Development progress and a cautiously optimistic outlook

It might be a daring statement in the light of current events, but the last two years have been a great success for Latvian Railways (LDz) – in 2008 it transported a record amount of cargo and in 2009 was spared a significant reduction of volumes and continued with extensive investment and development projects.

2008 recorded excellent amounts of carried cargo. We achieved a historical record; the largest amount of cargo ever transported by LDz – 56 million tonnes. Although initially it seemed that the complicated state of the economy, especially in the railway transport sector, would also threaten LDz, we managed to avoid a significant drop in volumes – in the previous year the reduction was only 4.3% compared to the record in 2008, while in Russia this decrease was approximately 15% and in Lithuania as much as 22%.

We are also satisfied with container transport records in the previous year, which also resulted in a record 71 142 TEU container units carried. Our subsidiary, LDz Cargo, experienced the highest growth in this cargo sector mainly thanks to the transport of non-military NATO cargoes to Afghanistan. Apart from that, other routes, such as to Kazakhstan and Ukraine, are also developing successfully and the amount of such high added value cargoes is increasing.

The past year has also been a success in terms of management because the results we have achieved would have not been possible without dedicated work and thorough planning.

The Marshaling yard in port-city of Ventspils

The relative success in terms of cargo volume coincided with the 90th anniversary of the company. Thus, LDz is only one year younger than the state of Latvia. We aimed to give a cause to celebrate not only to our employees, but to all people of Latvia, as the history of our company has always been closely tied to that of our country. Together with another remarkable Latvian company – the national postal service provider, Latvijas Pasts, we issued a 90th anniversary stamp, as well as cooperated with the Latvian Railway History Museum on the publication of a book on railways in Latvia, plus issuing a special publication to honour the talents of our employees. We also organised an international scientific conference called ‘Latvian Railways: Yesterday. Today. Tomorrow’, produced the historical film ‘Sliežu josta’ (‘Railway Belt’), celebrated our anniversary together with the Railway Museum and the public and staged a thank-you event for our employees in the National Opera.

The favourable figures of the cargo transport also serve as indicators that the infrastructure requires improvement because in certain sectors these recent volumes exceeded the 10% infrastructure capacity reserve. This capacity reserve has already been exceeded for several years in the Indra-Bigosovo section, which is not only the border between Latvia and Belarus, but also the frontier between Belarus and the European Union. To resolve this problem, during the past year a second railway track was built in this sector with support from the European Union. It is expected to enter service in May 2010, after all signalling systems have been installed.

Completing a significant infrastructure project for Latvia

During the past year, we also completed the preparation for one of the most significant infrastructure projects in the history of LDz – the construction of the second railway track between Skrīveri and Krustpils. This is a longawaited and thoroughly prepared project, which will bear a huge significance to the Latvian national economy. It will allow increasing the amount of cargo carried in the East-West corridor and help develop the valuable transit sector between the EU and our eastern neighbours.

The project will involve construction of approximately 52 kilometres of railway tracks, renovation of all stations and stops, construction of two new river bridges and renovation of the existing culverts and level crossings. We will also improve the railway signalling, communication and power systems.

The current amount of cargo carried in the Riga-Krustpils sector already stands at 97% of the maximum capacity of this section, which means that it is almost at full capacity. In addition, additional load is created by the suburban, domestic and international passenger train traffic.

When this project is completed, freight trains will not be required to stop at stations or interchange spots to allow oncoming trains to pass. This will also improve the safety of rail traffic and reduce the risk of accidents and pollution. The construction of the second railway track will increase the carrying capacity of the entire East-West corridor and improve the competitiveness of rail transport.

The project is a part of the European Commission programme ‘Infrastructure and Services’ and falls under its priority branch ‘Development of a Transport Network of European Significance and Promotion of Sustainable Transport’.

Our special position

Regardless of the country, all those involved in rail business will agree that railway is a specific branch of transport with particularly complicated regulation. Even in otherwise similar countries the railways can be very different – different gauges, rolling stock and, most importantly, different priorities and regulations. While international aviation uses the same aircraft, the road transport – the same roads and trucks (when talking about Europe, for example), and the maritime traffic is regulated by unified international rules, the railways present a great variety – some countries focus on freight transport where they can offer good conditions and their passenger traffic is negligible, while in others the situation is the complete opposite. This also heavily depends on the historical heritage and geographical layout.

