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Rail Baltic deemed less profitable by EY than Aecom analysis

A public discussion about the Rail Baltic project at the Pärnu county government. Jan. 27, 2017.
A public discussion about the Rail Baltic project at the Pärnu county government. Jan. 27, 2017. Source: (Mailiis Ollino/Pärnu Postimees)

The building of the Rail Baltic rail project has become much more expensive and the project's profitability has decreased while its social and economic benefits have increased, it can be seen in comparing the 2011 Aecom and 2017 Ernst & Young (EY) cost-benefit analyses.

Aecom's investment profitability analysis estimated the investment in the railroad construction to total €1.89 billion at present value, with additional maintenance costs during the project's lifetime to amount to €61 million. In addition, the railroad's proceeds from use would total €521 million and residual value total €117 million. According to Aecom, the Rail Baltic project would experience a loss of €1.31 billion.

According to EY's cost-benefit analysis, the project's investment costs would total €4.2 billion in present value, with additional maintenance costs totaling €909 million. The revenue from the project would total €898 million and residual value €255 million, and thus the total loss of the project would amount to €3.96 billion.

Considering the difference in the negative total net gain of the two analyses, the studies cover that loss differently in terms of socio-economic effects.

According to the Aecom analysis, the discounted revenue from an increase in safety in 30 years would be €338 million, from reducing air pollution €148 million, from climate change €342 million. Time saved in passenger carriage would be worth €340 million and in freight carriage €818 million, while the profit of railroad carriers would total €690 million. Thus the socio-economic impact would amount to €2.68 billion, meaning that Rail Baltic's profitability would be €1.37 billion in total.

As EY has still not yet published its analysis, the indicators made available in the expanded summary must be used. Even though EY estimates the rail project to potentially have a number of socio-economic effects, these effects have not been highlighted in the necessary detailin present value in the summary. EY estimates the socio-economic effects of the project to total €4.58 billion, which is €1.91 billion more than in Aecom's estimate. According to this estimate, the EY analysis shows the rail project to produce a surplus of €879 million.

Aecom's cost-benefit analysis also highlights the fact that during the railroad's period of operation, there should be no need for subsidies, even though they could be beneficial during the start-up period to inspire initial demand, particularly for the carriage of goods. The EY analysis highlights the need for a grand of more than €28 million during the first five years of the railway's operation.

Editor: Aili Vahtla

Source: BNS

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