Rail investment and development is a priority in Estonia

Ahti Asmann, Chairman of the Management Board at AS Eesti Radutee

Close co-operation is vital in an open railway market AS Eesti Raudtee – Estonian Railways Ltd – was one of the first railway companies in Europe to implement the legal separation of its railway infrastructure and operating companies, derived from discussions of principles of the 4th Railway Package of the European Commission, which covers standards and authorisation for rolling stock, independent management of infrastructure, liberalisation of domestic passenger services, plus workforce skills.

The idea of separating network owners and rolling stock operators is to reform the rail sector in a way that improves competition in the sector by creating independent and equal  opportunities to all railway enterprises, and opening the market. It is critical to remove sources that can cause conflicts of interest whilst sustaining the infrastructure company’s control over all functions essential to ensure effective operation of the railway network and performance of the central role as a railway administrator.

On 3 September 2012, AS Eesti Raudtee officially separated the subsidiaries of EVR Cargo Ltd and EVR Infra Ltd (currently Eesti Raudtee Ltd). Though considering the size of the Estonian market and the country’s railway network, as well as the location and railway width (1,520mm), which is somewhat different from the average in Europe, some conclusions to this separation decision can be made.

Overall, separating railway enterprises brings along improvements in competition by increasing transparency that has a positive influence on the overall effectiveness. On the other hand, it fragmentises the sector which can cause ineffectiveness. As the different parts of the railway sector are very tightly bound, consolidation is of essence to ensure maximum effective use of existent resources, as well as planning future investments to the right time, place and volume.

In Estonia, the situation of several railway operators acting on the market simultaneously has actually already prevailed over the past decade. From that perspective, the railway market was open before the 4th Railway Package was discussed. Also, as in Eesti Raudtee the bookkeeping and financial planning of subsidiaries EVR Cargo Ltd and EVR Infra Ltd were separated already, the juridical division didn’t bring along a substantial change.

As to the furtherance of competition, the effect to the railway sector in Estonia, due to its small size, is not as notable as it could be in bigger markets.

Even though there was no considerable positive or negative influence in the field of competition, some challenges have arisen since separation. One of the biggest challenges has been planning investments in a way that is aligned with the development plans of cargo and passenger traffic enterprises, as well as the governmental development plans of the transportation and railway sector.

As a railway infrastructure only carries a purpose together with trains and train operators, it is essential to maintain a very close co-operation with both cargo and passenger operators, as well as other participants of the railway market, to ensure that the infrastructure doesn’t start ‘living its own life’. Discrepancies of interest often emerge in these discussions that must be attended to with most severity.

Governmental role is vital

The separation has considerably complicated financial and income planning, so the need for governmental contribution as a conductive and intermediary force has increased. In February 2014, the Estonian Government approved the Governmental Development Plan of Transportation for 2014-2020 in which context the aspects of transportation that need governmental financing or regulations are being discussed.

The vision set in the Development Plan identifies railway development as one of the main instruments to achieve the set aims in the field of the entire country’s transportation. Priority in railway development is to increase the quality of railway connections that maximises the potential in international, domestic, regional and local transportation by raising both the connection speeds and frequency of departures. The main goal is to turn railway transportation into a fast, safe, and comfortable way of travelling by enhancing the quality and safety of the rail network.

Important growth for 2014-2020 is also planned for international railway passenger traffic. If in 2012 train traffic formed 0.9% of the entire international passenger traffic, then by 2020 it should reach 2%. The ambition for the Tallinn–St. Petersburg and Tallinn–Moscow lines are even higher; by 2020 the number of passengers should have almost tripled compared to 2012.

A fast, comfortable and frequent railway system is relevant also in the North–South direction. The location of the Rail Baltic that connects Estonia to the international railway corridors in Europe has to be chosen, which requires the close co-operation of all Baltic States.

