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International Internet Magazine. Baltic States news & analytics Tuesday, 26.09.2017, 03:22

Rail Baltica is Financially and Economically Viable

BC, Riga, 24.04.2017.Print version
The Rail Baltica Global Cost-Benefit Analysis (CBA) presented on April 24 during Rail Baltica Global Forum 2017 confirms that the Rail Baltica project is financially and economically viable. The new study reaffirms the project’s economic feasibility and highly beneficial nature, providing the necessary updated parameters for the project’s continued EU and national co-financing, Rail Baltica Global Forum representatives informed BC.

The Ernst & Young Baltic Ltd (EY) prepared study is a Cost-Benefit Analysis of the whole Global project [1] – public-access railway infrastructure in the three Baltic states. The key aim of this study is to re-assess the economic case for Rail Baltica in light of the amended route alignment and expanded project scope since the 2011 AECOM study, and to provide new parameters for long-term project financing.

 

The study suggests that the total estimated cost of the project is 5.8 bln in all three countries. Estonia – 1.35 bln (national share ~268 mln); Latvia – 1.968 bln (national share ~393 mln); Lithuania - 2.473 bln (national share ~493 mln).

 

Measurable project socio-economic benefits – estimated at 16.2 bln euro – will far outweigh national co-investments. Furthermore, it is assessed that the project would create a GDP multiplier effect worth an additional 2 bln euro. In addition, there will be substantial unmeasurable benefits (mostly of a catalytic nature). There will be considerable unmeasurable benefits from a strengthened Baltic business community to greater regional access to entertainment, culture or other services. Therefore, the project is economically viable, as the benefits to society considerably exceed project capital and operational expenditures.

 

On average, Rail Baltica will generate measurable discounted net benefits/cash flow worth 6 euros to the wider economies of the three Baltic states for every invested euro from national budgets.

The Rail Baltica project will create 13 000 full-time equivalent construction jobs and over 24 000 FTE indirect and induced jobs in related industries during the construction phase. However, during the operational phase, Rail Baltica will create the conditions to save 400 human lives, equivalent to average annual value of 30 mln EUR. It will create CO2 emission reduction benefits worth 3.0 bln EUR and air pollution reduction benefits of 3.3 bln EUR value – contributing greatly to the EU’s global leadership in environmental sustainability.

 

In 2030, it is estimated that infrastructure maintenance costs for the entire railway line in all three countries, for example, for track, traction, bridges/tunnels, terminals and stations, etc. will be 58.9 mln euro.

 

The study also verifies that the infrastructure manager is financially sustainable in the long-term, following an initial 5-year period of national financial support (28.6 mln euros shared by the three Baltic states) during the project uptake stage as Rail Baltica achieves its intended potential.


Passenger travel

Rail Baltica will be a game changer, especially, for intra-Baltic travel. Rail Baltica competitive advantages for passenger travel are:


●        Speed, time savings, comfort, productive travel time, safer and environmentally sustainable means of transport;

●        RB passengers – mostly domestic hub-to-hub and intra-Baltic travelers. Also, used by extra-Baltic travelers (e.g., from Warsaw to Kaunas);

●        The international train service will be available at least once per two hours on the main line (resulting in eight train pairs daily in each direction);

●        Estimated long-term average income per passenger: Tallinn - Riga 38 EUR; Time = 1:55 min (travel by car - 68 EUR; h= 4:05 (full costs assuming one passenger per car)); Estimated long-term average income per passenger: Riga - Vilnius 38 EUR; Time = 2:01 (travel by car – 65 EUR; h=3:30 (full costs assuming one passenger per car)); 

●        Time saving benefit: 2.4 bln EUR.


Freight

It is estimated that in the base scenario RB Rail will carry 2 mln tons in 2026, 13.7 mln tons in 2030 and approximately 20 mln tons in 2055.


Rail Baltica’s competitive advantage for freight:

●        Speed – freight transport between the Baltic States and Central European destinations would take less than 2 days while the same route for trucks takes up to 4 days;

●        Reliability – with predictable and regular schedules, limited stops and high resilience to unfavorable weather conditions, supply chains via rail can be organized on just-in-time basis, especially when efficiently aligned with other intermodal supply chain elements (e.g. Gulf of Finland ferry schedules);

●        Full loads – Rail Baltica would connect several key stopping points (hubs) where full loads can be obtained, thus limiting empty kilometers;

●        Cost – the transportation cost compared to road transport will decline in medium to long distances, thus extending the geographical scope of the Baltic States’ and Finland’s foreign trade markets enabling to supply at the same cost to/from more distant markets;

●        Origination of freight: mostly from transit 57% (e.g. Finland – approx. 29%; CIS to/from Poland, Germany and rest of Europe - approx. 31%); imports/exports (Baltics) – 43 % (Estonia – 10%, Latvia – 10% and Lithuania – 23%);

●        Time saving benefit from freight: 2.9 bln EUR.






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