The failed attempts of the European Commission to apply single standards in order to unify the technical aspect of the railway systems of all EU member states, or to liberalise the member states’ markets, are a testimony to this. The European Commission has sent complaints to 21 member states concerning the delayed liberalisation measures – it is a clear proof that it is not so simple to achieve. Each country has its own story, but Latvia and other Baltic states stand out especially. We have to work with two systems: 1,520mm gauge used by our eastern neighbours because we historically share this gauge and the technologies, and at the same time we are subject to the EU legislation, which has been historically shaped in countries with totally different tradition and, hence, technical and technological processes.

Since rail transport is a market sector and has to compete with road, air and maritime transport on an equal level, this special position requires special understanding not only from cooperation partners, but also from the regulatory authorities.

The significance of freight in Latvia

In Latvia, as a consequence of the relatively low population density and other historical factors, freight plays a significantly larger role than passenger transport – the relatively small length of railways (2,200km) is being used very efficiently making us one of the most efficient railways in Europe in terms of cargo tonnekilometres (t-km). We have the seventh highest freight intensity in Europe – in 2008 we achieved 19,554t-km. In Spain, for example, where the total length of routes is 13,468km, this figure was 10,207t-km, while in Finland with 5,919km of rail routes it was 10,777t-km.

The free market is represented by private carriers, who account for approximately 20% of the Latvian rail freight. Even the strongest and industrially most developed EU states do not have such figures. Liberalisation of the rail sector might bring the intended benefits, such as cheaper and better service, in countries with low service intensity where it is necessary to attract new operators. However, with the current high loads and efficiency of the Latvian railways, we certainly believe that the liberalisation project offered by the European Commission, in its current interpretation, would result in a completely opposite effect – rise in prices and reduction in quality of the service. It would be very complicated to equip full trains for each service provider – construction of rail parks from scratch or formation of trains in multiple stations would be very expensive or it would be necessary to use short trains. Those are only two of the aspects that would make the transportation process more expensive and adversely affect the competitiveness of the transit corridor, not to mention the complexity of transport planning in the existing infrastructure.

Latvian infrastructure usage tariffs

Another factor that sets Latvia apart from other railways in the EU is the relatively high infrastructure use tariffs, which directly depend on the state support that our sector receives. As an enterprise, LDz uses its revenue not only for development of the company and infrastructure, but also brings millions into the national budget. One of the fundamental problems with the high cost of infrastructure arises from the excise tax paid by LDz for the purchased diesel fuel. The state, however, uses these funds for maintenance of national roads, thus supporting the rival road transport sector. Only recently, after several years of discussions, is the government considering the possibility of repaying the excise tax from fuel to the railways, in order to facilitate the maintenance and development of our railway sector, which is more environmentally friendly and costeffective than road transport.

Latvian infrastructure more suited to freight

Due to historical and geographical circumstances, rail freight plays a larger role than passenger services in Latvia. The country is not large; the population is small and almost a half of the population lives in the capital, Riga. Historically the railway infrastructure is more suited to freight services – there is an East-West corridor connecting Russian and Belarusian railways to the ports of Riga, Liepāja and Ventspils. This is another factor, which significantly sets Latvian and the other Baltic states, Lithuania and Estonia, apart. It also largely affects the development of one of the largest modern rail projects – Rail Baltica – even though the initial scenario was to connect the three Baltic capitals with standard gauge (1,435mm) and high-speed service in this route, this project is not financially viable. Population density in our country is low; the internal mobility is relatively negligible, whereas the costs of the project are huge. Therefore we are currently working on improvement of the existing infrastructure to increase the maximum speed on the existing routes between Vilnius, Riga and Tallinn.

It should be noted that Rail Baltica reflects not only our rail transport problems, but also those of the whole region. The project about a linked connection initially supported by the European Commission currently can be considered incomplete, insufficiently planned and fragmentary, as is the entire Northern Dimension policy, which has never properly taken off. It might even be a positive situation, as our region has to try and solve the problems using its own resources and market mechanisms, as opposed to Portugal and Greece, for example, which had the wellstructured and planned EU Mediterranean policy resources. Therefore we are determined to strive forward and pay a lot more attention to investments in declaratory and politically motivated projects, such as Rail Baltica, because we, and not politicians, will bear the responsibility for the implementation, maintenance and profitability thereof.

Our social responsibility

Not without reason, railways are considered one of the safest and environmentally friendly means of transport. We try to demonstrate this in our daily operations.

In comparison, the figure for CO2 emissions per tonne-kilometre of LDz is half as much as the average figures in Europe – 10 g versus 20- 25 g in Europe. Our trains are also more ‘seriously’ equipped than others elsewhere in Europe – we usually carry transit loads and use larger and heavier trains. We are also working on energy performance by constantly training locomotive engineers on how to drive in certain sectors to save fuel.

