crosssection of 24.60m, as follows:Traffic lanes: 4 (2 per direction), each 3.50m wideCentral reserve: 3.00m wideEmergency lanes: 2 (1 per direction), each 2.00m wideMarginal strips towards central reserve: 2 (1 per direction), each 0.50m wideMarginal strips towards emergency lanes: 2 (1 per direction), each 0.30m wideShoulders: 2 (1 per direction), each 1.00m wide9.807.801.00 0.30 0.50 3.00 0.500.302.00 3.50 3.50 3.50 3.50 2.001.00Figure 4.3: Alternative C typical motorway cross section in the case of Alignment 2 and ofsection from Udovo to Smokvica of Alignment 1 (V d = 90-110km/h)EGNATIA ODOS S.A. 42APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XIn the case of Alignment 1 the design speed will be between 80 and 100km/h alongthe motorway between Demir Kapija and Udovo, while for the rest of the motorwaybetween Udovo and Smokvica will be 110km/h. For Alignment 2 the design speedwill be 110km/h along the entire section.Additionally, as in the case of Alternative B, the reduction of the cross section is alsoforeseen at tunnels and bridges longer than 50m. This reduction is achieved throughthe removal of the emergency lane. The width of tunnel is 9.2m with two traffic lanesof 3.50m each, two verges of 0.35m each and two service footpaths of 0.75m each.Alternative DMotorway construction for design speed of 120km/hAlignment 1 Motorway construction with a cross-section of 27.60m for designspeed of 120km/h and 26.40m for design speed of 80-100km/hThis alternative examines the case of the cross sections as proposed by the detaileddesign. The following table and Figures 4.4 and 4.5 illustrate the cross-section.Traffic lanes: 4 (2 per direction), each 3.75m/ 3.50mwideCentral reserve: 4.00m wideEmergency lanes: 2 (1 per direction), each 2.50m wideMarginal strips towards central reserve: 2 (1 per direction), each 0.50m/ 0.35mwideMarginal strips towards emergency lanes: 2 (1 per direction), each 0.35m/ 0.30mwideShoulders: 2 (1 per direction), each 1.00m wide10.808.301.00 0.30 0.50 4.00 0.500.302.50 3.75 3.75 3.75 3.75 2.501.00Figure 4.4: Alignment 1 – Alternative D typical cross section of the motorway section fromUdovo to Smokvica (V d = 120km/h)EGNATIA ODOS S.A. 43APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X10.207.701.00 0.35 0.35 4.00 0.350.352.50 3.50 3.50 3.50 3.50 2.501.00Figure 4.5: Alignment 1 – Alternative D typical cross section of the motorway section fromDemir Kapija to Udovo (V d = 80-100km/h)It should be mentioned that the central reserve is normally 4m but is frequentlynarrower and reduced to barely 3m when necessary.The width of tunnel is 9.2m with two traffic lanes of 3.50m each, two verges of 0.35meach and two service footpaths of 0.75m each.Alignment 2Motorway construction with a cross-section of 28.20m for designspeed of 120km/hThis alternative examines the case of the cross sections as proposed by thepreliminary design. The following table and Figure 4.6 illustrate the cross-section ofthis alternative:Traffic lanes: 4 (2 per direction), each 3.75m wideCentral reserve: 3.50m wideEmergency lanes: 2 (1 per direction), each 2.50m wideMarginal strips towards central reserve: 2 (1 per direction), each 0.50mMarginal strips towards emergency lanes: 2 (1 per direction), each 0.30m wideShoulders: 2 (1 per direction), each 1.50m wide incut and 2.00m in fill10.858.351.50 0.35 0.50 3.50 0.500.352.50 3.75 3.75 3.75 3.75 2.501.50Figure 4.6: Alignment 2 – Alternative D typical cross section of the motorway section fromUdovo to Smokvica (V d = 120km/h)EGNATIA ODOS S.A. 44APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThe width of tunnel is 9.7m with two traffic lanes of 3.75m each, two verges of 0.35meach and two service footpaths of 0.75m each.4.2.2.2 Length of sectionThe total length of the motorway section in the case of Alignment 1 is 32.15km, whilefor Alignment 2 is 28.05km.In the case of Alignment 1, the foreseen motorway can be divided into twosubsections: Between Demir Kapija and Udovo (19.9km) and between Udovo andSmokvica (12.15km).4.2.2.3 Horizontal alignmentAlignment 1 adopts the alignment of the existing M-1 road for most sectors. BetweenDemir Kapija and Udovo the new carriageway would be on the left (east) bank of theVardar River, following as much as possible the existing M-1 road. The percentage ofthe second carriageway following the existing M-1 alignment is 80% (F.N.R.R.).Alignment 2 foresees the construction of a completely new motorway sectionbetween Demir Kapija and Smokvica, which follows the west bank of the VadrarRiver, bypassing Udovo. The total length of this alignment is 28.05km.The position of the aforementioned alignments is roughly presented in the followingmap:LegendAlignment 1Alignment 2Map 4.5: Alternative motorway Alignments 1 and 2EGNATIA ODOS S.A. 45APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XCurvatureIn Alignment 1 the minimum horizontal curve radius for design speed of 120km/h is750m and for design speed of 100km/h is 450m. For design speed of 80km/h theminimum radius is 250m.In Alignment 2 the minimum curve used is 900m, which actually corresponds to adesign speed of 130km/h.4.2.2.4 Vertical alignmentVertical alignment along sub-sections with design speed of 120km/h foreseesminimum radii of 16,000m in convex curves and bigger than 11,266m (2/3 of convexradius) in concave curves.Along sub-sections with design speed of 100km/h minimum vertical radii are7,600m in both convex and concave curves. Finally, for the design speed of 80km/hthe minimum radii is 3,025m.AltitudeThe altitude of the motorway of Alignment 1 from Demir Kapija to Gevgelija liesbetween 54 and 112m.In the case of Alignment 2 the motorway altitude lies between 75 and 350m. Next tothe river and for 8km the altitude is between 110 – 140m, in the mountains and for15km altitude reaches 350m and then drops to 150m, and finally, in the plain, for therest of its length (5km), is gradually reduced to 75m, where it is connected to thealready constructed motorway between Gevgelija and Smokvica.GradientsGradients along the entire section under study are reserved lower than 5% for alldesign speeds.Especially in the case of Alignment 2, the maximum longitudinal slope is 4.0% withan exception of a sector of 1,400m where it reaches 4.6%, due to the mountainouslandscape. The maximum slope in the tunnels was kept below 2.5%.EGNATIA ODOS S.A. 46APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X4.2.2.5 PavementThe pavement structure used on roads in the F.Y.R. of Macedonia is the following:For new carriageways:- wearing course (polymerised asphalt) 5 cm- bearing course (3-4% bitumen) 12-14 cm- blanket course 25-35 cm- stabilised road base in cut 30-40 cm- stabilised road base in fill 60 cmFor connecting roads at interchanges:- wearing course (polymerised asphalt) 4 cm- bearing course (3-4% bitumen) 8-10 cm- blanket course 25-35 cmFor local roads:- bearing course (3-4% bitumen) 7 cm- blanket course 25-35 cm4.2.2.6 StructuresBridgesAlignment 1The bridges foreseen in Alignment 1 are summarised in the following table, preparedby the F.N.R.R.:Demir Kapija – Udovo Length (m) Udovo – Smokvica Length (m)Bridge on River Vardar 124 Underpass 1132+757 8.7Bridge on Kkosareska River 15 Underpass 1132+337 13Bridge on Lutkova River 101 Overpass 1133+484 46Bridge on Vodosir River 169 Overpass 1134+420 46Bridge on Gradeska River 202 Overpass 1138+236 46Bridge on Mustenica River 136 Bridge on Anska River 45.5Bridge on Arazliska River 237 Overpass 1140+540 46.0Underpass 1141+460 8.7Bridge on Vardar River 504Underpass 1142+760 8.7Subtotal 983 Subtotal 773Total 1,756EGNATIA ODOS S.A. 47APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAlignment 2The bridges foreseen in Alignment 2 are summarised in the following table, preparedby E.O.A.E.:Name Starting km point Ending km point Length (m)S1-Bosava 900 1000 100S2-Rail 1400 1600 200S3 3260 3440 180S4 5000 5040 40S5 7100 7200 100S6-Javorica 8800 9140 340S7 10100 10400 300S8 14300 14700 400S9-Petruska 21275 21425 150Total 1,810TunnelsAlignment 1The foreseen tunnels concern only the section between Demir Kapija and Udovo:Three of them are single-tube and the other two are double-tube tunnels. Theirlocation and lengths are listed in the following table:Tunnel Location Starting km point Length (m)T1 and T2 Demir Kapija 1112+934 – 1114+428 1,494T3 Kisalder 1117+336 – 1117+540 204T4 Ilovski 1122+822 – 1123+326 504T7 Kamen 1128+269 – 1128+892 623Total 2,825mAlignment 2The foreseen tunnels are two:Tunnel Starting km point Ending km point Length (m)T1 1830 3080 1,250T2 8180 8580 400Total 1,650m4.2.2.7 Traffic interchangesThe construction and operation of interchanges is foreseen in order to connect thefuture motorway with the rest of the road network, with regional and municipalcentres. The foreseen interchanges in the case of Alignment 1 are at Udovo and atSmokvica. As already mentioned, in the case of Alignment 2 only one interchange isforeseen, however its exact position has not yet been defined; potential places forconstruction of interchange are Smokvica and Miletkovo.EGNATIA ODOS S.A. 48APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X4.2.2.8 Environmental protection equipmentCosts for the environmental impact mitigation measures are currently beingestimated for each of the two examined alignments of the project, therefore theyare not included in the costs of the projects.EGNATIA ODOS S.A. 49APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X5. TRAFFIC FORECASTS5.1 Presentation of the tool for traffic forecasts5.1.1 Methodology of the development of the forecasting tool5.1.1.1 Data collection – Construction of the base year databaseThe construction of the base year Database has been achieved through extensivequestionnaire based-surveys followed by on-site visits of expertise at the network inthe countries of Corridor X (Austria, Slovenia, Croatia, Hungary, Serbia, Bulgaria,F.Y.R.O.M. and Greece). The necessary information, collected via the questionnairesand via various National and International Organizations (National Statistic Services,Eurostat, World Bank, United Nations, World Trade Organization, World TourismOrganization, Organization for the Economic Cooperation and Development etc.)concerns physical and operational characteristics of the network (e.g. traffic flows,operational speed, road category, duration of trips, delays at cross-borders etc.) andvarious demand parameters (e.g., socioeconomic characteristics, population, GrossDomestic Product, imports and exports of goods, tourism etc.).5.1.1.2 Methodological issues and constraintsObjectively, it is difficult to obtain reliable estimations of the future transportdemand and the respective realistic volumes’ assignment on the transport networkbecause of the highly uncertainty of the socioeconomic status of the countriescomposing the area of Corridor X. In the mean time the representation of the currentstatus is insufficient, due to the lack of data, their incompatibility from country tocountry and from period to period, because of the new borders and the creation ofnew independent states after 1990 in the area of the Western Balkans (formerYugoslavia).Due to the political changes, the technical structures and administration systems alsocollapsed, and among those, the organisations of systematic data collection andprocessing of transport demand and supply. Obviously, the confusion produced wasenjoined by the border changes, given the fact that substantial part of relative data isreferred at certain «screenline stations», which are the countries’ various borderstations. Many of them did not exist before 1990 but they were created afterwardsand not simultaneously. Far from the partial data reliability, comparability issuesraise from year to year and also from independent state (pre-existing or new) toindependent state. The reliability problem does not concern only the transport data,but also demographic data, macroeconomic indicators, industrial production andexternal trade.5.1.1.3 Adopted methodology and assumptions for the scenarios’ developmentThe traffic forecasting approach of the Technical Secretariat of Corridor X is based onbest practices (TIRS and REBIS/ approved by the EC and the WB/EIB), which werealso based on the TINA and NEA study.EGNATIA ODOS S.A. 50APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XIn the Corridor X traffic forecasting, a marginal expression of generalized time wasused, which was extracted by real data and comprises trip durations and delays forvarious reasons, of which (and mainly) the delays at border crossings.The reference network is Corridor X, i.e. the main axis and its four branches. It iscomposed by existing infrastructures, with reduced operability due to lack ofmaintenance, investments and also desolation or war disasters. Corridor X is part ofa greater grid, which also comprises Corridors IV, V, VII and VIII.The network refers to land transport, with respect to rail and road transport,passenger and freight transport and, finally, local (domestic) and internationaltransport. The primary discrimination is based on the mean travel – transportdistance, where, according to TIRS, the line between local and long distance trips is100km, while the biggest part of international inland transport does not exceed400km.Additionally, the increase rate of local mobility, which mainly depends on theprivate car ownership indicator, is significantly higher than the increase rate ofinternational mobility in the area.The reference network is inscribed in an area separated in zones, for the needs of tripgeneration and spatial distribution. The available, from national and internationalorganisations, demographic and macroeconomic information, usually refer atcountry level and not to smaller geographic – administrative divisions. This is thereason why each Corridor X’s country consists a zone.Given that the current decade is a commutative period, it was intended that thescenarios and mainly their quantitative projections to have as target year the year2015.The country grouping was combined to the perspective of accession of thosecountries to the E.U. and the accession time for each one, which of course is notabsolutely defined and for some countries is absolutely unknown. The accessionperspectives obviously affect the scenarios definition because the external trade, andtherefore the freight transport, in relation to the accession, tends to liberization andthe same happens with the free movement of persons. At the same time, theenlargement of the E.U. with these countries affects the heading to Europeanintegration in global level (globalisation) but to some extend diverts from it.5.1.2 The scenariosThree scenarios of development were formulated: the basic-medium (realistic) andtwo scenarios of low and high development, namely the pessimistic and optimisticscenario, respectively. The scenarios’ definition ends up with the application ofannual change rates on variables affecting directly the passenger and goods flows.The annual change rates of the socioeconomic, demographic and other (arrivals ofvisitors/ tourists at borders) characteristics used, had been extracted from relevantstudies carried out by the OECD, the World Bank and other internationalorganizations.EGNATIA ODOS S.A. 51APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAdditionally, it should be mentioned that the models used concern only the roadinternational transport, separately for passenger and freight, taking into account theexisting modal split (share of international transport by road 78%). The estimation ofthe domestic transport was produced by the use of growth factors.Passenger transportFor the estimation of the generation of passenger transport an exponential equationwas produced by linear regression. In this equation the independent variable is theGDP and the dependent variable is the number of trips per person per year.The journeys per person per year, which are used for the creation of the equation,were obtained by pilot studies of Eurostat and DG TREN, where the passengerstravelling various distances using all modes and their behaviour are examined.CountryGDP/capita(2000)Trips/person/yearEstimation of road long distance trips per yearPopulationTrips/ year%roadtripsRoad trips/year%personstravellinglongdistanceRoadlongdistancetrips/yearF.Y.R.O.M. 4,400 0.69 2,031,100 1,396,459,97 0.78 1,089,238,78 7.024 76,504Albania 3,000 0.60 3,500,000 2,092,011,18 0.78 1,631,768,72 6.743 110,028Bosnia/Herzegovina1,700 0.52 3,922,205 2,058,581,01 0.78 1,605,693,19 6.515 104,614Romania 5,200 0.74 22,430,500 16,706,277,75 0.78 13,030,896,64 7.203 938,551Bulgaria 6,300 0.83 8,149,500 6,775,542,91 0.78 5,284,923,47 7.473 394,950Serbia &Montenegro2,300 0.56 10,645,200 5,932,656,02 0.78 4,627,471,70 6.617 306,181Croatia 5,800 0.79 4,381,400 3,465,064,44 0.78 2,702,750,26 7.346 198,556Hungary 11,500 1.40 10,005,300 13,991,889,98 0.78 10,913,674,18 9.245 1,008,986Slovenia 15,600 2.11 1,990,100 4,193,550,76 0.78 3,270,969,59 11.460 374,854Slovakia 10,800 1.30 5,402,500 7,044,341,93 0.78 5,494,586,70 8.950 491,749Turkey 5,900 0.80 65,784,000 52,548,658,53 0.78 40,987,953,65 7.371 3,021,332Greece 15,460 2.08 10,565,000 21,953,126,64 0.78 17,123,438,78 11.368 1,946,673Austria 24,570 5.17 8,121,000 41,964,172,61 0.78 32,732,054,64 21.023 6,881,265EGNATIA ODOS S.A. 53APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThe attractions are calculated in respect to the arrivals of visitors at the borders ofeach zone - country. The necessary data were obtained by Eurostat and the WorldTourism Organization.Arrivals of visitors at borders (in thousands)Country 1994 1995 1996 1997 1998 1999 2000Albania 340 304 288 119 184 371 317Croatia 18,441 16,100 18,085 22,624 24,379 28,211 35,961F.Y.R.O.M. 3,189 2,628 2,156 2,078 1,848 2,223 2,865Serbia/ Montenegro - - - 152 239 351 448Bulgaria - 5,284 6,811 7,543 5,240 5,056 4,922Czech Republic 101,140 98,061 109,405 107,884 102,844 100,832 104,247Estonia 1,900 2,110 2,435 2,618 2,909 3,181 3,310Hungary 39,836 39,240 39,833 37,315 33,624 28,803 31,141Latvia 1,944 1,633 1,750 1,842 1,788 1,738 1,882Lithuania 2,369 2,055 3,499 3,702 4,287 4,454 4,092Moldavia 1,066 1,125 1,198 1,229 1,240Poland 74,253 82,244 87,439 87,817 88,592 89,118 84,515Romania 5,898 5,445 5,205 5,149 4,831 5,224 5,264Slovakia 21,868 27,301 33,113 31,742 32,735 30,757 28,769Slovenia 3,339 3,184 3,594 3,828 3,297 3,000 3,179Turkey 6,671 7,727 8,537 9,713 9,431 7,487 10,428The Eurostat data concern total arrivals at borders, e.g. entrances in the country, sothey include arrivals by all modes of transport. For this reason, the arrivals at roadcross border stations were obtained from the World Tourism Organization, wherethe arrivals at the borders are discriminated per mode according to the nationalstatistic services.Arrivals of tourists at borders (in thousands)Country 1996 1997 1998 1999 2000Albania - - - 354 -Croatia 2,914 4,178 4,499 3,805 5,832F.Y.R.O.M. 136 121 157 181 224Serbia/ Montenegro - - - - -Bulgaria 2,795 2,980 2,667 2,491 2,785Czech Republic 4,558 4,976 5,482 5,610 4,666Estonia 665 730 825 950 1,200Hungary 20,674 17,248 2,871 2,789 -Latvia 556 626 567 489 452Lithuania 832 1,012 1,416 1,422 1,083Moldavia 1,054 1,111 1,182 1,214 1,216Poland 4,088 3,923 3,562 3,178 3,122Romania 762 833 810 795 867Slovakia 951 814 896 975 1,053Slovenia 832 974 977 884 1,090Turkey 7,888 9,063 8,638 6,893 9,586Finally, from these data the arrivals of the visitors of the same date were identified,which mainly consist of transit visitors, in order to avoid overestimation ofinternational transport. For the countries grouped to a zone, the trips between themwere estimated and they were abstracted. Also, for the zones bordering withEGNATIA ODOS S.A. 54APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR Xcountries out of the study area (Turkey, Russia – former socialistic republics) thepassenger flows were adjusted to the observed traffic volumes at borders within thestudy area.Freight transportThe produced freight flows were considered, based on the TIRS experience, by thetotal tonnage of the transported goods by road. The calculation was made possibleunder the assumption that the goods transported by road are at a high percentagecommodities of categories 6 (construction and raw materials and minerals) and 9(machinery, manufactured products, transport equipment etc.) of NSTR(Nomenclature uniforme des marchandises pour les Statistiques de Transport,Révisée e.g. Nomenclature of statistical data in use by Ε.U. since 1 st January 1967).Those categories are directly related to the GDP but could not be reliably distributedbetween the zones of the study area with GDP criteria, not with the GDP of thedestination country but also not with the GDP of the origin country. Due to theexistence of a complete origin–destination matrix of road transport in tonnagebetween E.U. countries and countries of the PHARE zone, it was preferred to extendand complete this O-D with data for the extra zones of the study area, so that thecalibration and trip distribution preserve the existing bilateral trade relations.Therefore, the danger of producing trade flows that do not correspond to reality, andcould came up if the GDP was used for the distribution, was avoided.As for the case of passenger transport, for the countries grouped to a zone, the tripsbetween them were estimated and they were abstracted. Also, for the zonesbordering with countries out of the study area (Turkey, Russia – former socialisticrepublics) the freight flows were adjusted to the observed traffic volumes at borderswithin the study area.The attractions were automatically calculated through the use of the complete O-Dmatrix.5.1.3.2 The modelThe forecast of international traffic flows on the various road sections of Corridor Xwas based on the creation of models with the use of TRIPS (TRansport ImprovementPlanning System) software for transport planning. Two models were constructed;one for the modelling of passenger transport and one for freight transport. Thesimulations concerned the stages of trip distribution to zones and trip assignment onthe network.Traffic zones and road networkDue to the fact that Corridor X crosses and serves a big part of the Balkan Peninsula,the study area was set to be the Balkan countries and their main road network. EachBalkan country considered as a unique traffic zone with trip productions andattractions with the capital as centroid. Several external zones were used, in order toEGNATIA ODOS S.A. 55APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR Xinclude the trips from and to the rest of the European countries in the simulation ofinternational traffic on Corridor X. The definition of the external zones was based onthe socioeconomic characteristics of the various countries, on their geographicposition and the road network connecting them with the Balkans. In total 24 trafficzones were defined.The codification of the road network was performed based exclusively on the roadsections characteristics (Link Based Network). Primarily the nodes are defined andthen the connections between them are defined too. Then, for each road section thecapacity, the distance, the road category, the running time and other indicators aredefined.The representation of the delays observed at the cross border stations was simulatedby adding time charging/penalties (in TRIPS the additional travel time andeconomic charges are simulated as tolls) at the respective points of the network.The hierarchy of the road network and therefore the calculation of the capacity oftraffic lanes per hour are based on the Great Britain’s standings (Department ofTransport, DOE Advice Note 1A, 1971), which are compatible with the TRIPSstructure.The examination of the digitized network and the calibration was performed for eachpair of traffic zones (using AVROAD application), the best routes were defined with"all or nothing" method and then tested.After the network calibration a cost matrix was calculated using the AVROAD basedon the generalised cost function used in TRIPS.Generalised costThe calculation of the optimum routes and generally of the travel cost per pair ofzones, was performed based on the relation of generalized cost. Time was selected tobe the expression of generalised cost. The cost of tolls used in the generalised costequation represents the delays at cross borders.Model for trip distribution to zonesThe trip distribution was based on the methodology of gravity models.For the model calibration two matrices were used: an O-D of freight transport for theyear 2000, and cost matrix (time-distances) between the zones.Having the gravity model calibrated and using the results of the trip generation stage(trip ends) the O-D matrices for each scenario and target year were estimated.EGNATIA ODOS S.A. 56APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XTraffic assignmentThe trip assignment was performed using the TRIPS AVROAD application with “allor nothing” method, where for each pair of origin-destination one and only optimumroute (depending on generalized time) is calculated.No issues of capacity limitations are examined, because the assignment refers only tointernational traffic and obviously no volumes close to capacity are expected.Each origin-destination matrix of the scenarios was distributed to the road networkand the traffic assignment of the various sections of Corridor X occurred.5.1.3.3 Estimation of local traffic and assignment of road Corridor XFollowing the assignment of the international flows on the study network andCorridor X, the traffic volumes are abstracted from the observed respective volumes,in order to estimate the local traffic for the base year.For the various target years and scenarios the local traffic was calculated by applyingan annual growth rate of 1.25 on the annual growth rate of GDP of each country.Hence, the total assignment for the various target years and scenarios is achieved bythe distribution of the international traffic and the addition of the each timeestimated local traffic.5.2 Formulation of scenarios (time horizons)The time horizons for the economic analysis, and therefore for the traffic projections,are formulated depending on the construction and operation period of the project.The first year of the analysis period is set to be the year 2008.For Alignment 1 the construction period is from six to eight years, while for thescope of the study the construction is considered to take six (6) years, in the period2008-2013.In the case of Alignment 2 the construction period is three to four years. For thescope of the study the construction period is three (3) years, i.e. 2008-2010.Therefore, the first year of operation of pay-toll motorway between Demir Kapijaand Smokvica is 2014 in the case of upgrading the existing road to a motorway(Alignment 1) and 2011 in the case of construction of a totally new motorway(Alignment 2).The usual period of economic analysis of a project is 25 years, despite the fact thatproject’s life cycle is undoubtedly longer than that. However, traffic estimations forlonger time horizons would be arbitrary; one could doubt even for a shorterprojection of traffic is such a sensitive and uncertain, also complex in terms ofeconomic development, region. For the scope of the study, traffic estimations areEGNATIA ODOS S.A. 57APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR Xmade for each year during the 25-years period of analysis, in order to estimate theeconomic benefits from the reduction of vehicles operational costs, from thereduction of accidents and also to estimate the revenues from the charge ofmotorway users.5.3 Traffic forecasts5.3.1 Evaluation of traffic projections5.3.1.1 General conclusions of the traffic flows forecasting of the TechnicalSecretariat of Corridor XThe development priorities of the Corridor X’s infrastructure, experience theinfrastructure development criteria at Pan-European, and not only national, level.Priorities are not defined only by the demand-supply relation, but also by theirinvolvement in development projects of strategic character, where among their otheraims are also the arsis of the Western Balkans’ area isolation and the securing of theconsecutiveness of the structural and operational characteristics of theinfrastructures. Transport policy, as expressed by the Directorate General for Energyand Transport of the European Commission, is interpreted to the effort of the Pan-European and Trans-European Networks implementation, and to the definition of aWestern Balkans Core Network based on REBIS. The national strategies are fromnow on adjusted to the same direction, which is of course the most appropriate wayfor securing international financing.The most important result arising from the forecasting process is that internationaltraffic flows, despite the increasing trends, will not be the, at least in the short-term,the main component of traffic volumes:In the medium-realistic scenario, by the year 2005 the road international transport inCorridor X’s countries – at national level – of commercial vehicles will increase by 13-28% and of passenger vehicles by 18-28%. By 2010 – compared to 2000 – theinternational flows of commercial vehicles will increase by 28-63% and of passengervehicles by 18-69%. Finally by 2015, the international flows of commercial vehicleswill increase by 45-108% and of passenger vehicles by 31-235%. The lowest valuesrefer to Austria, whilst the highest ones refer to the Balkan countries.In the low scenario, the international freight transport flows will increase by 6-13%by 2005, by 13-28% by 2010 and by 20-45% by 2015. Respectively, the internationalpassenger transport flows will increase by 8-24% by 2005, by 18-57% by 2010 and by31-102% by 2015.Finally, in the high scenario, the international freight transport flows will increase by20-44% by 2005, by 45-106% by 2010 and by 74-196% by 2015. Respectively, theinternational passenger transport flows will increase by 8-32% by 2005, by 18-85% by2010 and by 31-192% by 2015.Furthermore, on road Corridor X, bottlenecks are not expected to appear, except nearbig cities or the capitals of the countries (for example near Belgrade), only in the casethat bypasses’ construction plans won’t be implemented, and at some links, wherealso motorways construction plans exist.EGNATIA ODOS S.A. 58APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X5.3.1.2 Results and evaluation of results of the various available traffic flowsforecasting exercisesThere are various traffic projections available, derived by traffic flows forecastingexercises in the past.The results of the traffic forecasting tool of Technical Secretariat for Corridor X in themoderate scenario are presented in the following table:Demir Kapija –UdovoUdovo –GevgelijaDemir Kapija –Gevgelija(weighted)AADT2000(veh/day)AADT2005(veh/day)Averageof annualtrafficgrowthfactor2000-2005AADT2015(veh/day)Averageof annualtrafficgrowthfactor2005-20152,754 3,711 5.1% 5,476 4% 4.7%3,334 4,955 6.8% 7,430 4.1% 5.5%3,060 4,366 4.6% 6,506 4.1% 5.2%Averageof annualtrafficgrowthfactor2000-2015The table below details traffic forecasts of the Technical Secretariat and REBIS for2005, as well as the actual recorded AADT:Forecasted AADT for 2005-06 in Actual Actualveh/dayAADT in AADT inSectionTechnical2005 2006REBIS (2006)Secretariat (2005)(veh/day) (veh/day)Demir Kapija –Udovo3,711 2,877 2,671 3,596Udovo – Gevgelija 4,955 4,084 3,368 4,098Demir Kapija –Gevgelija(weighted)4,366 3,513 3,038 3,860Compared to the actual traffic flows it is concluded that the forecast of the TechnicalSecretariat is higher. However, traffic growth within one year, between 2005 and2006, was very high, that one may rationally allege that any attempt for trafficforecast might easily proved unsuccessful.It is considered that this high increase is a result of the stabilization of the situation inthe wider region; however, traffic is not expected to continue growing with the samehigh rates. Hence, for the scope of the present study, it is considered that more or lessthe same traffic volumes are expected by the year 2015, no matter if that will be theresult of stable increase or a jump in the first years.Average annual growth factor of the forecast of the Technical Secretariat during theentire period 2000-2015 is 5.2%.EGNATIA ODOS S.A. 59APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThe estimation of REBIS for the year 2006 is 3,513 veh/day along the section fromDemir Kapija to the Gevgelija. REBIS estimates 5,561 veh/day for the year 2015 and8,770 veh/day for the year 2025. Average annual growth factors calculated by theprojections of REBIS are 4.58% in the period 2001-2006, 5.24% in the period 2006-2015and 4.66% in the period 2015-2025. Average annual growth factor of REBIS forecastduring the entire period 2001-2025 is 4.86%.SectionForecasted AADT for 2015 in veh/dayTechnical Secretariat REBIS TIRSDemir Kapija – Udovo 5,476 4,554 n.a.Udovo – Gevgelija 7,430 6,465 n.a.Demir Kapija –Gevgelija (weighted)6,506 5,561 4,450Based on the above considerations, an annual traffic growth factor of 5% isconsidered a realistic and achievable assumption for the next years until 2015. Thislevel of growth would mean that depending on the type of intervention (do nothing,upgrade, motorway construction), in some year between 2015 and 2020 the trafficvolumes on the corridor would be back at the levels they were in 1990 (i.e.immediately before the regional crisis), at about 6,000 veh/day.Finally, it is considered unlikely that traffic will continue growing at the same ratesindefinitely. Over the period 2015 – 2025 traffic is assumed to grow at a reduced rateof 4% per annum and from 2025 onwards at a rate of 3% annually.5.3.1.3 Traffic projection to various target yearsFollowing the review of the available traffic forecasts presented in the above, theprojection of traffic for the period of economic analysis of the project is performed,based on the assumption that traffic flows will grow faster within the next decade(by 5% annually), slower in the period 2015 – 2025 with annual growth factor of 4%and after 2025 with annual growth factor of 3%. These assumptions are consideredconservative for a developing country, while in EU countries annual traffic growth isbetween 2-3%.Generated and diverted traffic on a future motorway (alternatives B, C, D)Generated traffic occurs on the first year of operation of the motorway, when is givento traffic. The new infrastructure with higher level of service has a direct impact ontraffic. Therefore, apart from the traffic growth represented in the model by theincreased mobility (and car ownership) due to the improvement of the economicstatus and potential of the residents of the F.Y.R. of Macedonia and of the residentsof all the other considered traffic zones and countries in the form of GDP increase, anadditional increase of traffic by 10% is considered realistic to expect after themotorway opening to traffic.EGNATIA ODOS S.A. 60APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XFurthermore, additional traffic is expected as a result of the completion of the entiremotorway from Skopje to the Greek border, which would cause diversion of trafficfrom the M-5 and M-6 roads from/ to Strumica and Dojran (See Map 5.1). Thispercentage is considered to be an additional 5%, i.e. around to 200 veh/day.The introduction of tolls along the new motorway will cause traffic volumesdecrease. In the present study, the diverted traffic is estimated with the use ofrespective percentages per vehicle category, as estimated for Serbian motorways.Diverted traffic to the alternative road network would be around 7.7% of the trafficestimated for the last year of construction:Diverted traffic to thealternative road networkSmall cars Buses Heavy trucks Articulatedtrucks9% 3% 5% 0%The above percentages are applied in the case of Alignment 1, where the newmotorway offers direct connection to Udovo and the connecting links to Miravci andValandovo.In the case of Alignment 2, the direct access to Udovo and the connecting roads R-103to Miravci and R-110 and R-116 to Valandovo is disturbed (See Map 5.1). Therefore,the diversion of forecasted traffic to the existing M-1 road (serving as alternative roadin this case) would be higher.Source: Fund for National and Regional RoadsMap 5.1: Adjacent and alternative road networkEGNATIA ODOS S.A. 61APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThrough the examination of the traffic assignment performed by Scetauroute for theyear 1998, it is estimated that a percentage of 25% of the traffic between Demir Kapijaand Udovo is directed to Valandovo and Miravci. Thus, it is assumed that upon theopening to traffic of the new motorway section on the west bank of Vardar River adirect loss of additional traffic volumes will occur along the motorway. In the case ofAlignment 2 the following percentages of diverted traffic per vehicle category areassumed:Diverted traffic to thealternative road networkSmall cars Buses Heavy trucks Articulatedtrucks27% 9% 15% 0%Forecasted traffic is estimated with the application of annual growth factors, additionof the generated traffic on the first year of operation and subtraction of the divertedtraffic in the first year of operation and introduction to the pay-toll system:First year of operation – additionof generated trafficIntroduction of tolls – subtraction ofdiverted traffic to alternative networkAlignment 1 2014 2014Alignment 2 2011 2011In the following tables the annual projected traffic of the section under examinationare presented for the “Do Minimum” Alternative A and the motorway alternativesfor each one of the two examined alignments.EGNATIA ODOS S.A. 62APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XTraffic forecast along Demir Kapija – Smokvica section“Do minimum” AlternativeYear MotorcyclesVansPrivateLight Medium Heavy Articulatedand Busescarstrucks trucks trucks truckspickupsTotal PCUs2006 36 2,464 250 71 143 143 214 250 3,571 4,9282007 37 2,587 262 75 150 150 225 262 3,750 5,1742008 39 2,717 276 79 157 157 236 276 3,937 5,4332009 41 2,852 289 83 165 165 248 289 4,134 5,7052010 43 2,995 304 87 174 174 260 304 4,341 5,9902011 46 3,145 319 91 182 182 273 319 4,558 6,2892012 48 3,302 335 96 191 191 287 335 4,785 6,6042013 50 3,467 352 100 201 201 301 352 5,025 6,9342014 53 3,640 369 106 211 211 317 369 5,276 7,2812015 55 3,822 388 111 222 222 332 388 5,540 7,6452016 58 4,014 407 116 233 233 349 407 5,817 8,0272017 60 4,174 423 121 242 242 363 423 6,049 8,3482018 63 4,341 440 126 252 252 377 440 6,291 8,6822019 65 4,515 458 131 262 262 393 458 6,543 9,0292020 68 4,695 476 136 272 272 408 476 6,805 9,3912021 71 4,883 495 142 283 283 425 495 7,077 9,7662022 74 5,078 515 147 294 294 442 515 7,360 10,1572023 77 5,282 536 153 306 306 459 536 7,654 10,5632024 80 5,493 557 159 318 318 478 557 7,961 10,9862025 83 5,713 580 166 331 331 497 580 8,279 11,4252026 86 5,941 603 172 344 344 517 603 8,610 11,8822027 89 6,119 621 177 355 355 532 621 8,869 12,2392028 91 6,303 639 183 365 365 548 639 9,135 12,6062029 94 6,492 659 188 376 376 565 659 9,409 12,9842030 97 6,687 678 194 388 388 581 678 9,691 13,3732031 100 6,887 699 200 399 399 599 699 9,982 13,7752032 103 7,094 720 206 411 411 617 720 10,281 14,1882033 106 7,307 741 212 424 424 635 741 10,590 14,6142034 109 7,526 764 218 436 436 654 764 10,907 15,0522035 112 7,752 786 225 449 449 674 786 11,234 15,504Average traffic for the operational period 2008 – 2032 is estimated at 6,936 veh/day(9,572 PCUs/day).For comparison to the motorway alternatives the average traffic for the periods ofoperation of the two motorway solutions (alignments) are the following:• 2014 – 2032 (Alignment 1): 7,717 veh/day (10,650 PCUs/day)• 2011 – 2032 (Alignment 2): 7,460 veh/day (10,295 PCUs/day)EGNATIA ODOS S.A. 63APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XTraffic forecast along Demir Kapija – Smokvica motorway sectionMotorway Alignment 1Year MotorcyclesVansPrivateLight Medium Heavy Articulatedand Busescarstrucks trucks trucks truckspickupsTotal PCUs2006 36 2,464 250 71 143 143 214 250 3,571 4,9282007 37 2,587 262 75 150 150 225 262 3,750 5,1742008 39 2,717 276 79 157 157 236 276 3,937 5,4332009 41 2,852 289 83 165 165 248 289 4,134 5,7052010 43 2,995 304 87 174 174 260 304 4,341 5,9902011 46 3,145 319 91 182 182 273 319 4,558 6,2892012 48 3,302 335 96 191 191 287 335 4,785 6,6042013 50 3,467 352 100 201 201 301 352 5,025 6,9342014 55 3,810 386 118 231 231 346 425 5,601 7,8382015 58 4,000 406 124 242 242 363 446 5,881 8,2302016 61 4,200 426 130 254 254 381 468 6,175 8,6422017 63 4,368 443 135 264 264 397 487 6,422 8,9882018 66 4,543 461 140 275 275 412 506 6,679 9,3472019 68 4,725 479 146 286 286 429 527 6,946 9,7212020 71 4,914 498 152 297 297 446 548 7,224 10,1102021 74 5,110 518 158 309 309 464 570 7,513 10,5142022 77 5,315 539 164 322 322 482 592 7,813 10,9352023 80 5,527 561 171 335 335 502 616 8,126 11,3722024 83 5,748 583 178 348 348 522 641 8,451 11,8272025 87 5,978 606 185 362 362 543 666 8,789 12,3002026 90 6,217 631 192 376 376 564 693 9,140 12,7922027 93 6,404 650 198 388 388 581 714 9,415 13,1762028 96 6,596 669 204 399 399 599 735 9,697 13,5712029 98 6,794 689 210 411 411 617 757 9,988 13,9782030 101 6,998 710 216 423 423 635 780 10,288 14,3982031 104 7,208 731 223 436 436 654 804 10,596 14,8302032 108 7,424 753 229 449 449 674 828 10,914 15,2742033 111 7,647 776 236 463 463 694 852 11,241 15,7332034 114 7,876 799 243 477 477 715 878 11,579 16,2052035 118 8,112 823 251 491 491 736 904 11,926 16,691Average traffic for the analysis period 2008 – 2032 is estimated at 7,297 veh/day(10,192 PCUs/day).For the operational period 2014 – 2032 average traffic is estimated at 8,192 veh/day(11,465 PCUs/day).EGNATIA ODOS S.A. 64APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XTraffic forecast along Demir Kapija – Smokvica motorway sectionMotorway Alignment 2Year MotorcyclesVansPrivateLight Medium Heavy Articulatedand Busescarstrucks trucks trucks truckspickupsTotal PCUs2006 36 2,464 250 71 143 143 214 250 3,571 4,9282007 37 2,587 262 75 150 150 225 262 3,750 5,1742008 39 2,717 276 79 157 157 236 276 3,937 5,4332009 41 2,852 289 83 165 165 248 289 4,134 5,7052010 43 2,995 304 87 174 174 260 304 4,341 5,9902011 38 2,640 268 95 178 178 267 367 4,032 5,8482012 40 2,772 281 100 187 187 281 385 4,234 6,1402013 42 2,911 295 105 196 196 295 404 4,445 6,4472014 44 3,056 310 110 206 206 309 425 4,668 6,7692015 47 3,209 326 116 217 217 325 446 4,901 7,1082016 49 3,369 342 122 227 227 341 468 5,146 7,4632017 51 3,504 355 127 237 237 355 487 5,352 7,7622018 53 3,644 370 132 246 246 369 506 5,566 8,0722019 55 3,790 385 137 256 256 384 527 5,789 8,3952020 57 3,942 400 142 266 266 399 548 6,020 8,7312021 59 4,099 416 148 277 277 415 570 6,261 9,0802022 62 4,263 433 154 288 288 432 592 6,511 9,4432023 64 4,434 450 160 299 299 449 616 6,772 9,8212024 67 4,611 468 167 311 311 467 641 7,043 10,2142025 70 4,796 487 173 324 324 486 666 7,324 10,6232026 72 4,988 506 180 337 337 505 693 7,617 11,0472027 74 5,137 521 186 347 347 520 714 7,846 11,3792028 77 5,291 537 191 357 357 536 735 8,081 11,7202029 79 5,450 553 197 368 368 552 757 8,324 12,0722030 81 5,614 569 203 379 379 568 780 8,574 12,4342031 84 5,782 587 209 390 390 585 804 8,831 12,8072032 86 5,955 604 215 402 402 603 828 9,096 13,1912033 89 6,134 622 222 414 414 621 852 9,369 13,5872034 92 6,318 641 228 426 426 640 878 9,650 13,9952035 94 6,508 660 235 439 439 659 904 9,939 14,414Average traffic for the analysis period 2008 – 2032 is estimated at 6,194 veh/day(8,948 PCUs/day).For the operational period 2011 – 2032 average traffic is estimated at 6,474 veh/day(9,389 PCUs/day).EGNATIA ODOS S.A. 65APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X5.4 Evaluation of alternatives level of service in function with the forecastedtraffic flowsThe tool for the calculation of the level of service is the Highway Capacity Manual(HCM) 2000 for two-lane and multi-lane highways. The basic traffic parameter takeninto consideration for the definition of the Level of Service is the 50 th maximumhourly traffic.The 50 th maximum hourly traffic for multi-lane highways is defined by multiplyingthe Annual Average Daily Traffic by 0.14 for unfavourable conditions. The 15-minpassenger-car equivalent flow rate (pc/hr/lane) is estimated with the assumption of50%-50% (2001 data) distribution of traffic between opposite directions. For eachsubsection of the section under study the Volume over Capacity (V/C) ratio iscalculated for every traffic projection annually in the analysis period.It occurs that the 15-min passenger-car equivalent flow rate (pc/hr/lane) is retainedbelow 1,400pc/h/lane in the entire period of analysis, which is the Free Flow Speed(FFS) upper limit under low volume conditions [10].It is estimated that the level of service will be retained at Level A for almost the entireperiod of analysis due to the low levels of traffic. At this point it should bementioned that the recommended level of motorway utilisation is LOS D andmaximum level of utilisation is LOS B.Concerning the existing M-1 road, taking into consideration the 50 th maximumhourly traffic (AADT*0.12) it is concluded that, according to the existing andforecasted traffic, the LOS (if consider 0% of permitted overtaking) will reach LOS Ein at least fifteen years.EGNATIA ODOS S.A. 66APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X6. ECONOMIC ANALYSISThe following include the evaluation of benefits in relation to the construction andoperational costs of the road section in the Former Yugoslav Republic of Macedonia,which connects Demir Kapija with Smokvica. As it was reported in previouschapters this road axis is classified as part of the main and most important corridorof the national road network of the country, while at the same time it constitutes asection of the Pan-European Road Corridor X. Accordingly, the technical andeconomical evaluation of the project concerning the upgrade of the geometrical andoperational characteristics of this road section has a particular importance, not onlyfor F.Y.R Macedonia, but also for the wider area of the Balkans and Europe.A comparative technical and economical evaluation is separately carried out for twomotorway projects.In total seven (7) alternatives concerning the road construction are examined, i.e. the“Do minimum” alternative (alternative A) that concerns upgrading of the existingroad and also the other three alternatives, B, C and D that concern the motorwayconstruction (separated carriageways) for each of the two alignments.The two under study alignments are the following:Alignment 1Alignment 2Length32.15km28.05kmThe time schedule for the completion of the construction of the two alignments(independently of the alternative) is presented below:ConstructionFirst year of fullYears in constructionperiodoperationAlignment 1 2008 – 2013 6 years 2014Alignment 2 2008 – 2010 3 years 2011The period of analysis for each section was considered equal to 25 years. The year2008 was considered as the "base year" since it constitutes the year of beginning ofthe construction works and hence the year for the payment of the first expenses. Theperiod of analysis for the whole project is 25 years, from year 2008 to year 2032.6.1 Parameters of the analysisAll the costs and benefits were valued in constant prices of the current year for thepurpose of the economical and technical evaluation of the project.EGNATIA ODOS S.A. 67APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThe construction cost as well as the operational cost (expenses for the annual andperiodical maintenance etc.), are considered as the costs of the project. Benefitsinclude the reduction of the vehicles' operational cost, the reduction of the roadaccidents (benefits expressed in monetary values) and the reduction in travel time(taking into account the value of time). Tolls are examined only in the framework ofthe cash flow analysis and were not taken into consideration in the economicanalysis for the calculation of the Internal Rate of Return (IRR) and the Net PresentValue (NPV).Benefits and expenses should be valued using economic (real) prices, i.e. the marketprices (monetary prices), according to the approved specifications of the Ministry ofEnvironment, Physical Planning and Public Works concerning feasibility studies forroad projects in Greece (Approved Decision of the Direction for the Study ofHighway Projects, DMEO/a/O/1885/8-7-1996, paragraph 5.2). Taxes, VAT, assetsdepreciation, employers' share etc., should be deducted from the market prices inorder that economic indicators (IRR, NPV) will result from "clearly economic" prices.The construction cost included in the budget of the present study is reduced by 20%taking into account the above-mentioned directive. This reduction is considered thatit includes the participation of the previously mentioned parameters in the budget ofthe construction projects.Economic prices are equal to financial prices minus taxes (20%), hence it is estimatedas 80% of the financial prices.6.1.1 Determination of expected cost elementsThe expenses which are associated to the under study project refer to theconstruction cost and to the maintenance and operational cost of the road (annualand periodical maintenance).6.1.1.1 Construction costThe following presents the costs included in the budget of the project and which areassociated with the improvement of the geometrical and operational characteristicsof the road section under study.It must be clarified at this point that alternative D concerns the transformation of theexisting road into separated motorway with a cross-section of 27.6m or 28.2m,guardrail that separates the two directions, and two lanes per direction (of 3.75mwidth each one), in the case of Alignment 1 (detail design) and in the case ofAlignment 2 (preliminary design), respectively.Alternatives B and C are lower cost solutions with lower geometrical andoperational characteristics (compared to Alternatives D), as described in Chapter 4.EGNATIA ODOS S.A. 68APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThe economic construction costs for Alternative D of each of the two alignmentshave been provided by the F.N.R.R. The economic construction costs of AlternativesB and C were estimated on the basis of the costs of Alternative D. Costs used in theeconomic analysis for each alternative are the following:Length Economic construction cost (€)(km) Alternative B Alternative C Alternative DAlignment 1 32.15 144,501,616 152,613,331 156,621,546Alignment 2 28.05 107,989,433 114,829,350 125,149,748In the case of Alignment 1 the cost of Alternative C is 2.6% lower than the cost ofAlternative D, while the cost of Alternative B is 7.7% lower than the cost ofAlternative D. In the case of Alignment 2 the respective percentages are 8.25% and13.7%.Comparing the costs of the base alternatives (D) of the two alignments, the cost ofAlignment 2 is 25% less. The construction costs per kilometre are 4.9 mo€/km in thecase of Alignment 1 and 4.5 mo€/km in the case of Alignment 2.For the alternatives of motorway construction the costs are distributed in time asfollows:2008 2009 2010 2011 2012 2013Alignment 1 17% 17% 17% 17% 17% 15%Alignment 2 25% 40% 35% In operation6.1.1.2 Operational expenses (annual and periodical maintenance)Alternative A: Existing M-1 roadThe last rehabilitation of the existing road was performed in 1990. According to theF.N.R.R., roads should be rehabilitated every fifteen years. Therefore, the upgrade ofthe existing road is considered that should take place immediately and such worksshould include the repair of damages, the pavement rehabilitation (surfacing), therehabilitation of bridges and replacement and improvement of the traffic andtechnical equipment.In the 25-years study period the road should be rehabilitated after fifteen years, in2023.The economic cost of upgrade works is estimated on the basis of unit costs providedby the F.N.R.R. for such works at 25,747,916 €.Concerning the annual economic cost for maintenance and operation of existing M-1road in the entire period of analysis, it is estimated at 8,622 €/km, which results308,961 €/year for the existing M-1 road (estimated on the basis of unit costsprovided by the F.N.R.R.).EGNATIA ODOS S.A. 69APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAlternatives B, C and D: Motorway constructionThe operational expenses taken into consideration are the following:• the annual expenses of the road operation and maintenance (e.g., lighting,enforcement, road signing and marking, road equipment etc).