Fehmarn Link: Positive new economic calculations

11/02/2016

The latest updated economic calculations show that the economy of the Fehmarn project is robust: Figures show significantly lower construction costs and nearly a doubled reserve frame. This applies even if the German approval process is delayed. Now, Danish STRING politicians call on the conciliatory parties give the go-ahead for the binding agreements with contractors.

The new financial analysis from Fehmarn A/S confirms that the Fehmarn project is financially robust. The fixed link will be completed in 2026 – 2028, depending on when the German authorities are able to issue both environmental approval as well as a final building permit.
The analysis also took into account a continued parallel ferry operation. The project’s viability is now also confirmed by a “second opinion”; an external evaluation of Auditing and Consulting company Ernst & Young/EY.

The conciliatory parties behind the Fehmarn project were informed of this on Thursday the 11th of February.

Robust economy

The updated financial analysis is based on the delays that the German regulatory approval process and the announced lawsuits by German opponents are expected to cause.

Therefore, there were two calculations and forecasts based on final offers from construction syndicates. Scenario 1 is based on construction start in early 2018 and a projected tunnel opening by mid-2026. Scenario 2 assumes construction start in early 2020 and opening by mid-2028. Both scenarios show for the coast-to-coast tunnel – without additional hinterland constructions – an construction price of. 52.2 billion Danish Crowns ( approx. 7 billion Euro) and 52.6 billion Danish Crowns (approx.  7.06 billion Euro) respectively with a total reserve framework for both scenarios of 7.3 billion Danish Crowns (approx. 980 million Euro) (2015 prices).

The basis of the Construction Law from February 2015 has been 55.1 billion Danish Crowns (approx. 7.5 billion Euro) with a reserve of just 3.7 billion Danish Crowns (approx. 497 million Euro).

Construction costs for the Danish hinterland is unchanged at 9.5 billion. Danish Crowns (approx. 1.3 billion Euro), with reserves of 2.2 billion Danish Crowns (approx. 295 million Euro).

The financial analysis is based on areal interest rateof 3 percent and an EU co-financing of 10 percent of the construction costs for both the tunnel and Danish hinterland. The basis for the adoption of the Construction Act has so far been an EU co-financing of 18 percent of the tunnel and 10 percent for the Danish Hinterland.

Passenger rates for cars are set at 494 Danish Crowns pr. trip incl. VAT (aprox. 64 Euro) and income from rail traffic to 400 million Danish crowns (aprox. 54 Million Euro)  per. year. The construction period is calculated to take 8.5 years as opposed to 6.5 years. Thus, the developer now calculates a repayment period of 36 years compared to 39 years as previously calculated.

Invitation from STRING politicians

In response to the positive feedback from Femarn A/S and Ernst & Young/EY, the Danish STRING politicians now encourage the conciliatory parties to give the go-ahead  for negotiations with the contractors:

– We will request the parties behind the Fehmarn project quickly to approve for Fehmarn A/S to enter agreements with the bidding contractors. Such agreements would provide reassurance of the project and let us work dedicatedly for the positive effects in the close cooperation between the Swedish, Danish and German regions, the politicians state according to a joint statement from the Region Council Chairman Sophie Hæstorp Andersen, Capital Region, Lord Mayor Frank Jensen, City of Copenhagen and Region Council Chairman Jens Stenbæk, Zealand.

– The connection increases mobility significantly and creates growth of businesses and jobs for citizens. It will be easier for companies to carry goods and services across borders. And for individuals the connection brings increased choices of jobs and leisure. It will strengthen Denmark, including Copenhagen International Airport, as an intersection point between Scandinavia and Northern Europe, the statement reports.

– It is our firm opinion that the Fehmarn project will have a major positive impact on economic development in the corridor between Hamburg and Copenhagen / Malmö and further up to Stockholm and Oslo, the statement reads from Sophie Hæstorp Andersen, Frank Jensen and Jens Stenbæk.

Read STRING press release in full length HERE

Download Femern A/S’s new financial analysis HERE

Downlaod Ernst & Young’s/EY’s external evaluation HERE