Rail Baltica continues work on the implementation of a Public-Private Partnership model to lessen the burden on state budgets during construction
Rail Baltica, the transformative rail infrastructure project linking the Baltic states to the European rail network, continues to work on the implementation of a Public-Private Partnership (PPP) model to accelerate the project's development and lessen the burden on state budgets.
This approach is particularly timely, as it follows the successful funding allocation to the Porto-Lisbon High-Speed Rail (HSR) project, which received €813 million from the Connecting Europe Facility (CEF) – the highest amount awarded to any project in this funding round. This slightly exceeds the amount awarded to the second-place Rail Baltica.
The Porto-Lisbon HSR project serves as a significant precedent for Rail Baltica, demonstrating the viability of combining CEF funding with a PPP structure to address financing gaps in large-scale rail initiatives. In addition to the Porto-Lisbon project, several other notable European high-speed rail projects have successfully employed the PPP model, including the Lyon-Turin High-Speed Rail project, which aims to create a new rail link between France and Italy. Its PPP structure has attracted significant private investment, enabling a more efficient development process. Another relevant case study is the Brenner Base Tunnel. This ambitious project, which will connect Austria and Italy, is designed to significantly improve freight and passenger transport across the Alps. By utilizing a PPP approach, the Brenner Base Tunnel has garnered financial backing from both public and private sectors, further demonstrating that cross-border PPP projects have backing from the European Union and can be possible under the right regulatory framework.
“Our team is currently assessing which sections of the Rail Baltica project would be most suitable for a PPP approach, ensuring that we maximize the benefits of private sector involvement while delivering on our strategic objectives. Preliminary discussions with potential private investors and financiers have yielded encouraging results, with strong interest in participation. This, coupled with public support from governments, indicates the potential viability of a PPP strategy for Rail Baltica,” said Pēteris Celms, Investment Development Manager in RB Rail AS.
The integration of PPPs into the Rail Baltica project not only reflects a growing trend in European infrastructure development but also underscores our commitment to completing this economically and militarily significant initiative. By fostering collaboration between public entities and private investors, Rail Baltica aims to harness innovative financing solutions that can drive the project forward while minimizing financial risks.
However, implementing PPPs of this scale in the Baltics presents unique challenges that must be addressed, including adapting more unified regulatory environments with respect to complex PPP structures, carefully balancing risk distribution between public and private sectors, ensuring long-term political commitments and delivering on the attraction of international financiers, to name a few. Initial meetings with significant international participants, including a major French bank and French and Japanese infrastructure developers and others who have shown interest in the project, have already taken place.
Despite these challenges, the integration of PPPs into Rail Baltica represents a promising approach to infrastructure development in Europe. “By combining private investment with CEF funding, Rail Baltica aims to contribute to a new standard for major infrastructure projects, demonstrating how smaller economies can deliver financially stable, strategically vital initiatives,” added Pēteris Celms.
In the latest CEF call, the Rail Baltica global project was granted an additional €1.2 billion for construction activities across the three Baltic States and €346 million specifically for activities in Latvia. Together with previously granted financing, this brings the total to over €4 billion for the construction of Rail Baltica across the Baltics. The project is expected to generate direct net benefits worth €6.6 billion and boost GDP growth by 0.5% to 0.7%, adding between €15.5 billion and €23.5 billion in indirect benefits to the economies of Estonia, Latvia, and Lithuania during the project’s lifecycle. The costs for the first phase of Rail Baltica, which is planned to be completed by 2030, are projected at €15.3 billion.
www.railbaltica.com