• the periodical maintenance expenses, which concern important maintenanceinterventions in the road network (e.g. new pavement).The economic cost of rehabilitation (periodical maintenance) works of the motorwayused in the present study is based on the unit cost of 491,000 €/km estimated in thefeasibility study for the “gorge” section between Grdelica and Grabovnica in Serbia[7]. For Alignment 1, taking into account the increased length of tunnels, this cost isconsidered to be 5% higher.Length (km) Cost/ km Total CostAlignment 1 32.15 515,550 € 16,574,933 €Alignment 2 28.05 491,000 € 13,772,550 €The unit cost of 22,000 €/km estimated in the feasibility study for the “gorge” sectionbetween Grdelica and Grabovnica in Serbia is used for the annual operation andmaintenance costs of the motorway. As in the case of rehabilitation costs, it isconsidered that the operational and maintenance costs for the motorway in the caseof Alignment 1 would be 5% higher.Length (km) Annual cost per km Annual costAlignment 1 32.15 23,100 € 742,665 €Alignment 2 28.05 22,000 € 617,100 €It is considered that rehabilitation will take place in 15 years after opening to traffic.More specifically, the years considered for the purpose of reconstruction are the year2028 for Alignment 1 and the year 2025 for Alignment 2.6.1.2 Determination of expected benefit elementsBenefits result from:• the reduction of the vehicle operational expenses• the time savings due to travel time reduction and increase of operational speed• the reduction in the cost of road accidents due to the reduction in the number ofthese accidents• the residual (economic) value of the projectBenefits that result from tolls are not considered in the economic analysis.The traffic volumes, which are associated to the section under study in eachexamined alignment/ alternative, are those that were forecasted as average of theoperational period during the period of analysis.EGNATIA ODOS S.A. 70APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XHereinafter, the description of the main parameters of the technical and economicalanalysis is presented. All the calculations of the analysis that are described below arepresented in “special sheets of analysis” which are included in the Annex B of thepresent Technical Report.6.1.2.1 Time savingsFor the assessment of the benefits due to time savings, the estimation of the meanoperational speed of each section is based on the assumption, based on experiencegained from other projects, that it represents on average the 80% of the free flowspeed. For light vehicles it is considered that:• mean speed of 48km/h corresponds to maximum (cruising) speed of60km/h;• mean speed of 65km/h to maximum speed of 80km/h;• mean speed of 80km/h to maximum speed of 100km/h;• mean speed of 90km/h to maximum speed of 110km/h; and• mean speed of 95km/h to maximum speed of 120km/h.For heavy vehicles the above values are reduced by 15%.It is assumed that mean speed will remain relatively stable throughout the analysisperiod, given the fact that at motorways – especially low traffic motorways, meanspeed is reducing very slowly in time, still not affecting the V/C ratio for Level ofService C (0.5).The following tables present the running times for light vehicles in each alternativeexamined:Alternative AExisting M-1 roadSub-sectionAverage operationalspeed (km/h)Length (km) Running time (min)Demir Kapija – Udovo 56 22.27 23.9Udovo – Smokvica 65 13.564 12.5Total 59.1 35.834 36.4Upgraded existing M-1 roadFor the examination of Alternative A, the upgrade of the existing M-1 road isassumed that would result an increase of operational speed by 10%, thus operationalspeed in that case along the entire section would be 65km/h and the respectiverunning time 33.1 minutes.EGNATIA ODOS S.A. 71APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAlternatives B and CAlignment 1Sub-sectionAverage operationalspeed (km/h)Length (km) Running time (min)Demir Kapija – Udovo 76.6 19.9 15.6Udovo – Smokvica 90 12.25 8.2Total 81.2 32.15 23.8Alignment 2SectionAverage operationalRunning timeLength (km)speed (km/h)(min)Demir Kapija – Smokvica 90 28.05 18.0Total 90 28.05 18.7Alternative DAlignment 1Sub-sectionAverage operationalspeed (km/h)Length (km) Running time (min)Demir Kapija – Udovo 76.6 19.9 15.6Udovo – Smokvica 95 12.25 7.8Total 82.7 32.15 23.4Alignment 2SectionAverage operationalspeed (km/h)Length (km) Running time (min)Demir Kapija – Smokvica 95 28.05 17.7Total 95 28.05 17.76.1.2.2 Benefits form the vehicle operational costs reductionBenefits from the reduction of the vehicle operational cost come from thecomparison made with and without the project:• Fuel savings• Savings due to the fact that vehicles will cover fewer kilometers in the roadnetwork and thus they will be used for less time (this leads to the fact that thevehicle will not lose its value so fast as in the past)The parameters that were taken into consideration for the analysis of these threecategories are presented in the following:EGNATIA ODOS S.A. 72APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XFuel savingsIt is considered that fuel savings are due to improvements of the road operationalcharacteristics. The conditions of driving will change in the case of a motorwaycompared to the case of the existing situation (driving in quite difficult conditionswill be replaced by driving under good conditions). This saving is estimated to beequal to 0.01 lt/veh*km for the passenger cars and 0.02 lt/veh*km for the dieseltrucks and Heavy Goods Vehicles (HGVs). These values resulted from theexamination of the vehicles' manufacturer specifications (official documents fromvehicle manufacturers concerning representative passenger cars and HGVs).The cost of the unleaded petrol is considered equal to 0.97 €/litre and the cost ofdiesel is considered equal to 0.81 €/litre. These values are the current market pricesin the Former Yugoslav Republic of Macedonia. The use of these values waspreferred to cover the possibility of increase, which does not follow inflation, butdepends mainly to world oil market and to political decisions.Savings due to distance reductionIt is considered that part of the operational cost depends on the distance covered bythe vehicle (that is to say is proportional with the distance). The value of vehicleoperation for passenger cars is considered equal to 0.03 €/veh*km. This value isbased on the approved specifications of the Ministry of Environment, PhysicalPlanning and Public Works concerning feasibility studies for road projects in Greece.Savings due to the reduction of time at which vehicles are in operationIt is considered that part of the vehicle operational cost depends on the time spend tocover the distance. The value of the vehicle operation (as far as time is concerned) isconsidered equal to 0.08 €/veh*hour for passenger cars and 0.09 €/veh*hour fortrucks. These values are based on the approved specifications of the Ministry ofEnvironment, Physical Planning and Public Works concerning feasibility studies forroad projects in Greece.6.1.2.3 Benefits from time savings as far as the vehicle users are concernedIn order to calculate the time savings (and express them in monetary values) for thevehicle users, the expected value of the average hourly income in the country is usedaccording to the approved specifications of the Ministry of Environment, PhysicalPlanning and Public Works concerning feasibility studies for road projects in Greece.In the framework of the present study the value of time for different trip purposesare considered, based on the estimation performed in the feasibility study forTabanovce – Kumanovo motorway in January 2007, that the value of time for abusiness trip is 2.35 €/hour. On the basis of this value, a working hour rate of 3.40€/hour was estimated to represent the average values of working time during theoperational period for each motorway alternative, considering an annual increase ofincome by 2%.EGNATIA ODOS S.A. 73APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThe following values are formulated:• for trips made in the framework of work (e.g., salesman) and for professionaldrivers the value of time is considered equal to 3.40 €/hour• for trip purpose “to and from work” the value of time is considered equal to 1.70€/hour (which is equal to 50% of the average daily salary)• for trips with other purposes is considered equal to 0.85 €/hourVehicle occupancy rates taken into consideration in the framework of the presentstudy are:Vehicle typeVehicleoccupancyTrip purposePassenger cars2 To and from work, in the framework of work,other purposesTrucks 1.2 In the framework of workBuses 45To and from work, in the framework of work,other purposesThe following table presents the % distribution of trip purpose (all trip purposes areconcerned) in respect to the vehicle type, as it was taken into consideration in therespective calculations.Vehicle type Trip purposePassenger cars 35%: to and from work45%: in the framework of work & professional drivers20%: other purposesTrucks100 %: in the framework of workBuses 65%: to and from work5%: in the framework of work & professional drivers30%: other purposes6.1.2.4 Benefits from the reduction in the number of road accidentsThe values of human life cannot be expressed in monetary terms. However, the veryimportant problem of road safety worldwide led to the establishment of variousapproaches for the estimation of the consequences from the loss of a life in roadaccidents. These approaches are based on various parameters such as lostproduction, the funeral expenses, the human pain etc. Another approach is based onthe amount of money the insurance companies pay or the juridical decisions forcompensation because of fatal road accidents. The value of human life in thedeveloped countries can range from a minimum of 400,000 € and can reach even2,000,000 €.Medical expenses, pain and loss production must be expressed in monetary valuesin the case of injuries which take place in traffic accidents. Pain can constitute up to50% of the total expenses associated to an injury. The estimation of loss ofproduction is based on the conditions concerning the injured person that existedbefore the accident. The average cost of a light injury in a traffic accident is estimatedto be in the area of 15,000 – 20,000 € in Great Britain.EGNATIA ODOS S.A. 74APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThe Faculty of Transport and Traffic Engineering of the University of Belgradeestimates that motorway projects result a 40% reduction in the number of trafficaccidents, based on their experience from other motorway projects in Serbia. Thismoderate percentage of reduction is also used in the current study (in cases ofmotorway construction in other European countries the percentage of reduction isbetween 50 and 70%).For the alternatives of motorway construction with narrower cross sections thereduction of accidents applied in the economic analysis is the same, since it isconsidered that the separation of opposite direction traffic is the main factor foraccidents reduction. Road safety is subjected to the geometry of each alternative, andtherefore narrower cross sections (and traffic lanes) could have lower accidentsavings. Apart from the fact that this effect is not quantifiable, it is also consideredvery small to affect the economic analysis and therefore the same percentage ofaccidents reduction is used for all the motorway alternatives in the present study.For the estimation of the benefits due to the reduction of accidents after therealisation of the project, unit costs per type of accident are used. Considering thefact that the motorway users are partially EU nationals and locals, the European unitcosts could not be applied directly to the number of accidents. The unit costs used inthe current study are half of the European with the assumption that 20% of the roadusers are EU residents.The assumption that international transit traffic is 20% of the total traffic is based onthe statistics of entrances and exits at border crossing Bogorodica.The unit costs are calculated with the multiplication of the estimated value of onehour of business travelling (3.40 €/h) by the following factors:• for deaths: 43,000• for heavy injuries: 5,100• for light injuries: 400The above factors are recommended by the United Nations Economic Committee forEurope (UNECE) recommendations through the report “A Set of Guidelines forsocioeconomic cost – benefit analysis of transport infrastructure project appraisal“(2003) in the case of lack of reliable data.The unit costs per type of accident are presented in the following table:Type of accidentAverage unitcost in Europeancountries*Accident unitcost inF.Y.R.O.M.Accidents unitcost used in thestudyFatal accidents 1,000,000 € 146,200 € 316,960 €Accidents with severe injuries 125,000 € 17,340 € 38,872 €Accidents with light injuries 38,462 € 1,360 € 8,780 €Accidents with damages 4,739 € 170 € 1,084 €* Source: [6]EGNATIA ODOS S.A. 75APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThe unit costs used in the present study are weighted values according to theproportion of domestic and international traffic (80% - 20%, respectively).Concerning the estimation of the number of accidents in the base year 2007 along thesection under study, it was based on the indices extracted based on the registeredaccidents in 2005 along the M-1 road in Serbia between Grabovnica and F.Y.R.O.M.borders, and more specifically, on the Grdelica “gorge”, a national road with verysimilar characteristics, as well as drivers’ behaviour. The number of accidents usedfor the base year 2007 is estimated with the assumption of low increase of accidentsby 2% annually. In the following table, the annual numbers of various types ofaccidents per kilometre are presented:Accidents withdamages onlyAnnual number per kmFatalities Serious injuries Light injuries0.58 0.04 0.06 0.47In order to compare the benefits due to reduction of accidents costs after the projectrealisation the projection of accidents during the analysis period was performed. Theannual growth factor of 2% was also used for this projection. The use of thisrelatively low growth factor is based on the assumption of conservative accidentsincrease due to the annual increase of traffic and therefore increased density andlower operational speeds which result lower accidents probabilities. This low factorwas also preferred in order to avoid overestimation of the benefits from accidentsreduction.The number of accidents according to their severity used in the present study are thefollowing:Average annualnumber of accidentswith damages onlyAverage annualnumber of fatalitiesAverage annualnumber of seriousinjuriesAverage annualnumber of lightinjuries27 2 3 226.1.2.5 Residual value of the projectThe residual value of the project is estimated using the following formula:Y = (A/X)*(X-v)*fthat is determined by the respective specifications and the bibliography.In the above formula:• A is the initial value of the project,• X is the duration of the physical life of the project,• v is the period of analysisEGNATIA ODOS S.A. 76APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X• f is a coefficient which is equal to one or smaller than one and which expresses theestimate for the usefulness of the project after the expiration of its economic life. Itprovides significant margins for the estimations.The duration of the physical life of the various elements of the project is consideredto be equal to:• 40 years for earth works and pavement/asphalt works• 75 years for the bridges and tunnels• 30 years for the road equipment (lighting, vertical signing)The period of analysis, as it was mentioned above, is considered to be equal to 25years and the value of the coefficient f is considered to be equal to one for all thecategories. Residual value of the project for the various motorway constructionalternatives (economic prices) is presented in the following table.AlignmentResidual value (€)Alternative B Alternative C Alternative DAlignment 1 88,692,519 93,913,740 96,413,585Alignment 2 62,611,109 66,537,951 72,278,6326.1.2.6 Installation and operation of toll stationsThe case of tolls introduction, as it was mentioned above, was taken intoconsideration for the purposes of the financial analysis only. The road pricing systemto be used in the immediate forthcoming years will be open. Through a loan of theWorld Bank an EU interoperable system will be introduced, which foresees threepassing lanes per direction: one for cash payment, one for prepayment and one fortransmitters usage.The construction cost of one toll station of the new toll system according to theF.N.R.R. is 650,400 € and its annual operational cost for personnel, maintenance etc.is estimated at 100,000 €/year, while for the existing system it is around 200,000€/year. The installation of tolls is considered to be the last year of construction. Therevenues from the operation of the toll station begin from year 2011 in the case ofnew alignment and from year 2014 in the case of the alignment of the detail design.Details concerning road pricing in F.Y.R. Macedonia and toll revenues estimationsfrom the project are described in Chapter 6.3.1.6.1.3 Consideration of elements which cannot be quantified6.1.3.1 Consumer surplusAdditionally to the benefits mentioned in the above and were included in theeconomic analysis of the project, benefits of consumer surplus are also expected.The consumer surplus benefits come from the additional traffic after the projectrealisation and apply both for new passenger and freight traffic.EGNATIA ODOS S.A. 77APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XIn the present study there are no secure information concerning the private (social)cost in the F.Y.R. of Macedonia, and therefore consumer surplus benefits are notquantified and hence were not included in the economic analysis. Higher values ofthe economic indices would be expected if those benefits were included in theeconomic analysis.6.1.3.2 Spatial and regional development aspectsThe project is situated along the Pan-European Corridor X, backbone of the SoutheastEurope Transport Core Network and of the South-eastern Axis, as defined bythe High Level Group of the Directorate General for Energy and Transport of theEuropean Commission.The realisation of the project would mean the completion the road Corridor X mainaxis in the Former Yugoslav Republic of Macedonia, given the under-way realisationof the Tabanovce – Kumanovo motorway section, and will offer efficientinfrastructures with substantial time and vehicle operating costs savings. It wouldmaximize the benefits along the entire Corridor X by improving the level of service,ensuring at the same time homogenous infrastructure and operation, facilitation ofinternational passengers and trade flows, including transit traffic, if alsoaccompanied with measures for border crossing facilitation.Therefore, the project would contribute to the better connection of major urban,industrial and commercial centres along Corridor X, to the improvement of economicexchange and cooperation between these centres, and also to the strengthening of themultilateral relations between the countries of the wider region of the Balkans andtheir residents.Furthermore, the project would contribute to regional development and cohesion inthe weaker, “less favoured”, wider area of the Western Balkans, promoting the levelof access of the Former Yugoslav Republic of Macedonia from the south with Greece,and give access to the port of Thessaloniki.The project should be considered, if it is not already, as a basic component of anintegrated national strategy, which comprises measures and policies for regional andspatial development.6.1.3.3 Employment impactsAccording to other motorway construction projects, 45% of the economic cost of theproject concerns labour costs and the rest 55% material costs. Furthermore, 30% ofthe material costs refer to imported stock (machinery and equipment) and 70% todomestic material.Monthly gross average income for specialised and non-specialised work in the F.Y.R.of Macedonia is 390 € and the respective annual average income is estimated at 4,680€.EGNATIA ODOS S.A. 78APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XBased on the above-mentioned assumptions, and after deducting the land acquisitioncost from the economic cost of the project, the number of jobs created directly orindirectly during the construction period is possible.During the operational period of the project, costs refer to maintenance material forperiodical pavement, signs and medians replacement and signalling, whilstoperational costs refer to electric lighting and irrigation.Direct employmentDirect employment is expressed by the number of direct employees during theconstruction and operation/ maintenance of the project. Jobs are estimated asequivalents of labour costs. Differences appearing between the estimations for thetwo alignments are due to the different construction and operational periods.For the construction period direct employment is estimated by the division of 45% ofthe economic construction cost by the annual average income, at 13,150 man-yearsfor Alignment 1 and 11,150 man-years for Alignment 2.For the construction period of each one of the two alignments, the number of jobscreated are estimated based on the estimated average annual income of the periodrespective periods 2008 – 2013 and 2008 – 2010. The estimation of the average annualincome of the period is performed with the projection of current net income withforeseen growth of 2% (recorded in the last years) at 5,170 €. The number of jobscreated is estimated around to 2,190 jobs in the case of Alignment 1 and around to3,700 jobs in the case of Alignment 2. The reason that the number of jobs created inthe case of Alignment 2 is higher is the shorter (half) construction period.For the operation/ maintenance period direct employment is estimated by thedivision half of the economic annual maintenance cost by the annual average income,to 55 jobs for Alignment 1 and 45 jobs for Alignment 2.Further labour needs are also expected for the periodical maintenance of themotorway during the period of analysis. Rough estimation of the expectedemployment anticipated for such works is 1,100 man-years during the period ofanalysis in the case of Alignment 1 and 900 man-years in the case of Alignment 2.Indirect employmentApart from the direct employment anticipated during the construction and operationof the motorway, indirect employment is also expected in terms of increase of labourforce employment at enterprises providing material and equipment during theconstruction and operation/ maintenance of the project.Additional employment is also expected after the operation of the new motorwayand development of the related facilities such as motels, petrol stations, garages etc.Indirect employment due to the increase of labour force employment at enterprisesproviding material and equipment during the construction and operation/EGNATIA ODOS S.A. 79APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR Xmaintenance of the project, as well as indirect employment due to the creation offuture incomes and the caused trend for reinvestment, consisting additionalemployment for the entire life of the project, are not examined in the present study.6.2 Environmental considerationsThere are numerous sensitive ecosystems, biotopes and localities along the existingaxis of the project. In the previous feasibility study, Scetauroute Internationalestimated their degree of sensitivity according to several criteria. The followingdescription of the sensitivity of ecosystem, biotopes and localities are borrowed fromthe previous feasibility study and they should be taken into high consideration:• River Boshava: It is important because specific algal communities (especially diatom)communities differentiate this river form the other rivers along the axis of the project.Irrigation value of lower flow of the river for Demir Kapija is very high, so any kindof pollution or destruction due to motorway construction/ operation should beavoided.• River Anska and channels: They have extraordinary value for irrigation purposes inthe Valandovo valley. The riverbed is channelled and many additional channels areconnecting the Vardar and Anska Rivers, creating a sort of a network.• River Petrushka: It is very important for the area around the villages of Miravci andMiletkovo. It is divided into numerous channels in the lower flow. Beside theeconomic value, it has biodiversity importance, since the best plane (platanusorientalis) community (real forest) is developing on a broad area in the lower flow ofthe river. The algal community and presence of rare species is also evident.• Stagnant waters: They are very rich concerning species composition and particularlyin the region of villages Davidovo and Miravci they are represented with wellpreserved aquatic communities. Their special importance comes from the fact thatsuch ecosystems are endangered in the Former Yugoslav Republic of Macedonia.• Alluvial deposits: Their special characteristics arise from their importance in theDemir Kapija gorge concerning the agricultural use. They are the only areas in thegorge where agricultural activities are possible.• Sandstone cliffs: They are very interesting from archaeological point of view, but theyare even more important as nesting places for numerous Merops apiaster populations.• Spring tapes and wells: They are extraordinary important since the area of the projectaxis is characterised by the long dry period and quantity and quality of drinkingwater is not sufficient.• Hot water springs: They are very particular phenomenon and they have extremelyhigh economic value.• Demir Kapija canyon: It is a protected area since 1960 in the category Monument ofNature (III category according to the International Union for the Conservation ofNature and Natural Resources – IUCN). It has extraordinary importance from thebiodiversity point of view.• River Iberliska: It is water gap cut into Demir Kapija Jurassic limestone. It isprotected since 1963 as a category individual plant and animal species outside ofnatural reserves.• Bela Voda cave: It is the longest cave in the Former Yugoslav Republic of Macedonia(955m).• Plain woodland belts: They are the only high tree sites in the region of Demir Kapijagorge. They are characteristic for almost all dales and ravines on both slopes along theVardar River.EGNATIA ODOS S.A. 80APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X• Plain woodlands and forests: These biotope types are characteristic for the Valandovo– Gevgelija valley, especially for the lower flow of the rivers and springs in that area.Beside natural value they have economic value as well.• Willow and plain forests: They have extraordinary importance. They are especiallycharacteristic for the surrounding of village Grchishte (left side of river Vardar). Theyrepresent the remains from the real river bank vegetation, characteristic for theundisturbed sites along the river, which are almost absent nowadays.• Dense pseudomaquis biotope type has low economic value particularly for the localpopulation. It is important because it represents the real appearance of this type ofshrubland community. Many rare species have found suitable habitat in thisecosystem.• Sparse pseudomaquis has been changed due to the pronounced anthropogenousinfluence. It has even less (if any) economic value than the previous mentionedbiotope, but rare species (like Canis aureus, Ophiosaurus apodus etc.) are present.• Tamaris communities: There are many well preserved communities of tamaris alongthe lower part of the road, especially along the river Vardar. They are high sensitivesince they are rare types of vegetation, due to their transformation into cultivableland. They should be protected since their abundance of rare species of fungi, plantsand animals.• Agricultural land: The term refers to high productive land (fields, gardens, meadows)in the Gevgelija – Valandovo valley. Its extraordinary importance comes frompossibility for making two crops per year.• Poplar plantations: These plantations are well developed and they have greateconomic value.• Vineyard plantations are very important part of the local population activity. Theyare very characteristic for the area of the road corridor.• Greenhouses represent one of the most important branches of economic activities inthe area from Udovo to Gevgelija.• Eolian soils: The only soils of this type in the Former Yugoslav Republic ofMacedonia are represented next to the Vardar River, between villages Grchishte andGjavoto, on the left side of the river. They are covered with Tamaris shrublandvegetation with different density.• Surrounding of Udovo and Davidovo villages: The high sensitivity of this area ariseform the presence of several valuable localities: archaeological locality “Turskigrobishta” (Turkish graveyard), historic localities – chapel above the village Udovoand St. Ilija church above the village Davidovo. There is also well developed Tamariscommunity with rare species of fungi and swampy area close to the existing bridge onVardar River.• Archaeological localities Hisarkale, Dolna Crkva, Mramorot and Manastir are ofextreme importance since they represent remains of antic (Roman or Greek) period.Some of them contain well preserved objects.• Historic locality Church near the village Gradec and archaeological sites Tufka andAgova Cheshma – Vetka Crkva are less sensitive (but high) than previous localities,since they contain less archaeological material and the church is of a more recenttime. Anyway, any direct interference with these objects during construction worksshould be strictly forbidden.The above description is intentionally not presented in the Annex of the currentreport. The purpose is to emphasise the sensitivity of the project area and itsenvironmental importance.EGNATIA ODOS S.A. 81APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XFurthermore, and according to the Central & Eastern Europe, Caucasus, and CentralAsia Environmental Information Programme the Demir Kapija gorge is among therichest ornithological reserves in Europe. The rare birds of pray include: griffinvulture (Gyps fulvus), Egyptian vulture (Neophron percnopterus), golden eagle(Aquila chrysaetos), shot-toed eagle (Circaetus gallicus), long-legged buzzard (Buteorufinus), and different falcons (Falco peregrinus, Falco naumanni). Other rare andscientifically important bird species are also present in this area. In the Demir Kapijagorge, important mammal, reptile, and insect species are present as well as rare andendemic plant species (Caladonia macedonica, Lilium: heldreichii, Lilium martagon,Kitaibelia vitifolia etc.).Up to the day of completion of the present study the results of the assessment of theenvironmental impacts for the two motorway alignments have not been available,nor the costs for environmental mitigation measures, which were not included in thecosts of the projects examined.In any case, it should be mentioned that according to the designers of Alignment 2on the west side of Vardar River, this solution is considered more environmentallyfriendly compared to Alignment 1. The design of Alignment 2 avoids big cuts andembankments, sites of archaeological interest and the offence of Bela Voda Cave,while it has no conflict with a future dam to be constructed in Vardar River.6.3 Financing aspectsThe financing of the project is under negotiation between the governments of theFormer Republic of Macedonia and Greece, through a grant of maximum € 50million by the Hellenic Plan for the Economic Reconstruction of the Balkans(Hi.P.E.R.B.).The financial plan of the project as initially presented by the local governmentinvolves funds from the Instrument for Pre-accession Assistance (IPA) of theEuropean Community, own funds and the maximum of potential grant by the Greekgovernment:• HiPERB: 50 mil EUR and budget co-financing for HiPERB (10%) – 5 mil EUR• IPA – 32 mil EUR and budget co-financing for IPA (25%) – 10,6 mil EUR,i.e. total of 97,6 mil EUR (82 mil EUR donations and 15,6 mil EUR co-financing fromthe national budget, according for the rules for awarding of certain donations), asfollows:SourceAmount (mo€)IPA 2007-2008 32.0National contribution to IPA 2007-2008 10.6Hi.P.E.R.B. 50.0National contribution to Hi.P.E.R.B. 5.0Total 97.6EGNATIA ODOS S.A. 82APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAccording to the F.Y.R.O.M. Secretariat for European Affairs, IPA foresees financingof projects at 80% of Package III (Transport and Environment); that is the case forIPA 2007-2008, where, out of € 40 million, € 32 million were committed to Corridor Xproject as a first priority transport project in the country. Therefore, the rest of therequired funds could be covered by the next IPA Package III in 2009, with potentialof securing a respective amount to that of IPA 2007-2009.Taking into account the above considerations, the potential maximum financial planwithout loans could be:SourceAmount (mo€)IPA 2007-2008 32.0IPA 2009 32.0Subtotal IPA funds 64.0Hi.P.E.R.B. 50.0National contribution to Hi.P.E.R.B. 5.0National contribution to IPA 2007-2008 10.6National contribution to IPA 2009 10.6Subtotal national contribution 26.2Total 140.2Therefore, the above financial plan could be sufficient for the realization of theproject on the west bank of River Vardar, without need of loans.In line with the afore-stated and the initial analysis of the amount of finances neededfor the project, in the case of need for additional finances, it is suggested by the F.Y.R.of Macedonia government that the financial construction would be completed with aloan from the European Investment Bank (EIB), as a financial institution for suitablefor this purpose (offering the most compatible conditions for procurement and otherconditions with the conditions of the afore-mentioned donations).6.3.1 Toll revenuesTolls in the F.Y.R. of Macedonia are collected on the motorways of the country.According to the F.N.R.R. a new system for automatic collection of tolls will beintroduced in toll booths on the highways across the country in 2007. The project issupported by the World Bank and the USAID and is foreseen to become fullyoperational in early 2008.Three lanes will operate per direction at the toll booths. One lane will be for cashpayments, another for pay cards and the last for transmitters.According to the F.N.R.R. experts, the cost of construction of a toll booth is € 650,400and the annual operation and maintenance cost is € 100,000 (reduced by 50%compared to existing costs after the introduction of the new toll system).EGNATIA ODOS S.A. 83APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XVehicle classificationVehicle classification is performed according to the number of axles and the vehicleheight on the first axle into four classes:Category Iheight below 1.7m,length less than 5.5m:passenger cars andmotorcyclesCategory IIheight below 3.3m,length less than 9.5m:passenger cars withtrailers, jeeps, minibuses and light trucksCategory IIIheight below 4.2m,length less than10.5m: vehicles withtrailers, trucks with 3axles and midi busesCategory IVheight over 4.2m,length more than10.5m: tractors withmore than 3 axles andbusesToll rates applied are the same for domestic and foreign registered vehicles. Thefollowing table details the payments in Denars at the four toll stations along CorridorX in the Former Yugoslav Republic of Macedonia:Road section Kumanovo – Miladinovci Petrovec – Veles Veles – GradskoStationnameRomanovci Sopot Otovica StobiVehicleCategoryI 50 80 80 60II 75 115 115 90III 145 230 230 175IV 290 460 460 345EGNATIA ODOS S.A. 84APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XThe toll rates used in the present study for the estimation of the annual cash flowsare estimated on the basis of charge of the above table. More specifically, the chargesper kilometre were calculated for the tolled motorways, presented in the followingtable:SectionLength Charges per kilometre (€)(km) I II III IVKumanovo - Miladinovci 21.782 0.038 0.056 0.109 0.218Veles - Petrovec 34.136 0.038 0.055 0.110 0.220Veles - Gradsko 25.139 0.039 0.059 0.114 0.224Total 81.057Average charges 0.038 0.056 0.111 0.221On the basis of charging 0.04 €/km for vehicles of category I, using the existing ratiosbetween charges of category I and the rest of the categories, the following charges arecalculated:Vehicle CategoryIIIIIIIVRoad pricing0.04 €/km0.06 €/km0.12 €/km0.23 €/kmAs a conclusion, it can be expected that traffic growth and the application of theabove toll rates will ensure high revenues during the project lifetime, taking intoconsideration that apart from the toll station at Demir Kapija, another toll station isforeseen to be established, probably at Gevgelija. Therefore, revenues are expected tobe more than double, considering the higher traffic as moving close to the Greekborder, especially after Prdejci (south of Smokvica).Finally, it should be mentioned once more, that the toll revenues are not included inthe economic analysis of the project, since it is considered that they are compensatedby their inclusion also in the generalised (operational) cost as user charge.6.3.2 Cash flowThe cash flow diagram for each is formulated for each of the two alternativealignments examined, taking into account the following parameters in various timehorizons until 2032:• Annual construction costs• Costs of tolls installation• Annual operational and maintenance costs• Annual toll station operation and maintenance cost• Annual revenues from tolls collection• Periodical maintenance/ rehabilitation after 15 years of start of operationEGNATIA ODOS S.A. 85APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XCash flow diagramme151050Million euros-5-10200820102012201420162018202020222024202620282030-15-20-25CostsRevenuesCash flow-30YearGraph 6.1: Cash flow diagram Alignment 1Cash flow diagramme20100Million euros-10-20-30200820102012201420162018202020222024202620282030-40-50CostsRevenuesCash flow-60YearGraph 6.2: Cash flow diagram Alignment 2EGNATIA ODOS S.A. 86APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XIn the Cash flow diagrams the reduction in the columns of the years 2025 and 2028are due to the periodical maintenance costs. Also, the cash flow does not includeHi.P.E.R.B. financial aid and IPA funds.It can be commented that toll revenues in the analysis period ensure the cover of theannual maintenance and operational expenses and the costs for periodicalmaintenance of the motorway. Furthermore, as previously mentioned, theintroduction of a second toll station in the southern section between Gevgelija andSmokvica, will ensure high (more than double) revenues.6.4 Results of the economic analysisThe results of the economic analysis of the project are presented in Annex B of thepresent technical report.The discount rate (the rate by which the costs and benefits are reduced or discountedeach year when estimating the net present value [19] used in the present study inorder to estimate the NPV is considered to be 8%. It is considered that this valuediachronically express the opportunity cost of capital (the minimum rate of returnrequired above which it is worthwhile, and below which is not worthwhile investingcapital in a project. This is defined by the rate of return of the best project whichcould be financed if, but only if, the project does not proceed. Hence, the phraseopportunity cost of capital [19] in the F.Y.R. of Macedonia. The opportunity cost ofcapital is considered to be equal to the average bank long term interest rate returnplus the inflation.The inflation rates in the period 1999 – 2006 as reported by the National Bank ofF.Y.R. of Macedonia are the following:PeriodInflation rates1999 -1.0%2000 6.0%2001 5.0%2002 2.0%2003 1.2%2004 -0.4%2005 0.5%2006 2.9%*Source: National Bank of F.Y.R. of Macedonia (April 2006)* EstimationThe target for the year 2006 was for inflation to be retained at 1.8%.As for deposit interest rates, the National Bank of F.Y.R. of Macedonia reports thatthe nominal deposit interest rates in 2005 was between 5 – 5.5%, while in 2006,according to the U.S.A. embassy in Skopje [20], it was 4.6% (August 2006).EGNATIA ODOS S.A. 87APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XIt must be stressed at this point that the project evaluation should not be focused somuch in the NPV but in the efficiency of the project based on the IRR (from whereconcrete results can be derived concerning the investment attractiveness).Additionally to the use of the discount rate of 8%, the projects in the present studyare examined also with the use of other, lower discount rates of 2%, 4%, and 6%, inorder to cover the case of improvement of the economy of the Former YugoslavRepublic of Macedonia, as well as to examine the impact of lower discount rates tothe results of the economic analysis.In the following tables, the results of the economic evaluation of the project aresummarised:Alignment 1IRR(%)B/C(2%)B/C(4%)B/C(6%)B/C(8%)Alternative A (do minimum)Notdefined0.19 0.15 0.12 0.10Alternative B 2.33% 1.09 0.71 0.52 0.40Alternative C 2.05% 1.01 0.66 0.48 0.37Alternative D 1.91% 0.98 0.64 0.47 0.36Alignment 2IRR(%)B/C(2%)B/C(4%)B/C(6%)B/C(8%)Alternative A (do minimum)Notdefined0.19 0.15 0.12 0.10Alternative B 7.06% 2.31 1.54 1.14 0.90Alternative C 6.49% 2.15 1.44 1.06 0.84Alternative D 5.87% 1.98 1.32 0.98 0.77The costs and benefits breakdown of the project, indicatively for the Alternative D,are presented in the following graphs for each of the two alignments. It can becommented that in the case of Alignment 1 the percentage of the residual valueappears to be the most important benefit of the project (40%), since all other benefitsare lower (time savings, vehicle operational costs reduction), due to the smallreduction in the length of the proposed alignment compared to that of the existingroad. On the contrary, in the case of Alignment 2, where the length of the proposedmotorway is much shorter than the existing road, the benefits due to time savingsand due to vehicle operational costs reduction are substantial and therefore theirshares in the benefits breakdown are higher, reducing the residual value’s share at24%.EGNATIA ODOS S.A. 88APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAlignment 1Operational cost16%Construction cost84%Graph 6.3: Costs breakdown of the project (Alignment 1 – Alternative D)Benefits fromvehicleoperational costreduction34%Residual value40%Benefits fromtime savings23%Benefits fromaccidentsreduction3%Graph 6.4: Benefits breakdown of the project (Alignment 1 – Alternative D)EGNATIA ODOS S.A. 89APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAlignment 2Operational cost18%Construction cost82%Graph 6.5: Costs breakdown of the project (Alignment 2 – Alternative D)Benefits fromvehicleoperational costreduction46%Residual value24%Benefits fromaccidentsreduction2%Benefits fromtime savings28%Graph 6.6: Benefits breakdown of the project (Alignment 2 – Alternative D)6.5 Sensitivity analysis – Comparative evaluation of alternatives and rankingFrom the comparison of the results of the economic analysis of the alternativesexamined within the study, the lowest cost alternative of motorway construction isranked first. Apparently, the variations between the results of the three motorwayconstruction alternatives are marginal due to the fact that in the case of the lowercost alternatives B and C the benefits are decreased as result of the speed reduction.Furthermore, a sensitivity analysis can be conducted of any problem to explore theeffects of deviation from the original problem conditions. Since most engineeringeconomic problems extend over a period of years, future cash flows are necessarilyEGNATIA ODOS S.A. 90APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR Xestimated. These estimations may be quite reliable, but it is often enlightening toobserve how the attractiveness of alternatives varies as the initial estimates arealtered [13].The results that are presented in the sensitivity analysis in the framework of thepresent study were based on a number of assumptions concerning the necessaryparameters. The elasticity of results concerning changes (marginal or not) in thevalues of basic parameters like the cost of the investment and the operationalexpenses and revenues is examined through the sensitivity analysis. Accordingly theundertaken risk concerning the specific investment is evaluated with the aid of thesensitivity analysis.The parameters that are examined in the sensitivity analysis include:• The construction cost of the project• The traffic flows• The operational cost of the projectThe discount rates used in the sensitivity analysis include 8%, 6%, 4% and 2%. Thealterations of the basic parameters, which are examined in the framework of thesensitivity analysis, are as follows:• Alterations of the constructional cost by ±10%• Alterations of traffic volumes (demand) by ± 10% and by ± 20%• Alterations of the operational cost (annual and periodical maintenance) by ±10%The following tables present the results of the sensitivity analysis (actually theimpact to IRR and the Net Present Value) of the project for the Do minimumalternative and for the three motorway alternatives of each motorway alignment.Alternative ANPV (€)2% 4% 6% 8%IRRBasic scenario -16,380,539 -18,217,989 -19,168,114 -19,589,010 -NegativesIncrease of construction cost by 10% -18,880,096 -20,646,139 -21,528,416 -21,884,778 -Increase of operational cost by 10% -17,205,014 -18,850,740 -19,661,395 -19,979,461 -Reduction of traffic volumes by 10% -17,595,692 -19,167,336 -19,924,908 -20,203,537 -Reduction of traffic volumes by 20% -18,810,845 -20,116,683 -20,681,702 -20,818,064 -PositivesReduction of construction cost by 10% -13,880,983 -15,789,839 -16,807,812 -17,293,243 -Reduction of operational cost by 10% -15,556,065 -17,585,239 -18,674,833 -19,198,560 -Increase of traffic volumes by 10% -15,165,387 -17,268,642 -18,411,320 -18,974,484 -Increase of traffic volumes by 20% -13,950,234 -16,319,295 -17,654,525 -18,359,957 -EGNATIA ODOS S.A. 91APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAlignment 1Alternative BNPV (€)2% 4% 6% 8%IRRBasic scenario 6,925,004 -27,013,094 -47,430,231 -59,456,895 2.33%NegativesIncrease of construction cost by 10% -6,578,438 -39,662,144 -59,306,038 -70,631,005 1.70%Increase of operational cost by 10% 5,219,976 -28,217,107 -48,293,649 -60,085,666 2.25%Reduction of traffic volumes by 10% -3,569,884 -34,837,842 -53,359,909 -64,019,017 1.83%Reduction of traffic volumes by 20% -14,064,771 -42,662,589 -59,289,586 -68,581,139 1.30%PositivesReduction of construction cost by 10% 20,428,446 -14,364,044 -35,554,425 -48,282,785 3.05%Reduction of operational cost by 10% 8,630,032 -25,809,081 -46,566,814 -58,828,124 2.42%Increase of traffic volumes by 10% 17,419,892 -19,188,346 -41,500,554 -54,894,774 2.83%Increase of traffic volumes by 20% 27,914,779 -11,363,599 -35,570,877 -50,332,652 3.32%Alternative CNPV (€)2% 4% 6% 8%IRRBasic scenario 1,018,359 -33,220,670 -53,644,360 -65,523,614 2.05%NegativesIncrease of construction cost by 10% -13,243,110 -46,579,784 -66,186,824 -77,324,992 1.42%Increase of operational cost by 10% -837,556 -34,531,233 -54,584,186 -66,208,029 1.96%Reduction of traffic volumes by 10% -9,476,528 -41,045,418 -59,574,037 -70,085,736 1.56%Reduction of traffic volumes by 20% -19,971,416 -48,870,165 -65,503,715 -74,647,858 1.06%PositivesReduction of construction cost by 10% 15,279,828 -19,861,556 -41,101,896 -53,722,237 2.75%Reduction of operational cost by 10% 2,874,275 -31,910,108 -52,704,534 -64,839,200 2.13%Increase of traffic volumes by 10% 11,513,247 -25,395,922 -47,714,682 -60,961,493 2.52%Increase of traffic volumes by 20% 22,008,135 -17,571,175 -41,785,005 -56,399,371 2.99%Alternative DNPV (€)2% 4% 6% 8%IRRBasic scenario -2,072,072 -36,349,902 -56,714,117 -68,486,440 1.91%NegativesIncrease of construction cost by 10% -16,708,102 -50,059,878 -69,585,995 -80,597,767 1.29%Increase of operational cost by 10% -4,154,319 -37,820,289 -57,768,556 -69,254,320 1.81%Reduction of traffic volumes by 10% -12,706,436 -44,278,640 -62,722,599 -73,109,192 1.42%Reduction of traffic volumes by 20% -23,340,800 -52,207,377 -68,731,081 -77,731,944 0.92%PositivesReduction of construction cost by 10% 12,563,958 -22,639,926 -43,842,239 -56,375,113 2.60%Reduction of operational cost by 10% 10,174 -34,879,515 -55,659,678 -67,718,561 2.00%Increase of traffic volumes by 10% 8,562,291 -28,421,164 -50,705,635 -63,863,688 2.38%Increase of traffic volumes by 20% 19,196,655 -20,492,426 -44,697,152 -59,240,937 2.85%EGNATIA ODOS S.A. 92APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XAlignment 2Alternative BNPV (€)2% 4% 6% 8%IRRBasic scenario 85,645,948 41,109,817 11,501,944 -8,442,372 7.06%NegativesIncrease of construction cost by 10% 75,285,675 31,160,148 1,937,165 -17,645,861 6.17%Increase of operational cost by 10% 84,080,368 39,948,168 10,626,760 -9,111,840 6.98%Reduction of traffic volumes by 10% 68,971,840 28,236,165 1,370,617 -16,556,858 6.13%Reduction of traffic volumes by 20% 52,297,733 15,362,513 -8,760,711 -24,671,343 5.17%PositivesReduction of construction cost by 10% 96,006,221 51,059,486 21,066,724 761,117 8.09%Reduction of operational cost by 10% 87,211,528 42,271,466 12,377,128 -7,772,904 7.13%Increase of traffic volumes by 10% 102,320,056 53,983,469 21,633,272 -327,887 7.96%Increase of traffic volumes by 20% 118,994,163 66,857,121 31,764,599 7,786,599 8.85%Alternative CNPV (€)2% 4% 6% 8%IRRBasic scenario 80,091,942 35,252,837 5,584,182 -14,290,808 6.49%NegativesIncrease of construction cost by 10% 69,075,463 24,672,968 -4,586,419 -24,077,234 5.63%Increase of operational cost by 10% 78,387,815 33,988,387 4,631,548 -15,019,521 6.40%Reduction of traffic volumes by 10% 63,417,835 22,379,185 -4,547,146 -22,405,293 5.60%Reduction of traffic volumes by 20% 46,743,727 9,505,533 -14,678,473 -30,519,779 4.69%PositivesReduction of construction cost by 10% 91,108,422 45,832,706 15,754,782 -4,504,381 7.48%Reduction of operational cost by 10% 81,796,070 36,517,286 6,536,816 -13,562,095 6.57%Increase of traffic volumes by 10% 96,766,050 48,126,489 15,715,509 -6,176,322 7.35%Increase of traffic volumes by 20% 113,440,157 61,000,141 25,846,837 1,938,163 8.20%Alternative DNPV (€)2% 4% 6% 8%IRRBasic scenario 74,552,898 28,638,824 -1,573,624 -21,681,005 5.87%NegativesIncrease of construction cost by 10% 62,546,302 17,108,079 -12,658,317 -32,346,996 5.05%Increase of operational cost by 10% 72,599,386 27,189,333 -2,665,667 -22,516,358 5.78%Reduction of traffic volumes by 10% 57,543,106 15,505,999 -11,908,916 -29,958,851 5.03%Reduction of traffic volumes by 20% 40,533,314 2,373,173 -22,244,208 -38,236,698 4.16%PositivesReduction of construction cost by 10% 86,559,494 40,169,569 9,511,069 -11,015,014 6.83%Reduction of operational cost by 10% 76,506,410 30,088,315 -481,580 -20,845,651 5.96%Increase of traffic volumes by 10% 91,562,690 41,771,649 8,761,669 -13,403,158 6.70%Increase of traffic volumes by 20% 108,572,482 54,904,475 19,096,961 -5,125,311 7.51%Based on the above results and sensitivity tests the following conclusions concerningthe project are formulated.EGNATIA ODOS S.A. 93APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X6.6 Conclusions concerning the economic analysisAs it was mentioned before, the calculation of the NPV requires the selection of aprice for the discount rate, which is considered equal to the opportunity cost ofcapital (average long term interest rate plus the inflation). The inflation in the F.Y.R.of Macedonia is low; 0.5% in 2005 and 2.9% (est.) in 2006. The annual average interestrate is in the area of 5.0%. Therefore, the opportunity cost of capital in the F.Y.R. ofMacedonia is considered to be around 8%. This is the reason that the NPV wascalculated using the lower values for the discount rate of 6%, 4% and 2%.In a country where the opportunity cost of capital is in the area of 2% - 4% it results,according to the European Investment Bank and the World Bank, that:• for IRR < 8%, a transport project is characterized by low probability offinancing• for IRR > 12%, a transport project is characterized by high probability offinancing• for IRR 8% - 12%, a transport project has probabilities of financing. However,a more analytic approach of various parameters is required.Despite the fact that the value of the IRR is relatively low and the NPV is notpositive, the project is considered as attractive taking into account the national andinternational importance of the project. In the case where the opportunity cost ofcapital in the Former Yugoslav Republic of Macedonia would be smaller, then thespecific IRR could characterize the investment as attractive enough.The differences in the values of IRR between the alternatives B, C and D are verysmall. This happens mainly due to the fact that there is not an important reduction ofcost between the alternatives. That especially applies in the case of Alignment 1,where lower standards are already used in Alternative D for the biggest part of thesection under study (19.9km at the “gorge”), that allows marginal reduction ofconstruction costs.Despite the fact that Alternative B of Alignment 2 is the most “attractive” in terms ofIRR, the difference with the economic results of Alternatives C and D are notsignificantly better. Consequently, Alternative D can be considered as the mostprevailing one (among the three of them) because it refers to better geometrical andfunctional characteristics of the under study road project.It seems that parameters like the construction cost and the traffic volumes have animportant impact to the final results (IRR, NPV) as it resulted from the sensitivityanalysis. On the contrary, it seems that operational and maintenance costs do notparticularly affect the IRR and NPV. In the case where the construction cost could bereduced without any impact to the quality of the project, the investment will becomemore attractive in terms of the IRR and the NPV.EGNATIA ODOS S.A. 94APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X7. RECOMMENDATIONSIn the authors’ view the financing and realisation of the project is recommended,even though the results are considered relatively low, due to the high values of thediscount rate and not due to the project itself and its parameters.It must be mentioned that benefits like the consumer surplus, the quality of the tripas perceived by the users, the effect to the regional development (e.g., reduction ofunemployment in the long term), the general improvement of the environment, theimprovement of competitiveness at national level etc., were not taken intoconsideration in the framework of the economic analysis.However, the results of the environmental impact assessment study, as well as thecosts of environmental mitigation measures, which could result an increase in thecost, are not yet available. Hence, it is considered that the environmental criterion isdeterminative for the project realisation.Apart from the economic results of the present feasibility study, the final decision forthe project’s realisation should consider other important parameters, of neithereconomic nor technical nature:First of all, this project is situated along the backbone of the South-east EuropeTransport Core Network and its implementation is in full alignment with therecently established South-eastern Axis, as defined by the High Level Group of theDirectorate General for Energy and Transport of the European Commission, even notbeing a “soft” low-cost measure of infrastructure upgrade.The project would complete the road Corridor X main axis in the F.Y.R. ofMacedonia, given the under-way realisation of the Tabanovce – Kumanovomotorway section, projects that will offer efficient infrastructures with substantialtime and vehicle operating costs savings.Hence, the project would maximize the benefits along the entire Corridor X byimproving the level of service along the Corridor, ensuring at the same timehomogenous infrastructure and operation, facilitation of international passengersand trade flows, including transit traffic, if also accompanied with measures forborder crossing facilitation.Taking into consideration the already constructed motorway sections betweenNegotino and Demir Kapija as well as of the one between Smokvica and the Greekborder, the project would maximise the benefits of the above made investments, alsoin terms of revenues for the local government, since the use of the aforementionednew infrastructures is not yet charged.Finally, the project would contribute to regional development and cohesion in theweaker, “less favoured”, wider area of the Western Balkans, promoting the level ofEGNATIA ODOS S.A. 95APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR Xaccess of the Former Yugoslav Republic of Macedonia in the south with Greece,ensuring the country’s access to the sea via the port of Thessaloniki.EGNATIA ODOS S.A. 96APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XBACKGROUND DOCUMENTS – REFERENCES1. Aristotle University of Thessaloniki, Polytechnic School, Faculty of Rural andSurveying Engineering, Department of Transportation & HydraulicEngineering: Passenger and freight flows forecasting for the documentationof the priorities and the needs for development of Pan-European Corridor X.Thessaloniki, August 2003.2. Aristotle University of Thessaloniki, Polytechnic School, Faculty of Rural andSurveying Engineering, Department of Transportation & HydraulicEngineering: Report of experts’ autopsy at the sections Tabanovce –Kumanovo and Demir Kapija – Smokvica of Pan-European Road Corridor Xin F.Y.R.O.M., July 2006.3. Aristotle University of Thessaloniki, Polytechnic School, Faculty of Rural andSurveying Engineering, Department of Transportation & HydraulicEngineering: Support to international cooperation for development of Pan-European Corridor X (Technical Secretariat of the Steering Committee),Interim Report. Thessaloniki, July 2006.4. Balkan Konsalting DOOEL: Feasibility study National Road M-1 (E-75)Motorway Tabanovce – Kumanovo, January 2007.5. COWI: Regional Balkans Infrastructure Study (REBIS). Final Report, July2003.6. Despontin, de Brucker, Coeck, Verbeke: The economic evaluation of roadsafety in E.U. DG VII, Luxemburg, 1998.7. Egnatia Odos S.A.: Feasibility study for the upgrading of the road sectionGrabovnica (Lescovac) – Presevo (Serbian – F.Y.R.O.M. borders) of Pan-European Corridor X, 2006.8. European Commission – Eurostat: Statistical Yearbook on candidate andSouth-east European countries, 2002.9. Fund for National and Regional Roads of F.Y.R. Macedonia: Traffic Data,December 2006.10. Highway Capacity Manual (HCM) 2000.11. Hi.P.E.R.B. (Unofficial document) Application for Assistance projectHighway E-75 Demir Kapija – Gevgelija, 2002.12. Hi.P.E.R.B. (Unofficial document) Application for Assistance projectHighway E-75 Demir Kapija – Smokvica, 2004.13. James L. Riggs, David D. Bedworth, Sabah U. Randhawa: EngineeringEconomics, 4 th Edition, McGRAW-HILL International Editions, IndustrialEngineering Series, 1998.14. Louis Berger S.A.: Transport Infrastructure Regional Study (TIRS) in theBalkans. Final Report, January 2002.15. Ministry of Environment, Physical Planning and Public Works: Decision ofthe Direction for the Study of Highway Projects, DMEO/a/O/1885/8-7-1996.16. National Bank of FYROM: Annual Report 2005, April 2006.17. Scetauroute International: PHARE CBC Programme MA-96061: E-75 RoadSection Demir Kapija – Gevgelija, Feasibility Study, Final Report, 1999.18. Scetauroute International: PHARE CBC Programme MA-96061: E-75 RoadSection Demir Kapija – Gevgelija, Detailed Design, 2000.19. Tim Powell: The Principles of Transport Economics, PTRC, 2001.EGNATIA ODOS S.A. 97APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR X20. United States of America Embassy in Skopje: F.Y.R.O.M. Economy at aglance, October 2006.EGNATIA ODOS S.A. 98APRIL 2007

