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Latvijas Dzelzceļš buys plant the business of which has not been successful in the past

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe head of Latvijas Dzelzceļš has received the government’s approval to expand its business presence. LDz’s subsidiary LDz Rolling Stock Service plans to become the sole owner of Rīgas vagonbūves uzņēmums Baltija and commence manufacture of freight wagons in Daugavpils. The problem, unfortunately, is that the private investor has not been successful with the realization of this plan.

On top of that, there is no demand for freight wagons at the moment.

Four years ago, Ugis Magonis, then the president of Latvijas Dzelzceļš, said that it is planned to invest several million lats into LDz’s subsidiary in Daugavpils in order to establish a wagon manufacturing plant. He mentioned that the plant would be able to produce 1,000 wagons a year and employ 100 people, as reported by De Facto programme of LTV.

Nothing has come out of this initiative yet. RVU Baltija has manufactured a total of two freight half-wagons. Their festive presentation took place one and a half years ago. However, those wagons have yet to be certified, so there is no point in manufacturing more of them.

RVU Baltija currently has two owners. 25% belong to LDz RSS and 75% – to UK citizen Georgiy Chesnokov. Last year, Chesnokov decided to leave this business and extended an offer to LDz Rolling Stock Service – to either divide its assets or buy all of the company’s shares. LDz put some thought into the offer and decided it would be cheaper to take over the company.

In order to acquire influence over RVU Baltija, it was necessary for LDz to get permission from the government. Transport Ministry had submitted the draft of the order at the end of last year. The coordination process was ultimately delayed, but now Transport Minister Uldis Augulis is committed to achieve progress in this matter. It ended up on the government’s table on Tuesday. Unity’s ministers tried to oppose it.

Education and Science Minister Karlis Sadusrkis doubted «as to whether or not the government should take over non-functioning companies just in case something needs to be manufactured». Economy Minister Arvils Aseradents noted that this deal would not affect strategic infrastructure. With that, there should be clear factors as to why the government would go through with this deal. Otherwise, «if we start acting in such a way, we will have enough demand to do the same thing in the future,» – said Aseradens.

Augulis commented that the opinions coming from Unity seemed odd, since the coalition had previously put off the review of the matter for a week, and that Transport Ministry had not received any questions regarding any aspects of the matter in that time.

Ministers of UGF, the Prime Minister and the National Alliance took Augulis’ side on the matter. With votes divided into 7:4, the government gave LDz permission to acquire RVU Baltija. «The question is if nothing is done there in a year, we will have made a horrible mistake,» – Maris Kucinskis added.

Why did a company with premises, technical support and workers provided by LDz Rolling Stock Service and support promised by then the Prime Minister Valdis Dombrovskis failed to restore freight wagon manufacturing in Latvia? Guntis Innuss, the sole board member of RVU Baltija, has his own explanation for this: «We had submitted a request to receive EU funding when we started this project. The Prime Minister had also promised support here in Daugavpils. Unfortunately, the project was declined and we received no support and no financing was provided to us. The private investor, who was one of the founders of RVU Baltija, decided to leave the market entirely. And so the two wagons we have manufactured remain uncertified to this day.»

Innuss says Latvian Agency for Investments and Development had believed more in Russian Uralvagonzavod’s plan to establish a manufacturing plant in Jelgava at the time. That project has not gone anywhere either.

Private co-owner Chesnokov’s representative and former board member of RVU Baltija Dmitro Vakhnin has confirmed this version only partially: «We had hoped for the LIAA programme, but no one had ever believed in it 100%. Our plan was to focus our business project’s first stage on investors’ own resources.»

«At the time, LIAA told us that our request was not supported. That was spring 2014. So we decided to review our plans. Corrections were made not because of LIAA’s refusal, but because of the market conjuncture. The market had radically changed in 2013 and 2014,» – says Chesnokov’s representative Vahnin. He agreed with opinions of other representatives of the industry – while there was a deficit of freight wagons several years ago, there are too many of them now.

This makes one skeptically view Transport Ministry’s annotation in regards to RVU Baltija’s future directions, including the plans for the needs of LDz. Anrijs Matiss, former Transport Minister of Latvia, is among the sceptics. «Now that the market is overflowing with empty freight wagons, there is no problem with their availability. In addition, LDz is not exactly in a financially successful state at the moment. I think such a step is completely pointless.»

Transport Minister Augulis emphasizes that the main objective of RVU Baltija will be to provide transport of Abrams tanks: «This company will work to manufacture NATO platforms for the alliance’s needs, so that NATO forces can travel safely using platforms meant for heavy vehicle transports. LDz does not have those at the moment».

Ref: 102.109.109.9521


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