State has to further discuss whether it needs Operail or not, says minister
What is to become of the state-owned Operail, which has fallen into a loss as well as abandoned its profitable wagon leasing business, still needs to be further analyzed, but the Estonian state can maintain strategic capacity for rail freight transport without a dedicated company, said Minister of Economic Affairs and Infrastructure Riina Sikkut (SDE).
"Everyone who was involved in transit, logistics, the transport of Russian goods as well as the leasing of wagons in Russia — the situation has fundamentally changed for them," Sikkut told ERR Tuesday. "It's not currently possible for the old days to ever return. Understandably, in Operail's case, whose revenue also came from business in Russia and the transport of freight across the border, it will be necessary to analyze what the future holds and how to proceed."
Operail, which by government decision is abandoning its non-strategic businesses, including the leasing of freight wagons, earned a loss of €3.5 million in the first nine months of 2022 — down from €3.5 million in profits on year.
Commenting on the company's latest financial results, CEO Raul Toomsalu said that Estonia's entire railway infrastructure has been relying for years on wagon rental income and large transit volumes, and if it isn't making a profit, there's no point to Operail as a company and the future of rail freight transport as a whole may be called into question.
Strategic decision needed too
According to the minister, it needs to be discussed whether freight transport by rail is strategically necessary to the state and, if so, in what form.
"A government decision to exit the Russian business has been made," she explained. "That means the sale of the wagons. This decision hasn't been reconsidered in any way; that means closing down the business and an analysis regarding what the short-term financial perspective is. But from the state's perspective, a strategic decision also has to be made regarding how we see whether such activity is strategically necessary and in what form — whether that's a separate state-owned company or some other solution."
Sikkut said that this can be discussed in the government once Operail has sold off its nonstrategic businesses and further info exists regarding financial implications as well as future rail freight volumes.
"The state may have a business together with this strategic capacity, but it may also just have the capacity in some other company, in some other form as well," she explained. "But we're only just getting to those discussions. Perhaps Operail will continue [operations], just on a smaller scale and in Estonian, Latvian and Lithuanian transport and other tasks."
Operail is currently in negotiations with bidders. Toomsalu noted that the company is currently in the home stretch exiting its wagon leasing market, i.e. selling its wagons.
"There have been nearly 60 parties interested in being involved in the various stages of the auctioning of Operail Leasing's assets," he said. "Interest, however, doesn't always translate to the ability to make an offer and make a purchase. All bids have been submitted by now; among them are Estonian bidders as well. An analysis of the offers and negotiations are currently underway."
Currently, there are no private enterprises providing rail freight transport in Estonia. Toomsalu doesn't see private operators taking over their role if Operail should disappear, as rail freight isn't a profitable business under current infrastructure charge rates.
Operail is an Estonian state-owned railway company whose main lines of business are freight transport, the construction and repair of rolling stock as well as rolling stock rental. The company employs approximately 400 people.
Follow ERR News on Facebook and Twitter and never miss an update!
Editor: Aili Vahtla