Edelaraudtee wants govt to cough up €5m

Photo: Küllike Rooväli / Postimees

Edelaraudtee has sued Estonian state claiming premature termination of passenger carriage contract was null and void. Initially, the state offered compensation to the tune of €100,000.

According to auditors hired by Edelaraudtee, the company is facing a €5m loss due to state decision to cancel their passenger carriage contract before due date – by a year. As we know, the new year brings new diesel and electric trains for all of Estonia. The former will be taking over Edelaraudtee’s lines; however, state enterprise Elektriraudtee will do the carrying.

«Edelaraudtee’s losses arising from early ending of the contract amount to €4,975,507. The amount has been calculated by an international auditing company. The final figure may change and is linked to various circumstances including future steps by Ministry of Economic Affairs,» said Edelaraudtee press representative Kersti Gorstov.

Edelaraudtee is also defending its case in court having filed two claims.

«The dispute with economy ministry is in court since April 2013. Edelaraudtee had recourse to courts to be afforded an impartial assessment on whether the state has treated Elektriraudtee lawfully or not when signing a direct contract without organising a contest,» said Ms Gorstov.

She added that, in the opinion of the company, entering into a direct contract without a contest is a clear violation of Estonian and EU law regulating railways, competition and public procurement.  

«There are two parallel procedures – both initiated by Edelaraudtee. The first was initiated in April, regarding the premature termination of passenger carriage contract between Edelaraudtee and the state. The other proceeding was launched in July; this relates to contestation of the public passenger carriage service contract entered into by state and Elektriraudtee this July,» commented Ms Gorstov.

Ministry of Economy said they would not be commenting court cases still underway. The ministry press secretary Martin Miido underlined that Edelaraudtee has had recourse to the courts thrice. Mr Miido refused to specify the claims filed by Edelaraudtee.

«Pursuant to the public service contract, Ministry of Economic Affairs is willing to compensate to the other party the direct damage arising from premature cancellation of the contract; at the moment, extrajudicial bilateral consultations are also underway to determine the size of such damages,» said Mr Miido.

According to a source consulting Postimees, this rather is a complicated game of legal table tennis between the state and lawyers hired by the Marcel Vichmann owned Edelaraudtee, wherefore it would be hard to predict the size of the compensation to be paid by state to Mr Vichmann’s company.

Allegedly, the ministry’s initial offer was about €100,000 – for the reason that, for years, Edelaraudtee has been declaring losses. According to the latest public financial statement, Edelaraudtee’s 2012 losses amounted to €1.7m. Similar losses were also declared regarding 2011.

In 2012, Edelaraudtee carried close to two million passengers, showing 7 per cent growth for the year. The company’s sales (including state subsidy) amounted to €19m, operating profit being €262,000. The year before, operating loss of €900,000 had been declared.

Even so, Edelaraudtee’s economic indicators are characterised by a complicated structure, closely linked to other companies of the group. Even though dividends have not been taken out, loans have been given to and accepted from other companies belonging to the group. Last year, the group’s parent company Moonrider got, €4m of operating profit and €3.3 net profit at close to €30m of turnover.

Traditionally, Mr Vichmann has been considered a businessman closely linked to IRL; therefore, economy minister Juhan Parts is in a rather awkward position – on the one hand he is under strong pressure; on the other hand he has to defend the decision to deprive Mr Vichmann of the right to ride the new trains.

The termination of the Edelaraudtee contract is probably also caused by suspicions surrounding the company; as well as outrage at the company being unwilling to renew the train fleet itself with the state subsidies. Thus, the ministry is attempting to organise passenger carriage by new trains via a state company, hoping to get a trustworthy picture of costs and gains thereof. Also, it is hoped the new trains would breathe new life into public transportation popularity nationwide.

This year, Edelaraudtee receives about €15m worth of state subsidies. At the same time, the new diesel trains lease payments are a bit over €10m a year, the ministry hoping to pay it in a way not significantly increasing the total train traffic subsidy. In 2013, a total of about €20m of state subsidy is poured into diesel and electric train traffic.