BONJOUR L'ESTONIE

Finland and Poland will be invited to participate in Rail Baltic

Finland and Poland will be invited to participate in the joint venture of Rail Baltic at equal basis with the Baltic states, the Baltic states' ministers decided on Thursday, Äripäev Online reports.

Estonian economy minister Juhan Parts had a meeting on Thursday in Riga with Latvian transport minister Anrijs Matiss and Lithuanian transport minister Rimantas Sinkevićus. The three ministers focused on Rail Baltic and especially on the creation of the joint venture of Rail Baltic. At Estonia's proposal, Polish and Finnish ambassadors to Latvia also attended the meeting.

The ministers signed a common Rail Baltic declaration, the most important aspect of which is that Estonia will organise in the near future a meeting of ministers focussing on Rail Baltic, where the Finnish and Polish ministers will also be invited to. The necessary preliminary work to create the joint venture will be completed by the end of July.

The ministers also discussed European Union transport politics issues concerning highway and railway transport and aviation.

Port of Tallinn extends Muuga container terminal completion deadline

The council of the Estonian state-owned port operator company Tallinna Sadam (Port of Tallinn) decided on Thursday to grant the company's board the authorities to change the housing rights agreement of the new Muuga port container terminal, extending the completion deadline of the terminal by 12 months, based on the application of Rail Garant Estonia, Postimees Online reports.

"The terminal's developer submitted the application to extend the deadline of the completion of the terminal by 12 months, till July 2014," Tallinna Sadam council chairman Neinar Seli said.

Rail Garant Estonia OÜ representative, barrister Jüri Raidla said that the wish to extend the terminal completion was caused by numerous court disputes that have made it seriously difficult to include financial investors and strategic partners.

Estonian Air to serve the St Petersburg-Tallinn route with bigger aircraft

Estonian Air has put a bigger aircraft on its Tallinn-.St Petersburg route: a 88-seater CRJ900 NextGen and 76-seater Embraer 170 aircraft.

So far the route was operated with 33-seater SAAB340 which will be returned to the lessor in coming weeks.

The bigger aircraft are faster, therefore the flight time between two cities is 15 minutes shorter, the company said.

The bigger aircraft is offering more comfort due to larger and quiet cabin which means more space per passenger and bigger overhead bins.

Estonian Air is operating on Tallinn-St Petersburg route with 7 weekly flights on Mondays, Tuesdays, Wednesdays, Thursdays, Fridays, Saturdays and Sundays.

Toomas Hõbemägi

Tallinn airport announces annual profit of €3.7m

In its annual earnings report, Tallinn Airport disclosed a turnover of 29.3 million euros and a profit of 3.7 million euros in 2012.

The airport had a profit of 4.2m in 2011, 2m in 2010, 400,000 euros in 2009, 1.1m in 2008 and 6.6m in 2007.

The airport said the low growth in aviation revenue came due to an average decline of 30 percent in aviation fees, as a measure to stimulate the aviation market. In 2012, aviation revenue grew 1 percent and non-aviation revenue grew 21 percent compared with 2011.

"Tough competition on the European aviation market and heavy pressure on airport fees means that all airports must earn an ever greater portion of their revenues from activities not directly tied to aviation," said the airport's financial director, Anneli Turkin. "That is the reason why we must vigorously develop merchandise in the passenger terminal and real estate in our territory."

A total of 14.7 million euros was invested last year, the largest investment being going toward the construction of the Baltics' biggest aircraft maintenance hangars. At the year's end, the company's assets were valued at 146.6 million euros. The airport has put forward a preliminary estimate that it had 1.9 million passengers in 2012, the same as in 2011, compared with 1.3 million during a low ebb in 2010 and 2009.

In 2013, the airport plans to invest 13.8 million euros, the biggest of which will be the construction of a hangar for Panaviatic. Tallinn Airport includes a number of subsidiaries, including smaller airports across Estonia.

Genesus expands market to include Estonia

Genesus has announced a signed contract between Genesus Inc. and oooClean Gen.

Genesus will supply and operate the genetic component of the new state of the art facility. The farm is in an isolated location at Narva, Estonia right by the Russian border and about 120 miles (200 Kilometers) from St. Petersburg, Russia.

