TALLINN - The government announced it had sent Baltic Rail Services, the majority shareholder in Eesti Raudtee (Estonian Railway), a notice about violating the privatization contract and a warning about contract termination. According to the government, BRS has not met the aims stipulated in the privatization contract, the Economic Affairs Ministry said.
Both the notice and the warning were mainly due to the majority owner's failure to meet its investment obligation, the ministry said.
"We expect BRS to make up for its violations within 60 days of receiving this violation notice and termination warning," the ministry said in its press release.
This is not the first warning BRS has received from the government in connection with significant violations of contract. A penalty to the tune of 15 million kroons (958,000 euros) has been levied on the company, but BRS' attitude to observing the privatization contract has not changed, the ministry said.
If BRS fails to remedy the significant violations of the contract or does not present a reliable plan of action, the government will rescind the privatization contract.
BRS has hotly denied any violations and accused the government of a campaign to renationalize the asset. BRS, which claims state regulators have kept infrastructure fees artificially low and prevented the company from re-evaluating its fixed assets, has turned to the court. The majority shareholder is demanding billions of kroons in compensation from the Estonian government.
BRS bought a 66 percent stake Estonian Railway in 2001.
Meanwhile, TransCare, a young German transport and logistics firm, said it was interested in acquiring BRS' stake in Estonian Railway together with the Russian Prominvestors group.
The firm's chief executive said there were plans to include Estonian Railway into a logistics chain reaching ports on the Pacific Ocean.
"We have an agreement with Prominvestors under which TransCare has to get a shareholding in the would-be joint venture," Ralf Jahncke, founder and CEO of TransCare, told the daily Postimees. "I believe that TransCare and Prominvestors represent a unique combination of European railway know-how and expertise of the Russian market."
He said Prominvestors, which owns a ship line and a ground logistics network, would become one of the first companies in the Baltics to offer its services throughout the entire shipment chain.
"Estonian Railway may become the Baltic Sea's headquarters for a modern logistics chain extending until Pacific ports," Jahncke said. "Through that Estonia may develop into an important hub and be successful, for instance, in services-oriented economy in Eastern Europe just like Dubai is in the United Arab Emirates."
Jahncke identified excessive dependence on oil transit as the main weakness of Estonian Railway now.
"That is not sustainable in the long run," he said. "When Russia sets up new oil terminals by the Baltic oil transit may disappear overnight, just like it happened to Latvian transit after the Primorsk oil port was launched."
According to its Web site, TransCare acts as adviser to public transport authorities and helps operators optimize their logistics activities. The firm helped develop traffic and transportation concepts for the
FIFA World Cup in Germany this year.
