State, BRS fail to endorse report

  • 2006-03-29
  • Staff and wire reports
TALLINN - Shareholders of Eesti Raudtee (Estonian Railway) failed to approve the company's annual report for 2005, the second year in a row, after state officials refused to confirm the managers' re-evaluation of fixed assets. The Economy Ministry, which manages the state's 34 percent stake, said it could not endorse the 2005 report since it had been carried out in a manner and on a scale not consistent with the principles of understandability and objectivity.

The report, which was compiled by the railroad company's private owners, increased the company's assets from 2.5 billion to 6.1 billion kroons (160 million to 394 million euros).
The board's proposal to pay out some 80 million kroons in dividends was also torpedoed since, by law, profit cannot be distributed until the annual report is approved.
Baltic Rail Service, the private company that owns 66 percent of Estonian Railway, maintains that increasing the value of the company's fixed assets has been approved by auditors. They also argue that other infrastructure companies in Estonia have had their fixed asset re-evaluations approved by the state.
A higher value of assets means that the company would be able to introduce higher infrastructure access fees for operators.
Economy Minister Edgar Savisaar had hoped that BRS would abandon its plans for the asset appraisal.
Relations between BRS, which combines Estonian and U.S. investors, deteriorated once the new government took power at the beginning of 2005. The Center Party, which Savisaar chairs, strongly believes that the privatization of Estonian Railway was a mistake, and that the state should own the rails.
Both sides will try again to overcome their differences on April 5 at an extraordinary shareholder meeting. A proposal by BRS will be discussed to change the statutes of association in such asway as to abolish the state's right of veto.