ZURICH - A controversial plan to sell a majority share of Estonia's national railroad to an international consortium has been stayed by an administrative court in Tallinn pending a legal challenge. The privatization plan, approved last month by Estonia's federal privatization agency, called for the sale of 660f the shares in the railroad, Eesti Raudtee AS, to a consortium led by international logistics consultant Kingsley Group, and minor investments by CSX Corp. and RailAmerica of the United States.
According to Estonian press reports, the privatization agency agreed to sell the two-thirds share for about $100 million, which was the highest bid received. In return, the Kingsley-led group - called the Rail Estonia Consortium - pledged to help modernize the rail system's rolling stock and track network.But a competing bidder, Railway Privatization People Ltd. (RER), challenged the privatization award in the administrative court. And last week, the court put the sale on hold pending a hearing that is scheduled to start on March 14.
Estonia's national railroad became a target for international investors because it benefited from hefty increases in transit cargo carried between Russia and Northern Europe in recent years.
If the government's sale of a majority share in its railroad manages to get past the court challenge, it would represent the first real privatization of a rail system in formerly communist Europe. Many other countries in East and Central Europe have encountered problems with privatization efforts.
Estonian officials said 11 different consortia, including West European and U.S. companies, were involved in the bidding process. Parbo Juchnewitsch, the Estonian railroad's general director, said the main goal of the privatization is to increase the rail system's efficiency and competitiveness. In addition, transport and logisitics partnerships are expected to open up with other transport companies.
While Estonia's rail system is small - it has about a 620-mile track network - it has become important in transport between Russia and Western Europe, because many trains bearing Russian exports pass through Estonia on the way to Poland and Germany.
Since the mid-1990s, rail cargo volume transiting Estonia has doubled, to about 25 million tons last year. In all, the Estonian rail system handled more than 37 million tons of cargo in 1999.
Robert Koenig can be reached at 011-41-31-352-3808.