FEASIBILITY STUDY FOR THE UPGRADING OF THE ROAD SECTION DEMIR KAPIJA – UDOVO -SMOKVICA OF PAN-EUROPEAN CORRIDOR XANNEXESA. Issues discussed at the technical meeting in Skopje (01.03.2007)B. Results of the economic analysis- Alternative A- Alignment 1 (Alternatives B, C, D)- Alignment 2 (Alternatives B, C, D)EGNATIA ODOS S.A. 99APRIL 2007

ANNEX AANNEX A - Issues discussed at the technical meeting in Skopje(01.03.2007)1. Existing situation (physical – operational characteristics)• Design and operational speeds (per subsection and per vehicle category)• Traffic composition (vehicle categories: passenger vehicles, buses, lighttrucks, medium trucks and articulated trucks)• Percentage of international traffic• Rehabilitation economic cost (last rehabilitation – next rehabilitation)• Accidents data• Unit cost of accidents (for death, severe injury, light injury, damage only)2. Future motorway (for both alternative alignments)• Construction economic cost in current prices• Cost breakdown per type of works (according to the table included inHi.P.E.R.B. application form)• Period of construction• Cost annual allocation during the construction period• First year of economic analysis (2008)• Unit costs for traffic lanes, emergency lanes, earthworks, land acquisition,tunnels, bridges (for the estimation of cost savings of narrower cross sections)• Annual maintenance and operational economic cost (during operation phase)• Design speeds• Alignment• Number of toll booths along the new motorway section• Cost of construction and annual operation of toll installations• Toll system and rates per vehicle category. Planned revision• Facilities along the new motorway• Reduction of accidents after motorway construction3. Economic parameters:• Inflation rates• GDP and GPD annual growth estimation• Discount rate• Exchange rate of denar to euro and USD• Average monthly salary (for specialised and non-specialised work)• Current fuel prices for various types of fuels (with and without taxes)• Fuel consumption• Framework (terms) of loans from IFIs (EBRD, EIB etc.), which include aspectsas the following: duration, payback terms, percentage of loan etc.4. Environmental impacts• Environmental Impacts Assessment update (for Scetauroute alternative)• Environmental Impacts mitigation measures and their cost• Considerations of Environmental Impacts for alternative motorwayalignmentEGNATIA ODOS S.A.APRIL 2007

