ARCTIC CORRIDOR Jorma Pietiläinen Global Project Plaza 2013 29.05. – 31.05.2013, Lotte-hotel, Seoul, Korea.

ARCTIC CORRIDORJorma Pietiläinen

Global Project Plaza 201329.05. – 31.05.2013, Lotte-hotel, Seoul, Korea

• presentation of Finland and Lapland

• Business in Finland

• Arctic Corridor

• Drivers for the Arctic Railway

• Logistics in Kirkenes

• Arctic Railway

AGENDA

FINLAND EU´S NORTHERNMOST COUNTRY

• Total area: 338,000 km2• Neighbouring • countries:  Estonia, Sweden, Norway, Russia• Population:  5.4 million• Languages:  official languages Finnish (90.67%) Swedish (5.43%),

English important business language.• Currency:  euro (€, EUR)• GDP per capita:   35,928 € (2012)• GDP growth:  -0.2% (2012)• Unemployment rate:  8.7% (January 2013)• Monthly wages:  average 3,040 €

Finland is Member of Arctic Council

FINLAND FACTS

Paper and board, and softwareelectronics, chemicals,metal products,Main industrial products:

BUSINESS IN FINLAND

• Stable society politically and financially

• Creative solutions economy is knowledge-based and strong on innovation

• Gateway to Russia 1300 km border with Russia

• Strong in Logistics, 2012 3rd position in The World Bank´s Logistics Performance Index comparison

• Competent professionals workforce is highly educated

• Advanced infrastructure transport, communication, electricity

WHY FINLAND ?

LAPLANDNORTHERNMOST FINLAND

ARCTIC CORRIDORThe Arctic Corridor is a new cross-border economic area as well as a transport and development corridor. It links the Baltic region with the deep-water ports around the Arctic Ocean, oil and gas fields and the Northern Sea Route.

Arctic Corridor offers businesses and investors an opputunity to get involved with major projects in Arctic EuropaArctic Corridor is an initiative carried out municipalities of Rovaniemi, Sodankylä, Inari and Utsjoki .In Finland local authorities have a monopoly on land use planning.

TOURISM IN THE ARCTIC CORRIDOR

Composite Policy and Mineral Potential RankingFrazer Institute Mining Company Survey 2013

Finland

MINING INDUSTRY IN ARCTIC CORRIDOR

MINING INDUSTRY IN ARCTIC CORRIDOR

Estimated mining on metal ores in near future

Companies having activities in the Arctic Corridor region

An estimated 20–30% of the world’s untapped gas reserves and 5–13% of oil reserves are located in Arctic regions.

Norway side of Barent sea 14 Production Licences 01/2013

Latest development projects:SNÖVIT(snow white) 2001GOLIAT 2009HAVIS 2011SCRUGARD 2012

BARENTS SEA OIL AND GAS

Trafic at NSR, according Rosatom:

Year 2012:vessels: 46freight 1,26 million tons

Year 2013vessels : 71freight 1,36 million tons

NORTHERN SEA ROUTE

• Sea ice extent record low in Arctic last September:

• 3,4 million km2

• the trend is clear

NORTHERN SEA ROUTE

NORTHERN SEA ROUTE

LOGISTICS IN KIRKENES

NEW INVESTMENTS PLANS

1. KILA(TSCHUDI)

2. PULKNESET(GTI, SVI)

3. NORTERMINAL(STOLT-NIELSEN)

1. KILA

3. NORTERMINAL

2. PULKNESET

LOGISTICS IN KIRKENES

KILA- investor Tschudi AS- investment 100 million euros- all needed approvals granted

LOGISTICS IN KIRKENES

PULKNESET- harbor and industrial area- two private investment groups GTI and SVI- contruction start 2014

LOGISTICS IN KIRKENES

NORTERMINAL- investor Norterminal AS- Oil terminal with oil storege capacity of 700 000 cbm and annual capacity 20 million tons- investment 400 million euros- starting 2014

LOGISTICS IN KIRKENES

Railway created the basis for well-being in the U.S.

ARCTIC RAILWAY

The goal of the Arctic Railway is to develop alternative routes from Asia to the Baltic Sea Region for the goods flows of the future and to improve the competitiveness of mining and other industry by creating new, cost-effective transport possibilities.

