The majority Estonian state-owned Port of Tallinn published its unaudited financial results for 2024 last week, and figures included in the results indicate that TS Laevad earned €9.73 million in operating profit last year.

TS Laevad likewise received €21.304 million in public transport subsidies from the state last year, and posted a total ticket revenue of €14.795 million.

ERR asked Hartman whether the state intends to reduce its subsidies to TS Laevad, and whether it's reasonable for a portion of these subsidies to effectively end up as profit, but the minister saw no issue with this.

"AS Tallinna Sadam and its subsidiary TS Laevad are majority state-owned publicly traded companies, and turning an operating profit is part of both their business logic and the state's expectations," the minister said.

"It's important for a company to be profitable, as this enables it to develop as well as borrow money from the market if needed," she noted.

Hartman added that the Port of Tallinn pays dividends to the state, which are used to finance core state functions, including the payment of subsidies.

"It may look like moving money from one pocket to another, but this is primarily a result of the use of a corporate business model as such," she explained. "The corporate business model is used to raise additional capital from the market for the provision and development of a given service, as well as to ensure the efficient provision of this service."

TS Laevad CEO Indrek Randveer pointed out that neither the company's revenue nor its profit depends on changes in ticket prices or ticket sales revenue, and that the Ministry of Regional Affairs and Agriculture is the one with the authority to raise or lower ferry ticket prices.

"An increase in ticket prices and the revenue generated from ticket sales do not affect TS Laevad's revenue base, as the amount of state subsidies paid out for the service is reduced accordingly," he noted.

TS Laevad and the state have concluded a contract for the provision of passenger ferry services between the Estonian mainland and the major western islands of Saaremaa and Hiiumaa on the Virtsu-Kuivastu and Rohuküla-Heltermaa routes.

The associated contract fee consists of a fixed portion, i.e. capital costs, and a variable portion, i.e. wages, fuel and other indexed operating costs. According to Randveer, these constitute a significant portion of TS Laevad's revenue base, which is supplemented by other revenue such as operating lease income and the sales of other services.

"Profit figures primarily depend on how efficiently we can manage costs," he noted.

First full year on new contract in 2027

In 2014, the contract between TS Laevad and the state was signed on the latter's behalf by the Ministry of Economic Affairs, but since July 2023, the organization of ferry services has fallen under the purview of the Ministry of Regional Affairs and Agriculture, which also has the authority to set ticket prices.

According to Hartman, the ministry will impose a profit cap on TS Laevad in 2026 to ensure that future dividend earnings remain balanced. Under the new contract, the company will no longer be allowed to generate more than an 8 percent return on invested capital.

In response to an information request at the end of last month, Andres Ruubas, head of the ministry's Public Transport Department, noted that the forecast cost of the new contract's first full year in 2027 is €39 million, with the amount of state subsidies to be determined after ticket revenue has been deducted.

In 2027, the Virtsu-Kuivastu route is projected to serve 17,500 trips, while the Rohuküla-Heltermaa route is expected to serve another 6,000 trips.

"The actual amount of subsidies will depend on actual index changes, and the actual number of trips ordered for 2027 as well as collected ticket revenue," Ruubas added.

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