€43 million missing from Estonia's railway electrification budget

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€43 million is still missing from Estonia's budget to electrify the railway system. A small part of the money can be covered with a loan but the rest will need to come from the state budget.

Electrifying the railways is one of Estonia's biggest infrastructure projects and will cost €279 million in total. Of this, €201 million will come from the EU and Estonia needs to put forward €35 million to claim the EU funding.

But this still leaves a €43 million hole which is need for security equipment and join substations. 

Indrek Gailan, head of the Transport Development and Investment Department of the Ministry of Economic Affairs and Communications, said it was hoped this money could come from the Cohesion Fund but now this is not possible.

The ministry then turned to state railways company Eesti Raudtee (Estonian Railways) and asked if it could find the missing money itself.

"Currently, we have calculated that approximately €7 million of the €43 million can be covered within the existing loan limits," said Andrus Kimber, CFO of Eesti Raudtee.

It is hoped €2 million can come from the Connecting Europe Fund and the results of the application will be known in August. But, at the moment, this means €36 million still needs to be found.

"In the autumn, when we have the results of these other financing solutions with Eesti Raudtee and the summer economic forecast has become clear, we can already go to discussions on this missing amount within the state budget and the RES [EU recovery fund]," said Gailan.

He said the electrification of the railway will not be held back by the missing millions.

Kimber said the money is not necessarily needed in the next 12 months. The plan sees the electrification of the Tallinn-Tartu track by 2024 and the remaining track by 2028. Additional funding could be found in the coming years.

However, in a letter sent to the Ministry of Economic Affairs and Communications, Kaido Zimmermann pointed out that covering the forecasted losses of Eesti Raudtee has been left out of the state budget strategy.

If a state-owned company spends more money on infrastructure than it receives revenue from, the state is required by law to pay the difference. Eesti Raudtee estimates that the annual deficit could be around €15 million, or €75 million over five years.

"And the other side is that we can't always say exactly what these volumes of freight transport on the Estonian railway will be. That if they increase, then accordingly the deficit will decrease, if they increase, it will increase," Gailan said.

Kimber specified that so far the state has covered the costs of Eesti Raudtee annually. 

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Editor: Helen Wright

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