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Ceturtdiena 09.04.2020 | Name days: Valērija, Žubīte
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Latvian Railway requests EUR 40.8 million from state budget to finance operations

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freight volume decline, Latvian Railway, LDz, Māris Kleinbergs, transports, market, state support, equal conditionsLatvian Railway (LDz) requires EUR 25 million from Latvia’s state budget to balance finances in 2020 and EUR 15.8 million to compensate ineligible costs for public transport services this year, says LDz representative Ella Pētermane.

She explains that 2019 was complicated for Latvia’s transport and transit industry on a global and regional level. Different external factors have caused a decline of freight volumes. This situation has had a major impact on Latvia’s entire transport industry. It had the most serious effect on the companies working in the transit sector, including LDz.

Even in the first two months of 2020 freight tendencies, as well as shocks to the global and regional economies have shown the situation with freight volumes is unlikely to improve or may even become worse, LDz explains.

«Therefore, although it is in the interests of Latvia’s national economy to maintain the operations of the railway network in full, in spite of last year’s adopted strict cost optimization and work efficiency raising activities, LDz will not be able to implement the 2020 finance balancing requirements because revenue has reduced so significantly that it is no longer possible to cover the costs that have already been reduced to the lowest possible level without putting at risk the quality of railway infrastructure and safety,» adds the company.

In accordance with the multi-year agreement On Latvian Railway’s managed public use railway infrastructure maintenance and development planning and financing, which was signed between LDz and Transport Ministry, the company submitted to the ministry a report on the state of railway infrastructure and financial balance on Tuesday, 17 March. The company also informed the ministry about the need to allocate state budget funds in order to finance multi-year operations.

In accordance with requirements of the multi-year agreement, LDz has informed Transport Ministry about the potential failure to implement certain finance balance requirements by the infrastructure manager in the first quarter of 2020. This is why already there is a need for additional financing from the state budget worth approximately EUR 25 million to ensure financial balance for LDz.

LDz also requires EUR 15.8 million to compensate ineligible costs associated with public transport services across the entire 2020.

Pētermane explains that considering the current and possible predicted situation and economic indexes associated with it, LDz has informed Transport Ministry that the infrastructure manager’s limited funding attraction capabilities create a significant risk of failing LDz’s planned and co-financed projects of the EU Cohesion fund.

LDz plans to make decisions about investment plans and review all commenced and planned projects at the next board meeting.

LDz stresses that since autumn 2019 the company has performed a wide range of activities to increase the efficiency of its internal operations, review and optimize organizational and technological processes, as well as reduce the number of employees accordingly.

In 2020 the company developed a new business model and an action plan. Following LDz concern’s reorganization and efficiency improvement in 2020, focus will be put on diversifying the target market and freight segments, attracting new freights on new markets and developing new services.

Read also: Latvian Railway plans to lay off 1 500 employees

LDz Concern consists of six subsidiaries – LatRailNet, LDz Cargo, LDz Infrastructure, LDz Rolling Stock Service, LDz Security and LDz Logistics.


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