The new production facility will utilize the latest technology in sow housing environmental design, including a filtered air system and production of pelleted manure. It will meet and exceed all European Union regulations that pertain to swine production and the environment. The first phase of production is projected to be 125,000 head per year.

The Clean Gen operation will be a primary nucleus and multiplication facility to supply Genesus swine genetics to the Balkans, Central Europe and Russian markets.

Jim Long, President and CEO of Genesus Inc said: "We at Genesus are pleased to do business with a company such as oooClean Gen, with their forward thinking attitudes and state of the art facilities. We foresee that this will be a profitable ongoing long term relationship that will benefit both parties."

World's leading sea maps producer opens a development centre in Estonia

The world's leading electronic sea maps and systems producer Navionics opened a development centre in Estonia, LETA/Public Broadcasting reports.

It chose former GuardTime Estonia chief Raul Vahisalu as the chief of the centre, said Enterprise Estonia.

Navionics' founder and president Giuseppe Carnevali said that the final choice was made in favour of Estonia based on the three Baltic states comparison as several factors were in favour of Estonia: favourable tax and labour legislation, low corruption level, balance of payroll costs and cost of living, existence of public infrastructure, the state's interest, possibilities of cooperating with universities, high level of sea culture and know-how in high-tech sphere.

Estonia's labor costs one-third of EU average

According to figures from Germany's Federal Statistics Office, Estonia has the 21st highest labor costs in the 27-member European Union.

Employers in the Estonian private sector paid their workers 8.6 euros per hour on average in 2012, up 6.4 percent compared to the previous year, but still far off the EU average of 23.5 euros, the office said in a press release last week.

Sweden topped the list with 41.9 euros per hour, followed by Belgium (40.4 euros) and Denmark (39.5). Labor is more expensive in Finland (31.1 euros per hour), but Latvia (6.2) and Lithuania (5.8) are fourth and third from the bottom respectively. Romania (4.5) and Bulgaria (3.7) have the cheapest labor.

Labor costs are calculated combining gross earnings and non-wage costs. Social tax and expenditure on employee pension schemes are included in non-wage costs, which in Estonia are 37 euros per every 100 euros paid in gross earnings. That number ranks Estonia sixth highest, tying with the Czech Republic, Spain and Austria in the EU.

Sweden (51 euros per 100 euros in gross income), France (50) and Belgium (47) are at the forefront of non-wage costs, with Luxembourg (16), Slovenia (16), Denmark (15) and Malta (10) at the foot of the list.

Finns pay less that the EU average of 32 euros per 100 euros, handing over 28 euros. Lithuanians pay 41 and Latvians 26 euros.

Estonian Air sells its office building to Tallinn Airport

Estonian national carrier Estonian Air announced that it signed an agreement with Tallinn Airport for the sale of Estonian Air's four-storey office building at the Tallinn Airport territory for 7.3 million euros, informs LETA.

Estonian Air will continue to rent the office space on two upper floors of the building from the new owner.

"In the process of changing the business model of Estonian Air the company has decided, among other things, to divest its non-core assets and the sale of office building is part of that process,” explained Jan Palmér, the CEO of Estonian Air. “We have already considerably reduced our operations and thus our office space need is remarkably lower than previously.”

According to Jan Palmér, the smaller Estonian Air with cost effective structure has reduced the need of office space from 3,500 to 950 m2.

Estonian Air put its property, four-storey building at Lennujaama tee 13, on sale late 2012 and the company received two independent offers to purchase the building. As of 4 April 2012, the property belongs to Tallinn Airport. The value of the sales contract is 7.5 million euros. The building is situated on Tallinn Airport’s land and legally it means termination of tenancy after which the landlord of the building is Tallinn Airport.

Merko to build Tondiraba ice arena in Tallinn

A contract was signed by Estonian construction company AS Merko Infra – a part of the AS Merko Ehitus group – and the Tallinn Sports and Youth Department on April 3, 2013, for construction of the Tondiraba ice arena located at Varraku 14, Lasnamäe, Tallinn, the company said in a statement.

