Operail moves forward with a privatization strategy to strengthen the railway sector

Operail moves forward with a privatization strategy to strengthen the railway sector
© operail.com

This major change aims to revitalize the company's operations and improve the competitiveness and environmental sustainability of the Estonian railway sector.

Operail has announced its plans to implement a strategic initiative developed in the autumn aimed at revitalizing its economic outcomes through the involvement of a private investor. This move will not only improve the company's financial position but also facilitate its expansion into international markets.

The strategy, prepared last fall at the behest of its owner and subsequently approved by Operail’s Council in late November, recently received the green light from the government. On February 15th, a pivotal decision was made during a cabinet meeting to propose the full prOn 15 February, a key decision was taken at a Cabinet meeting to propose the full privatization or sale of Operail, in line with the strategic objectives set by the company. Operail will start implementing its strategic plan, including the first steps towards privatization. However, the exact timing of the process is still under discussion.

Merle Kurvits, a member of Operail's board, highlighted the challenges faced by the company in achieving profitability within the Estonian rail freight market, citing the country's geographical limitations and the inherent nature of rail transport as a volume-dependent business. „Rail transport is a volume business where small quantities and short journeys do not pay off. Unfortunately, in the context of railways, Estonia is a very small country. Moreover, geographically we are located at the endpoint of the railway network. Therefore, it is difficult to achieve profitability by operating solely on the Estonian rail freight market,” explained Kurvits.

The strategic shift towards privatization is expected to enable Operail to extend its operations beyond Estonia, leveraging opportunities in the European market. Kurvits emphasized the potential benefits of this transition, noting, “Selling the company to a private investor allows Operail to expand its operational scope towards Europe, which is a competitive advantage in a volume business. This also contributes to the preservation and development of the railway as the most environmentally friendly and safest mode of transport in Estonia. This in return boosts our industrial and logistics sectors and consequently, the overall Estonian economy.”

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