TALLINN - Aadu Luukas, considered to be the father of Estonia's transit business, has sold his stake in Pakterminal, an oil terminal where he worked for 13 years, to an as yet undisclosed buyer.
Many reports speculated that Luukas sold to Russia's Severstaltrans or a company related to it, and that this subsequently led to his being dismissed from Pakterminal's supervisory council.
Much of the speculation centered on Spacecom, a leading railway freight handler and a subsidiary of Severstaltrans, though Spacecom officials refused to comment when asked if the company was involved in the deal.
Still, given Russia's increasing export numbers and vast resources, it appeared likely that the buyer was related to Russia, and this immediately raised concerns that the neighbor was becoming too influential in Estonia's lucrative transit business.
The typically reticent Luukas provided little insight into his sudden decision. "One important reason is that the oil transit situation has changed fundamentally, and it requires a lot of work. I do not wish to do that," he told The Baltic Times.
"I am ready to leave the sector. Also because I have a buyer," he added.
Luukas refused to name either the buyer or the price of the deal.
Historically, Pakterminal was a gem. At the best of times profitability was as high as 77 percent, though currently the transit market has difficulties. More Russian crude is being transported via pipeline to the terminal in Primorsk on the Gulf of Finland.
Toomas Rammo, finance director of Pakterminal, admitted that the situation was indeed complicated, though he stressed that profitability is still over 50 percent.
Pakterminal is an Estonian-Dutch joint venture mainly involved in loading and storing crude oil and oil products. The venture is owned by Trans Kullo, an investment company, and Royal Vopak, a Dutch concern, in equal shares.
Luukas controlled 10 percent of Pakterminal through Trans Kullo.
For the last seven years, Trans Kullo shareholders have paid out dividends to the tune of 1.7 billion kroons (109 million euros), with Luukas' dole amounting to approximately 330 million kroons.
Raivo Vare, development director of Estonian Railway, the privately owned cargo operator, said he saw danger in Severstaltrans' huge market share in Estonia. Severstaltrans owns half of the oil and oil products transport in Estonia, he said, and will be in a position to dictate prices as it controls products, terminals and transportation through its companies.
What's more, exports of crude have practically disappeared, and those of fertilizers and coal have not made up for the loss, he said.
The government does not understand that Russian companies engaged in transport are consolidating, Vare added. Russian companies cut most of the profits and the rail tariffs of Estonian Railway are kept ridiculously low to help them.
"Transit business is almost under control of one group," said Vare. "The government continuously ignores the fact."
Vare added that transport to the Estonian-Russian border in Russia costs 27 dollars, while only 3.7 dollars in Estonia.
Luukas shrugged off the criticism, saying that he had not owned a controlling stake in Trans Kullo, so it shouldn't be a problem.
"Vare represents Estonian Railway, and this is their view," said Luukas. "Everyone knows that their relations are a mess," he added, referring to the ongoing court battle between Spacecom and Estonian Railway.
Severstaltrans owns 70 percent of Spacecom.
Marika Roomere, a spokeswoman for Spacecom, said that Russian tariffs were high, but she added that, compared to Latvian and Finnish prices, Estonia's are also high. Specifically, she said prices proposed by Estonian Railway are five times higher than they should be according to the company's cost-revenue report.
Pakterminal's Rammo commented that Russian tariffs were high on product flows toward the harbor and should, according to his information, decrease substantially. Pakterminal, as well as other terminals, have not increased prices over last 13 years, he said.
"Transit is a huge and volatile business, and things can change a lot. The competition is getting tough and more terminals are being built," said Rammo.
As far as Pakterminal management, Rob Nijst will become the new chairman of the council, and Anne Aalt Bruggink will become deputy in lieu of Sulev Loo, who will leave the chairman's post Nov. 15.
"It is sad [that Luukas has to leave]," said Vare. "He has become sort of an icon in transit. It reflects the changing times on the market. The control has gone under one group. The production flows are decreasing, which is difficult to compensate. The business is not so effective and interesting any more."
Vare held the post of CEO at Pakterminal just two years ago.
Luukas, 66, held the 24th position in a list of Estonia's richest people with approximately 584 million kroons in assets.
He said he was planning to spend some time in southern Spain and continue his social engagements. Luukas is chairman of the council of the Public Understanding Foundation and of the volleyball federation.
Speculation about him leaving the transit business, he emphasized, wasn't true. Though he will no longer deal in liquid products, Luukas will be involved in container and fertilizer terminal businesses at Muuga Container Terminal, Refetra and HDG Invest through a holding company Transiidikeskus, he said.
According to press reports, Royal Vopak is also dissatisfied with Luukas' move to sell, and as a result it forced him off the company's council on Oct. 7.
But Rammo said that it was not up to Pakterminal management whom Luukas sells his shares to.