A consortium comprising French fund manager Meridiam and Finnish developers Destia and YIT has been named preferred bidder to design, build, finance and maintain a new highway in Finland, the team announced in a statement today.
The project calls for the private sector consortium to build and maintain a 53-kilometre stretch of European Road 18 – a network of roads connecting the UK to Russia – running between Koskenkylä and Kotka, to the south of Finland. The project has an estimated cost of €650 million, including close to €300 million in capex, with the concession contract to last for 15 years.
Negotiations between the Finnish Transport Agency and the preferred bidder will now commence with a view to signing the concession contract in November. Construction for the new stretch – which will include the construction of some 37 kilometres of greenfield road and the widening and refurbishing of 17 kilometres of existing road – is scheduled to start later this year and should be finished by 2015.
Presentation documents from a previous government roadshow stated that the European Investment Bank will provide the majority of the project’s debt, with the Nordic Investment Bank and commercial banks to provide the remainder, split about equally.
The project is being procured under Finland’s ‘life cycle model’, a variant of the availability payment system. It means the concessionaire will receive a base fee for making the road available to users in good condition, but there will be other factors that can add to or subtract from that fee. These include certain performance, environmental and technical criteria, according to a presentation from the Finnish Road Administration, the country’s roads agency.
The ‘life cycle model’ has already been successfully used in Finland, including for another stretch of the E18 highway, connecting Muurla to Lohjanharju, awarded to UK developer John Laing in 2005. That project was subsequently sold by the developer to the John Laing Infrastructure Fund, the developer’s sponsored listed infrastructure fund, in late 2010.
Meridiam is participating in the consortium through its second European infrastructure fund, which to date has raised at least half of its €1 billion target size. The French investor is also raising a North American focused infrastructure vehicle targeting $1 billion. In addition to the two vehicles it is now raising, Meridiam also manages a €600 million infrastructure fund, its first infrastructure vehicle, closed in 2008.