Minister: Operail future a matter for the next coalition

Riina Sikkut (SDE).
Riina Sikkut (SDE). Source: Ken Mürk/ERR

It is up to the incoming coalition once it is installed, to decide on the future of state-owned freight rail firm Operail, sitting Minister of Economic Affairs and Communications Riina Sikkut (SDE) says. Operail recently divested itself of over 1,500 rail cars, which had made up its rolling stock rental fleet – a business which accounted for nearly all of Operail's profits.

Sikkut said Tuesday that while Operail's financial forecast and future outlook has been issued, the company's actual future must be a matter for the new government, adding that it is in a situation where it can continue in business in the near future.

"In fact, at the end of last year, Operail also wanted them to review their financial forecasts and their personnel needs. They have done this. The company will be able to carry on for the next few years, but the long term question is whether Estonia needs a strategic capability state-owned company, or whether it should be reorganized," Sikkut said.

Carrying on would involve looking for new markets, she went on.

"If the company continues as it is, then new markets, new rail transports, which do not concern the eastern direction, but instead north-south transport vectors. Whether to privatize, merge with the (state rail track operator) Eesti Raudtee or what other alternatives there are; well a political decision is needed here, and that is what the new coalition needs to do," the minister went on.

All state-owned companies have several owner expectation, which must be in balance, while in addition to exiting the Russian business, new business directions must be sought, Sikkut said.

The company has sold all of the rail wagon stock which had been leased out to companies, mostly in or transiting to and from the Russian Federation. The changed security situation over the past 13 months made a full exit inevitable, though plans for restructuring date back as far as 2016 (the plan right up to 2022 had been to privatize the company).

The company started selling off its rolling stock in December, and had been awaiting a government decision since January, at a time when political parties were preparing for the Riigikogu election earlier this month.

The state itself had said the decision on Operail's future should have been unveiled in the same month.

Operail had fully halted the transit of goods of Russian and Belarusian origin, following a government order to that effect in January.

Operail board member Merle Kurvits says the company is waiting for new government plans on its future, and while there had been "no specific message for today, we do know what direction we are working on," adding that this mainly focused on domestic transit, and railcar and loco maintenance and repair, at the Tapa depot, adding that new business directions must remain in areas where the company already operates.

Nearly 100 percent of Operail's profit had derived from the rolling stock rental segment, though the new owner expectation (ie. the state's expectation) is that Operail remain in the black.

Kurvits added that: "Rail freight transport is a volume business - the more wagons there are in one train and the more trains move in one shift, the cheaper the transport. Without the scale effect, however, it is difficult to offer competitive prices to smaller customers. This means that in the current market situation, where the volumes of goods moving on Estonian railways have decreased significantly, but the number of operators who want to transport this goods has multiplied, a problem will inevitably arise with both serving smaller customers and operating profitably."

Minister Sikkut new directions should: "focus on multi-modal transport in the north-south direction," adding that this tallied with both the direction of the planned Rail Baltica high-speed link, which will run from Tallinn to the Lithuanian-Polish border when finished, and the need to move cargo off the roads and on to the railways, particularly in relation to achieving Green transition goals.


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Editor: Andrew Whyte, Barbara Oja

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