ANNEX BANNEX B – Results of the economic analysisAlternative APROJECT: DEMIR KAPIJA - UDOVO - SMOKVICAΑ. CONSTRUCTION ELEMENTSLength (km, new situation) 35.83Mean operational speed (km/h, exisitng situation) 59Running time (min, existing situation) 36.38Design speed (km/h, new situation) 74Mean operational speed (Km/h, new situation) 65Running time (min, new situation) 33.07Β. TRAFFIC VOLUMES (AVERAGE IN THE OPERATIONAL PERIOD)Private cars (P.C.) 5,341Light trucks 277Medium trucks 277Heavy trucks 416Articulated trucks 486Trucks total (reduced) 3,038Buses 139AADT (PCUs/day) 9,572C. GENERAL ELEMENTS OF THE PROJECTPeriod of analysis (years) 25Construction cost (€) 25,747,912Residual value (€) 7,724,373Operational costs (€/year, maintenance etc.) 308,9611st periodical maintenance cost during the analysis period (€) 02nd periodical maintenance cost during the analysis period (€) 4,119,656D. BENEFITSD1. BENEFITS FROM RUNNING TIMES REDUCTION (HUMAN TIME)Reduction of running time (min) 3.31Public cars occupancy (passengers/ vehicle) 2.0Trucks occupancy (passengers/ vehicle) 1.2Buses occupancy (passengers/ vehicle) 45.0Value of working time (€/ person/ hour) 3.40Value of travelling time from/to work (€/ person/ hour) 1.70Value of time for other purposes (€/ person/ hour) 0.85Working days per month 25Passengers/ day for work purposes 5,799Passengers/ day from/ to work 8,865Passengers/ day for other purposes 4,009Benefits for passengers for work purposes (€ / year) 346,464Benefits for passengers from/to work (€ / year) 269,328Benefits for passengers for other purposes (€ / year) 60,998Benefits subtotal 1 676,790D2. BENEFITS FROM THE VEHICLES OPERATING COST REDUCTION (FUELS, OPERATING TIME,TRAVELLING DISTANCE )Length (km, existing situation) 35.834Length reduction (km) 0.000Private cars fuel savings (lt/km/vehicle) 0.010Heavy cars fuel savings (lt/km/vehicle) 0.020Private cars fuel cost (€/lt) 0.97Heavy cars fuel cost (€/lt) 0.81Priavate cars operation unit value - time (€/hour/vehicle) 0.08Heavy vehicles operation unit value - time (€/hour/vehicle) 0.09Private cars & heavy vehicles operation unit value - distance (€/km/vehicle) 0.03Benefits for private cars from fuel savings (€ / year) 0Benefits for heavy vehicles from fuel savings (€ / year) 0Benefits for private cars from operation reduction (€ / year) 8,596Benefits for heavy vehicles from operation reduction (€ / year) 5,752Benefits for private cars & heavy vehicles from distance reduction (€ / year) 0Benefits subtotal 2 14,349EGNATIA ODOS S.A.APRIL 2007

