Nationalization of Estonian Railway completed

  • 2007-01-17
  • By TBT staff
TALLINN - The re-nationalization of the nation's railroad company, Eesti Raudtee (Estonian Railways), was finalized last week, with ownership of a 66 percent stake privatized over five years ago being transferred back to state hands.

The re-nationalization, which was concluded Jan. 9, capped an almost two year-long drama that had pitted the Economy Ministry against private owners/managers of Estonian Railways, which owns and operates the rails and infrastructure.
The state ultimately paid 2.35 billion kroons (150 million euros) to Baltic Rail Services for the stake, compared to the 1 billion kroons the firm paid for the asset in 2001.

The Economy Ministry immediately established a new supervisory council, which in turn appointed a new CEO and executive board. Kaido Simmermann, Estonian Railways' director of infrastructure, was offered the top job, and he accepted.
"My main task will be to prepare development plans for finding investment for the railway and start dividing the rail company," he told the Aripaev daily last week.

The Economic Affairs Ministry also announced that fees for usage of Estonian Railways' infrastructure would not increase this year. The fees had become a point of contention with Baltic Rail Services, which on numerous occasions had unsuccessfully requested they be increased.

Marika Priske, state secretary of the ministry, said that fees could not be increased since rail capacity had already been divided among operators and agreements for the current financial year concluded.
In one of its first decisions, the supervisory board approved the investment budget for 2007, according to which the company will plow 868 million kroons into development. Last year, the company invested some 500 million kroons, the Economy Ministry said.
In 2006 Estonia's rail system handled some 44.2 million tons of freight, which was only a 0.3 percent improvement on 2005. Still, the company said the result was a record, and that gains in coal and grain shipments helped offset losses in oil and oil products.

This year Estonian Railways intends to boost overall freight handling to 48.2 million tons.
Meanwhile, outgoing CEO Edmund Burkhardt told journalists last week in Tallinn that Estonian Railway's difficulties would not go away now that the company was in state hands.

Burkhardt said that low tariffs for infrastructure usage were the cause of Estonian Railways' problems. This leads to a negative cash flow and deprives the company of investment needs.
He also said the artificially low value of the company's assets 's which his company, BRS, had raised without the Economy Ministry's approval 's was nothing but self-deception, since depreciation of assets fails to cover the costs of maintaining those assets.

Surprisingly, Burkhardt, a U.S. citizen and lifetime rail businessman, isn't pulling out of the Baltics yet. He said that he was considering taking part in the Rail Baltica project, a multi-billion dollar rail line connecting Tallinn with Berlin.
In his words, Rail World, a firm that had co-owned Baltic Rail Services, is studying Rail Baltica and searching for potential partners. He said the EU-funded rail line was most attractive for freight cargo, but that passenger travel could also be developed.
Burkhardt said the project would take two to three years to materialize, and a preliminary study is scheduled for release by the end of January.

According to initial plans, the Rail Baltica line would run from Tallinn to Tartu, and from Tartu to Valga on the Estonian-Latvian border.