THE Estonian government has approved a proposal by the Ministry of Climate to privatise all business activities of the state-owned freight operator Operail, with a public auction now underway.

Operail’s freight and maintenance businesses are for sale along with assets, licences, contracts, and the Operail brand. Any deal also includes the transfer of staff.

The sale will be carried out in two phases. Interested parties have until June 21 to submit non-binding offers after reviewing provisional information on the company. Selected candidates will then receive additional information and will be invited to submit binding offers.

The sales process is led by the investment banking division of LHV Bank. Ellex Raidla is providing legal counsel. The government and Operail’s existing supervisory board, management board and employees are not participating in the sale process.

Traffic at Operail fell by 70% last year as it ceased moving freight to and from Russia and Belarus. This compares with a 39% overall decrease on the Estonian network and has caused financial difficulties for the company.

Operail does retain the largest overall share of freight traffic in Estonia, as board member, Ms Merle Kurvits, points out. It is hoped that the buyer will work to develop international business, as the company is already active in the Finnish market through its Operail Finland subsidiary.

“We approach privatisation with a positive outlook,” Kurvits says. “The buyer will acquire a highly competent operational company with good future potential and with strategic opportunities for expansion and profit generation."

Operail presented the Estonian government with several options for its future development, including winding the business up, continuing as usual, or finding alternative finance. The government ultimately decided to proceed with a full privatisation.