Proposal of the working group
New finance providers for transport infrastructure projects
A working group appointed to identify new ways of financing infrastructure projects has outlined a model where a limited company would be responsible for implementing major infrastructure projects. The group submitted its report to Petteri Orpo, Minister of Finance, on Thursday 20 December.
According to the working group’s proposal, the responsibilities of a project company could extend beyond project construction to maintenance and ownership. The company model could also be used in the planning stage. The state and municipalities, which typically have the primary financial responsibility for funding infrastructure, would be the natural choices for a company that would build and own the infrastructure.
However, the working group concluded that it is essential to identify other sources of finance for billion-euro projects to substitute for the state and municipal contribution, in other words the taxpayers’ share. This type of financing could be acquired from
increase in value through real estate development
financing share of private entities benefiting from the project
The larger the proportion of costs that can be covered with this financing, the more likely it is that the project will be implemented. Similarly, equity invested by a third party in the company will improve the chances of the project being implemented, if the involvement of a third party is estimated to benefit the project and if an agreement on the terms of such involvement can be reached.
The Government could specify in its Government Programme whether negotiations would commence on the implementation of certain projects, what kind of projects could be selected, and whether a project company would be responsible for implementation. Once the preparation stage and negotiations with municipalities and any other equity investors are concluded, the government would decide which projects can move forward and under which principles.
Minister of Finance Orpo considers new sources of financing a key requirement for project advancement
Petteri Orpo, the Minister of Finance, thanked the working group for its thorough input and emphasised the importance of good cooperation with the Ministry of Transport and Communications. Orpo explained that the assignment was driven by a need to identify new financing models for major infrastructure projects.
“There are several billion-euro infrastructure projects in the pipeline that will be difficult to implement with just budgetary funds. New financing models enable further preparation of important infrastructure projects. More funding will also be available for major transport projects in the provinces,” Minister Orpo points out.
“We will continue our joint preparations with the Ministry of Transport and Communications to outline a project company model. I am convinced that these preparations will enable the next government to decide on the launch of multiple projects,” Minister Orpo says.
Key players represented in the working group
The working group was chaired by Hannu Mäkinen, Director-General of the Ministry of Finance's Budget Department. Members included representatives from the Ministry of Finance, Ministry of Transport and Communications, Finnish Transport Agency, Government Ownership Steering Department of the Prime Minister's Office, the Cities of Helsinki, Tampere and Turku, and Confederation of Finnish Construction Industries RT.
Hannu Mäkinen, chair of the working group, Director-General of the Budget Department, tel. +358 2955 30330, hannu.makinen(at)vm.fi
Aleksi Randell, vice-chair of the working group, Director General, tel. +358 40 050 0822, aleksi.randell(at)rakennusteollisuus.fi
Kati Jussila, secretary of the working group, Ministerial Adviser, tel. +358 2955 30378, kati.jussila(at)vm.fi