bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Ceturtdiena 29.09.2016 | Name days: Mihails, Miķelis, Mikus, Miks, Miģelis
LithuaniaLithuania

Lithuanian state railway company Lietuvos Geležinekliai faces unbundling

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU

Linas Jegelevičius for the BNN

A state in the state – that is how Lithuania’s state enterprise Lietuvos Geležinkeliai is dubbed – has bumped into a major hurdle along the road. The European Commission, which is about to end the investigation into the dismantling by Lietuvos Geležinkeliai the railway stretch to Renge, Latvia, threatens to impose the Lithuanian railway company a huge fine and obligate it to rebuilt the stretch.

The other option Lietuvos Geležinkeliai has is to unbundle the company into two separate companies: one would be responsible for infrastructure and the other would be in charge of cargo and passengers.

EC Transport Commissioner is tough

«One is a fineand a commitment to rebuild the Renge stretch. And the second option is separating the activities into infrastructure and haulage,» Lithuanian Transport and Communications minister  Rimantas Sinkevičius said after meeting last week with Violeta Bulc, the EC Transport Commissioner.

In Sinkevičius’ words, Lithuania has a month to decide which of the two options suit Lithuania’s interests best.

Although the size of the fine is withheld, but the leaks in Lithuanian internet media hint it can amount to some 43 million euros.

The minister said he did not know yet which of the options the government will go for: «I don’t know it yet, we still have a month to decide.»

Will Lithuania sue EC?

According to Sinkevičius, if the state opts for a decision to separate  Lietuvos Geležinkeliai’s operations, the company ought to be given additional time as the ensuing unbundling process will be «complicated», especially that the company has a number of cases pending in courts, as well as a slew of financial obligations. The minister did not rule out to go to court should the EC impose the fine.

The EU probe into the company’s operations was opened by the EC in March of 2013 after the Polish oil concern Orlen filed a lawsuit against Lithuania over the railway stretch dismantling in 2008. The removal has interrupted traffic between Lithuania and Latvia. The rails are yet to be restored.

In its lawsuit, the European Commissioned argued that, as a monopolist, Lietuvos Geležinkeliaihad abused fair EU competition policies.

With the railway stretch off, Orlen’s Lithuanian offshoot, Orlen Lietuva, was forced to either employ Lietuvos Geležinkeliai railway services for the haulage of oil products to Latvian seaports or redirect the cargo traffic to the Lithuanian seaport of Klaipėda.

Orlen has claimed since the beginning it violated fair competition and asked the EC to step in.

Unwilling to litigate with the EC, Lietuvos Geležinkeliai sought a peaceful solution, but the Commission turned down the company’s proposal and, in 2015, filed charges against it.

If the Commission imposes the fine of 43 million euros, it would amount to nearly one-tenth of the Lietuvos Geležinkeliai’s annual turnover, according to Lithuanian media.

Big bills might lie ahead

Besides, rebuilding the Renge railway stretch would cost the company another 20 million euros. As Orlen is expected to lodge in a lawsuit against Lietuvos Geležinkeliai demanding it to remunerate all the pecuniary damages the Poles have incurred following the dismantling, Lietuvos Geležinkeliai’s legal bills are likely to be huge.

Facing the grim reality, Sinkevičius, the Transport minister, met this Wednesday Lithuanian President Dalia Grybauskaitė and discussed the situation.

«Unfortunately, state enterprise Lietuvos Geležinkeliai acts as if being a state within the state. It is intolerable that its interests have been put higher the state’s interests. The Government’s inactivity addressing the issue can cost the state dozen million euros, which will be paid by our taxpayers,» the head-of-state underscored after the meeting.

Government must talk to EC immediately

According to the President, the Government has to swiftly make up its mind (what to do next) and inform the European Commission about decisions that may prevent the sanctions against the railways company.

«After possible economic and financial aftermaths are assessed, the Government has to immediately pass decisions that would effectively reorganize state company Lietuvos Geležinkeliai,» Grybauskaitė is quoted as saying in the statement.

Lietuvos Geležinkeliai has long been known as the ruling Social Democrats’ stronghold and one of the chief donors for the party’s political campaigns.

The President had met the minister yet last summer and urged him to find solution in the row with the European Commission, but neither he nor the railway company has come up with it.

