Cost of Estonian portion of Rail Baltic has risen to EUR 1.8 bln

TALLINN – The cost of the Estonian portion of Rail Baltic has increased to an estimated 1.8 billion euros as a result of the price increases seen this year, and it is not possible to estimate the final cost of the project at this point, Postimees reported.

Last year, it was admitted that the project was five years behind schedule and instead of 2026, the deadline for the completion of the railway was set for 2030. The main problem is a delay in the design of the main line. A couple of years ago the Supreme Court of Estonia annulled a section of the route planned for Parnu County, and there have been problems related to the Spanish contractor on two sections of the main line.

"It's true that the design of the main line has been slow," said Anvar Salomets, CEO of RB Estonia. "Today, due to objective circumstances, we have to act as fast as we can, which is what we have done. As soon as we have a mature enough project, we'll try to get it to the construction procurement and start building."

In terms of financing and construction, the backlog has been rather small, although not everything has gone according to plan, according to the CEO.

"The main factor in the backlog has been, after all, the design, which also keeps our land acquisition and construction activities on hold. The geopolitical situation has been another reason," he said.

The Estonian Ministry of Economic Affairs and Communications finds the progress of RB, despite the difficult circumstances, to be rather good, although the backlog of design continues to be a problem.

"In the absence of design solutions, both the acquisition of land and construction works suffer," said Kristjan Kaunissaare, coordinator of Rail Baltic at the Ministry of Economic Affairs and Communications. However, since design solutions are completed by sub-section, they can be put into work on an ongoing basis.

According to current schedule, the design solutions for the main line of RB must be completed by the end of 2024. The completion of Rail Baltic is still slated for 2030.

In the first quarter of this year and also in the second, it seemed that Russia's military actions in Ukraine will cause more delays in supply chains and in the availability of materials, but the market has been very adapting throughout the year. Besides, fierce competition in a market where the construction of other infrastructure facilities is rather modest at this point is good for Rail Baltic.

"Of course, we, too, are affected by rising prices, extremely high inflation -- in such a volatile economic environment it is also difficult for contractors to take risks, or the risks are priced unbearably high," Salomets said.

RB Estonia got a feel for this with the first procurement of the Ulemiste joint terminal in Tallinn, where they were after a single large general contractor. Now, they have chosen a different approach, and at least for now, according to Salomets, it seems that this approach is justified.

A few weeks ago, a tender was announced for the construction of the first section of the main line of RB, the construction of which is expected to start in the late summer or early autumn of 2023. A couple of years ago, a strategic decision was taken to start building the railway from crossings with roads, which has allowed five crossings to be completed in less than 1.5 years, and the same number is currently under construction.

Last year, RB's deficit was estimated to hit 300-500 million euros by 2030. Today, the estimated figure for the Estonian portion of RB is 1.73 million euros. The moment of truth will be the construction tender and the estimate once the technical design of the main line has been completed. The cost of RB will be fully upgradable when the main designs are completed in 2024.

"Then it will become clear whether this leaves room for optimization when it comes to certain solutions, which would also allow for more conservative action," Salomets said. "Based on the construction procurements to date, we can see that we have been able to stay on the expected price schedule in terms of the construction of crossings."

This year, the authorities of the area of administration of ​​the Ministry of Economic Affairs and Communications have invested more than 40 million euros in the construction of Rail Baltic and related infrastructure. In total, the Estonian state has invested more than 100 million euros in the establishment of RB using both European Union funds and own money.

Hendrik Hololei, director general of the European Commission's directorate general for mobility and transport, described RB as one of the most important landmark investments for the Connecting Europe Facility (CEF), financing for which will not be withdrawn even in the light of the war in Ukraine because it connects four, indirectly five, countries of the European Union.

"The war has given this project a new dimension in the context of military mobility and geopolitics, and its funding will continue because it is a necessary project for Europe," Hololei said in an interview with Postimees.

"The money that has been allocated to the project must be used effectively, we cannot leave a penny unused, because otherwise we will not be able to ask for additional funding," he said.

Rail Baltic is an electrified 1,435 mm gauge railway line for the transport of passengers and freight from Tallinn to the Lithuanian-Polish border. The planned speed of passenger trains on RB is 249 kmh and the planned speed of freight trains is 120 kmh. The infrastructure will allow passengers to reach Parnu from Tallinn in 40 minutes and Riga in two hours.