ANNEX BD3. BENEFITS FROM ACCIDENTS REDUCTIONAverage traffic volumes during the operational period WITHOUT project (AADT in PCUs/day) 9,572Length (km, existing situation) 35.83Annual vehicle-kilometres WITHOUT project (PCUs*year) 125,197,564Fatalities/ year 2.00Severe injuries/ year 3.00Light injuries/ year 22.00Damages/ year 27.00Annual vehicle-kilometres WITH project (PCUs*year) 125,197,564Fatalities/ year (vehicle-kilometres based estimation) 2.00Severe injuries/ year (vehicle-kilometres based estimation) 3.00Light injuries/ year (vehicle-kilometres based estimation) 22.00Damages/ year (vehicle-kilometres based estimation) 27.00Accidents reduction factor 0%Reduction of fatalities/ year 0.00Reduction of severe injuries/ year 0.00Reduction of light injuries/ year 0.00Reduction of damages/ year 0.00Benefits from fatalities reduction (€/ year) 0Benefits from severe injuries reduction (€/ year) 0Benefits from light injuries reduction (€/ year) 0Benefits from damages reduction (€/ year) 0Benefits subtotal 3 0SOCIOECONOMIC ANALYSIS RESULTSBenefits/ Cost ratio (8%) 0.10Benefits/ Cost ratio (6%) 0.12Benefits/ Cost ratio (4%) 0.15Benefits/ Cost ratio (2%) 0.19Net Present Value (NPV) in €, discount rate 8% -19,589,010Net Present Value (NPV) in €, discount rate 6% -19,168,114Net Present Value (NPV) in €, discount rate 4% -18,217,989Net Present Value (NPV) in €, discount rate 2% -16,380,539Internal Rare of Return (IRR)Not definedSENSITIVITY TESTS INTERNAL RATE OF RETURN (IRR)10% increase in construction costs Not defined10% decrease in construction costs Not defined10% increase in operational costs Not defined10% decrease in operational costs Not defined10% increase in traffic Not defined10% decrease in traffic Not defined20% increase in traffic Not defined20% decrease in traffic Not definedEGNATIA ODOS S.A.APRIL 2007

