Rail Baltica is a project that will ensure the efficient connection between the railway networks of Baltic States as the railway systems in this region are inconsistent with those in Europe, because of different gauges.
Rail Baltica will be a double, electrified, European-gauge railway (1435 mm), equipped with ERTMS and designed for speeds of 240 km/h. The railway will start from Tallinn (Estonia), cross Parnu (Estonia), Riga (Latvia), reaching Lithuania through Panevezys, then extended to Kaunas (Lithuania) up to the Polish border. In Lithuania, there will also be a connection built between Kaunas and Vilnius, a segment part of Rail Baltica railway. The total length of the railway will be of 870 km, designed for freight and passenger traffic and interoperable with the TEN-T network.
In April, during the Rail Baltica Forum, the Cost-Benefit Analysis (CBA) confirmed the financial and economic reliability of the project. The study elaborated by Ernst & Young Baltic Ltd (EY) re-evaluated the economic sustainability of Rail Baltica based on the modification of the route and the extension of the scope of the project mentioned in the AECOM study from 2011 and provided new parameters regarding long-term financing.
According to the analysis, estimated project development costs amount to EUR 5.8 billion for all three countries. In Lithuania, the project has the highest cost, EUR 2.47 billion, of which the state budget contribution amounts to EUR 493 million. Lithuania’s investments are followed by those of Latvia, where the project requires EUR 1.97 billion, with a national contribution of EUR 393 million. In Estonia, the project needs a financing of EUR 1.35 billion, of which the state budget contribution was estimated at EUR 268 million.
As EU plans to financially support the transport infrastructure within multiannual budget periods, the project financing was divided in two parts. “It is assumed that the project will have the current base case funding gap rate and EU co-financing rate of 85% during the 2015-2020 period. Consequently, various EU co-financing rate scenarios for the period after 2020 have been analysed.”
Thus, capital expenditures (CAPEX) have been analysed for the two long-term financial periods of EU for each country for 2015 – 2020 and 2021 – 2025. Within the European co-financing rate scenarios, the total estimated value for Estonia is EUR 1.34 billion (of which EUR 239 million for 2015 – 2020 and EUR 1.1 billion for 2021 – 2025). In Latvia, of EUR 1.97 billion, EUR 491 million is estimated for the first period and EUR 1.47 billion for the second period. In Lithuania, of EUR 2.47 billion, the amount estimated until 2020 is EUR 406 million and over EUR 2 billion for 2021 – 2025. European co-financing will amount to 85% of the total cost of the project (EUR 5.8 billion) or over EUR 4.6 billion, of which EUR 909 million by 2020 and EUR 3.7 billion for 2021 – 2025.
During a meeting between Lithuania’s Minister of Transport, Rokas Masiulis, and EU Coordinator for the North Sea–Baltic core network corridor, Catherine Trautmann, the EU representative said that EC considers Rail Baltica a priority project and will grant funds for the implementation of the project and is also interested to continue financing after 2020 too.
It is important to mention that in February, RB Rail, the joint company established by the three Baltic states, submitted the documents for accessing funds worth EUR 313.3 million through the Connecting Europe Facility. This amount will be dedicated to the continuation of construction works in Latvia, Lithuania and Estonia, for completing the planning phase of the project elements, identifying cost-effective elements, analysing the supplier for the elaboration of the strategy and of resolution terms for the manager of the new railway. Also, the amount includes EUR 140 million for Lithuania’s railway company for the construction of 46.7 km of railway between Kaunas and Panevezys.
Measurable project socio-economic benefits, estimated at EUR 16.2 billion, will far outweigh national co-investments. Furthermore, it is assessed that the project would create a GDP multiplier effect worth an additional EUR 2 billion. 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 regio-nal 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 EUR 6 to the wider economies of the three Baltic states for every invested euro from national budgets.
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 EUR 58.9 million.
As regards the financial and economic benefits, the study also considered the creation of jobs, 13,000 jobs for construction and another 24,000 FTE direct and induced jobs in related industries during the construction phase. Moreover, in the operational phase, the conditions created by Rail Baltica will help save 400 human lives, the equivalent of an annual average of EUR 30 million. In terms of environmental benefits, Rail Baltica will help reduce CO2 emissions by EUR 3 billion and air pollution by EUR 3.3 billion.
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 (EUR 28.6 million shared by the three Baltic states) during the project uptake stage as Rail Baltica achieves its intended potential. Moreover, in the period 2048-2052, renewal investments will be allocated and therefore, the project will require new financing sources. “The financing equals to the part of renewal investments that cannot be financed with the accumulated surplus cash flow of the infrastructure manager. It is estimated that the financing need for the renewal investment would amount to around EUR 534 million,” the study says.
