Estonian Railways board denied bonus

The disorder discovered last May by the company’s internal audit became public last week as the business daily Äripäev wrote about €10m disappearing from the firm.

System based on trust

«The ten million have not been stolen; the problem is in potentially missed income, and differences in valuation of materials replaced during,» said chairman of Estonian railways Raivo Vare.

«No so-called culprits can be named as the internal audit dealt with the time period starting with 2007–2008 when the company was managed by other people. The board assumes collective responsibility because the problem was not detected sooner.»

Mr Vare said the problems begun when Estonian Railways was in private ownership and materials accountancy was based on a system of trust. Mr Vare was board member of Estonian Railways in 2005–2007 when the company belonged to the private investor Rail Baltic Services. «I cannot rule out that, with the audit, we will even have to go back into the times before the privatisation,» said Mr Vare.

The council thinks that despite the tensions springing from the public disclosure of the audit, the Estonian Railways board is able to keep on operating and no-one will be fired.

The term of CEO Ahti Asmann ends this September and the council will discuss a competition at its next session.

Regarding the claim posed by Äripäev about rails worth €10m disappearing from Estonian Railways, Mr Asmann said that was an exaggeration as not corresponding to the actual volume of repairs at the company. Even so, confusion plagues the accounting and, during inspection, both lack and surplus has been detected.

«Ten million euros sounds grand but this kind of number would mean rails stretching from Tallinn to Rakvere being stolen, which is improbable,» Mr Asmann told Postimees.

«Last year, to repair the railways, we purchased 20 kilometres of new rails with total weight of 1,300 costing €1.1m.» As railways are repaired, the old rails will be sorted so that the ones in bad shape will go for scrap iron, the better ones usable in repairs of sidings will be stored.

Size of damage unclear

Probably, there has been no large-scale theft of rails; rather, the amounts have been miscalculated. «Which will not mean that rails are never stolen, of course. Recently, we had recourse to police regarding four supervisors suspected in laying hold of rails sent to scrap iron, but the investigation is half finished,» said Mr Asmann.

As stated in legal opinion by law firm Eipre & Partners possessed by Äripäev, board member Parbo Juchnewitsch since last august in charge of infrastructure said the company formerly lacked any regulation regarding use of outdated materials.

Estonian Railway loses fifth of turnover

According to 2014 annual report of Estonian Railways approved by council yesterday, the group’s turnover suffered a €12.7m or 18.6 percent drop of turnover year-on-year.  

«The company’s main source of income is in a continual fall. The shrinking revenue base is now also reflected in results,» said Estonian Railways chairman Raivo Vare.

As compared to 2013, carriage of goods was down 21 percent. The main partner in carriage of goods was Russia with 10.2 million tonnes sent towards Estonia last year. As compared to 2013, that was a 30 percent drop. Meanwhile, carriage from Latvia and Kazakhstan were up.

At €55.5m of turnover in 2014, the company’s net loss was €0.26m.

During 2014, a total of 19.22 million tonnes of goods were transported on Estonian Railways infrastructure. Of that, 14.08 million tonnes were transit, 0.62 million tonnes exports and 1.05 million tonnes imports. The largest share of goods carried were oil and oil products (9.83 million tonnes), followed by fertilisers (3.35 million tonnes) and oil shale (2.67 million tonnes). Local transportation volume was 3.47 million tonnes. Volume of container transport was 72,000 TEU, a yearly increase of 16 percent.