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

AGENDA presentation of Finland and Lapland Business in Finland Arctic Corridor Drivers for the Arctic Railway Logistics in Kirkenes Arctic Railway

FINLAND EU´s northernmost country

FINLAND FACTS Finland is Member of Arctic Council 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

BUSINESS IN FINLAND Main industrial products: Paper and board, metal products, electronics, chemicals, and software

WHY 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

LAPLAND northernmost Finland

ARCTIC CORRIDOR The 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 Europa Arctic 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 winter tourism is very strong in Arctic Corridor espically tourism from Russia and Asian countries is growing main attractions are wintersporting, Santa Claus and northern lights main tourism centers are:Saariselkä, Pyhä/Luosto summer tourism attractions are hiking and fishing

MINING INDUSTRY IN ARCTIC CORRIDOR Composite Policy and Mineral Potential Ranking Frazer Institute Mining Company Survey 2013 Finland Finland has been considered to be one of the best exploration targets in the world. According to the Frazer Institute Mining Company Survey Finland was considered as second best country in the world as defined by Policy Potential Index.

MINING INDUSTRY IN ARCTIC CORRIDOR Estimated mining on metal ores in near future Companies having activities in the Arctic Corridor region

BARENTS SEA OIL AND GAS 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) 2001 GOLIAT 2009 HAVIS 2011 SCRUGARD 2012 An estimated 20–30% of the world’s untapped gas reserves and 5–13% of oil reserves are located in Arctic regions.

NORTHERN SEA ROUTE Trafic at NSR, according Rosatom: Year 2012: vessels: 46 freight 1,26 million tons Year 2013 vessels : 71 freight 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

LOGISTICS IN KIRKENES

LOGISTICS IN KIRKENES NEW INVESTMENTS PLANS 1. KILA (Tschudi) 2. pulkneset (GTI, svi) 3. norterminal (stolt-nielsen) 3. NORTERMINAL 2. PULKNESET 1. KILA

LOGISTICS IN KIRKENES KILA investor Tschudi AS KILA will be developed and made available for companies related to the oil and gas industry in the Barents sea and for maritime transport and logistics activities. Total area of 1.000 da (250 acres), 600 meters of deep water quays (13 to 23 meters) with ISPS status. All approvals required prior to construction have been granted. 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 Industrial park at Korsfjorden close to the Kirkenes Airport. The Pulkneset approach and port provides a large, deep and sheltered port, year round ice free by nature, with excellent manoeuvring conditions for ships and rigs of any size – operational at all times. Pulkneset is now in the impact assessment phase. The planned construction start is spring 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 Our mission is to build, operate and provide, a reliable land based tank storage terminal in Northern Norway, for oil and oil products exported from ice restricted ports, for reliable, low cost, onward shipments in large tankers.

ARCTIC RAILWAY 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 CONSTRUCTION The 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. PHASE 1: Rovaniemi – Sodankylä • The length of the Rovaniemi–Sodankylä track is around 145km. • The track will reach the Sodankylä mining areas, around 40km to the north of the population centre. • The estimated cost of construction is maximum 841 million EUR (2012) • A minimum transport amount of around 3,0 million tons per year is needed to support the execution of the phase PHASE 2 : Sodankylä – Kirkenes • The length of the Sodankylä-Kirkenes track is around 362 km. • The total cost of construction is maximum EUR 2,24 billion (2012) • A minimun transport amount of around 5,7 million tons per year is needed to support the execution of the phase. • The Sodankylä–Kirkenes track shall be included in the TEN-T transport network supported by the European Union.

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

ARCTIC RAILWAY Estimated break even traffic volume with different cost estimates, Rovaniemi-Kirkenes Rail section Rovaniemi–Kirkenes Low cost level Average cost level High cost level Costs: - investment (excl. interest) - operation and maintenance (30 v) 1 589 million € 200 million € 2 397 million € 3 078 million € Minimum traffic volume for implementation (break-even volume) 3 million tonnes/year 4,4 million tonnes/year 5,7 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) (*) 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)

Finance and implementation 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.

email: jorma.pietilainen@arcticcorridor.fi www.arcticcorridor.fi Mr Jorma Pietiläinen tel: +358 40 658 6880 email: jorma.pietilainen@arcticcorridor.fi Thank You !