Meeting future challenges in Finnish transport and logistics Oddgeir Danielsen

Energy

Raw materials

The Northern Sea Route

The Trans Siberian Railroad

Other Game Changers

The Northern Dimension Structure Non-governmental level Governmental Level Participants NDI ND Institute NDBC ND Business Council ND Forum? NDEP ND Environmental Partnership NDPC ND Partnership on Culture NDPTL ND Partnership on Transport and Logistics NDPHS ND Partnership in Public Health and Social Well-Being 4 Partnerships AC Arctic Council BEAC Barents Euro-Arctic Council CBSS Council of the Baltic Sea States NCM Nordic Council of Ministers EBRD, EIB, NEFCO, NIB International Financial Institutions 4 Participants 4 ND Partners EU, Russia, Norway, Iceland Ministerial meetings SOM Senior Officials Meeting Steering group / EU–Russia -strategic partnership Arctic policy Baltic Sea Region Strategy Other EU-policies EU

Suggested Ten-T Core network

NORDIC INVESTMENT BANK Meeting future challenges in Finnish transport and logistics Financing opportunities Kim Krokfors, Senior Manager, Lending

NORDIC INVESTMENT BANK Basic information Founded by the Nordic countries in 1975, The Baltic countries joined in 2005 NIB promotes sustainable growth of its member countries by providing long-term financing in support of projects that: Strengthen competitiveness, and/or Enhance the environment The main part of NIB’s lending is targeted on the member countries of the bank. Loans outstanding EUR 13,7 billion, 11 billion in member countries. New loans in member countries ca EUR 2 billion annually. Projects are foremost found in the areas of: Environment, Energy, Transport - Logistics - Communications, Innovation NIB finances: Large investments of the corporate and public sector Small and medium-sized enterprises through financial intermediaries

NORDIC INVESTMENT BANK Transport, logistics and communications Effective transport, logistics and communications are essential for ensuring member country competitiveness. Many infra projects also have significant environmental benefits.  For example increased road safety, reduced emissions in rail vs roads Project examples: Road construction, railways, airports, broadband and mobile phone networks Photo: SJ AB (Sweden)

NORDIC INVESTMENT BANK Financing infrastructure investments Most infrastructure projects are traditionally funded by the public sector as they are large scale, involve a high risk and have long payback periods. Transport projects are notorious for cost overruns, for technical deficiencies in construction and consequent high maintenance costs and for optimism in their estimates of future demand. (Channel tunnel, the Öresund link between Denmark and Sweden, TGV in France...) Demands towards increased investments in infrastructure prevailing (Investment needs in Nordic/Baltic countries EUR 95 bn. – Ojala)

NORDIC INVESTMENT BANK Financing infrastructure investments Private sector involvement in infra / transport projects is one way to meet the increased investment needs and to reduce pressures on public sector budgets and to cope with the increasing public sector borrowing requirements. Private sector can offer direct loans to the public sector, leasing set ups and Public Private Partnership set ups. Very important to note that : When the private sector is involved, the Risk allocation must be clear. - This means that the public sector should have a crystal clear view of the responsibilities between the parties involved before tendering.

NORDIC INVESTMENT BANK Reasons for the public sector to choose the PPP model could be: Decreased total cost based on o increased international competition o economies of scale o optimised timing and timetable o cost optimised for the whole time span of the project, not only for construction Decreased need for direct public sector financing (public debt) Critical risks are borne by private sector entities, not by the state, i.a. o cost overruns o delays o traffic and profitability risk=The value of risk transfer o guaranteed repair works o financing Benefits of a PPP project set-up

NORDIC INVESTMENT BANK "Long warranty period", i.a. the long maintenance period in the concession agreement. Project is often completed several years earlier than through traditional method, which leads to increased socio-economic benefits (net up to EUR million annually). At the end of the concession period, when the road is handed back to the authorities, there is no maintenance back log. In other words the road is in good condition and no immediate repair needs exist. High quality and user friendly service. However! The transferring of risks to the private sector comes at a cost: State budget funding is most often cheaper than private sector funding Benefits of a PPP project set-up

NORDIC INVESTMENT BANK PPP versus Traditional Comparative price Bid price Investment Interest costs of the investment Costs of the services Costs of the servicest TraditionalPPP D: cost-efficiency in maintenance & operations C:cost-efficiency of the investment Investoinnin korkokustannukse A: Value of the risk transfer B:Risk margin in interest costs Value of risks Investment Interest costs of the investment Savings = A + C + D - B Source: Finnish Road Administration

NORDIC INVESTMENT BANK Thank you for your attention! Contact us Oddgeir Danielsen Director NDPTL E Kim Krokfors Senior Manager Lending, NIB