Under the contract, AS Merko Infra will build a three-storey (including one underground storey) multifunctional ice arena, consisting of three full-size ice skating areas and three curling lanes including all of the necessary auxiliary areas (lobby, dressing rooms, shower areas, coat check, technical utility spaces etc.). In addition, other sports areas (aerobics and gym areas) and leisure areas (cafe, restaurant) are planned.

The center rink has 5,000 seats and can be covered with a special covering for concerts and other events that draw a high attendance. The other two are practice rinks.

The price of the contract is 22.53 million euros, plus value added tax, and the works are scheduled for completion in June 2014.

Residents of Tallinn already as rich as average Finns

While Prime Minister Andrus Ansip keeps telling everyone about his dream to make Estonian state one of the five richest countries in Europe in 15 years, this has already become reality in Tallinn, writes Äripäev.

The paper has calculated that in terms of per capita purchasing power parity, GDP in Tallinn could already have caught up with Germany and Finland. While Estonia’s GDP on purchasing power parity was 67% of EU average in 2011, GDP per capita generated in Tallinn amounted to 110% of EU average (EU27 = 100), according to Eurostat.

This is similar to Germany’s level and well above that of France and Italy.

Since the Estonian economy continued to outpace the EU economy also in 2012, GDP per resident in Tallinn has grown further. One reason why Tallinn is so high in the charts is the fact that it accounts for two-thirds of the Estonian average GDP per capita. This is comparable ratio with London for UK and Paris for France. Generally, there are very few capitals in EU that account for such a high share of the country’s GDP.

In comparison, Helsinki and Stockholm account for about one-third of the country’s GDP.

Some analysts have warned that although Tallinn’s share in the Estonian economy is very large, per capita figure is not necessarily accurate because Tallinn’s GDP may have been boosted by people who work there, but live outside the capital. On the other hand, Harju county that surrounds Tallinn is also relatively wealthy because average GDP per Harju county resident in purchasing power parity is at EU average.

Swedbank to discontinue operations in Ukraine and Russia

STOCKHOLM - Swedbank has decided to discontinue its remaining operations in Ukraine and Russia and has signed a share purchase agreement regarding its Ukrainian subsidiary with Mr. Mykola Lagun, the majority owner in Delta Bank.

The transaction is expected to be completed in the first half of 2013 and is subject to regulatory approval. Swedbank’s Ukrainian and Russian operations will, as of the first quarter 2013, be reported as Discontinued Operations.

“This is the final step in our strategy to concentrate Swedbank’s business activities to Sweden and the three Baltic countries. The executive management can now turn its full attention to our home markets”, said Michael Wolf, President and CEO of Swedbank. As a result of the divestment, Swedbank will report impairments in Ukraine of approximately SEK 340m under Discontinued Operations in the first quarter of 2013.

Once the sale transaction of the Ukrainian subsidiary is completed, a negative cumulative exchange difference of SEK 1.9 billion (which is due to the Ukrainian hryvnia’s depreciation against the Swedish krona) will be reclassified on the income statement under Discontinued Operations. The cumulative exchange difference has previously impacted equity directly via Other Comprehensive Income, mainly from 2007 to 2009. The reclassified item will therefore at this moment not affect Swedbank’s equity, capitalisation or cash flow. Hence the reclassified item will have no bearing on the Board of Directors’ 2013 dividend proposal.

Russian developers with links to Putin in dispute with port owner

Russian businessmen who are developing ten villas on the Lagedi island in Pirita River are disputing with the Tshulets family over access to the island, writes Eesti Päevaleht daily.

The development company SMB Invest belongs to Sergei Matvijenko who is son of Valentina Matvijenko, a Russian politician and close ally of Russian President Vladimir Putin.

Land over which the island can be accessed by a bridge belongs to Ljudmila and Maria Tshulets. Ljudmila is wife of Aleksei Tshulets, owner of Paldiski North Port and Maria is his daughter.

Ljudmila Tshulets claims that Russian property developers don’t want to pay an adequate fee for access to the island.

“They want to build electricity, water and sewerage lines through my land. I don’t want to block their development and I am ready to negotiate, but all they do is to make demands. I pay a hefty land tax and I cannot simply give my land away,” said Ljudmila Tshulets to the paper.

