Finland’s investment in infrastructure - An overview
April 2014

Finland’s investment in infrastructure - An overview

Investments from the public purse are creating opportunities for internationally active companies in the transport technology and energy infrastructure sectors.

Amongst these public investments, it is transport infrastructure which takes centre stage, and above all the expansion of railway transport. According to the government’s official transport strategy, transport investments amounting to EUR 1.3 billion are planned for 2012 to 2015, with a further EUR 3.5 billion earmarked for the following years, up until 2022.

Major rail transport projects

Around a third of the planned total investments are being spent on expanding the long-distance rail network. The majority is taken up by three major projects: the improvement of the Seinäjoki–Oulu line and its branches (investment volume of EUR 860 million, partly under construction already), the Helsinki–Riihimäki line (EUR 350 million, construction to start in 2014 or 2015), and the Luumäki–Imatra line (EUR 380 million, construction starting 2016).

A further key area for investment is local public rail transport in the Helsinki region. The first section of the western extension to the Metro (underground) and the new railway line to the airport are currently under construction. Upcoming major projects include the second section of the Metro extension (investment volume of approx. EUR 770 million, construction planned to begin in 2015) and the underground suburban rail loop in the centre of Helsinki (EUR 740 million, date for start of construction not yet set).

Local public transport is being developed outside the Helsinki region. Both the cities of Turku and Tampere are in the process of planning the creation of new tram networks. In both cases, the decisions on entering into the first construction phase are intended to be made in 2015.

Against this backdrop, many business areas remain open to foreign companies. Whilst the construction work itself is normally carried out by local companies offering the best prices, foreign suppliers have played a successful role in providing technology. At the moment, for example, the automation technology for the Metro (investment volume of approx. EUR 170 million) is being provided by Siemens. Siemens was also awarded the contract for providing 90 new electric locomotives (EUR 300 million) in December 2013. The new Metro trains (EUR 140 million) are being provided by the Spanish company CAF.

Trend towards smart traffic technology

Finland has set itself the target of becoming a frontrunner in the move towards using smart technologies in transport. The government’s strategy paper on smart traffic includes plans for investments totalling EUR 300 million in a range of key projects between 2013 and 2017.

These key projects include standardised control, payment, and information systems in local public transport, traffic monitoring and the creation of infrastructure for electric vehicles.

The government currently estimates that the entire “smart traffic” market is worth around EUR 300 million per year, the majority of which is accounted for by public procurement. The projects in question are therefore subject to the formal award procedure, in which foreign suppliers have already successfully participated on many occasions.

Partnership models up and coming

The first time a public-private partnership was tested for a major infrastructure project in Finland was in 1997, for the construction of the road between Järvenpää and Lahti. During the construction of various sections of the E18 motorway, further projects were procured using build-operate-transfer models. In 2014, a call for tender was launched for the Hamina–Vaalimaa section. A partnership model is being considered also by the city of Tampere for its new city rail project.

The Finnish authorities are very interested in public-private partnerships (PPPs). In future, these projects will have to involve more international providers than has been the case up until now, as there are a limited number of eligible Finnish providers.

For example in 2011, procurement of the stretch of railway between Kokkola and Ylivieska could not be carried out as a public-private partnership as planned, as too few tenders were submitted. According to the autumn 2013 report by the Central Road Service, this was due to the fact that the call for tender took place in parallel with another call for a partial section of the E18, and that not enough resources were available in Finland.

Projects in the energy sector

Finland is working intensively on its energy infrastructure. A key concern alongside securing energy supply is meeting climate protection targets.

In this regard, many projects have benefitted from the feed-in tariff for wind power facilities, which has been in place since 2011. The tariff, which is guaranteed independently of market prices through complementary public funding, ensures that new wind power plants are able to run economically. At the moment, however, funding is only valid until a total capacity of 2,500 MVA is reached. This means that the development of wind power projects is currently under a certain amount of time pressure.

The Finnish energy strategy also includes the construction of new nuclear power plants. Alongside the Olkiluoto 3 reactor, which is currently under construction, political decisions have been made to authorise two additional nuclear reactors. The reactor for the company Fennovoima Oy, which is being provided by the Russian company Rosatom, is to be erected in Pyhäjoki, in the north-west of Finland. The contract for the Olkiluoto 4 reactor in Eurajoki, western Finland, will be commissioned by Teollisuuden Voima Oyj.

The Finnish transmission network, which currently covers around 14,000 km, is also going to be significantly extended over the next few years. In its investment plan, the operating company Fingrid envisages constructing 1500 km of 400 kV lines and 1000 km of 110 kV lines between 2012 and 2022. Cross-border connections will also be enhanced. In total, around EUR 1.7 billion will be invested in the transmission network over the course of the planning period.