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Finland-Estonia Undersea Rail Faces Issues

Wednesday, September 4, 2019

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A proposed 15 billion-euro ($16.8 billion) undersea rail tunnel, connecting the capitals of Finland and Estonia, recently hit its first stumbling block: more details related to funding are needed. The Finland government has also not received an official request to sign a memorandum of understanding.

The tunnel, known as the Helsinki-Tallinn Tunnel, would run under the Gulf of Finland, connecting Helsinki, Finland, and Tallinn, Estonia. The European Union also approved 3.1 million euros for feasibility studies in 2016.

Helsinki-Tallinn Tunnel Project

In 2015, an early report indicated that the tunnel could be economically profitable, and that a 30% increase in passenger and freight traffic would cover over half the cost of building the tunnel, though there would still be a need for private investors. To cover construction costs, an EU grant covering 40% would be needed.

In mid-June 2016, the Helsinki-Uusimaa Regional Council announced that it would be studying implementation opportunities with the funding from the EU, and that the study was slated to take two years.

A feasibility study, published in 2017 and commissioned by the governments of Finland and Estonia, indicated that the tunnel would open in 2040, but Peter Vesterbacka, a former executive for Rovio and a project leader, noted that it would be completed by 2024.

In March of this year, China’s Touchstone Capital Partners announced that it would be providing a provisional 15 billion euros, a move that is part of the Belt and Road Initiative out of Bejing. (The initiative would connect China with central Asia, the Middle East, Europe and Africa.) Around that time, Finest Bay Area Development said that it had signed a memorandum of understanding to provide a third of the funding in private equity.

In July, Finest Bay Area Development signed a letter of intent for building the 62-mile rail project. The letter was signed with China Railway Group Limited (CREC).  

Financing Concerns

The government of Estonia recently requested additional details on how the project would be funded, according to Bloomberg. Estonian Economy Minister Taavi Aas expressed a need for a clear understanding of where funding would be coming from, and how much of it there would be. There are also concerns over whether the project will be completed, and that the developer has not been able to estimate how many would be traveling through the tunnel.

On top of this, Finland’s government has also not discussed the project, nor is the endeavor part of the country’s policy program.

“We’ve had unofficial talks with our Estonian colleagues regarding their idea of a memorandum of understanding, but they haven’t yet sent an official request to sign one,” noted Sabina Lindstrom, who serves director-general of the Networks Department for the Ministry of Transport and Communications, in an interview with Bloomberg.


Tagged categories: EU; Europe; Funding; Infrastructure; Program/Project Management; Rail; Transportation

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