Toomas Hõbemägi

Estonia government wants to create joint Rail Baltica company in 2013

Consultations will start in April between the three Baltic States that aim to form a Rail Baltic joint venture before the end of the year 2013, LETA/Public Broadcasting reports.

The first meeting at the ministerial level takes place on April 12 when Estonian economy minister Juhan Parts will present to his colleagues the Estonian position.

Although each member state has to carry out the preliminary project and evaluation of environmental effects by themselves, the position of Estonia is that the joint venture should be created as fast as possible. "It is important that the company would start looking at the project as a whole, would represent the business interests of the project in the planning stage and the stage of compiling the preliminary project, prepare financing of the project, development and marketing issues," Parts explained at the government press conference on Thursday.

The joint venture should be the developer of the project and later infrastructure administer and operator.

Estonia thinks that Riga is the suitable location for the joint venture. The share capital should be equal among members but its size hasn’t been divided. "The range in the 2014-2017 period is not over 2 million euros," Parts said.

Parts said that Finland and Poland will also be offered to participate as shareholders.

Gazprom may build a lubricant plant in Estonia

Gazprom Neft, a manufacturer of lubricants that belongs to Gazprom, Russian gas giant, is considering Estonia, Latvia and Finland as a location for its new plant to produce lubricants, writes Eesti Päevaleht.

The company is holding talks with three partners at present. It is believed that in Estonia, the most suitable location for the plant is Paldiski or Muuga ports.

Representatives of Gazprom and Port of Tallinn did not wish to comment the project to the press.

The project is expected to cost up to EUR 40m.

Gazprom Neft has 14% of the Russian market and has plants in Russia, Italy and Serbia. The company plans to increase its production capacity from 450,000 tons to 660,000 tons a year.

Toomas Hõbemägi

Estonian Air pays fine for cancelling aircraft order

Estonian national carrier Estonian Air has recently reached agreement on return of two excess aircraft and paid the contractual penalty, writes Postimees.

The company’s press spokesperson Ilona Eskelinen confirmed that the airline had agreed on return of two Embraer E190 aircraft that had been ordered, but that Estonian Air did not need as its network has been downsized. Eskelinen said that the aircraft had been ordered, but not yet delivered.

Erkki Raasuke, chairman of the supervisory board of Estonian Air, said in early March that the airline needs about EUR 8m to pay contractual penalties for terminating existing contracts. Some of the contractual penalties are believed to have gone to the manufacturer and the rest to the aircraft leasing company.

In addition, Estonian Air has four Embraer E170 aircraft that it does not need. Eskelinen says that the airline is looking into possibilities to return them as well. At present the airline has ten aircraft, but uses only half of them. The biggest problem is with three Bombardier aircraft since they are small and the demand on the market for such small airplanes is small.

Estonian Air will hold a press conference this week to talk about the return of aircraft, financial results and the current state with restructuring. The airline reportedly needs EUR 37m for restructuring.

Toomas Hõbemägi

BPT Baltic Opportunity Fund acquires Coca-Cola Plaza in Tallinn

BPT Baltic Opportunity Fund, the most recently launched real estate fund from BPT, has acquired its third asset, the Coca-Cola Plaza in the central business district of Tallinn, Estonia, the company said in a statement, writes LETA.

The Coca-Cola Plaza is the largest combined cinema and retail complex in Estonia. Constructed in 2001, the complex has approx. 9,930 sq m of usable space. Its anchor tenant, Finnkino, is the market leading cinema operator in Finland and the Baltic States.

The property is located in the central part of Tallinn on Hobujaama Street. It is located within the CBD in the area between the medieval Old Town, the City Harbour and Viru Square.

With this acquisition, BPT successfully closes its third acquisition for its latest Baltic real estate fund, BPT Baltic Opportunity, bringing the total acquisitions so far to EUR 32 million: “Adding the Coca-Cola Plaza we now have a strong seed portfolio in place for the Fund. The acquisition also demonstrates that for an experienced local buyer it is possible to acquire core assets close to development costs at square meter prices between EUR 1,000-1,300 and starting yields around 8-8.5%. This has been our focus all along and it’s great to be able to show it to the market,” says fund manager Tarmo Karotam.