In the head-of-state’s opinion, the only possible solution in the situation now is to unbundle the company into two separate companies. One of them would be responsible for the maintenance and management of the railway infrastructure and the other would be entrusted with the haulage of cargo and passengers.

A hard case to crack

Grybauskaitė told the Transport Ministry, which is the single shareholder of Lietuvos Geležinkeliai, to draw up a plan of actions that would help the problem.

Commenting the meeting, Sinkevičius was excusing himself that he had inherited the problem from his predecessor.

«All has started back in 2010 and the case is far from being simple. If it were such, the litigation would have not lasted entire six years,» the minister said.

He believes that Lietuvos Geležinkeliai, not the state should be held accountable for it.

«Government should be seeking maximally rational and beneficial solutions on all the possible levels. I believe that the most rational solution would be adhering to all the legal norms and laws that are passed in the European Union. I have in mind the so-called fourth EU railway package,» the minister pointed out.

Earnings plummeted

The package envisions establishing a Single European Railway Area (SERA) and sets out the Commission’s approach to ensuring the competitiveness of EU transport in the long term, while dealing with expected growth, fuel security and decarbonisation.

«We will be suggesting to make the activity of Lietuvos Geležinkeliai more transparent and retain the vertically integrated structure,» Sinkevičius suggested.

The company’s net earnings last year slumped more than seven times, year-on-year, and amounted to 2,776 million euros.

Disagreeing with the President, who insists the company does not cooperate with the EC, Lietuvos Geležinkeliai claims it has been communicating with the Commission «intensely».

«Sometimes we exchange several letters every week and then meet once or twice per month. And then a quieter period follows, when the Commission prepares queries for us and reconciles a drafted document in the Commission. But even in this case, we do keep ourhand on the pulse and inquire  periodically, once or twice per month, when we can expect a decision and whether we can assist the Commission with the preparation of one or another document,» a company official is cited in Lithuania media.

Neither Lietuvos Geležinkeliai, nor the Ministry of Transport and Communications commented the situation to BNN.

Ref: 020/111.111.111.3567


Leave a reply

Aseradens: decline of electricity prices expected in Latvia

If reforms are successfully realized in the electrical energy market, Latvia may experience a decline in electricity prices, as announced by Economy Minister Arvils Aseradens.

MH17 investigators: Missile came from Russia, was shot from rebel-held territory

The Dutch-led international team of prosecutors stated on September 28 that it has found that the missile with which passenger plane on flight MH17 was downed in 2014 over eastern Ukraine was shot from territory held by pro-Kremlin separatists.

Politicians forget about transit industry as a source of income for state budget

Politicians and the public regularly discuss the lack of budget funds to afford improvements for healthcare, education, law enforcement. New taxes and new ways of adding money to the state chancellery are sought left and right. They forget that transit has always been a stable source of income for Latvia, Vesti Segodnya writes.

Study: most girls and half of boys in Riga do not tie their future to exact sciences

73.5% of girls and 49.1% of boys in Riga do not see their future associated with exact sciences, according to results of Jaunieši IT study carried out in Riga’s schools.

Businessmen: faster adoption of e-procurements system would benefit competition

To ensure more transparent procurements, businessmen urge government to introduce an electronic procurement system as soon as possible. This system is expected to ensure honest competition and help resolve other problems that are often present in state and municipal procurements.

President: KNAB supervisory institutions should explain the loss of classified documents

Institutions that supervise the Corruption Prevention and Combating Bureau have to determine the cause behind the loss of classified documents, as announced by Latvian President Raimonds Vejonis.

Data on students and graduates to be compiled for more effective budget planning

To help develop the State Education Information System, it is planned to expand one of its sections by creating a register for students and graduates. This is provided by amendments to the Law on Institutions of Higher Education supported by the Cabinet of Ministers.

Global trade growth slowing, WTO

The World Trade Organisation has this week released an altered forecast for the global trade growth for 2016, which, comparing to its previous forecast for the same period has been cut by over a third.

Latvia resettles 82 people as part of EU refugee programme

Today, 28 September, nine people were transported to Latvia from Greece as part of the European Union’s resettlement programme, as LETA was informed by the Office for Citizenship and Migration Affairs.

