Construction and Operation of the Fehmarn Belt Immersed Tunnel Is a High-Risk Business Case

The Fehmarn Belt immersed tunnel project conditionally approved by the Danish parliament on 28 April 2015 is supposed to be built and commercially operated by a Danish state owned company and financed by loans guaranteed by the Danish government. The loans are going to be amortized by incomes from the tunnel users. According to plans construction work was supposed to start by 2016 followed by tunnel inauguration in 2022, this has been put on hold awaiting clarification of major uncertainty issues. Since the official financial model is publicly unavailable, the uncertainty profiles presented in this paper are based on a financial model developed by the author covering 60 years of future tunnel operation and validated in terms of project payback period (PBP) compared to published results generated by the official model. Uncertainty is represented and calculated by probabilistic uncertainty representation and Monte Carlo simulation as well as interval analysis. The resulting project uncertainty profiles are presented in terms of a traffic light metaphor: Green light corresponds to a payback period less than 40 years, yellow to 40-50 years, and red to larger than 50 years. It turns out that the tunnel project constitutes a high-risk business case and the likelihood of financial project failure in terms of the payback period being outside of the green light zone is substantially larger than acknowledged by the project proponents and presented to the public. This is primarily due to apparently too optimistic base case assumptions of critical, but uncertain, project variables and methodologically insufficient partial sensitivity analyses.