Establish a budget airline to replace Estonian Air : Toomas Peterson

Toomas Peterson who is former CEO of Estonian Air writes in Äripäev that now is the time to replace the troubled Estonian Air with an entirely new budget airline.

“For Estonian Air, horrible end would be better than endless horror. I suggest to set up an entirely new airline,” said Peterson.

He added that such a budget airline would operate 5 to 6 aircraft of the same type and fly to about ten Europe’s most important urban centres on a daily basis.

“The state could hold a golden share which could be a third of the airline, while a core investor and a strategic partner would have another third and the rest could be sold to Estonians, for instance, by public offering of shares,” he wrote.

According to Peterson, such ownership structure was guarantee stable and daily air connections to Europe’s most important centres, certain level of public control and, what’s most important, the interest and motivation of Estonians themselves to fly with their own airline.

Finland becomes Estonia’s biggest export and import partner

In January, Finland was Estonia's largest export and import market, according to Statistics Estonia.

In exports, Finland accounted for 26% of Estonia’s total exports, followed by Sweden (15%) and Latvia and Russia (both 8%).

Estonia’s total exports were significantly influenced by the increase in the dispatches to Finland (up by 127%) compared to January 2012. At the same time, exports to the Netherlands and USA decreased. Transport equipment made up more than half of the value of the dispatches to Finland. Machinery and equipment were the main commodities exported to Sweden and beverages and spirits to Russia.

In imports, Finland accounted for 23% of Estonia’s total imports, followed by Sweden (10%) and Germany (9%). Imports were mostly influenced by the increase in the arrivals from Finland and Russia (the growth rate 92% and 38%, respectively). There was a slight decrease in the arrivals of goods from Germany (down by 12%). Transport equipment was mostly imported from Finland, electrical equipment from Sweden and vehicles from Germany.

Estonian exports grew by 19% and imports by 16% at current prices in January year on year. Exports amounted to 1.13 billion euros and imports to 1.14 billion euros at current prices.

Toomas Hõbemägi

EU examining state financing of Estonian Air

TALLINN - Estonian Air faces an in-depth probe by the European Union executive over concerns that state aid for the Baltic country’s national carrier wasn’t in line with the bloc’s rules, reports Bloomberg. The European Commission will examine about 65.5 million euros in capital increases given to the carrier by the Estonian government since 2009, it said in an e-mailed statement on Feb. 20.

The commission started similar probes of Slovenia’s Adria Airways and Latvia’s airBaltic last November as EU rules restrict amounts of aid nations can give to prop up carriers weighed down by the bloc’s sovereign debt crisis and high oil prices. Malev, Hungary’s unprofitable state-owned airline, folded last year after the EU ordered it to repay state loans and guarantees.

While Estonia notified the Commission last December of a plan to grant an 8.3 million euro rescue loan to the carrier, it has also made three capital injections earlier without notifying the regulator, the EU executive said. The sale in 2009 of Estonian Air’s ground handling business to the state-owned Tallinn Airport may also have involved state aid to the carrier, it added.

Viking Line to benefit from Estonia's cheaper labour costs

Swedish ferry operator Viking Line has decided to transfer M/S Viking XPRS that operates between Tallinn and Helsinki under the Estonian flag, writes Äripäev. This decision will transfer about 230 jobs from Sweden to Estonia.

Another ferry M/S Rosella that operates between Aland islands and Kapelskär in Sweden will be transferred from the Swedish flag to the Finnish flag. The two ferries employ about 330 people.

The key factors behind the decision were pay levels and other economic reasons, especially the appreciation of the Swedish krona to euro. Jüri Lember who heads the Estonian trade union of seamen, says that Viking Line is interested to save on tax costs as such a transfer would enable the company to pay lower wages to ferry personnel and cut costs generally.

Lember said that negotiations over the transfer began last autumn. „There were two trade unions – we and the Finns – against one employer. We signed a memorandum of understanding that included a collective agreement and that is in average 300 to 390 euros higher a month than what is today in Tallink,” said Lember, adding that this could drive Tallink employees to Viking Line which pays higher wages. A representative of Tallink was not available for comment.