Political interference on the Helsinki-Tallinn plan 09 Jul 2020

Development of a rail link under the Baltic Sea to link Finland with Estonia and mainland Europe could be held up by years following a decision by local politicians in Finland. A regional plan to 2050 by the Uusimaa Regional Council has decided to support only one possible alignment for the link, passing through the centre of Helsinki, despite the fact that environmental impact assessments in both Finland and Estonia have yet to be completed and before geological investigations have been conducted.

Twin TBM tunnels of 100km would link the two capitals

“As any expert will tell you, there is not enough information yet to make a decision about alignments,” said Peter Vestebacka, a cofounder of project developer FinEst Bay Area Development, on a recent TunnelTalk video call with fellow cofounder, Kustaa Valtonen. “But the regional council decided they know better than the experts and made a political decision before the facts are fully known.” Privately-owned FinEst Bay Area Development is currently the only organisation to be developing a fixed sea link, after the two-year government-backed FinEst Link project produced its final feasibility report in 2018

The environmental impact assessments (EISs) include three possible alignments on the Finnish side and five on the Estonian side (Fig 1).

In another unusual turn, the decision would result in the development of two underground rail links between the centre of Helsinki and the airport. “The regional plan includes a separate high-speed connection to the airport effectively duplicating the alignment of our tunnel. They would be on top of each other, which makes no sense,” said Vestebacka.

The decision by the city regional council also complicates work on the Estonian side,” said Valtonen, “and may be illegal under Finnish and European Union law. If you fix the route on the Finnish side, it has implications on the Estonian side, as you cannot freely mix and match potential alignments. It is a very unfortunate decision.”

There is some hope of getting the decision reversed before the council officially closes the proposal plan in August. If it stays in place, the decision could delay the project by up to seven years. “We cannot proceed with just one route,” said Valtonen. “It is too limiting and too great a risk to a construction plan. We need the alternative routes because there is not enough information yet to decide which is the best. A process change to add the other routes back into the plan would take multiple years.”

Work on the project nevertheless continues. The EIA is well underway in Finland with hopes it might be finished this year (2020), although the Covid-19 pandemic has slowed the process. “It is do-able, but we also know that unexpected things happen. We are hoping we can do it this year,” said Vestebacka.

Fig 1. Potential routes for the Helsinki-Tallinn route

In Estonia, the EIA is yet to officially begin, although preparatory work is taking place. “Legislation in Estonia has been going through some changes,” said Valtonen. “Our understanding is that it will make the process smoother and more like the process in Finland. As a result, we actually pulled our original application and will now re-apply under the new system, when that is available most likely sometime later this year.”

Detailed design work is also ongoing with design contractors, AINS of Finland, AFRY, which was formed when ÅF acquired Pöyry in February 2019, and China-based CRIG, China Rail International Group, a subsidiary of China Railway Engineering Company, CREC. As previously reported in TunnelTalk, the project design includes twin TBM-bored 100km rail tunnels for dedicated passenger and freight routes, as well as an artificial island off the coast of Finland. When complete, it would be the longest rail tunnel in the world, with high-speed rail services linking the two cities in 20-25 minutes.

At the national level, political support appears to be growing for the project. “Estonia Prime Minister, Jüri Ratas, mentioned the tunnel as an example of the type of project that his country needs for the post-Covid recovery,” said Vestebacka. The Governments of Finland and Estonia are also due to sign an memorandum of understanding (MoU) endorsing the project. Despite delays due to Covid-19, “we recently heard from the Ministry of Transport and Communication in Finland that it is working with Estonia on the final wording of the memorandum,” added Valtonen.

This MoU is particularly important for the Estonian Government as a concrete sign that the political will is there to back the project. It does not however translate into financial support for the project. Funding for the €15 billion project, of which construction is expected to be some €12.5 billion, is being provided by London-based firm TCP, TouchStone Capital Partners, which has both major Chinese state-owned enterprises and private companies as investors. Under the structure agreed in 2019, 30% of the funding will be provided by TCP in exchange for equity, with the remaining 70% provided as a loan.

Major elements of the FinEst Bay project

Although the project is fully funded by TCP, “we have the possibility to bring on board additional investors,” said Valtonen. This was agreed to at the request of politicians in Finland and Estonia to balance concerns over Chinese investment in the project. Additional private investment is likely, as there are currently no plans to apply for public funds from either of the two countries involved or the EU. “We have potential investors that demand some sort of governmental financing. So if applying for public investment makes sense in that context, then it is something we would consider,” said Valtonen.

Earlier this year, the Estonian Government told TunnelTalk that it would support adding the connection to the EU TEN-T Core Network. “This would create both visibility for the project and would enable applications for certain EU funding,” said a representative of the Transport Development and Investments Department of the Estonian Ministry of Economic Affairs and Communications.

Meanwhile, Covid-19 has provided fresh impetus for investment, according to Vestebacka, as money managers look for safe havens for their capital. “We already had good interest but now it is spontaneous. People are reading about the project and contacting us, asking how they can be a part of it.” TCP is also in the process of an initial public offering with listings planned in Hong Kong, Singapore and London, although Covid-19 has put the Hong Kong listing on hold. An initial public offering (IPO) will open the company up to stock-market scrutiny and regulation, as well as investment, which may further help to alleviate political concern over the Chinese involvement element.

Hopes for a rail link between the capitals now lies solely with FinEst Bay Area Development, its founders and funding partners. A previous government-sponsored study, the FinEst Link project, which was backed by the Uusimaa Regional Council with fellow public stakeholders the local government of Harju County, the cities of Helsinki and Tallinn, the Finnish Transport Agency and the Estonian Ministry of Transport and Communications, concluded in 2018 with little appetite to pursue a public option further.