Ministry of Economic Affairs and Communications and BRS reached and agreement on reacquisition of Estonian Railways
On Wednesday, 18th of October the ministry and the majority shareholder of Estonian Railways OÜ Baltic Rail Services (BRS) finalized the negotiotiations on termination of the 2001 Privatization Agreement by technically initializing the Share Transfer and Termination Agreement. The initialized texts will be sent to the Government, if the Government approves the deal, then the Agreement will be executed.Pursuant to the Agreement the state would pay BRS for the 66% of shares and other goods a total consideration in amount of 2350 million kroons. As a condition precedent to the share transfer, the parties shall in the general meeting of shareholders approve 2004 and 2005 annual reports of Estonian Railways, without revaluating the basic assets of the company as previously insisted by BRS, and decide on distribution of dividends for these years. BRS is seeking an amount of 150 million kroons as dividends. Both parties withdraw and waive any further claims against each other.Furthermore, the deal will be closed only if the Parliament would foresee respective amount in the state budget, a decision to that effect is expected before 2007.
The negotiations were resumed on the basis of an unconditional offer made by Suprema Securities, investment bank representing BRS, that the amount to be paid for the majority shareholding be 2350 million kroons.
It was as take it or leave it offer, an absolute precondition to the negotiations, said Heido Vitsur who lead the negotiation team of the state. It is the ministrys firm position that all publicly important infrastructures, such as public railways, power stations and networks, port and motorways must belong to the state in order to secure their development and invest along the public and national interests.
Minister Edgar Savisaar proclaimed that It is in national Estonian interests to reacquire the railways as we must be certain in its development. If the state owns the railways, then it would facilitate utilizing EU Funds and get credits with lower interest rates. With the example of Eesti Energia the state has proven that it can be a good master.
Minister noted that the negotiations were complicated and none of the parties achieved all of its wishes. It is like a divorce. There are different opinions in sevceral questions, but still one is able to discuss and agree, he compared.
It is clear that during the last one and half years, the positions of the state and BRS concerning the future of railways have increasingly diverged, noted Edward Burkhardt, chairman of the council of BRS. It occurs quite naturally, that the state will regain the leadership and decides itself, which railway policies to pursue.
The negotiations were tense and timeconsuming, nobody got 100% what it wanted, but the final compromise was a professional and mutually considerate one, said Priit Koit, leader of BRS negotiations team.
According to wish of BRS the Agreement remains confidential for one year with the exception of information that must be disclosed pursuant to the law. The amount of total consideration is public.
The parties have been discussing transfer of 66% shares of Estonian Railways on various decisionmaking levels since 20th September.
The Government decided to resume negotiations with Suprema Securities pursuant to their offer on 14th September. Until very lately, the parties held talks on a very tight and tense schedule, including the weekends.
