Financial Services, Good for Business, Latvia, Railways, Tourism, Transport

The Transport Ministry explained that, according to the European Parliament and the Council's Regulation of May 21, 2013 on the European system of national and regional accounts (ESA) in the European Union, Pasazieru Vilciens is part of general government sector. Therefore an increase in the value of the company's assets (construction of a depot and procurement of new rolling stock) will have a direct impact on the general government sector balance, even if Pasazieru Vilciens borrows the funds necessary for the procurement project.

Pasazieru Vilciens offered several scenarios, but the Transport Ministry and Finance Ministry have concluded that none of them is viable, and the procurement project will affect the general government sector budget.

A report that the government took into consideration during a meeting on April 11 said that, should the current train procurement project be implemented as is, its impact on the general government sector balance could amount to EUR 19.2 mln in 2019 and EUR 63.9 mln in 2020, reducing the amount of financing available for new policy initiatives almost by half in 2020.

The Transport Ministry's latest report analyzes the effect of the project on the general government budget balance and debt before the commencement of the second round of the procurement project. Pasazieru Vilciens has estimated the predicted impact on the budget. The estimations include net impact, but not the overall project costs.

Pasazieru Vilciens reported that the negative impact on the general government budget is projected at EUR 5.7 mln in 2019, EUR 25.6 mln in 2020, EUR 44.7 mln in 2021, EUR 50.4 mln in 2022, and EUR 38.8 mln in 2023.

The Transport Ministry underscored that the new trains will be purchased by attracting a loan, and not by directly using budget resources.

The second round of the procurement will be launched immediately.

The Transport Ministry explained that the new trains are needed to meet the needs of passengers and meet the requirements for quality, uninterrupted passenger transportation services and efficient public transport system. The current trains are up to 50 years old and do not meet today’s quality and security requirements.

Pasazieru Vilciens last year announced procurement of 32 commuter trains with 400-450 seats each. The winning bidder would not only have to supply 32 new electric trains, but also equipment necessary for maintenance of the trains, and train personnel to maintain and repair the trains.

Pasazieru Vilciens has received five bids in total - from the Spanish company Patentes Talgo S.L (Talgo), Swiss company Stadler's Polish subsidiary Stadler Polska Sp. z o.o., Siemens AG and Sinara Group's joint venture in Russia - Uralskiye Lokomotivi, Spanish company Construcciones y Auxiliar de Ferrocarriles S.A. (CAF), and Czech company Skoda Vagonka a.s. All five bidders qualified for the second procurement round, but it has not been announced as yet.