High costs of Latvia’s first electrification phase spark negative comments

The first phase of the electrification project of Latvia’s railway network has come to an end and the companies shortlisted for the electrification of three sections are INABELEC, Siemens-TSO-BMGS, Cobra-Arčers and LREC. The winner of the tender will be announced later. Latvian Railways (LDz) plans to complete the final phase by 2023.
Latvia has a railway network of 1,933 km. Currently, only 257 km are electrified. The project envisages the electrification of 582 km of railways in three phases at an estimated cost of EUR 441 million.
Considering the benefits of an electrified railway network, some Latvian authorities have expressed their concern that the funds necessary are very high. Thus, Juris Iesalnieks, Director of the State Railway Administration, said “this project might dig deep into the pockets of Latvian taxpayers”.
If someone asked me, as director of a state institution in charge with this sector, over potential risks, I would say they are quite high, so the project should be halted immediately. It should be postponed until costs are re-analysed, errors corrected, and a new audit carried out”, pointed out Juris Iesalnieks.
Of the EUR 441 million necessary for the first phase of the project, EUR 94 million is the European Union’s contribution, the rest of the sum being covered from the state budget.
In turn, the representatives of the Baltic Association – Transport and Logistics have reviewed other negative aspects of the project.
“The Ministry of Transport and the Prime Minister have not revealed the cost of the whole project to the citizens. It could even exceed the initial cost by as much as EUR 230 million so that the final cost could actually be EUR 670 million, instead of EUR 441 million. Why do we think that? Because the state should invest another EUR 230 million from the state budget so that the whole project could be efficient. This is something that nobody mentioned in public. Ldz, through its subsidiary Passenger operator Pasazieru Vilciens, must also buy new trains for which estimated costs amount to EUR 130 million. Also, the railway stations along the three railway sections are not modernised. It is also necessary to extend some of the railways which means another EUR 100 million.
This year, Passenger operator Pasazieru Vilciens announced the finalisation of the documentation for the procurement of 32 electric multiple-units and is in the final phase of selecting the rolling stock manufacturer. The electric multiple-units should be delivered in 2020-2023. The rolling stock procurement will not benefit from European funds. Overall, the whole project would amount to EUR 670 million, but the authorities do not make public these details because, clearly, these huge efforts from the state will not have a good return on investment. The negative impact could transpose over the railway freight transport which could be extra charged to cover the budget deficit.

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