Case Studies: ARN-STO Rail link

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Project Overview
Figure 1: The ARN-STO Rail.
Photo courtesy of Niklas Alm
The ARN-STO Rail link (Arlandabanan) Concession, Sweden
Project Type: Greenfield
Contract duration:

45 Years (including Design & Construction

There are also limited possibilities for a 10-year extension.
Budget: SEK 6811M
The actual construction cost was SEK 6811M, while the forecast was SEK 6025M.
Project Time Line
Project conception: January 1993;
Call for Tender: June 1993;
Contract Approved: September 1994;
Financial Close: October/November 1995;
Start of construction: November 1995;
Start of Operation: 1999;
Refinancing: 1999;
Refinancing: 2004


The Arlanda – Stockholm link is a 19 km rail way and runs between Arlanda airport, and Stockholm, Sweden. During 2012 a total of 4.6 million passengers were carried on the link, out of which 3.3 million were carried by the concession holder.

The track included an expansion of the existing rail network leading out of Stockholm central station to a 4-track solution before the rail splits up to a 2-track link. This latter part is an exclusive part of the rail link.

The discussion of the need for a rail connection between Stockholm and Arlanda airport arose in the 1980s as Arlanda airport grew in size. The culmination came when Arlanda airport applied for approval for the construction of a third runway. In 1990 discussions started regarding whether the link should be built as a PPP or financed through the state budget. In 1993, the government opted for a PPP approach and a decision to start the procurement procedure was taken by the parliament.

The project is the only rail link connection to Arlanda – Stockholm airport. However, the airport can be reached by road. Competing firms are running bus and helicopter shuttles to the airport. Furthermore, as of 2012, the regional Stockholm public transport system has started to offer services on the rail link in competition with the concession holder. The concession holder is reimbursed for this traffic. Similarly traffic has been running on the link from the neighboring region of Uppland for some time; the concession holder is reimbursed for this traffic also.

The Contracting Authority (Public Party)

The project was initiated by what was then the Swedish Rail Administration, which was a government agency. The feasibility studies were conducted through a government-appointed inquiry, and the final decision was affirmed by law in the parliament (This practice is no longer mandatory nor possible in Sweden at the current date – 2013).

Arlandabanan Infrastructure AB, set up as a government owned SPV for the project, was the contracting authority.

The Concessionaire (Private Party)

The concession was awarded to a consortium including NCC (construction company), SIAB (construction company) and Vattenfall (state-owned energy/utilities company). Respective shares in the consortium are unknown. The successful consortium formed A-Train AB which along with the government-owned Arlandabanan Infrastructure AB formed the SPV. In 2004 the consortium SPV was sold to Macquarie European Infrastructure Fund.

The financial structure regarding the link is complicated, and involves many (more than 40) different agreements. It is not obvious that all agreements have been publicly disclosed, at least not in a collective presentation, which may explain why different accounts of the project report different numbers and parts of the project.

Construction costs are estimated to be between SEK 6000-6800M. Approximately 40 % (SEK 2700M) of the costs were capital costs, paid by the consortium. Regarding the private capital costs, SEK 1000M were financed through a conditional loan from the government. SEK 1100M were financed through external bank funding, SEK 200M were financed through loans from the consortium participants, and the rest (SEK 400M) were funded through equity.

The remaining percentage of the total capital costs was financed through the government as direct payments. The nature of those direct payments remains somewhat unclear, and different labels have been attached to these payments; some payments are marked as reimbursements and some as state aid subsidies, but still connected to specific sections of the project. The conditional loan awarded by the government was an interest-free, amortization free loan. In this respect, the government is to receive a profit share (to the amount of SEK 1850M), provided the concession holder makes a profit. This loan is subordinated to other debts in the case of a bankruptcy.

Refinancing has occurred during the project. Notably refinancing occurred in 1999, when the level of external financing was increased (mostly from banks where the government was a dominant shareholder). In 2004 refinancing occurred when debts were transferred to new creditors (where the government did not have any owner interests).

