Vichmann: economy minister Juhan Parts is a socialist

Photo: Toomas Huik / Postimees

Edelaraudtee desires to carry passengers and demands damages from government, for waiver.

If they only could, ministry of economy would confiscate his rails and all else, says Marcel Vichmann, Edelaraudtee sole owner, bus company Go Bus shareholder and former co-owner of Väinamere ferryboats.

Edelaraudtee has three court cases going, against the state. Why do you claim €5m, from the state?

We are not claiming money, from the state. We want to ride the passenger trains till end of 2014, as the contract reads. We want to keep the contract. The state asked us to calculate the damages – for not riding starting next year. We asked auditors to do the math. As we entered into a five-year passenger carriage contract, the trains underwent total overhaul. That was expensive.

According to Edelaraudtee annual report, passenger train traffic is a loss-making business. Aren’t you happy you will escape the losses, next year?

In the initial year, costs are the greatest. With a five year contract, the last year earns bulk of the expenses back. We have carried the costs, but there will be no income. Should the contract not be terminated early, the result would not be that bad. Even this year will, probably, not be as bad as the last one.

AS Edelaraudtee is operator and holding company. Consolidated, the railway is not in the red.

Without state subsidies, would passenger train traffic be profitable?

No. Estonia is so small, it’s not possible to maintain and develop train traffic here for business profits. It is a miracle that we are in the black, with Moscow and St Petersburg trains.

So even Tallinn-Tartu trains are not profitable, without subsidy?

Tallinn-Tartu passenger line might make profits, not counting the cost of the trains.

But isn’t that the economy ministry’s business plan: the state pays up the cost of trains and adds a little extra to cover carriage costs; the rest being up to Elektriraudtee to earn from ticket sales.

While electric trains were for the large part purchased for EU subsidies, state budget subsidies for train traffic will not decrease next year. New diesel trains were bought for our own money (Elektriraudtee taking them on capital lease – edit). These are not cheap. Would that be a prudent investment, Edelaraudtee would have done that long time ago. It is more prudent for the state to buy them, as EU money is highly probable and leans are cheaper for the state.

And now you are disappointed that the state did not let you ride the new trains?

The state well knows that Edelaraudtee did preparations and repairs counting on five years to ride. The purchase of new trains also was decided. Why did most of the new trains come a year earlier? I can’t tell.

The state has bought a hundred-some new buses, for CO₂ quota sales, giving these for private companies to ride. Why do they deal differently with trains? We were given the impression that the new trains would be given to us to ride. We know how to organise passenger train traffic. Edelaraudtee has been counting on the new trains coming, us using them for two-three years and then we would see whether to use the old or the new ones, so that the transition would be smooth.

Should there be an immediate competition to find the carries, who would be the competitors? We have experience with administrating the lines, but no-one has experience with riding the new trains. [Bus company] Sebe owner Hugo Osula would like to participate, but passenger carriage on railway takes big investments, knowhow – it not quite like that if you ride buses, you can also ride trains.

Are your lawyers now tasked with fighting at court for the state to have a competition on who rides the new trains?

The lawyers think the state-Elektriraudtee direct contract is null and void. Our contract is valid until 2014. The old trains are there. Ideally, we could ride both old and new trains. There are lines in Estonia where old trains are more reasonable. Is it reasonable to ride new trains to Pärnu while the railway is in a comparatively bad shape? On Tallinn-Tartu lines, while the [university] students’ trips peak, our old train would hold more people. Next year, Edelaraudtee has sole right to ride passenger trains.

Economy ministry claims that Elektriraudtee can manage the new trains cheaper than your company?

To my knowledge, Elektriraudtee does not know the costs of riding new diesel trains – as no-one has done that. Costs cannot be calculated by factory parameters alone; so no-one knows riding costs.

This year’s state subsidies for passenger train traffic are about €20m (15 for Edelaraudtee and 5 for Elektriraudtee). Next year it’ll be €22m, approximately; however, this will include leasing payment for new diesel trains (to the tune of €8m). So Elektriraudtee will manage with lower subsidies, actually.

