Rail funds to be used for modernization

RIGA - Latvia’s Transport Ministry will have a month and a half to inform the government about the possibilities of purchasing new trains and modernizing existing rolling stock, Prime Minister Valdis Dombrovskis told reporters after a meeting with President Andris Berzins on May 8, reports LETA. Dombrovskis allowed for the possibility of Latvia purchasing fewer new trains and lower costs, as compared to the failed train procurement. The arrival of new trains is expected in 2015, explained the prime minister.

The people of Latvia will have new trains. It has been clearly stated that it is necessary to seek alternatives and ensure the arrival of new trains, whether by attracting resources or by renting the trains. The rolling stock must be replaced gradually, Transport Minister Anrijs Matiss said in an interview with LETA on April 19.

The European Commission has approved Latvia’s proposal that the European Union funding originally earmarked for the procurement of new electric and diesel trains be spent on other railroad transport investment projects.
That amount, 100,079,289 lats (142 million euros) in total, will go to the modernization of railroad infrastructure, passenger access and service infrastructure - that is, the reconstruction of railroad station platforms and the current diesel trains.

According to Latvia’s proposal and the European Commission’s instructions, at least 21 percent of the investment amount will go to projects fostering the development of environment-friendly and up-to-date transport systems in cities and towns, improving the quality of passenger service and increasing the energy efficiency of trains. Seventy-nine percent will be invested in transport infrastructure that complies with quality and safety standards and is integrated in the common Eurasia transport system.

These projects will foster the development of an integrated, multimodal, environment-friendly and sustainable transport system, improve passenger transport quality and safety, and reduce travel time, notes the Finance Ministry.
Therefore, the state-owned railroad company Latvijas Dzelzcels is to implement the following projects: the modernization of passenger access and service infrastructure, the modernization of railroad signals at Skirotava Station, the modernization of Liepaja Station’s railroad signals and the reconstruction of several railway tracks, reconstruction of several railroads in West-East corridor, the replacement of switches in West-East and Rail Baltica corridors, the data transmission network modernization in the East-West transport corridor, and the modernization of passenger transport company Pasazieru vilciens’ rolling stock.

At the beginning of April the Cabinet of Ministers agreed in principle on the redistribution of funding from the EU Cohesion Fund for other railroad-related projects after the new train procurement failed as the mediation talks between Pasazieru vilciens and Spain’s train manufacturer Construcciones y Auxiliares de Ferrocariles produced nothing.
Pasazieru vilciens announced the train procurement in December 2009. Under the failed contract, the total cost of 34 new electric trains and seven diesel trains that Pasazieru vilciens wanted to buy was 144 million lats, of which 100 million lats would have been covered from the bloc’s Cohesion Fund, whereas Pasazieru vilciens co-financing would be 44 million lats. Pasazieru vilciens and CAF signed a contract on the manufacture of new trains for Latvia in April 2012. It was later established that the contract, signed by then Pasazieru vilciens CEO Nils Freivalds, was not in line with the original procurement requirements, which meant that the EU funding could be refused for the project.

Passenger train improvements
Passenger train operator Pasazieru vilciens continues analyzing the various opportunities on the market, and it currently believes that taking out a long-term loan or concluding a long-term lease contract could be the best opportunity to renew the company’s rolling stock.

Each option has its pros and cons that need to be thoroughly evaluated and analyzed from the financial and legal standpoints. The company is already planning to bring new trains to Latvia in 2014-2016, gradually replacing the current electric trains. The company’s proposals have been submitted to the Transport Ministry for evaluation.
Pasazieru vilciens has also evaluated the possible risks of not renewing its rolling stock, which would require investments in repairs of the existing rolling stock. This, however, would mean not only extra investments but also a possible reduction in the number of the company’s trains, something the company doesn’t want.

It also wants to use its own funds as much as possible, and as little extra budget funds as possible.
If Pasazieru vilciens obtains new trains, repairs to rolling stock will cost much more than now, and the new trains will also be more economic. The company is planning to complete its financial calculations this month.
Pasazieru vilciens emphasizes that its current trains are technically and morally obsolete, that they do not meet the European Union’s environmental protection requirements, and do not ensure proper boarding and travel conditions for people with disabilities, senior citizens, and young mothers with prams.