August’s construction costs declined by 0.4% in Latvia

Compared to July, the level of construction costs in Latvia dropped by 0.4% in August 2016. Prices of building materials decreased by 0.8%, maintenance and operational costs of machinery and equipment reduced by 0.1%, whereas labour remuneration of workers did not witness any significant changes.

One-third of state institutions to not have to report data on employees’ remuneration

On Tuesday, 27 September, the Latvian government accepted amendments to the Law on Remuneration of Officials and Employees of State and Self-government Authorities that relieve 233 state institutions from the duty to report information about remuneration of their employees.

Trial of two Russian 'observers' arrested at Adazi military base put off until 2017

On 27 September, Riga District Court decided to put off the viewing of the criminal case regarding the incident at Adazi military base involving two Russian citizens until 24 July 2017.

Valka expects even more alcohol buyers from Estonia next year

Because Estonia plans to raise excise tax for alcohol in January 2017, the number of alcohol buyers from the neighbouring country is expected to increase in Latvia’s border area stores, as predicted by Mayor of Valka Vents Armands Krauklis.

Study: Third of adults look into their phones at night

A study performed in the UK on addiction to smartphones found that a third of its adult population look into their devices at night, which often causes quarrels with their other halves.

Baltics and Iceland agree on strengthening mutual cooperation

Celebrating 25 years since the foundation of diplomatic relations between Iceland and Baltics, Latvian Foreign Affairs Minister Edgars Rinkevics visited Iceland’s capital city of Reykjavik on 26 September to discuss regional news and international relations with ministers from Iceland, Estonia and Lithuania.

Rimsevics: Latvia should prepare for future crises

Latvia should prepare for future crises, which will take place, said Governor of the Bank of Latvia Ilmars Rimsevics in his interview to 900 seconds programme of LNT.

Expert: average tourist in Latvia – German citizen of pension age

27 September is celebrated around the world as Tourism Day. This day marks the end of the tourism season in the northern latitudes and the beginning of the season for southern latitudes. For this event, Tourism Research Centre’s manager Eriks Lingeberzins explains the topical tourism trends and what has changed under influence of terrorism.

Former head of IMF tried for alleged credit card racket

The former head of the International Monetary Fund, Rodrigo Rato has stood before trial in Spain on September 26 over allegations that he and 64 other bankers have been involved in credit card racket at Bankia bank, which has been rescued at public expense.

Strong sides of Latvia’s start-up sector – financial and virtual technologies

Latvia’s start-up sector has attracted investments worth at least EUR 110 million, notes Chairperson of Latvian Start-up Association Yekaterina Novicka.

Unity: FM threatens to ruin single compensation system principles

Finance Ministry’s prepared amendments to the Law on Remuneration of Officials and Employees of State and Self-government Authorities that provide for refusal of keeping compensation records for state and municipal capital association officials will negatively influence the principles of the single compensation system, as noted by Unity.

EU states to look into options to improve Russia relations, leaving sanctions in place

European Union heads of state and government are to consider ways to improve relations with Russia as some member states are increasingly sceptical over official- and company-specific sanctions.

Reizniece-Ozola and Dombrovskis: Latvia should be among Eurozone’s strongest countries

«Opinions of EU member states about the future integration of the Economic and Monetary Union differ. Bu the only difference lies in views about tactics, not the strategy and commitment for future changes. A stable Eurozone is a guarantee against economic shocks,» – announced Latvian Finance minister Dana Reizniece-Ozola on Monday, 26 September.

Tallinn to develop the town centre; Vilnius and Riga – to reduce congestion

Baltic capitals have different town development strategies: Tallinn intends to focus on renovation and development of the city centre. Vilnius and Riga, however, consider realizing development projects outside of the city centre, as told on Monday, 26 September, by head architects of the three Baltic Capitals.

Experts: Russia may turn against opposition even harder

The recent State Duma elections in Russia concluded with United Russia crushing the opposition in terms of popularity. Experts interviewed by De Facto programme of LTV believe the consequences will be even worse for the opposition – stricter policy against differently-minded people and fractured society.

In pictures: Mass anti-government protest in Poland

A mass demonstration took place in Warsaw over the weekend, as thousands of people demanded Poland’s right-wing government to improve its conduct as, according to protesters, it has acted against the constitution and laws.