FINLAND: The Ministry of Transport & Communications and national operator VR have signed a directly-awarded public service obligation contract for the operation of loss-making passenger services over the next nine years, with provision for the procurement of new rolling stock and greater regional involvement in funding services.
The contract signed on January 27 runs from February 1 2022 to December 31 2031 and is worth up to €34·9m per year, with quality and performance-based incentives and penalties.
It replaces a short-term contract awarded in December 2020 to ensure continuity of operations during the pandemic.
The PSO agreement covers commuter and regional services in southern Finland which are operated using Sm2 and Sm4 EMUs, as well as DMU-worked regional services on less busy long-distance routes, overnight trains to and from the north, and selected inter-city services designed to complement the 85% of long-distance trains which VR operates on a commercial basis.
The services amount to about 16% of long-distance journeys and 44% of long-distance trains, and 17% of local journeys and 19% of local trains.
Ticket revenue is expected to cover 68% of the cost of operating the services, based on pre-pandemic figures from 2019, with the ministry reimbursing VR for 22% of the costs and Helsinki municipal transport authority HSL 10%.
The contract makes provision for additional services to be added subject to national or regional funding, and for possible infrastructure changes.
More than €280m is to be invested in new overnight and commuter train rolling stock during the period, and there is provision for further purchases of night train coaches. This stock would be made available to any future winner of tendered operating contracts.
‘We will take the business risk of increasing passenger numbers over the next nine years. The long contract period enables long-term development of the customer experience’, said Topi Simola, VR’s Director of Passenger Traffic.
He said the agreement enables longer-term planning, ‘and gives the regions a new opportunity to gain more traffic independently’, which is planned in the Tampere region.
Competitive tendering next
The contract has been directly awarded, but EU rules will require the next contract to be competitively tendered.
VR’s exclusive right to provide passenger rail services expired at the end of 2020, with open access operators now able to enter the long-distance market should they wish. Since June 2021, VR has operated services within the Helsinki region under a 10-year contract competitively tendered by HSL, which specifies and funds most suburban rail services.
The ministry said impediments to market-based competition had been removed with the signing of the latest PSO contract, and its long duration would allow ‘careful preparation’ for tendering.
- VR Group’s Senior Vice-President for Strategy & Corporate Development Ilkka Heiskanen discussed plans to grow the passenger and freight business in the October 2021 issue of Railway Gazette International magazine, which subscribers can read online.
