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Six questions and answers about the fast rail connections and the project companies

Six questions and answers about the fast rail connections and the project companies

Press release 05.04.2019 10.26 fi sv en

Rails. (Photo: Shutterstock)

There has been public debate about the project companies aimed at promoting large-scale investments in railway transport and the fast rail connections to Turku and Tampere. There are several open questions related to the project companies. This press release is aimed at clarifying their current situation.

What has already been done?

– On 1 February 2019, the Cabinet Committee on Economic Policy adopted a favourable opinion on establishing a limited liability company wholly owned by the State of Finland. According to the Cabinet Committee’s favourable opinion, this limited liability company would form a group by establishing five subsidiaries, which are project companies Suomi-rata (“Finland line”) and Turun tunnin juna (“fast Helsinki-Turku line”), a rolling stock company, a real estate company and the Rail Baltica company.
– The Ministry of Transport and Communications established the parent company Nordic Railways Ltd (Pohjolan Rautatiet Oy) on 14 February 2019 according to the decision made by the Government. The State provided capital for Nordic Railways Ltd by handing over to it shares of Neste Oyj to the value of EUR 107 million. The company sold the shares on 1 March 2019.
– The subsidiaries of have not yet been established. The shareholder agreements for the project companies Finland line and the fast Helsinki-Turku line, both promoting fast rail connections, have already been negotiated with the cities involved and Finavia, but they cannot be signed during the caretaker government.

Why are fast connections needed?

– The accessibility of the regions and areas is essential for Finland’s competitiveness and success. Large-scale railway projects such as the Finland line, the fast Helsinki-Turku line and making the eastern rail line faster would connect the regions and have significant impacts on community structures. The projects are strategic in terms of the whole country and would contribute to economic growth, employment, the development of income distribution, city structures and the environment.
– Fast train connections will facilitate mobility and extend the commuter areas.
– Many measures are required to mitigate climate change. Rail transport is a sustainable means of transport and the aim is to make rail travel a more attractive alternative to private cars.

What are the project companies needed for?

– The State’s capacities to allocate funding to investments in the development of the rail network is limited and especially the large-scale investments will fail to materialise unless the funding base of the projects is expanded from the current model, which is based on funding from the Budget. The Finland line and the Airport line together have been estimated to cost about EUR 5.5 billion, while the estimate for the line to Turku is about EUR 2.2 billion.
– The companies that will be established to promote the railway investments would enable the use of new financing mechanisms to develop the railway network and would also make it possible to implement a larger number of projects than before. Both the parliamentary working group on transport network funding (final report on 28 February 2018) and the Ministry of Finance’s working group investigating the implementation of infrastructure projects using a corporate model (final report on 20 December 2018) came to this conclusion.

Who is involved in the project companies?

– So far, negotiations have been conducted with the cities of Tampere, Turku, Helsinki, Vantaa and Espoo and with Finavia. The aim of the preparations has been to also give other cities the opportunity to join the companies.
– There have been no private sponsors in the shareholder agreement negotiations.

From where do the project companies get their funding?

The funding of the planning and construction phase of the railway projects: 

– The planning and construction phase is funded with the capital provided for the company by the owners. The owners can also invest real estate in the project company to provide the company with the opportunity to receive rent income.

– The company may take out a loan to finance its operation.

– Funding can also applied for to the EU, whose funding share can during the current funding period be a maximum of 50% of the planning costs eligible for funding and a maximum of 20% of the construction costs eligible for funding. The new funding period will begin in 2021 and its terms are currently being negotiated.

In the operation phase, the company’s income would consist of the fees charged to passengers and transport operators, the rent income received from the real estate and the fixed-term remunerations paid by the owners.

When will it be possible to use the fast train connections from Helsinki to Tampere and Turku?

– According to preliminary estimations, the Finland line a could be in operation at the beginning of the 2030s and the Airport line possibly even slightly earlier.
– In the west, the Espoo urban railway could be in use in 2025 and the fast Helsinki-Turku line at the beginning of the 2030s.
– The Airport line refers to a fast connection between the centre of Helsinki and Helsinki Airport. It is not the same as the City Rail Loop (Pisararata), which is a planned railway line under Helsinki.

In future, the project company model can also be used in making the eastern rail line faster. The report drawn up by the group examining the eastern rail line will be published on 5 April 2019.

The Ministry of Transport and Communications is working on a report on the City Rail Loop together with the Finnish Transport Infrastructure Agency, the City of Helsinki and Helsinki Regional Transport Authority (HSL). The aim of the report is to update the plans for the City Rail Loop to meet the objectives set for it, ensure that the plans currently in force for the rail line project are up to date and determine the possible needs to update them. The report on the City Rail Loop will be published later in April.

Inquiries:
Sanna Ruuskanen, Director of Unit, tel. +358 50 376 2377 (Project companies)
Sabina Lindström, Director-General, tel. +358 40 527 6103 (Eastern rail line and the report on the City Rail Loop)