LDz has a large potential to further improve the energy performance and specific CO2 emissions (g CO2/transportation quantity unit) through acquisition of new rolling stock and electrification the routes.

Continuing environmental measures

Although our main area is freight transport, we are also tasked with soil and groundwater monitoring and quality control in all key stations. The measurements carried out throughout Latvia indicate that the environmental situation in railway territories generally meets the applicable requirements. The situation is more complicated with areas where fuel depots were formed between the 1950s and 1960s because then the attitude to environment was completely different. Pollution has accumulated over the years and LDz continues restoration works despite the crisis. The groundwater treatment has been taking place for several years already in Riga and the second biggest city of Latvia, Daugavpils. As a result of this extensive project, the pollution under fuel depots has reduced significantly and does not threaten the surrounding areas.

Pollution prevention

Similarly important as treatment is the prevention of new pollution. That is why, over the last two years, we have allocated more funding to projects that do not cause pollution. Substantial resources have been invested in improvement of the largest LDz fuel depots in Riga and Daugavpils. All the old large (1,000m3 and 2,000m3) surface fuel tanks have been restored and made as safe for fuel storage and the environment as new. The oil containers that were previously buried under ground have now been excavated, restored or replaced with new and special heated underground rooms. The tanks are placed on special supports so that in the case of an emergency it can be detected and rapidly dealt with. The fuel depots have been fully rearranged and we are confident that the historical pollution, which has also been significantly reduced, will not increase even by the smallest amount.

We have also implemented substantial power-saving measures, which allow us to save 50% of the energy required for lighting of rail parks. LDz is taking part in the European Commission project ‘Green Light’ and has received a partner’s status for implementation of lighting technology renovation projects in rail parks in Jelgava and Ventspils. Here we have installed high-intensity natrium lamps, which consume approximately 50% less electricity and serve almost twice as long as ordinary lamps – up to five years. Both of the aforementioned projects together have allowed LDz to save 434.5 MWh or €18,858. In addition to the rail parks in Jelgava and Ventspils, the lighting has been updated and such lamps installed in Daugavpils, Šķirotava and Rēzekne.

Safety is paramount

While thinking about the environment, LDz is also concerned about the safety of train passengers and children on the railways. The safety and accident statistics of the past years has showed positive trends. We genuinely hope that these improvements were the result of our work in the national children safety projects and cooperation with schools located in direct proximity to railways where we present lectures about safety. Specially trained staff members of LDz teach children how to behave on the railway. We try to visit all such schools at least once a year.

The Council – this year’s main event

The main event of the past year was the celebration of the 90th anniversary of our railway network. This year, however, there will be an event which strictly focuses on the future instead of past: the 52nd meeting of the Railway Transport Cooperation Council on 13 and 14 May in the city of Jūrmala.

The Council encompasses 17 1,520mm gauge national rail administrations and aims to coordinate the rail transport operations in these countries. The members of the Council agree on the use of joint car and container fleets, organisation of international transport process, rail traffic safety, procedures of mutual settlements between rail administrations, use and repairs of rolling stock, the economic liability of administrations for violations of regulations and the procedure of settlement of disputes between railway administrations.

We see the meeting, which will be organised by us and taking place in Latvia, as not only a testimony to our ability to stage such a high-profile event, but as an opportunity to demonstrate Latvia and the advantages offered by our businessmen to our partners. We have a great honour and a great responsibility. The signing of a contract on cooperation between LDz and Russian Railways in the organisation of rail transport has been planned.

We are proud that, despite the global economic turmoil, we have retained our transport volume and have been able to continue investing in projects, provide support to our country and show appreciation to our most valuable asset – our employees – by improving their working conditions and the remuneration system. So far, we have succeeded in cautiously investing resources only in thoroughly selected and assessed projects, about whose profitability we were certain. We hope that this cautiously optimistic approach will prove itself in the future as well.

About the Author

Uģis Magonis

In 1989, Uģis Magonis graduated as a Navigator Engineer from Admiral Makarov State Maritime Academy in St. Petersburg, which is the most prestigious maritime academy. This led him to successfully work and further his professional activities relating to the transport sector; he worked in the Ministry of Transport of the Republic of Latvia as a Counsellor to the Minister. Over recent years, LDz has been significantly reorganised in an effort to increase productivity of the company, and as a result of this, which was under the guidance of Uģis Magonis, he has received some industry awards to recognise his achievements for increased company performance results, plus being awarded an Honorary Diploma from the Railway Transport Council in spring 2009. Uģis Magonis is a Member of the General Assembly in the Community of European Railway and Infrastructure Companies (CER), a Member of the Board in the Latvian Transit Business Association and has been Chairman of the Board of LDz since 2005.