Rolling stock was financed through a credit arrangement where the government guarantees repayment if the concession holder is unable to repay the loan. This loan had an initial investment cost of 730M SEK.


The ARN-STO rail link serves only passenger traffic. Ridership in 2012 was 4.6M passengers. Cargo can be shipped on the non-exclusive part of the link.

Apart from the users, stakeholders include: the National Transport Authority (the authority responsible for the national rail network), the Swedish Transport Agency (the regulatory authority); Swedavia (the airport operator), SL (a regional public transport company), SJ (the national public transport company), UL (a regional public transport company) and Arlanda Express.

Key Purpose for PPP Model Selection

The reason for initiating the project was the need for the service. The reason for choosing a PPP solution was financial.

Project Timing

The need for the project was based on increased traffic projections for Arlanda Airport, and a need to decrease the environmental impact of the airport. However, neither the airport nor the rail link has met the original projections.

Project Locality and Market Geography

The rail link contributes a key part of the passenger traffic to and from Arlanda airport.

Procurement & Contractual Structure


The contract was assigned following an open call for expressions of interest and a negotiation phase. Eighty (80) potential bidders responded to the open call for the expression of interest. Two (2) bidders (two consortia) took part in the final stage. The procurement process was concluded within 15 months.

Contract Structure

A 45 year concession agreement was signed, establishing some levels of service and including some termination clauses relating to breaches of the contract’s intent. Within this contract, the private party is fully responsible for design, construction, and operation and maintains the link.

At the end of construction, assets are to be sold to the government SPV at a fixed price, then immediately leased back to the private SPV for a one-time-fixed-price, identical to the former transaction price.

Financial guarantees have been provided to creditors by the government, but not to the concession holder, whose revenues are based on user fees.

Risk Allocation

Risk is allocated as depicted in figure 2.


Figure 2 Risk allocation

There were political risks associated with the project. While parties in parliament cannot affect the actual contract, they can influence the SPV’s overall conditions, which are not regulated in the contract but still related to the operation of the project.


The contract contains vague statements about upholding good service standards. Actual traffic has been less than forecast: ridership 4.6M vs 5.1M forecast for 2005 (the forecast traffic for 2020 is 7.4M passengers).

While the forecasts have not been met, this risk is mainly held by the private party, and relates to business decisions on pricing vs. number of travellers carried. The availability/punctuality of the link has outperformed regional rail traffic: approximately 95% vs. 91% on time (+5 min).


  • Centre for Mega Projects in Transport and Development. (nd). Project profile: Sweden: Stockholm Air Link: Arlandabanan. from Accessed 2013-04-22.
  • Enberg, Nils, Hultkrantz, Lars, & Nilsson, Jan-Eric. (2004). Arlandabanan: en uppföljning av samhällsekonomiska aspekter på en okonventionell projektfinansiering några år efter trafikstart VTI Notat 46-2004. (NP).
  • Regeringens proposition (1993) 1992/93:176 om investeringar i trafikens infrastruktur m.m. [The government’s bill on investment in transport infrastructure etc.]. Stockholm: Riksdagen.
  • Regeringens proposition (1994) 1993/94:213 Godkännande av grundläggande principer för Arlandabanan. [The government’s bill on approval of fundamental principles for Arlandabanan.] Stockholm: Riksdagen.
  • Riksrevisionsverket. (1995). Upphandlingen av Arlandabanan -regeringsuppdrag [The procurement of Arlandabanan - commissioned report] RRV 1995:43. Stockholm: Riksrevisionsverket.
  • Riksrevisionen (2004). Arlandabanan: Insyn i ett samfinansierat järnvägsprojekt. [Arlandabanan: Transparency in a co-financed railway project.] RiR 2004:22. Stockholm: Riksrevisionen.
  • Trafikutskottet betänkande (1992/93) 1992/93:TU35 Investeringar i trafikens infrastruktur m.m.. [The transport committee’s report on investment in transport infrastructure etc.]. Sto