Lyon - Turin railway line will cost France up to €10.6 billion

07 August 2020 Consultancy.eu

The building of the Lyon - Turin railway line will cost the French side of the table between 9.2 and 10.6 billion, according to a study from Sia Partners.

The project in question includes a 58 km tunnel running through the Alps from the South West of France to Turin, Italy, alongside access roads to the tunnel on both sides. Due to be completed in 2030, the size and scale of the project has thrown up several complications from technical, economic and political perspectives, feeding a dynamic and constantly evolving set of cost and profit forecasts.

Accounting for complexities expected and unforeseen, Sia Partners has laid out three scenarios for the cost build up of the project for French taxpayers. So far, the project has reached completion of nearly 20%. Provided that the project is commissioned in 2030, the consulting firm anticipates additional costs of €200 million for each year until the project is completed.

In the best-case scenario, this annual cost will persist up until 2039, while the worst-case scenario might see works drag on till 2052, according to Sia Partners. Depending on the timeline and other factors, the total cost of the project for the French government might eventually range between €9.2 billion and €10.6 billion.

Lyon - Turin railway line will cost France up to €10.6 billion

The cost forecasts account for a number of developments, including a promised increase in European Union (EU) support for the project. Given that the project is expected to have tremendous positive effects on trade and freight transportation across Europe, the EU is currently footing 40% of the bill for the tunnel. This is expected to increase to up to 55% according to some official sources.

Despite this growth in support, financial pressure on the French government is likely to remain high. Local government bodies are subsidising the project, and have pledged up to €1 billion to this end. Meanwhile, fees and additional tariffs of heavy goods vehicles crossing the Alps could exceed €2 billion, while debt to the European Investment Bank could cross the €4 billion threshold.

Add to this the substantial costs that will amass on the Italian side of the table, and the estimate by Sia Partners for the total investment required for the project amounts to €18 billion.

The high costs have been a persistent cause for unrest in Italy, which will house only 20% of the tunnel. The project has been grounds for the opposition party in Italy to allege a misallocation of substantial funds that could be of much greater use elsewhere.

Locals in Italy’s Piedmont region have been demonstrating against the project, taking issue with digging up land at the foothills. Environmental groups have also taken issue with the substantial digging of natural land. The government’s response has been to point out that the project will have significant environmental benefits, given that it will move freight transportation from road to rail. More than three million cargo trucks reportedly cross the France-Italy border each year, and the tunnel is expected to halve this number.

As a result, governments on both sides have trudged on with the project. On the other hand, tenders and other developments have repeatedly had to be put on hold due to public unrest and other factors. It remains to be seen how these disruptive factors play out against Sia Partners’ forecasts.