The use of project companies (special purpose entities) as the funding and organisation form for the planning of railway projects should be carefully considered and its selection should be justified transparently. Before going ahead with the implementation of major railway projects, the Government must make decisions on any major issues and ensure that significant risks are managed.
Using a project company set up as a limited liability company to supplement funding under the Budget in the planning and construction of large railway projects is a new practice in Finland. The NAOF audited the project company model in the operations of Turku One Hour Train Ltd, Suomi-rata Oy and Itärata Oy, which were established in the period 2020–2022. The audit examined from the perspective of central government finances how planning carried out using the project company model affects the appropriateness, efficiency and goal achievement in the operations.
The estimated planning costs of the projects range from EUR 25 to EUR 155 million and the construction costs from EUR 1.7 to EUR 5.5 billion. The Ministry of Finance and Ministry of Transport and Communications have estimated that the projects can result in an annual cost obligation of between EUR 33 and 51 million for the general government for several decades. The projects may have wider economic impacts on issues such as land use and labour market or on the regional economy and real estate, income and value-added tax.
Long-term funding granted to special purpose entities throughout the planning phase has been considered the strength of the project company model. The audit showed that the funding may change or be cancelled as was the case in 2023, when new policy lines on the funding of the entities were set in the Government Programme. The special purpose entities have developed new, efficient operating methods and created innovative technical design solutions. The procurement environment has been challenging, and the project company model has not yet been found to achieve significant cost savings. Finnish legislation does not recognise special purpose entities as planners of the state-owned railway network, and the entities have not been organised in accordance with the Ministry of Finance guidelines on the establishment of state-owned companies.
The NAOF recommends that the Government should carefully consider the possible use of special purpose entities as a funding and organisation form for the planning of railway projects and justify their selection in a transparent manner. Before the implementation of major railway projects, the Government must make decisions on any major issues, such as on the routes of the railways, and ensure that significant risks are managed. The Ministry of Transport and Communications should specify the roles of different parties in the system of special purpose entities and ensure that the Finnish Transport Infrastructure Agency has access to sufficient resources for the planning cooperation.
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