Roughly, a train car costs a million euros. Getting this for free, of course it’s cheap. If you calculate that leasing payment is included, it’s very cheap, of course. A locomotive 30 years newer has lower fuel and service/repair costs. Same with buses. New ones are cheaper to ride than buses ten years older, no matter the leasing payments and the buses costing ten times more. Less fuel, less spare parts.

Economy ministry says your business is opaque and you are asking for unnecessarily high subsidy, as it partially goes to support other businesses.

These claims are unfounded. The state can check us, there is nothing we can hide. Maybe with some things we are profitable as we can repair railways, for instance, more effectively than Estonian Railways (Eesti Raudtee).

Will new trains mean more passengers?

With more departures, passengers will be more. If trains are cheaper than buses, more people will come. 

You will keep Edelaraudtee infrastructure and the profits from it.

If they only could, ministry of economy leadership would confiscate his rails and all else. 

Why do you think so?

Economy minister and his chancellor favour state capitalism. The state wants to run areas which private sector might handle as well. Plains, ferries, trains – it’s all moving into state hands. State thinks it knows best how to organise transport.

You think otherwise?

The state should see to its direct responsibilities. Infrastructure is state’s responsibility. Should there be no railways, it would not make economic sense to build these. But we do have railways so we can ride. It is up to the state to keep the infrastructure is as good a shape as possible, for private entrepreneurs to use.

Freight train doesn’t care if it rides 40 or 80 km/h. A passenger train should go faster. Edelaraudtee’s trains could go at 120 km/h (75 mph), and at places they do, but mostly the infrastructure will not allow that. Even the new Stadlers cannot go at 120 or 160 km/h.

So you wish Santa Claus will bring a new economy minister?

[The IRL’s economy minister] Juhan [Parts] is a nice person, but with a socialist attitude. Also, he’s in the wrong party; he should sit at the left wing of the soc dems.

Continuing with the state capitalism theme – when new ferries were ordered for Väinameri, you were co-owner; not any more.

Yes, we split the assets with Olav Miil. Olav got the ferries, to my knowledge he is sole owner of these.

Public registers say Vjatšeslav Leedo is ferryboats’ co-owner.

I have not looked into public registers, but I do doubt that. To my knowledge, it’s Olav only. Olav is owner, Mr Leedo uses the ships.

While you were co-owner of the ferries, your companies got the largest bite of the transport subsidies paid by from state budget. How did you manage to lay hold of the state-subsidised bus and train traffic?

Just happened. Ferryboats is not my business any more. Subsidies is a stupid word, foul-tasting word, as it were bad for state to pay subsidies. The state also orders road construction, as well as bus and train lines.

In bus business, I am in overall minus, as we pay the state extra – quite a lot. State orders not covering the costs, we have paid extra, a shameful amount of money. Nothing doing, got to keep contracts. Should we not do that, the buses would not ride. Ferryboats are different.

Is ferryboat traffic profitable?

The new ships were a big miracle and a large risk, taken by the investing entrepreneurs – me and Olav, mainly. In total, the ships cost about €86m, or €90m additional expenses added. Slavik [Leedo] took the rental payments risk. To my knowledge, he has not been able to pay that. One ship’s rental is €10,000 a day; three ships make for €900,000 a month. Leedo paid the sum that went to the banks, but there was not enough left over to service ship owners’ equity. Leedo could not make enough money, operating, to pay contractual rent.

To earn the ships back takes 20 years, minimum. What will happen in 2016? Parts says state will buy ships for Port of Tallinn, or Estonian Pilot (Eesti Loots). The state wants to continue with the same quality of service; but it is not possible to buy ferries cheaper. Why take over the ferry traffic?

Maybe the state can organise train or ferryboat traffic cheaper than private entrepreneurs?

I think there comes the time when state buys the mainland-islands ferries back.

Olav Miil will be real happy, then...

Sure, should that happen. Knowing Olav, he will not ask little. Then again: it would be more reasonable for the state to buy from him, than to order itself. I believe they will find a solution, once a more reasonable minister, or government, comes. State money is cheaper, anyway, yielding some1 per cent; however, a ship owner’s equity yield ought to be 15-20 per cent – and, considering the risks, that would be too little, really. And the risk is all the greater while all the government does is talk about reorganising ferry traffic.