UNCOUPLING: The cabinet's plan to split Estonian railway into three separate entities is driven by the desire for transparency and compliance with EU regulations, though trade union officials warn that the move will bankrupt the company.
TALLINN - Voting on a proposal by Estonian Minister of Economy Juhan Parts, the Cabinet at an extraordinary sitting on Oct. 15 adopted a decision to split the state-owned rail company, Eesti Raudtee, into three companies. The purpose of the plan is to make the revenues and spending of the rail company more transparent.
According to the ministry's proposal, one of the companies would manage the infrastructure, the second would operate the trains and the third would serve as the parent company of the two.
Apart from making income and spending more transparent, the move would be in line with an indirect EU demand that such companies be split.
A split of the rail company into three would be a direct path to the company's bankruptcy, said Oleg Tshubarov, chairman of the rail workers trade union. "Every reorganization requires additional costs, and splitting the company in three in a situation where there's no operational volume and revenue is a direct path to bankruptcy," he added.
"There is no explanation to such a proposal now that volumes have declined and more than 200 workers are being laid off. The company is lacking a development plan and a vision for its future. The government's efforts today should be aimed at coming out of the crisis," the union leader said.
Although the government is expected to back the change in principle, exactly how it will be executed may become a matter of argument. In the opinion of the Reform Party and its leader, Prime Minister Andrus Ansip, two companies would be enough, this being a simpler and more transparent option.
The parent company, Eesti Raudtee, would be headed by the current CEO, Kaido Simmermann, said Parts, but he didn't name any potential candidates for the top jobs at the two subsidiaries.
Eesti Raudtee is about to invest over 370 million euros in infrastructure over the period from 2008 - 2017, according to the business plan endorsed by the Cabinet.
Track repairs would take 128.2 million euros during the period, reported the Ministry of Economy. The company would repair 430 kilometers of main track, equal to a little more than half the total length of main track.
Of the sum earmarked for track repairs, 96.1 million euros would be spent between 2008 - 2012 to increase traffic safety.
The new business plan, an adjusted version of the business plan drawn up this spring, takes into consideration a significant decrease in oil and coal transit and pays more attention to boosting container shipments to the east.
Parts said Eesti Raudtee's business plan for the short term as regards cargo flows was very conservative, even though the company will be pressed to find new revenue channels.
In a majority share buyback from the private owner, Baltic Rail Services, the state paid 147 million euros for a 66 percent share in the railway last winter.