ANNEX BAlignment 1 – Alternative BLength (km, new situation) 32.15Mean operational speed (km/h, exisitng situation) 59Running time (min, existing situation) 36.38Design speed (km/h, new situation) 80-100Mean operational speed (Km/h, new situation) 81Running time (min, new situation) 23.76Β. TRAFFIC VOLUMES (AVERAGE IN THE OPERATIONAL PERIOD)Private cars (P.C.) 5,942Light trucks 309Medium trucks 309Heavy trucks 463Articulated trucks 540Trucks total (reduced) 3,380Buses 154AADT (PCUs/day) 10,650C. GENERAL ELEMENTS OF THE PROJECTPeriod of analysis (years) 25Construction cost (€) 144,501,616Residual value (€) 88,692,519Operational costs (€/year, maintenance etc.) 608,1241st periodical maintenance cost during the analysis period (€) 13,572,2272nd periodical maintenance cost during the analysis period (€) 0D. BENEFITSD1. BENEFITS FROM RUNNING TIMES REDUCTION (HUMAN TIME)Reduction of running time (min) 12.62Public cars occupancy (passengers/ vehicle) 2.0Trucks occupancy (passengers/ vehicle) 1.2Buses occupancy (passengers/ vehicle) 45.0Value of working time (€/ person/ hour) 3.40Value of travelling time from/to work (€/ person/ hour) 1.70Value of time for other purposes (€/ person/ hour) 0.85Working days per month 25Passengers/ day for work purposes 6,452Passengers/ day from/ to work 9,863Passengers/ day for other purposes 4,461Benefits for passengers for work purposes (€ / year) 1,471,327Benefits for passengers from/to work (€ / year) 1,143,754Benefits for passengers for other purposes (€ / year) 259,038Benefits subtotal 1 2,874,118D2. BENEFITS FROM THE VEHICLES OPERATING COST REDUCTION (FUELS, OPERATING TIME,TRAVELLING DISTANCE )Length (km, existing situation) 35.834Length reduction (km) 3.684Private cars fuel savings (lt/km/vehicle) 0.010Heavy cars fuel savings (lt/km/vehicle) 0.020Private cars fuel cost (€/lt) 0.97Heavy cars fuel cost (€/lt) 0.81Priavate cars operation unit value - time (€/hour/vehicle) 0.08Heavy vehicles operation unit value - time (€/hour/vehicle) 0.09Private cars & heavy vehicles operation unit value - distance (€/km/vehicle) 0.03Benefits for private cars from fuel savings (€ / year) 1,296,450Benefits for heavy vehicles from fuel savings (€ / year) 2,019,320Benefits for private cars from operation reduction (€ / year) 36,506Benefits for heavy vehicles from operation reduction (€ / year) 24,428Benefits for private cars & heavy vehicles from distance reduction (€ / year) 938,335Benefits subtotal 2 4,315,040EGNATIA ODOS S.A.APRIL 2007

