TALLINN - Eesti Raudtee (Estonian Railway), the privatized rail cargo company, lashed out at the government last week after regulators proposed a set of lower fees that Estonian Railway can charge train operators for use of rail infrastructure.
Council Chairman Edward Burkhardt went so far as to announce that the company was freezing plans for a public listing, which is widely regarded as crucial for the further development of the transit enterprise.
Last week the Estonian Railway Inspectorate published a draft document setting out the new parameters of fees that Estonian Railway will be able to charge operators for using infrastructure, which the company runs. Since the proposed fees are lower than those currently charged by Estonian Railway, the company alleges it will be impossible to meet planned investments.
Raivo Vare, the company’s development director, said Estonian Railway was seeking a fee of EEK 7.00 higher than the present average fee of EEK 24.00 per ton. But the Railway Inspectorate’s proposed fee is some EEK 7.00 lower than the present fee.
The company is reportedly mulling over a lawsuit against the state, and Burkhardt, a U.S. citizen, even went so far as to suggest that he would not rule out selling the railway infrastructure back to the state.
Burkhardt told reporters on April 21st that the proposed tariffs would create a shortfall of EEK 800 million (EUR 51 million) in the rail company’s revenues.
He also said regulators were not allowing Estonian Railway to reevaluate its fixed assets. As a result, assets shown on the balance sheet amount to a mere EEK 1.2 billion, while, according to the company, their real value exceeds EEK 4 billion. Since the book value is far below the actual value, depreciation is too small and fails to cover outlays for modernizing assets.
Burkhardt said such a situation was impossible to comprehend, since the country’s large energy and communications companies had been permitted to re-evaluate their assets.
Still, on April 25th the company announced that it went ahead and reevaluated its assets, increasing them by EEK 3.8 billion to more than EEK 6 billion. Financial director Stephen Archer said the decision to reevaluate had already been made before adoption of the new railway act. “It will no longer be possible to buy rails in 2005 with 1980 steel prices,” he said.
Estonian Railways is 66 % owned by Baltic Rail Services, a firm uniting Estonian and U.S. investors, while the government holds the remaining 34 %. Baltic Rail Services has said it would like to obtain a listing for the company as early as this summer, while the government has responded negatively to the idea.
Burkhardt reiterated to reporters that a stake in Estonian Railways should be sold to a Western investor and that a public listing would enable the company to attract money for much-needed investment.
A recently endorsed business plan for the company calls for investments in infrastructure to the tune of EEK 424 million per year over the years 2005-2009.
The Railway Inspectorate is to determine the final size of the fee in the near future.
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Estonian Railway’s annual shareholders’ meeting on April 26th did not confirm the company’s annual report and dividend proposal as the state said it wanted another opinion on management’s asset revaluation.
Juri Kao, representative of Baltic Rail Services, told the Baltic News Service that the state did not doubt the revaluation process per se but wants to check whether it was carried out in agreement with rules. He voiced hope that the assessment of the asset revaluation process would take place soon and Estonian Railway shareholders could soon confirm last year’s results and dividend.
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