Minister Savisaar calls for shareholder meeting of Estonian Railway

  • 2006-01-11
  • By TBT staff
TALLINN - The Ministry of Economy and Communications has called for a general meeting of Eesti Raudtee (Estonian Railway) shareholders to discuss the company's future ownership and the use of EU funds. Specifically, the government, which owns 34 percent of the company, wants to determine whether the state's stake should be increased in light of EU money invested in a new railroad track.

Also, Economy Minister Edgar Savisaar, who has led the government's offensive on Baltic Rail Service, said he did not rule out renationalizing the company if an investigation revealed breaches in fulfilling the privatization agreement of Estonian Railway.

Ministry officials explained that the company's privatization agreement, signed by current company owner Baltic Rail Service, which owns 66 percent, allows for the state to place EU funds or other monetary assets into Estonian Railway's stock capital either as monetary or non-monetary contributions.

A PHARE-finance project worth approximately 53 million kroons (3.4 million euros) for laying new track was recently completed. If capitalized into equity, the investment would increase the state's stake 10 percent to 44 percent, the ministry said on Jan. 4.

Given that several owners of Baltic Rail Service, which took over the railway company five years ago, have in recent weeks expressed a desire to sell out, Economy Ministry officials said it was important that the issue of increasing stock capital was solved before any change of ownership.

Otherwise it will become one of the first issues for Baltic Rail Service's new owners, the ministry said.

Under the privatization agreement, BRS has the right to make an additional investment in the stock capital that is proportional to its shareholding in the company. In order to maintain the proportion, BRS would have to invest some 100 million kroons, the ministry said.

In Savisaar's words, "Now BRS must choose whether it agrees to an increase in the state's shareholding in Eesti Raudtee or will increase investments on its part." "If BRS chooses the second option, we would like these to be real investments, not just things on paper."

Savisaar said it was important that the general shareholders meeting was convened quickly and decisions made, the ministry said.

Savisaar said that, while the government has not yet decided whether to buy the shares, he did not rule out an early termination of the privatization agreement, which would effectively renationalize Estonian Railway.

A commission appointed by the ministry is currently conducting a probe into the rail company, and is scheduled to submit its findings in the second half of January.

Savisaar explained that the government's decision would ultimately depend on the report. He pointed out that Estonian Railway's 2004 annual report has not been approved yet, and that the owner of the railway is faced with a penalty for failing to make investments in the amount required by the privatization contract.

Already the government has hit Baltic Rail Service with a 15 million kroon penalty for failing to meet an investigation obligation. BRS has until the end of January to prove the opposite.

BRS officials lashed out at the ruling, calling the government "corrupt, dishonest and incompetent."

"If under the latter article further significant violations are found in the course of the analysis, early termination of the privatization agreement cannot be ruled out," Savisaar said.

He added that the privatization had failed to produce the desired result 's that is, making the necessary investments in railway infrastructure.

Martin Jasko, a government spokesman, said Prime Minister Andrus Ansip believes that the offer by BRS to sell its stake to the government must be seriously weighed, but that the purchase definitely cannot be executed at any price.

"Therefore the commission set up with the ministry is examining the merchandise 's its real value, existing obligations of the company and the possible price," Savisaar said.