Funding - The State Guarantee Model
The fixed links across the Great Belt and Oresund are funded via the state guarantee model with user financing. A similar model will be applied on the forthcoming Fehmarn Belt connection.
Illustration: Femern A/S
The total construction cost of the Fehmarn Belt connection is expected to be 40.7 billion Danish Kroner (approx. € 5.4 billion), while an upgrade of the Danish rail and road network is expected to cost approximately 8-9 billion Danish Kroner (approx. € 1.5 billion). The project is expected to be paid in full paid after 39 years of operation.
The state guarantee model includes the establishment of a state-owned company responsible for the planning, design, funding, construction and operation of a major infrastructure project.
In connection with the project planning and the construction of the Fehmarn Belt fixed link, the Danish Government has established the company Femern A/S, which is a part of Sund and Bælt Holding A/S. Sund and Bælt is also responsible for the operation and maintenance of the Great Belt Bridge and the Oresund Bridge.
Femern A/S funds the project through obtaining loans on the international financial markets. The Danish state provides state guarantees for these loans. The debt of the company will be repaid by the user financing of the project.
Denmark has great experiences with this way of funding, which has provided lower interest rates equivalent to what the Danish state pays for its loans. The funding does not put a strain on the government budget, which is another advantage of applying the model. In this way money can be spent on other areas of the budget.