ANNEX BD3. BENEFITS FROM ACCIDENTS REDUCTIONAverage traffic volumes during the operational period WITHOUT project (AADT in PCUs/day) 10,650Length (km, existing situation) 35.83Annual vehicle-kilometres WITHOUT project (PCUs*year) 139,293,869Fatalities/ year 2.00Severe injuries/ year 3.00Light injuries/ year 22.00Damages/ year 27.00Annual vehicle-kilometres WITH project (PCUs*year) 124,973,430Fatalities/ year (vehicle-kilometres based estimation) 1.79Severe injuries/ year (vehicle-kilometres based estimation) 2.69Light injuries/ year (vehicle-kilometres based estimation) 19.74Damages/ year (vehicle-kilometres based estimation) 24.22Accidents reduction factor 40%Reduction of fatalities/ year 0.72Reduction of severe injuries/ year 1.08Reduction of light injuries/ year 7.90Reduction of damages/ year 9.69Benefits from fatalities reduction (€/ year) 227,499Benefits from severe injuries reduction (€/ year) 41,851Benefits from light injuries reduction (€/ year) 69,324Benefits from damages reduction (€/ year) 10,502Benefits subtotal 3 349,176SOCIOECONOMIC ANALYSIS RESULTSBenefits/ Cost ratio (8%) 0.40Benefits/ Cost ratio (6%) 0.52Benefits/ Cost ratio (4%) 0.71Benefits/ Cost ratio (2%) 1.09Net Present Value (NPV) in €, discount rate 8% -59,456,895Net Present Value (NPV) in €, discount rate 6% -47,430,231Net Present Value (NPV) in €, discount rate 4% -27,013,094Net Present Value (NPV) in €, discount rate 2% 6,925,004Internal Rare of Return (IRR) 2.33%SENSITIVITY TESTS INTERNAL RATE OF RETURN (IRR)10% increase in construction costs 1.70%10% decrease in construction costs 3.05%10% increase in operational costs 2.25%10% decrease in operational costs 2.42%10% increase in traffic 2.83%10% decrease in traffic 1.83%20% increase in traffic 3.32%20% decrease in traffic 1.30%EGNATIA ODOS S.A.APRIL 2007

ANNEX BAlignment 1 – Alternative CPROJECT: DEMIR KAPIJA - UDOVO - SMOKVICA (ALIGNMENT 1)Α. CONSTRUCTION ELEMENTSLength (km, new situation) 32.15Mean operational speed (km/h, exisitng situation) 59Running time (min, existing situation) 36.38Design speed (km/h, new situation) 80-110Mean operational speed (Km/h, new situation) 81Running time (min, new situation) 23.76Β. TRAFFIC VOLUMES (AVERAGE IN THE OPERATIONAL PERIOD)Private cars (P.C.) 5,942Light trucks 309Medium trucks 309Heavy trucks 463Articulated trucks 540Trucks total (reduced) 3,380Buses 154AADT (PCUs/day) 10,650C. GENERAL ELEMENTS OF THE PROJECTPeriod of analysis (years) 25Construction cost (€) 152,613,331Residual value (€) 93,913,740Operational costs (€/year, maintenance etc.) 661,9411st periodical maintenance cost during the analysis period (€) 14,773,3092nd periodical maintenance cost during the analysis period (€) 0D. BENEFITSD1. BENEFITS FROM RUNNING TIMES REDUCTION (HUMAN TIME)Reduction of running time (min) 12.62Public cars occupancy (passengers/ vehicle) 2.0Trucks occupancy (passengers/ vehicle) 1.2Buses occupancy (passengers/ vehicle) 45.0Value of working time (€/ person/ hour) 3.40Value of travelling time from/to work (€/ person/ hour) 1.70Value of time for other purposes (€/ person/ hour) 0.85Working days per month 25Passengers/ day for work purposes 6,452Passengers/ day from/ to work 9,863Passengers/ day for other purposes 4,461Benefits for passengers for work purposes (€ / year) 1,471,327Benefits for passengers from/to work (€ / year) 1,143,754Benefits for passengers for other purposes (€ / year) 259,038Benefits subtotal 1 2,874,118D2. BENEFITS FROM THE VEHICLES OPERATING COST REDUCTION (FUELS, OPERATING TIME,TRAVELLING DISTANCE )Length (km, existing situation) 35.834Length reduction (km) 3.684Private cars fuel savings (lt/km/vehicle) 0.010Heavy cars fuel savings (lt/km/vehicle) 0.020Private cars fuel cost (€/lt) 0.97Heavy cars fuel cost (€/lt) 0.81Priavate cars operation unit value - time (€/hour/vehicle) 0.08Heavy vehicles operation unit value - time (€/hour/vehicle) 0.09Private cars & heavy vehicles operation unit value - distance (€/km/vehicle) 0.03Benefits for private cars from fuel savings (€ / year) 1,296,450Benefits for heavy vehicles from fuel savings (€ / year) 2,019,320Benefits for private cars from operation reduction (€ / year) 36,506Benefits for heavy vehicles from operation reduction (€ / year) 24,428Benefits for private cars & heavy vehicles from distance reduction (€ / year) 938,335Benefits subtotal 2 4,315,040EGNATIA ODOS S.A.APRIL 2007

ANNEX BD3. BENEFITS FROM ACCIDENTS REDUCTIONAverage traffic volumes during the operational period WITHOUT project (AADT in PCUs/day) 10,650Length (km, existing situation) 35.83Annual vehicle-kilometres WITHOUT project (PCUs*year) 139,293,869Fatalities/ year 2.00Severe injuries/ year 3.00Light injuries/ year 22.00Damages/ year 27.00Annual vehicle-kilometres WITH project (PCUs*year) 124,973,430Fatalities/ year (vehicle-kilometres based estimation) 1.79Severe injuries/ year (vehicle-kilometres based estimation) 2.69Light injuries/ year (vehicle-kilometres based estimation) 19.74Damages/ year (vehicle-kilometres based estimation) 24.22Accidents reduction factor 40%Reduction of fatalities/ year 0.72Reduction of severe injuries/ year 1.08Reduction of light injuries/ year 7.90Reduction of damages/ year 9.69Benefits from fatalities reduction (€/ year) 227,499Benefits from severe injuries reduction (€/ year) 41,851Benefits from light injuries reduction (€/ year) 69,324Benefits from damages reduction (€/ year) 10,502Benefits subtotal 3 349,176SOCIOECONOMIC ANALYSIS RESULTSBenefits/ Cost ratio (8%) 0.37Benefits/ Cost ratio (6%) 0.48Benefits/ Cost ratio (4%) 0.66Benefits/ Cost ratio (2%) 1.01Net Present Value (NPV) in €, discount rate 8% -65,523,614Net Present Value (NPV) in €, discount rate 6% -53,644,360Net Present Value (NPV) in €, discount rate 4% -33,220,670Net Present Value (NPV) in €, discount rate 2% 1,018,359Internal Rare of Return (IRR) 2.05%SENSITIVITY TESTS INTERNAL RATE OF RETURN (IRR)10% increase in construction costs 1.42%10% decrease in construction costs 2.75%10% increase in operational costs 1.96%10% decrease in operational costs 2.13%10% increase in traffic 2.52%10% decrease in traffic 1.56%20% increase in traffic 2.99%20% decrease in traffic 1.06%EGNATIA ODOS S.A.APRIL 2007

ANNEX BAlignment 1 – Alternative DPROJECT: DEMIR KAPIJA - UDOVO - SMOKVICA (ALIGNMENT 1)Α. CONSTRUCTION ELEMENTSLength (km, new situation) 32.15Mean operational speed (km/h, exisitng situation) 59Running time (min, existing situation) 36.38Design speed (km/h, new situation) 80-120Mean operational speed (Km/h, new situation) 83Running time (min, new situation) 23.33Β. TRAFFIC VOLUMES (AVERAGE IN THE OPERATIONAL PERIOD)Private cars (P.C.) 5,942Light trucks 309Medium trucks 309Heavy trucks 463Articulated trucks 540Trucks total (reduced) 3,380Buses 154AADT (PCUs/day) 10,650C. GENERAL ELEMENTS OF THE PROJECTPeriod of analysis (years) 25Construction cost (€) 156,621,546Residual value (€) 96,413,585Operational costs (€/year, maintenance etc.) 742,6651st periodical maintenance cost during the analysis period (€) 16,574,9332nd periodical maintenance cost during the analysis period (€) 0D. BENEFITSD1. BENEFITS FROM RUNNING TIMES REDUCTION (HUMAN TIME)Reduction of running time (min) 13.05Public cars occupancy (passengers/ vehicle) 2.0Trucks occupancy (passengers/ vehicle) 1.2Buses occupancy (passengers/ vehicle) 45.0Value of working time (€/ person/ hour) 3.40Value of travelling time from/to work (€/ person/ hour) 1.70Value of time for other purposes (€/ person/ hour) 0.85Working days per month 25Passengers/ day for work purposes 6,452Passengers/ day from/ to work 9,863Passengers/ day for other purposes 4,461Benefits for passengers for work purposes (€ / year) 1,521,548Benefits for passengers from/to work (€ / year) 1,182,794Benefits for passengers for other purposes (€ / year) 267,880Benefits subtotal 1 2,972,222D2. BENEFITS FROM THE VEHICLES OPERATING COST REDUCTION (FUELS, OPERATING TIME,TRAVELLING DISTANCE )Length (km, existing situation) 35.834Length reduction (km) 3.684Private cars fuel savings (lt/km/vehicle) 0.010Heavy cars fuel savings (lt/km/vehicle) 0.020Private cars fuel cost (€/lt) 0.97Heavy cars fuel cost (€/lt) 0.81Priavate cars operation unit value - time (€/hour/vehicle) 0.08Heavy vehicles operation unit value - time (€/hour/vehicle) 0.09Private cars & heavy vehicles operation unit value - distance (€/km/vehicle) 0.03Benefits for private cars from fuel savings (€ / year) 1,296,450Benefits for heavy vehicles from fuel savings (€ / year) 2,019,320Benefits for private cars from operation reduction (€ / year) 37,752Benefits for heavy vehicles from operation reduction (€ / year) 25,262Benefits for private cars & heavy vehicles from distance reduction (€ / year) 938,335Benefits subtotal 2 4,317,120EGNATIA ODOS S.A.APRIL 2007

