Can you begin by giving us the historical outline to Estonian Railways?
Estonian Railways history today is 130 years. It has started from the last century. There have been different periods. The first period from the beginning to 1940s had very big changes in our political status. The railway system was changed. In 1940 started so-called soviet railways history. Estonian Railways was the smallest part of the huge Russian railway system. For 50 years, 1940-1992, it was a small part of Soviet Railways. It was called the Baltic Railways.
At soviet times we had some Turkish and Russian technology. The understanding of railways was totally military because railways were a part of soviet military system. Estonian Railways transported construction details from Estonia to Western Soviet. Estonians produced some 500 km of rails here. Transportation was 3-4000 km. People and construction materials from Estonia were taken there.
Then it changed from soviet system to real railway, very big changes took place. We started in 1994 with special transportation because it was profitable everywhere in Europe. Few million tons a year, first of course Russian export, transport from East to West and also rail imported from the US.
Today we have 95% of Russian export through Estonian territory. Also some other countries, the second importer is Kazakhstan, then Uzbekistan.
We had 22 million of freight Russian export in 1994; today we have 37 million tons. It is mainly oil products, fertilizers and coal. Estonian Railways infrastructure is 1100 km train track. The whole network is 1900 km.
Our legal status today is a state owned joint stock company. Due to the Estonian situation we have a business code and railway law.
What does this exactly mean?
Estonian business code means that all joint stock companies are working under the same understanding as before in state owned companies. Main target is to have profit. European railway business is one moment to ask profit from railway, they are staying in business situation. In freight business we have profit and we have separated trade business from passenger business. Estonian Railways is an independent joint stock company 100% owned by state. We are operating and supporting border systems here and Narva. 30 million tons of Russian export and 7 million tons of local oil shale produced here and transported to big power stations.
The second biggest railway company in Estonia is South-West Railways (Edelaraudtee), they own infrastructure here and they operate all passenger traffic.
Do they hire lines from you?
Yes. They have to pay us for using the infrastructure starting from this year. The third company is the international passenger traffic company, operating 1-2 trains between St. Petersburg and Moscow. 51% is owned by strategic investor, we have 49% of shares. They started in May last year. 52 km is sold to a private operator. They own the infrastructure. We have electrified lines only 130 km and multiple units for transportation from Tallinn to here.
How many trains do you have?
Estonian Railways owns 4500 railcars and 100 locomotives.
What is the level of traffic?
There are 30 trains to and from Russia every day. One oil train is roughly 4-5000 tons.
Has it been improved on this level?
Every year we have some more investments. In 1998 we had the level of 31 million tons, in 1999 it was 37. This year we have estimated 40 million tons. Now we are working on investments in Narva station. There is a border crossing; it takes a lot of time for our customers and the border guards to check, also on Russian side. It took 4 hours to check a train, today only 1,5 hour.
Can you tell us what investments have been made since 1994?
For main investments we have taken a loan from European Investment Bank. The total investments were 30 million Ecus what were partly financed by European Investment Bank, by PHARE and Estonian state budget. Today it is finished, before the track was in a terrible situation. Today it is possible to operate by speed about 120 km/h. Of course we could have more speed but it is risky.
The second project was the railway communication project. 60 million EEK was invested. It finished in June last year. Today we have not the cable communication but link communication.
Can you give us some statistics on the railways? How many employees do you have, what was your turnover and your profit margin?
Today we have 4500 employees, four years ago the
number was 8000. Turnover was 1.2 billion EEK, our
balance 1.19 billion and profit 44 million in 1998.
In 1999 we had turnover 1.4 billion EEK, balance
1.3, profit 120 million EEK. |
It was a big increase from 1998. What was it due to?
It is interesting why. It depends on the marketing situation. It is a huge increase in oil prices on world market. Due to that there was a dramatic change in export of oil products. It depends also on the political situation between Russia and Estonia, Latvia and Lithuania. Last year there was embargo against Latvia. Also you should ask from our main clients - Pakterminal and EOS. Estonian Oil Service has been very profitable. Terminals and ports do not have the same situation as in Latvia or Lithuania or St. Petersburg. The question is the privatisation of ports. The land transportation to our Muuga Port is only 200 km from the Eastern border; to Ventspils port it is 450 km. The closest refinery is only 200 km from our port to this direction - Kirishi. Today we have new project and railway operator is supporting 6 trains per day. Why there are needed rapid trains between the port and refinery? They are transporting heavy oil and sometimes it takes 3-4 times more time to unload it. There are some time limits, they have to transport it from Kirishi refinery to port during 12-15 hours. It is only 500 km transportation from this refinery. Today GTS importing from Jaroslav 1200 km what makes 40 hours.
With shorter trains we can increase our volumes up to 40-45 million tons per year.
Are you going to introduce quicker trains?
Yes, but for quicker trains we need logistics, new signalling systems. Muuga Port built in 1985 needs also some reconstruction. The main problem is the railways on the port territory.
How important is the railway infrastructure to Estonia? If tomorrow the railway stop working what will be the repercussions?
7 million for port stations, and 30 million for Russian last year. I think it is quite important that more than 15% of GDP is the part of railway.
Lot of people describe Estonia as a kind of platform between Russia and Western Europe. What is Estonian Railways doing do adapt itself into the role?
It is important to join the West and East. We have the same technical standards, documentation. In Finland and in the Baltics we have the same railway system. In business we are World Investment News Ltdrs but in the political issues in every 3 months we have CIS and Baltic countries railway management meetings. Last one took place in Russia. Estonian Railways is working on CIS territory. Every day we have some 10.000 tons from Russia to unload here.
What about going westwards?
There is not much railway or transportation to that direction. The capacity of the Baltic States is 120 million tons freight per year for Russia and only 2 million here.
There are plans for the railway company to be privatised. Could you give us some details about the privatisation?
There are not so many details. Railway shares will be sold between 51-66%. At the same time we have to follow the European directives for infrastructure.
When is this due to happen?
It will be decided by our politicians. Maybe next year, it started in April. There will be some preparation, documentation. There is some formal time for tender.
I heard for example that British Railways is interested.
Yes, some private operators are interested.
Do you think it is more likely that private strategic investors who win the bid or is it just going to be investors?
Our philosophy is to look for strategic investors, private companies. Maybe not so much private companies in Europe, some might be in the UK, in the US.
Are you confident about the future of Estonian Railways? Where would you like to see it?
First we have to look for the railway market. Our market is Russian export. Russian export is very sensitive because of the political changes. We have one-year contracts with our clients. Have to compete with our neighbours, Latvia and Lithuania
At the moment you are saying that you are number one among these countries.
Yes, today Estonian Railways is, we had 37 million tons last year.
What has been your greatest success while you have been in Estonian Railways?
We have changed the situation from Russian railway to Estonian railway.
What would be your message for Forbes Global readers?
Invest to Estonian infrastructure, railways and roads. Estonia is a small country but at the same time we have only 1100 km railways, it is working well. It is a central complex for Russian freight forwarders. We know how it is working, maybe not so much about the Western countries but we know more than others about Russian export. |
