Costs of the 17.6km long Fehmarnbelt fixed link between Denmark and Germany have been revised upwards for inflation to €6.2 billion in 2014 prices. This increases the estimate of the overall project from the earlier €5.5 billion estimate in 2008 prices and the cost of the central immersed tube element contract estimate to €4.3 billion in 2014 prices. The adjustment was revealed as Danish state-owned developer, Femern A/S, awaited final priced bids in late December for the three major contract packages.
Using the recast costs, Femern A/S is set to weigh the price bids of the main design-build tenders that comprise two tunnel packages, a portals and ramps package, and a package covering dredging and land reclamation. Jens Villemoes of the communications office of Femarn A/S Denmark confirmed that all prequalified consortia that presented technical and administrative bids for the tunnel contracts submitted a corresponding price bid.
Landworks in Denmark for the combined road and rail scheme are excluded from the main figure and are handled separately in the financial report issued in December. Landworks for the German side of the project are also excluded from the Danish estimates as their procurement will be managed by the German Ministry of Transport.
The tender data with the priced bids will also help confirm the bulk 75%-80% of the project budget. Latest cost estimates will form a vital part of the budget data in the Construction Act that is to be submitted to the Danish Parliament in February 2015 and as the same process progresses in parallel with the German government authorities. The Construction Act will give legal powers to proceed with the scheme.
Tenders have a 20-month validity period but it is hoped that both the contract awards and commencement of construction will happen by the third quarter of 2015. The scheme is scheduled for completion in late 2021, and will create a fixed crossing between mainland Europe and Scandinavia.
The financial analysis forecasts that the payback period for the tunnel and Danish landworks might be 32 years or about seven years less than previously calculated.
The latest financial forecast of construction costs by Femern A/S is an inflation-adjusted update of its 2011 analysis, which itself was benchmarked with consistent prices against the previous 2008 studies, the 2011 costs being given in 2008 prices.
The latest €4.3 billion coast-to-coast tunnel section cost in 2014 prices, is up from the €3.8 billion 2008 prices given in the 2011 analysis.
To the core tunnel costs are added:
- Other costs in the construction category, which increase the latest estimate for total construction costs to €4.6 billion in 2014 prices, up from the 2011 estimate of €4.1 billion (in 2008 prices); and
- further costs to cover planning, design, studies, management and a contingency reserve the increase the latest budget estimate for the coast-to-coast tunnel works to €6.2 billion in 2014 prices compared to the 2011 financial analysis of €5.5 billion in 2008 prices.
The cost of landworks on the Danish side is given separately in the analysis at €1.3 billion (2014 prices) versus €1.1 billion (2008 prices).
Consequently, the latest capital cost for the coast-to-coast tunnel works, plus the Danish landworks, is estimated to be €7.5 billion in 2014 prices.
In addition to capital costs there is provision for construction cost variation as well as estimates for operating, maintenance and reinvestment in the infrastructure asset.
The fixed crossing is being funded on a state-guarantee basis by Denmark and the analysis includes traffic revenue estimates, provision of EU grant funding, as it is a strategic European transport link, and various interest rate assumptions.
Femern A/S said that while the real interest rate is presently less than 1% it had set a higher rate of 3% for the financial calculations. It added that, depending on the level of reserves in the construction estimate, the latest financial analysis shows that the repayment period for the entire scheme is 32-37 years, set against an earlier estimate of 39 years.
Early cost estimates for a fixed link were based on feasibility studies performed in the late 1990s and draw also from the Øresund fixed sea-link between Denmark and Sweden.
Initially, the Fehmarn crossing was investigated to be either a bridge or a tunnel. By 2008, the first cost estimates for the alternatives favoured the bridge the coast-to-coast section at €4.4 billion (in 2008 prices) against €5.5 billion for an immersed tube tunnel. Associated landworks on the Danish side for both options at the time was €1 billion.
Further studies in 2010 however, suggested the bridge alternative would be more expensive than previously thought and the tunnel might be cheaper than had been estimated. The tunnel was recalculated to be marginally cheaper at €5.1 billion against an increased bridge price of €5.2 billion with both still benchmarked to 2008 prices.
The immersed tube cost estimated had benefited from advances in ventilation systems and the possibility of constructing special larger tunnel elements at intervals to house services. The technical review came out in favour of the tunnel in six categories overall – environment, navigation safety, emergency preparedness and safety, technical risks, time schedule, and finances.
An immersed tube was also calculated as cheaper than other tunnel construction methods and was pursued. The bridge alternative was dropped in late 2010.
However, within a few months, the estimate of the coast-to-coast tunnel section was re-assessed higher to €5.5 billion (in 2008 prices) due to definite selection in mid-2011 of Rødbyhavn as the site of the drydock for casting the elements, ruling out drydock and casting yard alternatives by bidders. The revised estimate has been the reference cost of the scheme until the December 2014 revision.
Since 2011, the investigations and design of the immersed tube tunnel has developed and has drawn upon building information modelling (BIM). The tender process for the major tunnel contracts started in late 2012 and in September 2013 the prequalified contractors received tender documents for each package. All contractors submitted the first technical and administrative bids in April 2014, and dialogue followed with each in the run up to submission of the priced bids in December 2014.
Separate contracts are also under procurement for packages to include track work; power supply; mechanical and electrical installations; architectural lighting; and toll collections. Advance works to prepare for main construction activity is underway. Technical and administrative bids for the power supply and the M&E installations contracts are due in late 2015 with award for both anticipated in early 2016.
Procurement for the major contracts has been running parallel to legal procedures for the Construction Act powers in Denmark and Germany. Femern A/S said the bid tenders for the major tunnel packages would provide market-priced data relating to about three-quarters of the project’s construction budget and help “reduce significantly” budget uncertainty. “The Construction Act will be based therefore on a greater certainty than is normally the case” said the Femern A/S published statement.
There is much to achieve however to finalise the budget. According to Femern A/S it now has to match, or “realign”, the latest construction estimate to the contract structure employed by the tender documents; include changes from dialogue with bidders; and make amendments to meet needs coming out of the consultation process in Germany.