Feasibility study of an underground transportation system in Malta

Abstract

Purpose Over the years the traffic problem in Malta is becoming worse making it hard for commuters to travel from one place to the other. Given the narrow road structures in this densely populated island, a new transportation system below ground could be a viable solution. The purpose of this study is to analyse whether the underground transportation could be a feasible project for Malta over 26 years. Design The model of this underground system was developed with the advice of local professionals and international online sources. The perception of the Maltese population was studied through the circulation of a questionnaire. Finally investment appraisal techniques and sensitivity analysis of different scenarios were undertaken to assess the viability of this project. Findings This underground transportation system is a PPP project and under this study it is assumed that the government will provide 35% of the initial capital expenditure (between Year 1 and Year 6). The initial capital expenditure accumulates to €134,679,334 and apart from the government grant it is funded with debt (18%) and equity (82%). Under the base scenario the project achieves a positive NPV of €21,226,873 showing that the project is beneficial. Conclusion The sample gathered from the questionnaire illustrates that the Maltese population are open minded to the idea of this new transportation system. The study demonstrates to be feasible under the base scenario and remains feasible under the different scenarios analysed. Nonetheless, the results show that the project has a substantial degree of risk and could be only counterbalanced through government support Implications This project is feasible and benefits investors, thus it could be implemented given that the necessary government aid is provided.