Chinese funding could see Finland to Estonia Tunnel a reality

FinEst Bay Area Development has signed a memorandum of understanding for $16.8bn in financing with China’s Touchstone Capital Partners for a 100km long undersea train tunnel project linking Helsinki with the Estonian capital Tallinn.

One-third of the funding will come as a private equity investment – giving Touchstone a minority stake in the project – and two-thirds will be debt financing, it said.

“Financial details will be negotiated over the next six months,” FinEst Bay Area said in a statement.

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In December 2018, the Helsinki-Tallinn tunnel project was reported to have secured its seed funding for $113M from ARJ Holding LLC, to be deployed towards achieving the planning and the licensing phases of the project.

Dubai-based ARJ Holding is a family-owned company, specializing in water, energy and infrastructure technologies and has accomplished a number of significant construction projects in 18 different countries.

Until last year’s agreement between Finest Bay Area Development Oy and ARJ Holding LLC, Helsinki-Tallinn tunnel has been a bootstrapped startup project, run without external financing.

In addition to financing, the tunnel project has also progressed in the areas of relevant permits and licenses, as well as in the matter of environmental concerns. The tunnel project is already included in the proposal for the Regional Land Use Plan of Uudenmaa province.
“The arrival of the first outside investor is a significant milestone in the entire project. This has signaled the high level of interest and attractiveness of this region beyond Finland and Estonia. The greater Helsinki – Tallinn metropolitan area will be one of the fastest growing urban areas in all of Europe”, said Peter Vesterbacka of Finest Bay Area Development.

The tunnel project will also make a significant contribution to the Finnish economic growth. The tunnel project represents around 7% of the current Finnish GDP and is forecast to make a very sizeable growth input in the coming years. According to the best-case estimates, the tunnel may even double the Finnish economic growth rate.

The project though, has not secured backing from either the Finnish or Estonian governments or the European Union.