Posted by: swissmetro | May 29, 2009

Cost, Financing, and Profitability

The Swissmetro main study also looked into cost, financing options and profitability of the project. The total cost for the west-east-axis Geneva to St.Gallen and the leg Basel – Zurich was estimated to cost about 25 billion Swiss francs. These figures are from 1997, unfortunately, more recent figures are not available.

It is not possible to finance Swissmetro only through private investors. That is why a financing model consisting of a combination of private companies and public corporations is intended. A public corporation finances the necessary infrastructure. No interest is paid on the invested capital but the money is repaid over a period of 40 years through a share of the profits. A private transport company finances the vehicles and installations and licenses them to an operating company (Swiss Federal Railways and partners) in exchange for a share of the profits. The operating company does not invest capital but shares the profits with the other two companies.

There are 2 main reasons why it is not possible to finance Swissmetro only with private investors. A project of such dimensions needs a favorable political framework, and that means a public stake. Nobody is going to invest in this project and run the risk of a new minister of transport suddenly changing the transportation policy during the project duration of 20 years.

Secondly, the high interest makes private financing impossible. Private investors need need a high return on the invested capital as soon as possible. A large part of the profits would have to be used to service the credits because of the high initial investments. The substantial indirect benefits of the project for the public are not worth anything to private investors, because they cannot be easily quantified and invoiced to the state. The project does pay off for the state. Instead of an interest on the invested funds, the state profits from the macroeconomic benefits.

The public loans would also be repaid and part of it could be financed through reduced investments in other transportation infrastructure projects. While there is no direct return on the public funds invested in the infrastructure, the state profits indirectly from macroeconomic improvements such as the time passengers save, reduced social costs of accidents, air and noise pollution, and saved energy. The cost of Swissmetro is also an investment in Switzerland’s economy and research. Directly or indirectly Swissmetro is profitable for all the involved parties.

By way of comparison, the cost of AlpTransit (NEAT) was estimated at 14,7 billion Swiss francs in 1998, but the actual total cost will be as high as 24 billion Swiss francs. Taking into account the longer distance, Swissmetro would cost less than NEAT. First of all because the diameter of the tunnel is much smaller and secondly because the tunnel is constructed near the surface in relatively soft molasse instead of hard gneiss and granite. The geology of the area is known much better, so the costs and risks can be estimated much more accurately.



  1. “The public loans would also be repaid and part of it could be financed through reduced investments in other transportation infrastructure projects.”

    What transportation infrastructure projects may be affected?

  2. For example a third railway line between Geneva and Lausanne. Swissmetro would create the needed additional capacities instead of a conventional railway line. Thanks to Swissmetro more local commuter trains could circulate on the existing surface lines. (interestingly, a conventional railway line would also require underground expansion of railway stations:

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