Tallinn port [state-owned company Tallinna Sadam] has announced a sale of assets owned by Mūgas coal terminal. The company responsible for managing the territory – Coal Terminal – went bankrupt. Now the port searches for a new partner, port’s representative Sirle Arro told Dienas Bizness (DB) journalist Egons Mudulis.
Businessmen working at Riga Freeport say it is a warning for Latvian terminals – that they should consider attracting new cargoes to avoid bankruptcy.
The port hopes to get EUR 3.3 million from selling assets, as reported by BNS. The port organized procurement for construction rights and coal terminal management at the end of 2017. The initial price was EUR 4.5 million. There was no interest.
DB previously wrote that problems with transit of Russian coal in Estonia started with the political scandal involving the relocation of the so-called Alyosha monument in spring 2007. After this scandal, coal turnover declined from 7.47 million tonnes in 2006 to 3.72 million tonnes in 2007. Although there was an increase of coal turnover in 2009 and 2010, volumes of this type of cargo in Tallinn dropped again in 2011 – to 0.3 million tonnes. Volumes continued to decline in the following years. In the two last years there were no coal cargoes to handle, says Mudulis.
Instead those cargoes went to Latvian and Russian ports. Arro told DB that transit of coal cargoes in Estonia will not be restored any time soon. Because of that, the port wants the territory to be used for a new terminal. Contenders can submit their offers for all assets of the coal terminal or some of them until 5 February 2018. Coal Terminal had a long-term lease with the port until 2050. The company spent its last years paying penalties for lost cargo volumes previously promised to the port.
DB reports that a representative of a terminal active at Riga Freeport voiced his surprise over the decision made by Tallinn port. Previously information was reported that Kremlin had permitted the use of Mūgas terminal. The reason for that is the upcoming plan to perform repairs at Ustyug terminal. This will require four months and will cut this Russian port terminal’s output by half. But even in the event of a positive scenario for Estonian transit corridor, Latvian businessmen hoped Russia would not be able to reorient its cargoes from Ustyug to Tallinn quickly enough, leaving the door open for Latvia.
Mudulis says Coal Terminal’s equipment was offered to Riga’s coal terminals some years ago.
The decision made by Estonia’s port to drop transit of Russian coal is a signal for Latvia as well, said a representative of Riga Freeport’s terminal. Ever since the scandal with Alyosha monument, Estonian terminal worked off hope that coal turnover would recover soon. It is also important to remember that transportation of cargoes through Tallinn is also more economical (3.5-4 USD/t) if it is not possible to use Belarus as a transit corridor. But the result of mutual sanctions was that coal cargo turnover never recovered. In the end, the port made the decision to cease supporting the terminal, Dienas Bizness wrote.
When asked if some of the sold equipment could end up in Latvia, Mudulis said it is entirely possible. At the same time Coal Terminal equipment can be used by any coal or ore enrichment factory. The industry’s representative doubts anyone would invest in equipment worth dozens of millions that also requires dismantling. Looking at what is happening in Tallinn, Riga City Council and freeport representatives should consider the risks that appear for private terminals in the form of massive investments in coal-handling equipment, says Mudulis.