Estonian Operail to be auctioned off and privatised
Operail, the Estonian state-owned rail freight operator, is for sale. On 6 June, the government approved the imminent privatisation of the company. It has struggled to maintain profitability following sanctions against Russia and Belarus.
Operail is now being auctioned off completely. The Estonian climate ministry had made a proposal to that end, which the government approved on 6 June. Operail’s freight and repairs businesses are for sale, along with assets, licenses, contracts, employees, and the Operail brand, the company states.
Operail board member Merle Kurvits commented on the upcoming privatisation: “We approach privatisation with a positive outlook. The past years have been challenging for the railway sector and the economy. While overall freight volume on the Estonian railway decreased by 39 per cent last year, Operail’s volume decreased by almost 70 per cent, for unlike our competitors, Operail ceased freight transportation to and from Russia and Belarus”, Kurvits says.
“Nevertheless, we have maintained the largest market share in freight transportation on the Estonian railways. The buyer will acquire a highly competent operational company with good future potential – strategic opportunities for expansion and profit generation,” Kurvits added.
Sanctions on Russia
Operail lost a significant amount of income following the Russian invasion of Ukraine and subsequent sanctions on Russia and Belarus. In 2023, freight volumes in Estonia dropped by 39 per cent as passenger transportation overtook freight. Whereas 9,5 million tonnes of freight were transported in Estonia in 2021, only a meagre 2,1 million tonnes remained in 2023, making a dent in Operail’s finances.
Operail’s future was uncertain, and the company presented a number of business strategies to the Estonian government. Options included business closure, continuing business as usual or finding alternative financing sources. It was the latter option that the government ultimately agreed on, which is taking the shape of complete privatisation.
Privatisation allows for additional sources of investment but also enables the company to expand into foreign markets. According to the company, Estonia is located at a geographically disadvantageous position at the endpoint of the railway network. This hinders profitability when the company remains limited to the Estonian market. Earlier, other Baltic operators also expanded internationally for similar reasons.
Public auction
Operail will be sold in a public auction, which will take place in two stages. In the first stage, interested parties can submit non-binding offers after reviewing an initial information package. Then, selected candidates will be able to receive additional information in the second stage and submit binding offers. To participate in the auction, interested parties must demonstrate genuine interest and capability to purchase the asset and sign a non-disclosure agreement, Operail says.
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