Neeme Jõgi, chairman of EVR Cargo, said that the risks of the state railway company's planned freight car business in Russia were unclear, and that the board would decide in the near future whether or not to continue the project.
“The supervisory board decided last week to partly and temporarily stop the purchase of the cars as well as the implementation of the rental business plan,” Jõgi told BNS.
Where the company had already entered into contracts, EVR Cargo would fulfill them but wouldn’t assume any new liabilities until the business plan had been discussed and approved by the current supervisory board, Jõgi said.
The company’s plan to set up a Russian subsidiary and invest €35 million in state funds in the purchase of hundreds of container flatcars and open freight cars, which it would then lease to Russian companies, has faced sharp criticism over the last few days.
The plan, already accepted by the previous composition of EVR Cargo’s supervisory board under recently appointed Minister of Finance Toomas Tõniste, will now be revised.
“If we receive sufficient information so we can discuss it in enough detail, then we can make a decision. If the information provided should in any way be insufficient, or if any other details need to be analyzed, then we won’t make a decision on Thursday,” Jõgi commented the possibility of further development in the matter following a board meeting scheduled for tomorrow Thursday.
“So far the information provided [about the business plan] has not been sufficient, and actually brought up more questions than it offered us answers,” Jõgi said, adding that the questions mainly concerned the cost-benefit analysis and risk management issues.
"We are looking at this solely from a business point of view. Does the business plan have a sufficient business aim, does it follow good business practice, have the risks been addressed conservatively enough in the business plan?” These and other similar questions now needed to be answered, Jõgi said.
Ahti Kuningas, deputy secretary general for transport at the Ministry of Economic Affairs and Communications and himself also a member of the supervisory board, said already on Tuesday that the new board would likely want more clarity regarding the business plan. Kuningas is the only member of the board left over from its previous composition.
On June 14 EVR Cargo signed a contract worth €17.8 million to buy 300 container flatcars and 200 open wagons as the first part of a plan to invest €35 million.
The plan is to lease the freight cars to major international customers operating between China and Europe. Most of the business is expected to come from Russia’s internal market, where EVR Cargo is counting on the effect of a 2016 directive of the Russian state to phase out some 200,000 freight cars categorized as too old for operation.
EVR Cargo is an Estonian state-owned rail cargo operator. Its main business includes transportation, repairing railway engines and freight cars, and leasing freight cars to railway freight companies. With the new freight cars, EVR Cargo’s rolling stock will increase to a total of 66 engines and 3,022 cars. The company's average number of employees in 2016 was 684 people.
The company reported a €189,000 loss in 2016 compared to €1.8 million in 2015, while the company's sales revenue dropped by 19.8 percent to €51.8 million. The company’s revenue from leasing freight cars grew by 39 percent to €1.5 million.
Editor: Dario Cavegn