Privatization adviser's fee debated

TALLINN (BNS) - A panel preparing the selection of an adviser for the privatization of Estonian Railroads proposed to the Privatization Agency's council to pick two advisers - but their fees became a cause for debate.

Privatization Agency Director General Vaino Sarnet told the Baltic News Service that according to the proposal one adviser would be chosen by the agency together with the European Bank for Reconstruction and Development. The bank has promised financing to the tune of up to 3 million kroons ($201,900) for the adviser.

To select the other adviser, the agency will arrange a public competition in cooperation with the minister of roads and communications.

The second adviser's fee, of an estimated 5 million kroons, should be paid by Estonian Railroads, Sarnet said.

The adviser picked in the competition must among other things suggest the form in which investments into the rail company should be made and where the money should be spent.

The adviser must also recommend the best way to protect the interests of the Estonian state in relations with the Russian rail company.

The council of the Privatization Agency will discuss ways and means of financing the selection of an adviser and the adviser's principal tasks next week.

Meanwhile, Estonian investment banking specialists want more clarity about the principles of selection of an adviser in the privatization of Estonian Railroads.

Rain Tamm, board member of the investment bank Lohmus, Haavel and Viise-man, said it is unclear at present whether the task of an adviser to be picked by public competition is just to prepare the privatization or to provide counseling through the entire privatization process.

A fee of about 5 million kroons mentioned by Sarnet will be sufficient if it is to be paid solely for preparing the sale, Tamm said, but not enough if the adviser is to steer the entire process.

Suprema's investment banking director, Henrik Igasta, said it is not sensible to set limits on the adviser's fee in advance because this reduces investment banks' interest in the whole thing.

As Igasta sees it, an international public competition should be announced where the price of the service will be determined by the market.

The agency hopes to find the adviser by November and sign an agreement on selling the railroad into private hands at the end of next May.