ARCTIC RAILWAY

Potential cargos for Arctic Railway:

• ore concentrates from the mines in Lapland• iron pellets from Kostamus• paper from Kemi and Oulu• timber from Lapland forests• coal from USA to Raahe• oil products from Barents Sea to south• product transportation in containers to and from Asia

ARCTIC RAILWAY

THE ARCTIC RAILWAY – TWO PHASES OF CONSTRUCTIONThe first phase of the Arctic Railway, Rovaniemi–Sodankylä, is being constructed to meet the needs of the mining and forest industries in central Lapland. Planning for the route will begin in 2013. The goal is for the track to be finished by 2020. The demand for transports in the direction of the Arctic Ocean is expected to grow to fulfil the financial preconditions to begin construction on the second phase, Sodankylä–Kirkenes, by 2030.

ARCTIC RAILWAY

• According to economic prerequisites, the implementation of the first phase of the Arctic railway Rovaniemi–Sodankylä is possible providing that mining industry in Central Lapland will grow according to expectations and railway transport will be a competitive alternative (large and frequent transport volumes).

• With regard to economic feasibility, the required traffic volumes for railway implementation in the first phase are millions of tonnes/year. Transport needs of few potential mining projects together with wood transport can produce sufficient transport volumes in the short run.

• Long-term potential for the implementation of the second phase of the Arctic railway Sodankylä-Kirkenes is based on versatile transport needs of the oil and gas deposits in the Barents area as well as on faster alternative transport route between Europe and Asia as a result of the opening of the Northern Sea Route. At the moment, sufficient potential for the construction of the second phase cannot yet be precisely identified.

• Arguments for the implementation of the Sodankylä–Kirkkoniemi railway will be defined when critical factors regarding the utilization of oil and gas reserves as well as the transport economic feasibility of the Northern Sea Route will be specified.

• Based on freight transport survey, the Arctic Corridor and especially the Northern Sea Route are significant and probably frequently used transport routes in the long run.

• Companies and business life consider the Arctic railway as an important long-term project. The significance of the Arctic railway will probably increase over time.

ARCTIC RAILWAY

Main rail alternative Length of new

railway (km)

Estimated construction cost (million €)

Low cost level Average cost level High cost level

Rovaniemi–Sodankylä (*) 145 365 624 841

Sodankylä–Ivalo (*) 125 315 538 725

Ivalo–Näätämö–Norwegian border

184 464 791 1067

Total, in Finland 454 1 144 1 953 2 633

Finnish border–Neiden–Kirkenes

53 445 445 445

TOTAL 507 1 589 2 398 3 078

(*) from/to Sodankylä mining area

ARCTIC RAILWAY

(*) estimated for bulk cargo, real volumes can be larger (net weight of train 5 600 tons)(**)estimated for bulk cargo, real volumes can be larger (total weight of vehicle 60 tons, load 40 tons)

Estimated break even traffic volume with different cost estimates, Rovaniemi-Kirkenes

Rail section Rovaniemi–Kirkenes Low cost level Average cost level High cost levelCosts:

- investment (excl. interest)

- operation and maintenance (30 v)

1 589 million €

200 million €

2 397 million €

200 million €

3 078 million €

200 million €

Minimum traffic volume for implementation (break-even volume)

3 million tonnes/year4,4 million

tonnes/year5,7 million

tonnes/year

Minimum number of trains for implementation (*) 2-4 trains/day 4-5 trains/day 5–7 trains/day

Minimum number of trucks for implementation (**)

17-19 trucks/hour

(411-413 trucks/day)

25-27 trucks/hour

(603-605 trucks/day)

32-34 trucks/hour

(781-783 trucks/day)

ARCTIC RAILWAY

FINANCE AND IMPLEMENTATION

Implementation of the Arctic railway is suitable by PPP – Public Private Partnership or an Infrastructure Company

• In PPP the State contracts a construction company to build and operate the track over a fixed period

• The construction company is responsible for acquiring market financing for the project

• Reimbursements to the construction company are agreed upon by the State and other beneficiaries (e.g. mining companies and other track users)

• The Infrastructure Company is suitable for constructing and operating international transport connections

• The Infrastructure Company engages committed shareholders to the project and it’s risks

• The shareholders could consist of the State of Finland and e.g. mining companies, logistics companies and other States

• The shareholders participate both in direct financing as well as in acquiring loans• The investment can be partly financed by collecting track charges• The Infrastructure Company would contract construction and operation of the

tracks as in PPP.

ARCTIC RAILWAY

Thank You !

• Mr Jorma Pietiläinen

• tel: +358 40 658 6880

• email: [email protected]

www.arcticcorridor.fi