In five days’ time, as Port of Tallinn council gathers for its meeting, a competition will probably be announced to buy four ferryboats for connecting islands and mainland.
Port of Tallinn in search for ferries
16th January 2014, 17:39
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According to port council member Tiit Riisalo, they do have the tender documents prepared by economy ministry; various issues having risen regarding these at their last get-together (at end of 2013), they did not proceed back then. Now, as the issues get their answers, the next step – holding the competition – may be taken towards obtaining the ferries. Should some nuances still remain unclear, the formal decision might be postponed by a couple of more weeks.
Leedo’s vessels welcome
At the same time, adds Mr Riisalo, the remaining issues are not strategic in nature, rather the legal-technical kind. The main thing: major issues have been settled.
Firstly: the state shall indeed purchase ferries. This is definite, not the «ought», «might» or «plans to buy» talk.
Secondly: the transaction will be done by Port of Tallinn, which will also become owner of the new ferries. Half a year ago, this was still undecided; there was the talk of the public enterprise Estonian Pilot (Eesti Loots) as a possible owner of ferries.
And, thirdly: four ferries will be purchased, not three.
To Postimees’ knowledge, Vjatšeslav Leedo and his representatives have also been visiting economy ministry, about the ferry buying business. The man, whose companies currently operate Saaremaa ferry traffic and who, in medias eyes, has been linked to ownership of the ferries used, is worried: should state launch procurement of vessels, would his ferries be disqualified from competition?
Theoretically, one may indeed imagine a revenge action: the state and Mr Leedo having often quarrelled over the ferry subsidy size, the ministry might now pay back, setting up such rules as would block Mr Leedo from participating. This, however, will not happen; surely, Mr Leedo will be given a chance.
Rather, the officials are inclined to think thoughts of peace: perhaps, as Port of Tallinn organises a ferry competition, it would lead to Mr Leedo’s ferries being purchased and one new ship purchased/built in addition?
Even so, economy ministry and Port of Tallinn cannot give Mr Leedo any guarantees. In the end, all is up to the prices and the offers made.
Economy minister Juhan Parts, speaking to Riigikogu this Monday, said that to the ministry’s knowledge, there are no ferries on the used ship’s market, which could be engaged for Saaremaa and Hiiumaa connections without being substantially rebuilt. As a rule, ships are built for specific lines; thus, Mr Leedo’s current vessels were also built specifically for the said islands. Among other things, this was the message for Mr Leedo. His ships are okay, and as the competition launches, he’s welcome to make an offer.
At the same time, Mr Parts also pointed to deadlines, letting it be known that, if necessary, the state will manage to build the new vessels. Meaning: should Mr Leedo offer a good price, he’d get the deal; should somebody else make a better offer, the ships would be ordered from him.
Actual costs unknown
About a dozen years ago, the government first tried to alter order of ferry-traffic with Saaremaa and Hiiumaa. Back then, the endeavour failed, unseating Meelis Atonen as economy minister.
If Port of Tallinn will now organise a competition and end up buying the ferries – from whoever, really – it may be said that Mr Parts has succeeded in forcing a conceptual change in Estonian transport system – to the tune of purchasing diesel trains for state enterprise Elron, handing it the right to drive these. Indeed, as written in praise of Mr Parts, yesterday, by the Äripäev journalist Aivar Hundimägi: this amounts to correction of former privatisation errors. As, basically, it so happened with Estonia’s ferryboats and passenger trains alike, that in these areas the market does not function; there is only one bidder and the business is built on asking state for subsidy.
The former economy minister Mr Atonen adds that, in this case, he sees no need to harp about the steps not being liberal and Estonia moving towards state capitalism. «With market economy lacking in these fields, why play it?» says he.
The state having, in the name of the taxpayer, already decided to subsidise these activities, only one question remains: what would be the definite way to subsidise these? Up to now, the state has subsidised private enterprises, which own infrastructure (ships, trains) and also operate these. From the state point of view, this has led to a string of problems.
Firstly, the state can never really know what the operator’s actual costs are, there being no competitor who could offer the state comparative process. Also, the operator is constantly motivated to show larger costs – then it can asks state for larger subsidy.
«It has been asked, for instance, why, in Elron’s case, the state did not just buy the trains and let a private company service the lines. The way I understand it: the state actually wanted to know what the real costs are,» says Mr Atonen. The same kinds of signals are coming from others, as well. The strategic goal is owning the trains; however, in the future as the ministry has all clarity regarding the costs of the business, a competition will be held to find an operator.
Same with ferries. To begin with, Port of Tallinn will purchase the ferries; thereafter, a competition will be organised to find the operator – quite probably, Mr Leedo’s company will remain the operator, just not owning the ships any more.
The other major set of problems, in the current system, comes from the fact that these are very long term and large investments, meaning that, in ferry and train business, capital expenditure plays a leading role.
Ten additional millions
Mr Parts has said that while buying three ferries, the state would save €6m a year; with four ferries – €8m. One reason being: the state or a public enterprise would simply get money cheaper, to buy such big things.
In the Elron-Edelaraudtee comparison, Mr Parts has claimed the yearly savings to be €6.5m. Judging by the state subsidy paid to Elron this year as compared to the money given to Edelaraudtee, the difference will amount to €4.2m; probably, however, the ministry gets a bigger sum counting up the additional kilometres covered by Elron trains.
In any case, yearly savings from ferry and train traffic would be to the tune of €10m a year. This is big money: had these steps been taken earlier, for the money saved we might have built both Art Academy and Estonian National Museum.