• Austria, Slovakia, Ukraine and Russia announced they are about to launch the tender for the elaboration of technical and environmental details
• The development of the project requires investments of EUR 6.36 Billion
• Traffic estimates include 33 countries from Europe and Asia
• The project is aimed at reducing the freight transport times by 50% compared to maritime transport
Developing a transport corridor on China-Russia-Central Europe axis is an international priority in ensuring a seamless, efficient and competitive transport compared to the other transport modes. In order to meet this objective, the railway companies in Austria, Slovakia, Ukraine and Russia have decided to implement the multi-national railway project on the extension of the broad-gauge line to Vienna, via Slovakia (Bratislava). Announced in 2010, the project has not only remained to the idea of market connection, but becomes a reality which will ensure the most efficient transport connection between Asia and Central Europe aimed at creating a sustainable transport corridor. At the beginning of July, the parties involved in the project announced that they would soon launch the tender for the elaboration of the technical and environmental evaluation.
Connecting markets, especially in Central Europe, Russia and the rapidly growing markets from Asia, has become important in terms of global economic development. Therefore, Breitspur Planungsgesellschaft mbH, the JV including the railway companies in the four countries, ÖBB, ŽSR, UZ and RZD, is responsible with the development of the freight transport corridor.
The 1520mm gauge railway system ends in Kosice (east of Slovakia), near the Ukrainian border, and the continuation of the transport route (from China to Central Europe) will be the foundation of a competitive railway transport. The development of the corridor will require the extension of the infrastructure by around 450 km and the construction of a logistics centre that will become a development engine in the region due to the establishment of the undertakings. The terminus point of the line will be the new terminal in the Vienna-Bratislava region which, due to its development opportunities (creation of jobs, set-up of new companies and initiation of activities) will contribute to the GDP growth by EUR 12.1 Billion and an increase of the revenues charge by EUR 3.6 Billion. The project requires investments of EUR 6.36 Billion and, according to preliminary studies, the construction and operation of the broad-gauge line will create the equivalent of 642,000 jobs.
If other countries were sceptical when the authorities announced their intention to implement the project regarding the possibility to implement this corridor, the next step launched by the four member states of the project prove the opposite: the railway companies in charge announced that a tender would be soon launched to carry out a detailed evaluation on the technical and environmental aspects for Kosice-Vienna line. “The launch of the tender is the main step towards project implementation which is vital for both Ukraine and the entire transport and economic system. It offers ideal solutions to several problems by stimulating economic growth and creating jobs and it also provides the best of the railway alternatives”, declared Sergey Bolobolin, the General Director of Ukrainian Railways.
The tender refers to the elaboration of the design works and of a poll to determine technical opportunities and key decisions, the identification of social and environmental aspects, as well as the definition of the land corridor limits. It will also be necessary to initiate a separate research project to prepare the financial and business plan, including estimates on the traffic volume and the integration of auxiliary projects.
“Over the next years, traffic in Eurasia will know significant growth and a corridor dedicated to freight transport will make the connection between Europe and Asia possible and will create a competitive transport system compared to maritime transport”, declared Stefan Glinka, the CEO of Slovakian Railways.
The extension of the broad-gauge line will create a supplier of logistics services, an 8,000km long freight transport corridor, as well as a transport service more rapid than maritime transport. Traffic prognoses rely on the general estimates of the freight volume for each country by 2050, divided on transport modes. A significant part of the cargo volumes in the project area has been defined, followed by the identification of the volumes on the broad-gauge line. The traffic prognosis includes origins and destinations relevant for the project and includes the traffic of 33 European countries from Asia, but also Austria, Slovakia, Ukraine and Russia.
Attracting freight volumes from the other transport modes and the traffic shift level depend on the capacity of the new line. The transfer of freight is believed to rely on the fact that the railway infrastructure is significantly improved on the entire Russian territory, where some of the necessary projects are already considered, but also in Ukraine and Slovakia (from the Ukrainian border to Kosice) so as to enable a travel time of 15 days on the route eastern China-Vienna. The travel time of goods is considerably reduced from the 23 days, on the existing railways and from the 25-45 days on maritime routes (depending on origin, destination, routes and the speed of vessels).
“The project focuses on reducing the travel times of goods by 50% compared to maritime transport. We continue to collaborate to create connections with the European and Asian markets. Russia’s railway system is a key element in creating the Eurasian transport platform and many European countries are facing the lack of railway freight transport. Therefore, the appearance of new freight flows on their network will make a significant difference”, declared the RZD President Vladimir Yakunin.
According to estimates, the traffic volume on this line will be of at least 16 million tonnes per year (up to 24 million tonnes per year until 2050) and the rapid goods trade between continents through direct connection will reduce the transport time of freight between Eastern China and Vienna to 15 days. Also, the west will account for around 70% of the traffic volume (by 2050), while the east will account for 30%; as regards the type of freight, the container segment is expected to have the highest growth rate compared to the bulk and liquid goods.
Regarding the attractiveness of the project for its investors, the net present value (NPV) of sponsors (governments) has been calculated for different financing options. Through public financing, the NPV is of EUR -2.2 Billion, project financing EUR -2.5 Billion and PPP EUR -6.8 Billion. Consequently, the public financing brings the highest net present value, while with the other financing options, the investors demand a higher rate of return, especially equity investors within PPPs.
The application of the best traffic estimate alternative generates a positive net present value of EUR 0.3 Billion within the public financing. In its initial variant, the project could reach a 0 NPV and then will gain the equity cost of sponsors, if EU funds (through TEN-T and Cohesion Funds) worth EUR 0.5 Billion are allocated and capital costs (CAPEX) are reduced to 56% compared to the initial considered level (in principle, comparable with the non-reimbursable subsidies of around EUR 3.6 Billion from one of the four participating countries).