Three passenger key groups
The cost-benefit analysis is elaborated for the global project and includes the transport services from the 7 passenger stations (Tallinn, Parnu, Riga, Riga Airport, Panevezys, Kaunas, Vilnius) and the transport service to Warsaw (Poland), and from there to all over Europe.
For passenger traffic, Rail Baltica will mean a domestic hub-to-hub transport, but it will also be used by passengers outside the Baltic region, such as on Warsaw-Kaunas route. The international transport service is available at least every 2 hours on the main route which means 8 pairs of trains per day in each direction. The average long-term income per passenger will amount, for Tallinn – Riga route, to EUR 38 with a travel time of 1:55 hours. By comparison, travel cost by car amounts to EUR 68 and a 4-hour journey (figures are estimated for one passenger/car). For Riga – Vilnius route, the estimated, long-term income amounts to EUR 38 and 2 hours of journey, while on the same route by car it amounts to EUR 65 and a 3:30-hour journey. For passenger traffic, time saving benefit amounts to EUR 2.4 billion.
By combining the market growth effect and the possibility of shifting passengers to Rail Baltica, potential flow for 2055 stands at between 4.7 million passengers (in the low case scenario) and at 7.1 million journeys (in the high case scenario). For 2026, single journeys are estimated at 3.6 and 5.5 million journeys for the same types of scenarios.
These estimates are elaborated keeping in mind that Rail Baltica has to stay competitive compared to road and air transport reaching an air-rail modal shift share of 23%. This modal shift will only represent 11% of the total number of Rail Baltica passengers, while road-rail shift will represent 85% of Rail Baltica passengers.
The study identifies three main groups of passengers: those travelling adjacent to international stations (point-to-point travellers), those travelling only inside Baltic states (intra-Baltic travellers) and those accessing and/or existing outside Baltic states (extra-Baltic travellers). The flow of “point-to-point” travellers will be mostly represented on Riga International Airport – Riga central intermodal hub route; intra-Baltic flows will dominate flows on each section of Rail Baltica with the highest volumes estimated on Panevezys–Kaunas, Kaunas – Vilnius and RIX – Panevezys sections, and results show that the sections with the highest intensity will be those that combine passengers between Riga and Kaunas and Vilnius; extra-Baltic flows will occur on Lithuania/Poland section.
Most of freight flow comes from transit
In the baseline scenario for freight traffic, RB Rail will ensure the transport of 2 million tonnes in 2026, increasing to 13.7 million tonnes (in 2030) and to 20 million tonnes in 2055.
Although the broad-gauge railway network can ensure the freight transport on the North-South axis, Rail Baltica will improve both the railway traffic of the three countries, as well as the transit potential of freight in the region, especially that of transport flows from Finland and Poland and the transshipment between the two types of gauges.
The increase of the railway freight transport will be due to the elimination of gauge transfer at the border between Lithuania and Poland and to the establishment of logistics terminals in each country such as in Estonia (in Muuga), Latvia (Salaspils), and Lithuania, in Kaunas and Vilnius.
According to the study, estimates show that the trade of Baltic States with Poland and Germany represents 10-15% of total Rail Baltica volumes, similar to that of transit in Finland. Thus, as regards volumes (tonnes), the largest share of freight on Rail Baltica will be represented by transit flows from Poland and Germany, as well as other EU countries, but also from the biggest CIS countries that link the two railway systems (with 1435 mm and 1520 mm gauge). In turn, in terms of tonne-km, Finland’s share is similar to that of CIS due to the fact that transit from and to Filand crosses Rail Baltica from Tallinn to the border between Poland and Lithuania.
Considering the freight carried on the TEN-T Corridor, the main destinations, by individual countries, will be Germany, Poland and Finland due to improved connections with other transport infrastructures from these countries which will be assured of infrastructure optimisation as part of the North Sea-Baltic Corridor activities.
Due to the improved railway connectivity, the North Sea-Baltic Corridor is the main area where freight will be shipped. The Baltic States, Finland and Poland will generate third of the shipped freight, while Germany, Belgium, the Netherlands and UK will generate 10% of total volumes.
The most intense freight traffic will occur on the section Kaunas-Lithuanian border with Poland, while flows are balanced for the rest of the sections.
According to the study, 57% of freight flows will come from the transit activity, Finland accounting for 29%, on the CIS-Poland axis, while Germany and the rest of Europe will represent 31%. Also, in the Baltic States, imports and exports will account for 43% of which Estonia and Latvia 10% each and Lithuania 23%.
Regarding the transport speed between Baltic States and Central Europe, travel time will take less than 2 days, while by road, the travel time is 4 days. The benefits of the time saved have been valued at EUR 2.9 billion.
by Pamela Luica