ANNEX BD3. BENEFITS FROM ACCIDENTS REDUCTIONAverage traffic volumes during the operational period WITHOUT project (AADT in PCUs/day) 10,650Length (km, existing situation) 35.83Annual vehicle-kilometres WITHOUT project (PCUs*year) 139,293,869Fatalities/ year 2.00Severe injuries/ year 3.00Light injuries/ year 22.00Damages/ year 27.00Annual vehicle-kilometres WITH project (PCUs*year) 124,973,430Fatalities/ year (vehicle-kilometres based estimation) 1.79Severe injuries/ year (vehicle-kilometres based estimation) 2.69Light injuries/ year (vehicle-kilometres based estimation) 19.74Damages/ year (vehicle-kilometres based estimation) 24.22Accidents reduction factor 40%Reduction of fatalities/ year 0.72Reduction of severe injuries/ year 1.08Reduction of light injuries/ year 7.90Reduction of damages/ year 9.69Benefits from fatalities reduction (€/ year) 227,499Benefits from severe injuries reduction (€/ year) 41,851Benefits from light injuries reduction (€/ year) 69,324Benefits from damages reduction (€/ year) 10,502Benefits subtotal 3 349,176SOCIOECONOMIC ANALYSIS RESULTSBenefits/ Cost ratio (8%) 0.36Benefits/ Cost ratio (6%) 0.47Benefits/ Cost ratio (4%) 0.64Benefits/ Cost ratio (2%) 0.98Net Present Value (NPV) in €, discount rate 8% -68,486,440Net Present Value (NPV) in €, discount rate 6% -56,714,117Net Present Value (NPV) in €, discount rate 4% -36,349,902Net Present Value (NPV) in €, discount rate 2% -2,072,072Internal Rare of Return (IRR) 1.91%SENSITIVITY TESTS INTERNAL RATE OF RETURN (IRR)10% increase in construction costs 1.29%10% decrease in construction costs 2.60%10% increase in operational costs 1.81%10% decrease in operational costs 2.00%10% increase in traffic 2.38%10% decrease in traffic 1.42%20% increase in traffic 2.85%20% decrease in traffic 0.92%EGNATIA ODOS S.A.APRIL 2007

ANNEX BAlignment 2 – Alternative BPROJECT: DEMIR KAPIJA - SMOKVICA (ALIGNMENT 2)Α. CONSTRUCTION ELEMENTSLength (km, new situation) 28.05Mean operational speed (km/h, exisitng situation) 59Running time (min, existing situation) 36.38Design speed (km/h, new situation) 110Mean operational speed (Km/h, new situation) 90Running time (min, new situation) 18.70Β. TRAFFIC VOLUMES (AVERAGE IN THE OPERATIONAL PERIOD)Private cars (P.C.) 4,730Light trucks 286Medium trucks 286Heavy trucks 429Articulated trucks 589Trucks total (reduced) 3,398Buses 153AADT (PCUs/day) 9,389C. GENERAL ELEMENTS OF THE PROJECTPeriod of analysis (years) 25Construction cost (€) 107,989,433Residual value (€) 62,611,109Operational costs (€/year, maintenance etc.) 494,5551st periodical maintenance cost during the analysis period (€) 11,037,5762nd periodical maintenance cost during the analysis period (€) 0D. BENEFITSD1. BENEFITS FROM RUNNING TIMES REDUCTION (HUMAN TIME)Reduction of running time (min) 17.68Public cars occupancy (passengers/ vehicle) 2.0Trucks occupancy (passengers/ vehicle) 1.2Buses occupancy (passengers/ vehicle) 45.0Value of working time (€/ person/ hour) 3.40Value of travelling time from/to work (€/ person/ hour) 1.70Value of time for other purposes (€/ person/ hour) 0.85Working days per month 25Passengers/ day for work purposes 5,565Passengers/ day from/ to work 8,738Passengers/ day for other purposes 3,960Benefits for passengers for work purposes (€ / year) 1,791,993Benefits for passengers from/to work (€ / year) 1,431,864Benefits for passengers for other purposes (€ / year) 324,962Benefits subtotal 1 3,548,819D2. BENEFITS FROM THE VEHICLES OPERATING COST REDUCTION (FUELS, OPERATING TIME,TRAVELLING DISTANCE )Length (km, existing situation) 35.834Length reduction (km) 7.784Private cars fuel savings (lt/km/vehicle) 0.010Heavy cars fuel savings (lt/km/vehicle) 0.020Private cars fuel cost (€/lt) 0.97Heavy cars fuel cost (€/lt) 0.81Priavate cars operation unit value - time (€/hour/vehicle) 0.08Heavy vehicles operation unit value - time (€/hour/vehicle) 0.09Private cars & heavy vehicles operation unit value - distance (€/km/vehicle) 0.03Benefits for private cars from fuel savings (€ / year) 1,512,735Benefits for heavy vehicles from fuel savings (€ / year) 3,449,608Benefits for private cars from operation reduction (€ / year) 40,702Benefits for heavy vehicles from operation reduction (€ / year) 34,377Benefits for private cars & heavy vehicles from distance reduction (€ / year) 1,129,868Benefits subtotal 2 6,167,289EGNATIA ODOS S.A.APRIL 2007

ANNEX BD3. BENEFITS FROM ACCIDENTS REDUCTIONAverage traffic volumes during the operational period WITHOUT project (AADT in PCUs/day) 9,389Length (km, existing situation) 35.83Annual vehicle-kilometres WITHOUT project (PCUs*year) 122,808,017Fatalities/ year 2.00Severe injuries/ year 3.00Light injuries/ year 22.00Damages/ year 27.00Annual vehicle-kilometres WITH project (PCUs*year) 96,131,185Fatalities/ year (vehicle-kilometres based estimation) 1.57Severe injuries/ year (vehicle-kilometres based estimation) 2.35Light injuries/ year (vehicle-kilometres based estimation) 17.22Damages/ year (vehicle-kilometres based estimation) 21.13Accidents reduction factor 40%Reduction of fatalities/ year 0.63Reduction of severe injuries/ year 0.94Reduction of light injuries/ year 6.89Reduction of damages/ year 8.45Benefits from fatalities reduction (€/ year) 198,487Benefits from severe injuries reduction (€/ year) 36,514Benefits from light injuries reduction (€/ year) 60,483Benefits from damages reduction (€/ year) 9,162Benefits subtotal 3 304,646SOCIOECONOMIC ANALYSIS RESULTSBenefits/ Cost ratio (8%) 0.90Benefits/ Cost ratio (6%) 1.14Benefits/ Cost ratio (4%) 1.54Benefits/ Cost ratio (2%) 2.31Net Present Value (NPV) in €, discount rate 8% -8,442,372Net Present Value (NPV) in €, discount rate 6% 11,501,944Net Present Value (NPV) in €, discount rate 4% 41,109,817Net Present Value (NPV) in €, discount rate 2% 85,645,948Internal Rare of Return (IRR) 7.06%SENSITIVITY TESTS INTERNAL RATE OF RETURN (IRR)10% increase in construction costs 6.17%10% decrease in construction costs 8.09%10% increase in operational costs 6.98%10% decrease in operational costs 7.13%10% increase in traffic 7.96%10% decrease in traffic 6.13%20% increase in traffic 8.85%20% decrease in traffic 5.17%EGNATIA ODOS S.A.APRIL 2007

ANNEX BAlignment 2 – Alternative CPROJECT: DEMIR KAPIJA - SMOKVICA (ALIGNMENT 2)Α. CONSTRUCTION ELEMENTSLength (km, new situation) 28.05Mean operational speed (km/h, exisitng situation) 59Running time (min, existing situation) 36.38Design speed (km/h, new situation) 110Mean operational speed (Km/h, new situation) 90Running time (min, new situation) 18.70Β. TRAFFIC VOLUMES (AVERAGE IN THE OPERATIONAL PERIOD)Private cars (P.C.) 4,730Light trucks 286Medium trucks 286Heavy trucks 429Articulated trucks 589Trucks total (reduced) 3,398Buses 153AADT (PCUs/day) 9,389C. GENERAL ELEMENTS OF THE PROJECTPeriod of analysis (years) 25Construction cost (€) 114,829,350Residual value (€) 66,537,951Operational costs (€/year, maintenance etc.) 538,3211st periodical maintenance cost during the analysis period (€) 12,014,3522nd periodical maintenance cost during the analysis period (€) 0D. BENEFITSD1. BENEFITS FROM RUNNING TIMES REDUCTION (HUMAN TIME)Reduction of running time (min) 17.68Public cars occupancy (passengers/ vehicle) 2.0Trucks occupancy (passengers/ vehicle) 1.2Buses occupancy (passengers/ vehicle) 45.0Value of working time (€/ person/ hour) 3.40Value of travelling time from/to work (€/ person/ hour) 1.70Value of time for other purposes (€/ person/ hour) 0.85Working days per month 25Passengers/ day for work purposes 5,565Passengers/ day from/ to work 8,738Passengers/ day for other purposes 3,960Benefits for passengers for work purposes (€ / year) 1,791,993Benefits for passengers from/to work (€ / year) 1,431,864Benefits for passengers for other purposes (€ / year) 324,962Benefits subtotal 1 3,548,819D2. BENEFITS FROM THE VEHICLES OPERATING COST REDUCTION (FUELS, OPERATING TIME,TRAVELLING DISTANCE )Length (km, existing situation) 35.834Length reduction (km) 7.784Private cars fuel savings (lt/km/vehicle) 0.010Heavy cars fuel savings (lt/km/vehicle) 0.020Private cars fuel cost (€/lt) 0.97Heavy cars fuel cost (€/lt) 0.81Priavate cars operation unit value - time (€/hour/vehicle) 0.08Heavy vehicles operation unit value - time (€/hour/vehicle) 0.09Private cars & heavy vehicles operation unit value - distance (€/km/vehicle) 0.03Benefits for private cars from fuel savings (€ / year) 1,512,735Benefits for heavy vehicles from fuel savings (€ / year) 3,449,608Benefits for private cars from operation reduction (€ / year) 40,702Benefits for heavy vehicles from operation reduction (€ / year) 34,377Benefits for private cars & heavy vehicles from distance reduction (€ / year) 1,129,868Benefits subtotal 2 6,167,289EGNATIA ODOS S.A.APRIL 2007

ANNEX BD3. BENEFITS FROM ACCIDENTS REDUCTIONAverage traffic volumes during the operational period WITHOUT project (AADT in PCUs/day) 9,389Length (km, existing situation) 35.83Annual vehicle-kilometres WITHOUT project (PCUs*year) 122,808,017Fatalities/ year 2.00Severe injuries/ year 3.00Light injuries/ year 22.00Damages/ year 27.00Annual vehicle-kilometres WITH project (PCUs*year) 96,131,185Fatalities/ year (vehicle-kilometres based estimation) 1.57Severe injuries/ year (vehicle-kilometres based estimation) 2.35Light injuries/ year (vehicle-kilometres based estimation) 17.22Damages/ year (vehicle-kilometres based estimation) 21.13Accidents reduction factor 40%Reduction of fatalities/ year 0.63Reduction of severe injuries/ year 0.94Reduction of light injuries/ year 6.89Reduction of damages/ year 8.45Benefits from fatalities reduction (€/ year) 198,487Benefits from severe injuries reduction (€/ year) 36,514Benefits from light injuries reduction (€/ year) 60,483Benefits from damages reduction (€/ year) 9,162Benefits subtotal 3 304,646SOCIOECONOMIC ANALYSIS RESULTSBenefits/ Cost ratio (8%) 0.84Benefits/ Cost ratio (6%) 1.06Benefits/ Cost ratio (4%) 1.44Benefits/ Cost ratio (2%) 2.15Net Present Value (NPV) in €, discount rate 8% -14,290,808Net Present Value (NPV) in €, discount rate 6% 5,584,182Net Present Value (NPV) in €, discount rate 4% 35,252,837Net Present Value (NPV) in €, discount rate 2% 80,091,942Internal Rare of Return (IRR) 6.49%SENSITIVITY TESTS INTERNAL RATE OF RETURN (IRR)10% increase in construction costs 5.63%10% decrease in construction costs 7.48%10% increase in operational costs 6.40%10% decrease in operational costs 6.57%10% increase in traffic 7.35%10% decrease in traffic 5.60%20% increase in traffic 8.20%20% decrease in traffic 4.69%EGNATIA ODOS S.A.APRIL 2007

ANNEX BAlignment 2 – Alternative DPROJECT: DEMIR KAPIJA - SMOKVICA (ALIGNMENT 2)Α. CONSTRUCTION ELEMENTSLength (km, new situation) 28.05Mean operational speed (km/h, exisitng situation) 59Running time (min, existing situation) 36.38Design speed (km/h, new situation) 120Mean operational speed (Km/h, new situation) 95Running time (min, new situation) 17.72Β. TRAFFIC VOLUMES (AVERAGE IN THE OPERATIONAL PERIOD)Private cars (P.C.) 4,730Light trucks 286Medium trucks 286Heavy trucks 429Articulated trucks 589Trucks total (reduced) 3,398Buses 153AADT (PCUs/day) 9,389C. GENERAL ELEMENTS OF THE PROJECTPeriod of analysis (years) 25Construction cost (€) 125,149,748Residual value (€) 72,278,632Operational costs (€/year, maintenance etc.) 617,1001st periodical maintenance cost during the analysis period (€) 13,772,5502nd periodical maintenance cost during the analysis period (€) 0D. BENEFITSD1. BENEFITS FROM RUNNING TIMES REDUCTION (HUMAN TIME)Reduction of running time (min) 18.66Public cars occupancy (passengers/ vehicle) 2.0Trucks occupancy (passengers/ vehicle) 1.2Buses occupancy (passengers/ vehicle) 45.0Value of working time (€/ person/ hour) 3.40Value of travelling time from/to work (€/ person/ hour) 1.70Value of time for other purposes (€/ person/ hour) 0.85Working days per month 25Passengers/ day for work purposes 5,565Passengers/ day from/ to work 8,738Passengers/ day for other purposes 3,960Benefits for passengers for work purposes (€ / year) 1,891,751Benefits for passengers from/to work (€ / year) 1,511,575Benefits for passengers for other purposes (€ / year) 343,052Benefits subtotal 1 3,746,378D2. BENEFITS FROM THE VEHICLES OPERATING COST REDUCTION (FUELS, OPERATING TIME,TRAVELLING DISTANCE )Length (km, existing situation) 35.834Length reduction (km) 7.784Private cars fuel savings (lt/km/vehicle) 0.010Heavy cars fuel savings (lt/km/vehicle) 0.020Private cars fuel cost (€/lt) 0.97Heavy cars fuel cost (€/lt) 0.81Priavate cars operation unit value - time (€/hour/vehicle) 0.08Heavy vehicles operation unit value - time (€/hour/vehicle) 0.09Private cars & heavy vehicles operation unit value - distance (€/km/vehicle) 0.03Benefits for private cars from fuel savings (€ / year) 1,512,735Benefits for heavy vehicles from fuel savings (€ / year) 3,449,608Benefits for private cars from operation reduction (€ / year) 42,967Benefits for heavy vehicles from operation reduction (€ / year) 36,290Benefits for private cars & heavy vehicles from distance reduction (€ / year) 1,129,868Benefits subtotal 2 6,171,468EGNATIA ODOS S.A.APRIL 2007

ANNEX BD3. BENEFITS FROM ACCIDENTS REDUCTIONAverage traffic volumes during the operational period WITHOUT project (AADT in PCUs/day) 9,389Length (km, existing situation) 35.83Annual vehicle-kilometres WITHOUT project (PCUs*year) 122,808,017Fatalities/ year 2.00Severe injuries/ year 3.00Light injuries/ year 22.00Damages/ year 27.00Annual vehicle-kilometres WITH project (PCUs*year) 96,131,185Fatalities/ year (vehicle-kilometres based estimation) 1.57Severe injuries/ year (vehicle-kilometres based estimation) 2.35Light injuries/ year (vehicle-kilometres based estimation) 17.22Damages/ year (vehicle-kilometres based estimation) 21.13Accidents reduction factor 40%Reduction of fatalities/ year 0.63Reduction of severe injuries/ year 0.94Reduction of light injuries/ year 6.89Reduction of damages/ year 8.45Benefits from fatalities reduction (€/ year) 198,487Benefits from severe injuries reduction (€/ year) 36,514Benefits from light injuries reduction (€/ year) 60,483Benefits from damages reduction (€/ year) 9,162Benefits subtotal 3 304,646SOCIOECONOMIC ANALYSIS RESULTSBenefits/ Cost ratio (8%) 0.77Benefits/ Cost ratio (6%) 0.98Benefits/ Cost ratio (4%) 1.32Benefits/ Cost ratio (2%) 1.98Net Present Value (NPV) in €, discount rate 8% -21,681,005Net Present Value (NPV) in €, discount rate 6% -1,573,624Net Present Value (NPV) in €, discount rate 4% 28,638,824Net Present Value (NPV) in €, discount rate 2% 74,552,898Internal Rare of Return (IRR) 5.87%SENSITIVITY TESTS INTERNAL RATE OF RETURN (IRR)10% increase in construction costs 5.05%10% decrease in construction costs 6.83%10% increase in operational costs 5.78%10% decrease in operational costs 5.96%10% increase in traffic 6.70%10% decrease in traffic 5.03%20% increase in traffic 7.51%20% decrease in traffic 4.16%EGNATIA ODOS S.A.APRIL 2007