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Finnish investor eyes railway stake, Ansip reiterates state's interest

Feb 15, 2006
Staff and wire reports

TALLINN - VR, Finland's national railway company, has expressed an interest in buying the controlling stake in Estonian Railway from current shareholders, Finnish media reported.
Prime Minister Andrus Ansip, meanwhile, said the state was still interested in acquiring the asset 's a 66 percent stake in the Estonian Railway 's if the price was reasonable. Economy Ministry officials have reportedly claimed a fair price would be 2.2 billion kroons (141 million euros).


The Taloussanomat newspaper in Finland reported last week that Henri Kuitunen, VR Group president, said that planning of the deal was still in the early stages.

Kuitunen has met with Economy and Communications Minister Edgar Savisaar but not with executives of Baltic Rail Service, the company that owns the 66 percent stake and, after five years of managing the company, has opted to bail out over dissatisfaction with government policies. "Negotiations are still in such an early stage that we haven't contacted the shareholders yet," he said.

The main issue for VR was what would become of the infrastructure, Kuitunen explained. "In Finland we don't own the infrastructure," he said, adding that VR was not interested in owning infrastructure in Estonia either.

Government officials who favor the sale, including all three coalition parties, have also stressed that the government should not be involved in cargo transit but should own the rails.

Baltic Rail Service reportedly wants to receive 2.5 's 3.0 billion kroons for its stake. Kuitunen, however, would neither comment on the price nor on whether the government's 34 percent interest made VR less enthusiastic about the investment.

Although other investors have reportedly met with BRS, only VR has visited the Economy Ministry, a ministry official said.

As Heido Vitsur, adviser to the minister of economy and communications, told the Baltic News Service, "But there have been hints through various channels that the wish exists to meet and speak about the railway too."

For now, the state remains the only investor with a concrete offer on the table.

Prime Minister Ansip, speaking to Estonian Radio on Feb. 10, said, "In making the decision about buying the shares the main argument will be the price. If the price is favorable we will buy, but if it's not economically favorable, we won't buy."

He stressed that the "goal is not to start paying extra on Russian transit at any cost 's that is not in the interest of the Estonian people and the government."

Ansip would not reveal how much the government is prepared to pay for the majority stake, but admitted that the sum was to the tune of 2.2 billion kroons.

The prime minister said that while BRS has in every way tried to suggest it was the government that showed the initiative to buy back the majority shares, actually the opposite was true. "It's BRS that is interested in selling the shareholding," Ansip said.

The government is expected to decide about buying back the shares in Eesti Raudtee next week.

Juri Kao, a member of BRS' supervisory board, has expressed doubts as to whether the state is able to make an offer for the 66 percent shareholding in Eesti Raudtee.

Meanwhile, it was reported last week that Edward Burkhardt, an owner of BRS and chairman of the supervisory board of Estonian Railway, is bidding for 100 percent of Cargo Slovakia, a Slovakian rail operator, via his holding Rail World Inc.

Rail World holds 27.88 percent of the shares in Baltic Rail Service.

A report published in the Slovak Spectator said Rail World had placed a bid in the Cargo Slovakia privatization tender as part of a consortium with MID Europa Parntners and Penta. The consortium offered 330 million euros for 100 percent of the rail company.

The bid was the second highest after a 340 million euro joint bid by Rail Cargo Austria and J&T.

However, the size of the bids did not meet the Slovakian government's expectations. The newspaper wrote that uncertainty about the fees for using rail infrastructure was one of the reasons for the low offers.

Slovakia's transport minister originally estimated that the state could get 390 's 530 million euros for the shares
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