The government decided to grant the Road Administration 100 percent of the passenger-focused Edelaraudtee (SW Railway) in order to let companies bidding for privatization of Estonian Railway to focus on freight transportation issues.
Five companies - SW Railway, EVR Ekspress railway company and Sebe, Tarbus and Suure-Jaani Buss bus companies - tendered for the passenger transportation, but none of them succeeded because all the projects envisaged larger state subsidies.
According to a Road Administration spokesman, the best suitable project proposed getting 105.8 million kroons ($5.71 million) from the state to keep all present railway routes in action, whereas the state budgeted only 60 million kroons ($3.24 million) for that purpose.
"If earlier SW Railway asked for 100 million kroons worth of subsidy to keep all of the railway routes in action, now that sum increased to 140 million kroons," said Toivo Jurgenson, the minister of communications and transportation. He mentioned that the offer of SW Railway was still better than the one of EVR Ekspress.
"The tender completely failed, and now we faced even more complicated situation," added Jurgenson.
According to the Road Administration, one of the most probable solutions is that SW Railway will service only a handful of routes, including Tallinn-Narva, Tallinn-Tartu, Tallinn-Valga etc. Busses would replace the trains, departing from Tartu. Due to reduced fees, SW Railway would have to pay for using the infrastructure of Estonian Railway. The sum of 60 million kroons should be sufficient to cover all expenses for passenger transportation, according to the bid.
The Road Administration sees the privatization of SW Railway as a way to improve passenger transportation in Estonia.
British GB Railways, which is interested in the privatization of SW Railway, completed talks with the Estonian Privatization Agency and will pay 10 million kroons ($540,000) for the shares of SW Railway, BNS reported on Nov. 27.
GB Railways will also invest 260 million kroons during the next five years, including the increase of SW Railway stock capital by 100 million kroons, and will provide 366 jobs.
The privatization contract will be signed in the near future.
GB Railways' Jim Morgan said the aim of the company is to encourage growth. "There are plenty of empty seats on most trains. We are going to improve marketing and offer more discounted fares to attract new passengers," he said.
Morgan said the new contractor for passenger transportation should speed up journeys to compete bus services and refurbish the trains and stations to make them more attractive.
"Train services are presently slow and unattractive. We will need to invest in all parts of the business to modernize it and make it more comparable to Scandinavian railways," said Morgan.