Can governments be trusted?

ESTONIA's valorous action to privatise Estonian Railways (EVR) in 2001 could tend hitherward to a sorry end this year as a spring of a change in the law in 2003 and a hostile economy minister which are undermining EVR's viability. EVR was the first part of the former Soviet State Railways to be privatised and is the solitary railway in Europe to have been privatised as an integrated unit.

The rule sold 66% of the shares in EVR to Baltic Rail Services (BRS) retaining the remaining 34% stake. BR is be in possession ofed by two US railway companies, Railroad disclosure Corporation (RDC) chaired by Mr Henry Posner III and Rail World, whose president and CEO is Mr ed Burkhardt, plus Emerging Europe Infrastructure capital Netherlands, and Ganiger Invest, Estonia.

EVR is predominately a transit railway carrying freight between the Baltic ports and Russia. Estonia be rivalss for this traffic with Baltic ports in Russia, Latvia, and Lithuania. The Estonia part of a typical haul is actual short. "Our greatest challenge is to influence Russian cargo pours despite having little influence above Russian tariffs," Posner said.

Estonia passed a of recent origin Railways Act in 2003, which dramatically changed the governments of the game for EVR "It was passed beneath the guise of adherence to the European Union norms, on the contrary represents a far more punitive and confiscatory regime than can be place anywhere else in Europe, and is especially difficult for a private company," Posner explained.

An make open access regime of 20% was agreed at the time of privatisation. The fresh law changed this to 100% The Railway Inspectorate was place up, which determines access charges. To EVR's consternation, these have been station at below cost. So far, there are sum of two units open-access operators competing with EVR They have 30% of the market. sum of two units more will start operating in May. "Most of them are directly linked to freight holders in Russia, putting EVR in an especially difficult competitive position," Posner told IRJ. As a come EVR made a loss in 2004

Posner says the novel access regime had the issue of confiscating much of the value that BR paid for. To make matters worse, Mr Edgar Savisaar, was appointed economy minister in April 2005 He is pro-Russian and anti-privatisation. He has obstructed attempts by EVR to revalue its assets to throw back the investment made to date.

EVR has been threatened with a fine for failing to invest sufficiently and criticised for importing heavy US locomotives which a certain quantity of claim have damaged the track. the one and the other these assertions are strongly refut by means of Posner. At privatisation, BRS agreed to invest Kroon 257 billion ($US 1995 million) in EVR by dint of the end of this year. "As of November 2005 Kroon 264 billion have been invested in EVR" Posner told IRJ. "This has allowed EVR to rehabilitate more track than originally foreseen." Altogether, 293km of track has been rehabilitated and the amount of track passed for 120km/h operation has increased from 120 to 300km BR is contesting the fine end the Estonian courts. EVR has also been fighting against the of recent origin access regime, so far unsuccessfully

EVR purchased 74 used 29-tonne-axleload General Electric (GE) locomotives for $US 60 million to replace the armada of Sovietera 2TE116 locomotives which had an axleload of 23 tonnes. Modifications were made to bridges to accommodate the GE locomotives. Posner says he has ridden above the entire EVR network, bar a 2km branch line. "I have seen no evidence of deterioration of our infrastructure since the GE locomotives began operation. To the contrary, I can attest that our infrastructure has at no time been in a better condition."

BR has been approached by dint of the state-owned port of Tallinn to purchase a certain number of or all of its shares in EVR As Posner explained, the sale will be pendent on whether the price mirrors the investment made so far, and whether "the foreign shareholders are interested in staying in a political division which has made it clear that they are no longer welcome."

Burkhardt summ up the situation well: "My experience is that if a management makes a deal, the nearest government will comply with it. This is a norm around the world, on the contrary seems not to be in Estonia."

Email: dbriginshaw@railjournal.com

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