Small and open economy depends remarkably on international trade. According to the Development Plan, one of the most important aspects of economic development in Estonia is international cargo transportation. Effective use of our abundant marine space by connecting existing highly modernised harbours to the rest of the infrastructure network is one of the main agents in improving the international competitiveness of Estonia, enabling us to participate in the trade between Europe, Russia, and Asia. Goods arriving to, or leaving from, the ports should preferably be transported by railway. However, domestic cargo transportation is reasonable on a few routes due to the shortness of lines.

Planning investments carefully

To fulfil the aforementioned requirements, investments are inevitable. An investment plan has been developed by Estonian Railways for the 2014-2020 period to reach the set goals. For both passenger and cargo traffic, priority is given for investments that warrant safety and emergency potential.

In 2013, a total of €26.5 million was invested, of which €22.5 million derived from EU funds (the Cohesion Fund of the European Union and the Regional Development Fund of the European Union).

The first stage of major projects, including the renovation of the Tallinn–Keila–Paldiski and Keila–Riisipere lines, and reconstruction of the railway contact network on the Tallinn–Keila–Paldiski and Keila–Vasalemma lines, implemented in last three years was concluded.

Stage 2 of renovation works is planned during 2014 and beyond, mainly including the renovation of station rails and rail switches, with planned investments and financial aid from the European Union totalling approximately €6.9 million.

The project for reconstructing contact networks, including cargo stations in Keila and Järve, by the end of 2014 will continue, and €6.1 million will be invested in the project. These investments are important for maintaining the west directional electric train traffic and increasing travel times in that direction.

In the field of cargo transportation, improvements include widening the railway in the ports of Sillamäe and Paldiski to provide sufficient capacity and competitive railway connections between Estonian ports and the 1,520mm railway network.

Other investments for 2014 include the overhaul at Muuga and the Tapa–Narva line totalling approximately €10 million. The investment mainly budgets for the renovation of reception and dispatch roads and increasing the capacity of Vaivara Station in accordance with the development perspectives of the port of Sillamäe. Passenger platforms at the 9th station on the same railway line will also be renovated – works costing approximately €3.4 million.

One of the priorities is continuing the renovation of worn sections of the Tapa–Tartu railway line in order to maintain current travelling speeds and create perspective for higher speeds in the future. The total cost of the project is estimated to be €4.2 million, €3.3 million of which will come from the European Union.

Other larger investment areas include the renewal of communication and security devices (traffic organisation systems and crossing automatics) for €5.3 million (including €2.4 million from our own funds) and the overhaul of railway bridges for €3.7 million.

During 2009 to 2013, approximately 13% of railroads underwent major renovations, and 100% of passenger waiting platforms have been renovated.

Progress in passenger traffic implies further improvements to railway safety

Investments made during recent years have been the basis for a huge leap in the popularity of railway passenger transportation in Estonia. On 1 January 2014, Estonia changed the entire passenger train park overnight which resulted in passenger train traffic on all domestic railway lines being operated by brand-new Stadler FLIRT electric and diesel trains. There are currently 18 electric and 16 diesel trains in use.

Results can be seen in statistics

In the first quarter of 2014, over 1.2 million passengers used the domestic railway lines (the entire population of Estonia is 1.3 million). The most popular lines were near the capital Tallinn and between Tallinn and Tartu, the second biggest town in Estonia. In March 2014, over 455,000 passengers used the new trains, which is 45% more than during the same period in 2013. By the end of 2014, a total of 5.6 million passengers are estimated to have travelled on domestic railway lines.

Biography

Ahti Asmann graduated from the Tartu University Faculty of Economics and Business Administration with an MBA in Finance and Banking in 1995. From 1994 he worked within the SEB Group and was CEO between 2007 and 2009. Between 2010 and 2012, Ahti was General Manager of the SEB Group in Ukraine. Ahti has been Chairman of the Management Board of AS Eesti Radutee, the national railway company of Estonia, since 2012.