Finland-Estonia tunnel developer seeks to firm up funding

15 July 2019 - 12:00 am UTC

FinEst Bay Area Development, the private developer of a tunnel connecting the capitals of Finland and Estonia, is looking to firm up EUR 15bn (USD 17bn) in financing from Chinese investors.

 

The company is now in advanced negotiations with private equity group Touchstone Capital Partners after signing an MOU in March, founding partner Kustaa Valtonen told Inframation. The two parties will consider the option for Touchstone to invest through its One Belt One Road Fund that counts some major Chinese state-owned enterprises (SOE) as LPs, he added.

 

FinEst is also leaving the door open to other investors like those in Europe and the Middle East for participation, as the Chinese investors will only take a minority stake in the project, Valtonen said. The developer is also aiming to secure financial backing from multilateral agencies such as the European Investment Bank.

 

“We are going to make another announcement with more financing details by the fourth quarter,” said Valtonen, adding that the the developer also aims to secure capital from European, Nordic and Finnish investors, including pension funds, and is looking for a “sustainable and fully balanced financing solution for the project.”

 

The tunnel, which is scheduled to take six years to construct is still going through environment impact assessment procedures by the Finnish government. It will also need regulatory approvals from the Estonian government.  When completed in 2024, it will overtake the Channel Tunnel between Estonia and Finland to become the world’s longest undersea tunnel. The project, stretching a length of 103km, is poised to cut the ferry travel time of two to three hours to about 20 minutes by train. 

 

As part of the  MOU signed in March, a third of the financing from Touchstone will be in the form of equity with the rest to come as debt capital. The London-based private equity firm runs a USD 100bn One Belt One Road Fund focusing on co-investment with Chinese SOEs in Belt and Road infrastructure.

 

CREC, PowerChina, CCCC, Sinosure, ICBC, China Eximbank, Bank of China, and China Development Bank were all partners named by Touchstone interested in equity or debt commitment to the fund.

 

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