Aseradens sees PPP as most realistic funding source for Rail Baltica

RIGA - Public-private partnership (PPP) might be the most realistic funding source for the Rail Baltica railway project, Finance Minister Arvils Aseradens (New Unity) said  Thursday in an interview with Latvian Radio.

"The PPP model will not reduce the project's costs but it would allow us to "stretch" the payments over a longer period of time," Aseradens said. 

The finance minister said that a reallocation of EU funds and a government bond issue could  also be considered as alternative options. 

According to Aseradens, the government is not thinking about funding at the moment, because before starting to raise funding for the project it is first necessary to set up a project management team, then to figure out to what extent the project is being implemented. 

The finance minister said that until now the government had always perceived Rail Baltica as an EU-funded project with a 15 percent co-funding from the state budget, but that now has turned out to be a major nationally funded project. 

The project has received EUR 900 million from the Connecting Europe Facility (CEF), and is expected to receive another EUR 900 million from the CEF, Aseradens said. The rest of the funding may have to be sought by the state.

Aseradens stressed that until now Rail Baltica was "the Transport Ministry's closely guarded secret" and that the government is only starting to realize is happening with it.

"Some people, somewhere, have seriously increased the project's costs," said Aseradens.

Now it is necessary to re-evaluate the project, to understand why the total cost of the two Riga stations has grown to EUR 1.5 billion, said Aseradens, underlining that the government has not approved such a project. Therefore, it is necessary to analyze how to proceed with the project.

"The project team will have to work on cutting the costs," said Aseradens.

The finance minister stressed that much of the responsibility for the current situation lies with the Transport Ministry, including former transport minister Talis Linkaits (New Conservative Party), who continuously expanded the project.

"If the minister says all the time that everything is fine, that it is EU money, there is no reason not to believe him. Janis Vitenbergs (National Alliance) was the first transport minister to admit last year that things are not good," said Aseradens.

The finance minister said that the primary focus should be on the mainline connecting all three the Baltic states, and then looking at how to deal with the situation in Riga. Currently, the Transport Ministry has to prepare a budget proposal, after which the government will assess what it can afford.

As reported, there is currently no clarity on the model of operation and management of the Rail Baltica railway line, according to the report on the Rail Baltica project presented by the supreme audit institutions of the Baltic states.

According to the latest Rail Baltica cost-benefit analysis, the total cost of the line in the Baltics could reach EUR 23.8 billion, including EUR 15.3 billion for the first phase of the project in the Baltics and EUR 6.4 billion in Latvia. A previous cost-benefit analysis in 2017 estimated the total cost of the project at EUR 5.8 billion.