Short
Review of PBI report: Financing of Large-scale Infrastructure, case Nordic
Connector (FLINC)
Financing of Large-scale Infrastructure, case Nordic Connector (FLINC)
Guide:
Square bullets are from the PBI report, unfilled circles are my comments
PBI’s
financing perspectives for the Nordic Connector:
§ “The
Nordic Connector should not be viewed as a single infrastructure project,
but rather as a program investment consisting of several interrelated
subprojects.”
o
Nordic Connector (NC) must be viewed as a
project on its own right. Expanding it to include many subprojects
overcomplicates and causes delays. Subprojects can be included later.
§ “Large-scale
transport infrastructure is seldom fully self-financing through user charges.
The Nordic Connector is no exception to this. Instead, investments of this
scale are typically justified by broader socio-economic and strategic benefits.”
o No
“typical” case is shown. No benefit without willingness to pay! User charge is
important. According to my traffic forecast, tolls on Nordic Connector over Kvarken would make NC self-financing.
§ “Financial
modelling demonstrates that financial feasibility is conditional rather than
fixed. Under favourable assumptions the
project can achieve financial sustainability. The analysis shows that no single
factor is sufficient on its own; a combination of measures is required”
o
No such analysis was made. NPV for the
favorable and optimistic scenarios is positive (and at a low traffic estimate!)
and road tolls pay the loans off in 30 years!
§ “A
hybrid model based on a publicly owned Special Purpose Vehicle (SPV) is
identified as the most viable financing structure. In this model, Finland and
Sweden Jointly establish and own SPV … Public sector involvement, including
state guarantees …to enable long-term debt financing.”
o SPV,
type Öresund or E-18, are possible with state loan guarantees. EU grants are
likely.
§ “Public
co-financing for the Nordic Connector will be critical.
EU instruments, particularly the Connecting Europe Facility (CEF) and Military
Mobility, are the most relevant of 10–30% of total.”
o
CEF and Military Mobility contribution likely
range is 30-50%.
§ “A central
conclusion is of distinguishing between bankability and societal value. The fixed
link is not bankable on user charges; it may generate substantial Wider
Economic Impacts (WEI).“
o
NC road may be fully bankable on user charges
plus CEF grant. Non-monetized WEI are important for public acceptance.
§ “The
key question is therefore not whether the project can pay for itself, but
whether its wider economic and strategic benefits are sufficient to justify the
required public investment.
o Public acceptance of NC should be assessed and developed using a professional
application of Policy Delphi (such as RD Aluekehitys Delfoi) or complementary
methods.
Recommended next steps from a
financing perspective for the Nordic Connector: